Sugar firms sweeten balance sheet

At a time when corporate financial defaults and insolvencies are making headlines, leading players in the sugar industry are repaying and prepaying debt, after a long gap.

Heavy losses or meagre profit during FY12-16 had impacted sugar companies, taking away the ability to make timely payment to farmers and service their debt on time. However, with profit for many at a new record last year, companies have got down to debt reduction and are sweetening their balance sheets.

Balrampur Chini, Triveni Engineering, Dhampur Sugar and Dwarikesh Sugar together have repaid about ~1,100 crore to financial institutions since FY17. With a stable cash flow outlook, they’re looking at bringing debt further down.

Balrampur Chini, the country’s second biggest sugar company, repaid ~472 crore after it made a record profit of ~592 crore last year.

“Given the cash flows, we should be in a good position to bring the longterm down to bare bone when the year ends. Some of the loans had a longer repayment period but we decided to prepay it, in our interest. The financial ratios will improve and one can look forward to the next round of rating improvement,” said Tarun Sawhney, vice-chairman and managing director at Triveni Engineering & Industries, which has repaid ~165 crore. The company was left with a longterm debt of ~376 crore at the end of the June quarter.

Sugar companies have long-term and short-term debt. The long-term debt had been taken in the past for capital expenditure (capex).

Short-term debt is taken every year for procuring sugarcane and paying farmers. This debt is usually nil at the beginning of the crushing season in October every year and peaks when the crushing ends around March. As sugar stocks get liquidated, this debt comes down.