Bajaj Hindusthan Sugar's Debt Restructuring Plan Approved

Introduction to the Restructuring Initiative

Bajaj Hindusthan Sugar Limited's Board of Directors approved a comprehensive debt restructuring plan on February 12, 2026, aiming to resolve the company's stressed assets under the Reserve Bank of India's Prudential Framework. This move marks a critical step in the company's efforts to stabilize its financial health after a prolonged period of distress, including previous restructuring attempts and loan defaults.

Background of Financial Stress

The company has faced significant financial challenges for years. Lenders had previously restructured its loans in 2017 under the Scheme for Sustainable Structuring of Stressed Assets (S4A). However, subsequent defaults led to the account being classified as a Non-Performing Asset (NPA). In 2022, another restructuring plan was proposed, and the company faced an insolvency petition from the State Bank of India (SBI) at the National Company Law Tribunal (NCLT), which was later dismissed after dues were cleared. The current plan is a renewed effort to create a sustainable capital structure.

Core Components of the New Debt Plan

The approved resolution plan involves a multi-pronged approach to address the company's substantial debt obligations. The primary components include the conversion of outstanding interest into equity instruments and the modification of terms for existing debentures.

Conversion of Debt into Equity and Preference Shares

A significant part of the plan involves converting outstanding dues into equity for the lenders. The outstanding Yield to Maturity (YTM) of ₹2,939.97 crore and a right of recompense of ₹485.60 crore will be converted into equity shares and Compulsorily Convertible Preference Shares (CCPS).

• Equity Shares: Up to ₹570.03 crore will be issued to the lender consortium, ensuring their initial shareholding does not exceed 50%.
• Compulsorily Convertible Preference Shares (CCPS): The remaining amount, totaling ₹2,855.54 crore, will be converted into CCPS. These shares will have a tenor of up to 20 years, carry a cumulative coupon of 0.01% per annum, and include a buy-back option for the company.

Restructuring of Optionally Convertible Debentures (OCDs)

The existing Optionally Convertible Debentures (OCDs) worth ₹3,215.31 crore will continue as debt but with significantly relaxed terms to ease the company's repayment burden.

Promoter and Company Capital Infusion

As part of the resolution, the promoters and the company are mandated to infuse ₹1,000 crore during the 2025-26 financial year. Of this, ₹630.79 crore was already infused in June 2025 through a share buy-back, with the proceeds used to pay overdue instalments and coupon payments. The remaining ₹369.21 crore is scheduled to be infused within the fiscal year.

The Lender Consortium

The restructuring involves a consortium of 12 major Indian banks that will receive equity and CCPS as part of the debt conversion. The key lenders include State Bank of India, Punjab National Bank, Indian Bank, Canara Bank, Union Bank of India, and Bank of Baroda, among others.

Recent Financial Performance: Q3FY26 Results

Coinciding with the restructuring announcement, Bajaj Hindusthan Sugar reported its financial results for the quarter ended December 31, 2025. The company showed a return to quarterly profitability, a positive sign amid its financial overhaul.

The power segment was the strongest performer, while the sugar segment, despite being the largest revenue contributor, reported a small loss. A significant reduction in finance costs to ₹5.34 crore in Q3FY26 from ₹22.31 crore in Q3FY25 also points towards initial benefits from debt management efforts.

Market Impact and Shareholder Dilution

The conversion of a substantial portion of debt into equity will lead to significant dilution for existing shareholders. The promoter's stake is also expected to decrease notably once the conversion is complete. The plan's success is crucial, as statutory auditors have previously issued qualified opinions, highlighting material uncertainty regarding the company's ability to continue as a 'going concern' due to past losses.

Next Steps and Outlook

The Board has approved the draft notice for an Extraordinary General Meeting (EGM) to seek the necessary shareholder approvals for the proposed restructuring. The successful implementation of this plan is vital for Bajaj Hindusthan Sugar's long-term survival. It aims to provide the company with the financial stability needed to focus on operational efficiency and navigate the cyclical nature of the sugar industry.