The Hindu Business Line : Bajaj Hindusthan counts on raw sugar to boost capacity use

New Delhi, Sept 13 Bajaj Hindusthan Ltd (BHL) hopes to more than double the capacity utilisation of its mills in the ensuing 2009-10 season (October-September) following the execution of contracts for import of seven lakh tonnes (lt) of raw sugar.

During the 2008-09 season, BHL’s 14 mills – including four of its 75 per cent owned subsidiary, Bajaj Hindusthan Sugar and Industries Ltd (BHSIL) – produced 6.13 lt of sugar on a total cane crushed of 67.31 lt.

The 14 mills have a combined crushing capacity of 1.36 lakh tonnes cane a day (tcd), which, in a normal operational season of 150 days, translates into 204 lt.

The 67.31 lt crushed in 2008-09 represents a capacity utilisation of hardly 33 per cent, with no mill running for more than 122 days (see Table).

Sugar recovery

By contrast, 2007-08 saw BHL and BHSIL together crush over 120 lt of cane and produce 11.94 lt of sugar.

It was even better in the season before – when almost 140 lt of cane crushed yielded 13.57 lt of sugar and the mills operated between 152 to 195 days.

The average sugar recovery – an indicator of the quality of cane crushed – has also fallen from 9.80 per cent in 2006-07 and 9.99 per cent in 2007-08 to 9.10 per cent this season.

capacity utilisation

“We don’t foresee substantial improvement on the cane supply front in the coming season too. But capacity utilisation will certainly go up because of the seven lt of imported raw sugar that we have contracted”, according to the BHL Joint Managing Director, Mr Kushagra Bajaj.

Boosting capacity utilisation is vital for the company, which, as on March 31, had a consolidated debt of Rs 4,354.64 crore.

Since then, BHL has repurchased nearly $20 million out of its $120 million zero coupon convertible bonds (due in 2011) and used the entire Rs 710 crore proceeds from a qualified institutional placement issue to retire part of the liabilities.

“Besides, another Rs 200 crore or more of working capital has been paid off through internal cash flows. So, the overall debt stands reduced to just above Rs 3,000 crore, with a net debt-equity ratio of 1:1”, Mr Bajaj told Business Line.

Much of this debt went towards funding capital expenditures that have resulted in BHL expanding its aggregate crushing capacity from 17,000 tcd to 1,36,000 tcd since 2003-04 and emerging as India’s No. 1 sugarcane processor.

Distribution

The 7 lt of imported raws will be distributed among all the 14 mills, which would process these along with the juice from the domestically sourced cane.

“Three of our mills would additionally have coal-fired boiler facilities to enable processing of raws in the off-season, when bagasse (the regular fuel obtained from crushing cane) is not available.

In all, we expect to produce 14-15 lt of white sugar during 2008-09, with average ex-factory realisation of Rs 32 a kg.”, he added.

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