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News
Sugar companies sweeten balance sheet
Date:
18 Aug 2017
Source:
Business Standard
Reporter:
Ajay Modi
News ID:
22605
Pdf:
Nlink:
At a time when corporate
financial defaults
and insolvencies are making headlines, leading players in the
sugar
industry
are repaying and pre-paying
debt
after a long gap. With profits for many sugar makers hitting a new record last year,
companies
have got down to
debt
reduction and are sweetening balance sheets.
Four sugar companies—Balrampur Chini, Triveni Engineering,
Dhampur Sugar
and Dwarikesh Sugar—together have repaid about Rs 1,100 crore to financial institutions since FY17. The
debt
reduction process does not end here and with a stable cash flow outlook
companies
are looking to bring down the
debt
further. Country's second biggest sugar company
Balrampur Chini
has repaid Rs 472 crore after it made a record profit of Rs 592 crore last year.
"Given the cash flows we should be in a good position to bring the long-term 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 next round of rating improvement," said Tarun Sawhney, vice chairman and managing director at
Triveni Engineering
& Industries, which has repaid Rs 165 crore. The company is left with a long-term
debt
of Rs 376 crore at the end of Q1.
Sugar
companies
have long-term and short-term
debt.
The long-term
debt
had been taken in the past for capex. The short-term
debt
is taken every year for procuring sugarcane and making payment to 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. Since sugar makers have no significant capex requirements, the long-term
debt
is expected to be under control.
Dhampur Sugar
has repaid Rs 302 crore since April last year. "We have reduced the high cost borrowings and the extra cash flows this year will be mainly used to repay debt," said Arhant Jain, chief financial officer at Dhampur.
Dwarikesh Sugar
has repaid Rs 179 crore to the banks as of June 30. The company's CFO Vijay Banka said another Rs 33 crore has been repaid in Q2 so far, taking the
debt
further down to just Rs 89 crore. "Barring Rs 30 crore of interest free loans from government, we will completely repay the rest," he said.
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