Siddharth Shriram, Chairman of Mawana Sugars in an interview to CNBC-TV18's Mangalam Maloo and Reema Tendulkar spoke in detail about how the company has been planning to settle their debts with various banks - State Bank Group, Punjab National Bank and foreign banks.
Below is the transcript of Siddharth Shriram's interview with CNBC-TV18.
Mangalam: What exactly does this one-time settlement do to your debt? You settled for about Rs 110 crore. How much is remaining on your balance sheet and what is the plan for that going forward?
A: Our accounts have become NPA. Mawana Sugars was in serious distress and then we sold one of our sugar factories and with the proceeds of the sugar factory we paid a good chunk to the farmers and we are settling, as far as possible, with our bankers to whom we have been neither paying interest nor principal for the last four years.
Therefore, we settled with foreign banks at 40 percent. We settled with State Bank Group to have a schedule of payment over the next four years with zero interest and now we have settled with Punjab National Bank (PNB) to settle their Rs 109 crore worth of debt for about Rs 80 crore payable over 15 months with no interest.
One of the problems with our company is that we had no bank facility; being NPA we had zero bank facility, no cash credit, no long-term debt other than what is NPA and so we were stressed in terms of not getting government subsidies, government excise loans as well as soft loans. Therefore, we were unable to pay our farmers to that extent. In the next 12 months, I believe these problems will be behind us
Mangalam: What is the debt on your books right now?
A: The debt on our books is Rs 280 crore.
Reema: After making this settlement of Rs 110 crore?
A: The settlement is agreeing a debt of Rs 109 crore for Rs 80 crore and we will be paying this Rs 80 crore over the next 15 months.
However, there is one more bank left, State Bank of Hyderabad with whom we are negotiating to settle their debt and that will happen in next four-six weeks.
Mangalam: What is your exposure with the State Bank if Hyderabad?
A: It is about Rs 45 crore.
Reema: How is the company making these payments - Rs 80 crore to Punjab National Bank? You will have to make some payment to State Bank of Hyderabad as well. Could you tell us where is the cash going to come from?
A: We have sold one of our sugar factories.
Reema: You said you have used that – the Titawi plant, right? You said you have used to pay the farmers?
A: We have not fully used that because part of the payment is still to come once we deliver the no objection certificate from Punjab National Bank and State Bank of Hyderabad to them. So, that amount of money will help us to manage the farmer debt as well as the debt to the banks. Second, the EBITDA this year and last year is quite powerful; we are getting over Rs 100 crore EBITDA.
Mangalam: Let us shift focus to the sugar industry itself. It has been a buzz for a while. We understand that production in the south has completed halted what is your sense on the production for UP how long is it going to last in this sugar year?
A: The production is going to go on till April 15th. As the agricultural produce declines the factory will slowly stop shutting down and the amount of cane that will come in keep getting less from now steadily up to April 15th but we will produce it will be less than 9 million tonne.
Mangalam: What exactly would your outlook on sugar prices be what is your ex- mill price currently and what is the trajectory likely to be?
A: Ex-mill price currently is about Rs 3,650-3,700 quintal that is Rs 37,000 a tonne. It has come down in the industry. The reason is that there is quite a lot of confusion whether imports will take place or they will not because the prices are going up higher than what the government wanted. But the government want higher sugarcane price and they want low sugar price. So, what we have recommended very strongly and a letter has gone to our government including Prime Minister and to the new Chief Minister of UP that why don’t we have a linkage formula of sugarcane.
Reema: You said that you had sold the plant; I remember it was Titawi plant and I think you got a profit close to about Rs 235 crore on the back of that. What amount of that will be used to pay-off the farmers and how much will be left to pay-off the current debt on the books?
A: We will use about Rs 150 crore to pay the bankers and the rest will go to the farmers.
Reema: Then the farmer’s dues will be completely eradicated?
A: The last years dues are completely gone. It is this current season dues - because we produce sugar during a season but we sell it over the whole year. So, we are carrying stocks and the stocks are sufficient to pay for the farmers dues by around September of this year. As we are selling more sugar we are paying the farmers.
Mangalam: Could you tell us the quantum of stocks you are currently sitting on?
A: It is about Rs 350 crore. One more thing about Mawana is that in 2004 the government of UP had announced a sugar investment incentive plan against which we invested Rs 700 crore, that is the start of our debt problem and against this, the government of UP were to give us and to other millers who had similarly invested certain incentives, those incentives never came forward. So, we are due a capital subsidy of over Rs 70 crore and other benefits if we total them up plus interest it may come as high as Rs 200 crore. This was done in the Samajwadi Party government when Mulayam Singh Yadav was Chief Minister after that Mayawati came to the Chief Minister and she cancelled.
Mangalam: Irrespective of the political discussions can we expect the company to be debt free in the next say 15 months or 24 months?
A: Not debt free but certainly on a very healthy wicket.
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