Dharani Sugars keeps Rs 334.65 crore debt as contingent

Dharani Sugars and Chemicals Limited continues to disclose Rs 334.65 crore of original unsustainable debt as a contingent liability at September 30, 2026, although its restructuring was cancelled after repayment defaults and the amount became payable. Dharani Sugars says the accounting treatment reflects lender discussions, prospective restructuring and funding arrangements.

Why is Dharani Sugars’ Rs 334.65 crore debt still contingent?

Dharani Sugars has kept Rs 334.65 crore of unsustainable debt as a contingent liability because management cites ongoing negotiations with lenders and its assessment of proposed restructuring and funding arrangements. The amount originated in a Master Restructuring Agreement, or MRA, dated May 24, 2024, with India Debt Resolution Company Limited, or IDRCL, acting as trustee for National Asset Reconstruction Company Limited, or NARCL.

The MRA had classified the Rs 334.65 crore as unsustainable debt and disclosed it as contingent from the previous financial year. Dharani Sugars says it subsequently breached repayment obligations and financial covenants several times, including by not paying instalments under the agreed schedule. This means the continuing contingent-liability disclosure follows a cancellation event, rather than the restructuring remaining in force.

IDRCL’s legal counsel issued a default notice on February 7, 2026, giving Dharani Sugars one month to cure the existing events of default. The company says it did not remedy those defaults during that period and made a subsequent default on the liability on September 30, 2026. Those dates establish that the defaults extended beyond the original cure window.

What changed when the MRA was cancelled?

The cancellation withdrew the MRA’s concessions, waivers and reliefs, making Dharani Sugars’ original outstanding dues, including the Rs 334.65 crore unsustainable debt, payable. Dharani Sugars reported that result after failing to cure the February 7, 2026 default notice within one month and then defaulting again on September 30, 2026.

Despite the cancellation, Dharani Sugars has not reclassified the related borrowings as current liabilities because the lender had not recalled the loan as at the report date. The company is discussing resolution of the defaults and a restructuring of repayment obligations with the lender. This distinguishes the stated payment consequence of the cancelled MRA from the balance-sheet classification applied at September 30, 2026.

Dharani Sugars also said it communicated the debt default through a communication dated October 27, 2026. The filing does not state a new repayment schedule, a revised settlement amount or a completed funding arrangement. Its stated basis for preparing the September-quarter standalone accounts on a going-concern basis is management’s revival and recommencement plan, rather than a completed resolution of the Rs 334.65 crore liability.

What happened to Dharani Sugars’ SDF settlement?

Dharani Sugars also lost a One Time Settlement, or OTS, for its Sugar Development Fund, or SDF, loan after failing to pay Rs 61.11 crore by an extended deadline of April 6, 2026. The SDF loan is secured by fixed assets of Unit III, excluding refinery assets and harvester machines, according to the September 30, 2026 notes.

The Government of India had sanctioned the Rs 61.11 crore OTS and, in an October 13, 2025 letter, extended the payment date to April 6, 2026. The SDF Authority then informed Dharani Sugars on April 22, 2026 that the OTS was cancelled. As with the MRA, the cancellation withdrew concessions and reliefs, while the original liability together with applicable interest became payable.

Management says it is evaluating the financial effect of reinstating the original SDF liability, including applicable interest and related charges. It will make accounting adjustments, where required, after final determination. The filing therefore does not quantify the reinstated SDF obligation beyond the cancelled Rs 61.11 crore settlement amount.

A later Government of India communication dated August 18, 2026 extended the timeline for OTS settlements of SDF loans. Dharani Sugars says it is considering a fresh application for settlement of its outstanding SDF loan. That prospective application is separate from the cancelled arrangement and is not described in the filing as approved.

How is Dharani Sugars seeking liquidity for a restart?

Dharani Sugars says management is arranging working capital and operational funding, holding discussions with lenders and other stakeholders, and evaluating external funding and financial support. These measures are intended to recommence operations and meet working-capital needs after the manufacturing facilities and operations remained non-operational for a prolonged period.

During the quarter ended September 30, 2026, Dharani Sugars obtained unsecured loans of Rs 3.30 crore from corporate entities under loan agreements. Total outstanding loans from directors and related parties stood at Rs 219.63 crore at the same date. The filing does not specify whether these funding sources will be sufficient to settle the MRA-related dues or the reinstated SDF liability.

Dharani Sugars also reported that a loan obtained from I Heart Properties Private Limited in August 2024 had a four-month tenure. At September 30, 2026, Rs 31.31 crore, including Rs 6.61 crore of interest, remained unpaid beyond its due date. This overdue loan adds a separate identified repayment obligation alongside the MRA and SDF matters.

The company’s financial statements cite accumulated losses, negative net worth at September 30, 2026, defaults on certain borrowings and settlement obligations, and prolonged non-operation. Management nevertheless expects operational and financial improvement in the foreseeable future through its revival plan. That expectation is management’s view and remains linked to obtaining funding and restoring production capabilities.

Conclusion

Dharani Sugars faces two cancelled debt-relief arrangements: the MRA, under which Rs 334.65 crore of unsustainable debt has become payable but remains classified as contingent, and the Rs 61.11 crore SDF OTS, whose original liability and interest are being evaluated. The filing makes clear that the contractual consequences of cancellation differ from the accounting presentation still used for the MRA borrowing.

The next disclosed matters are Dharani Sugars’ lender discussions over repayment restructuring, potential working-capital and external funding, and its consideration of a fresh SDF OTS application after the August 18, 2026 extension. Management’s final calculation of the reinstated SDF liability, including interest and related charges, would determine any accounting adjustments disclosed subsequently.