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Private &Confidential Viability Report

Bihar State Sugar Corporation Ltd. 1


IMPORTANT NOTICE


This Report contains proprietary and confidential information regarding to Bihar State Sugar
Corporation Ltd (BSSC) or the Corporation).This has been prepared by SBI Capital Markets
Ltd. (SBICAP) on the basis of information provided by the corporation, technical consultants,
valuers, legal advisor and publicly available sources, to be used for the purpose of providing
Advisory Services to the Corporation or Sugarcane Industries Department, Government of Bihar
for exploring the possibility of revival of the closed sugar units of the Corporation..

This report is based on information made available by BSSC. No assurance can be provided that
the assumptions or data upon which these recommendations have been based are accurate or
whether this business plan will actually materialize.

Neither SBICAP, nor State Bank of India or any of its associates, nor any of their respective
directors, employees or advisors make any expressed or implied representation or warranty and
no responsibility or liability is accepted by any of them with respect to the accuracy, completeness
or reasonableness of the facts, opinions, estimates, forecasts, projections, or other information set
forth in this Report or the underlying assumptions on which they are based .There is no
assurance on the success of the assignment and it is solely based on the judgment of the investors
and the current market conditions.

This Report is furnished strictly on confidential basis. Neither this Report, nor the information
contained herein, may be reproduced or passed to any person or used for any purpose other than
stated above. By accepting a copy of this Report, the recipient accepts the terms of this Notice,
which forms an integral part of this Report.
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Bihar State Sugar Corporation Ltd. 2
TABLE OF CONTENTS
SECTION I ..................................................................................................................................... 4
1. INTRODUCTION............................................................................................................ 5
2. BACKGROUND.............................................................................................................. 6
3. APPROACH AND METHODOLOGY ADOPTED.................................................. 10
SECTION II............................................................................................................................... 12
4. THE SUGAR INDUSTRY............................................................................................. 13
4.1 Nature of Industry and Current Trend ...................................................................... 13
4.2 Possible business models for a sugar company ........................................................ 14
4.3 Revival of Mandatory Ethanol-Blending Programme ............................................. 14
4.4 Status of sugarcane based industry in Bihar Vs. other states.................................. 15
4.4.1 Area under cultivation in State of Bihar ................................................................ 17
4.4.2 Annual production of sugar in State of Bihar ....................................................... 17
4.4.3 Yield of sugarcane production in State of Bihar ................................................... 18
4.4.4 Sugarcane crushed in State of Bihar ....................................................................... 19
4.4.5 Duration of crushing season in State of Bihar....................................................... 19
4.4.6 Recovery Rate in State of Bihar ............................................................................... 20
4.5 STUDY OF EXISTING SCENARIO IN STATE OF BIHAR..................................... 21
4.6 Conclusion...................................................................................................................... 23
5 SUGAR UNITS-LOCATIONAL MAP.............................................................................. 24
SECTION III ................................................................................................................................ 25
6 SCOPE OF WORK............................................................................................................... 26
7 APPROPRIATE TRANSFER MODEL.............................................................................. 31
7.1 Mode of Transfer ........................................................................................................... 31
7.2 Rationale of Leasing Model.......................................................................................... 32
7.3 Lease Period for Land................................................................................................... 32
8 VALUATION & FAIR VALUE ......................................................................................... 35
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8.1 Valuation ........................................................................................................................ 35
8.2 Fair Value........................................................................................................................ 35
9 SETTLEMENT PROCESS, SACRIFICE & UTILISATION OF THE PROCEEDS ....... 37
9.1 Settlement process......................................................................................................... 37
9.2 Sacrifices ......................................................................................................................... 37
9.3 Utilisation ....................................................................................................................... 40
10 LITIGATIONS AND SETTLEMENTS........................................................................ 42
10.1 Litigations................................................................................................................... 42
11 SUGGESTED PLAN OF ACTION.............................................................................. 44
12 TENDERING/BIDDING PROCESS........................................................................... 45
13 SELECTION CRITERIA................................................................................................ 46
14 TRANSFER PROCESS .................................................................................................. 49
15 SUGGESTIONS FOR ADDITIONAL INCENTIVES FOR INCLUSION IN SUGAR
POLICY........................................................................................................................................ 51
16 RECOMMENDATIONS............................................................................................... 53
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Section I





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1. Introduction
Bihar State Sugar Corporation Ltd. (a Government of Bihar Undertaking) was
incorporated in 1974 to manage, operate and control the loss making sugar and
distillery units under the control of State Government. The Government of Bihar
(GoB) under the Bihar Sugar Undertakings (Acquisition) Ordinance 1976 and
Sugar Undertakings (Acquisition) Act 1985 acquired 15 sick Sugar Mills and 2
distilleries from private companies/owners between 1977-1985. The said
takeover of the sick units was undertaken with an objective to revive them and
make them operational and viable.

Most of the units could not sustain the mounting pressure of declining prices and
increasing input costs and thereby the units started closing down one after
another. The units thereafter could not be revived and all the units were closed
by the crushing season 1996-97.

The machineries have not been refurbished since the closure. Due to the same,
the conditions of the units are presently not satisfactory.

The Government of Bihar, constituted a high level committee under the
chairmanship of Cane Development Commissioner in February 2006. The
Committee was of the opinion that a financial advisor shall be appointed for
valuation of the units and to suggest appropriate revival plan for the closed
sugar units of BSSC.

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With a view to finalise the policy for making these units operational, GoB, finally
invited bids for Advisory Services to suggest the Methodology and Approach for
Revival/Restructuring/Sale/Lease of the closed sugar units of Bihar State Sugar
Corporation Limited.

Accordingly, SBI Capital Markets Limited was appointed to advise the
Government in adopting appropriate strategy subject to the approval of the State
Government. SBICAP will also assist the Government in preparing the Bid
Documents for inviting expression of interest, preparing Request for
Qualification and Request for participation etc as is necessary to attract investor
for revival/lease/sale of sugar units based on various parameters.

2. Background
Incorporated in 1974 under the companies Act 1956, the Bihar State Sugar
Corporation Limited (BSSC) was formed to acquire and manage sugar units of
Government of Bihar. The units were facing problems in satisfying their cane
growers dues, labour dues as also the statutory dues. Considering the same, the
Government of Bihar under the Bihar Sugar Undertakings (Acquisition)
Ordinance 1976 and Bihar Sugar Undertakings (Acquisition) Act 1985 acquired
various units under the aforesaid provisions. Since then the units were managed
under the BSSC.

The financial statement of BSSC was internally audited in FY 2001-02. The
Balance Sheet as on March 31, 2002 is as under:




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Rs. Crores
PARTICULARS 2006
Rs.
SOURCES OF FUND:
SHAREHOLDERS FUND:
Shareholders Fund H.O 20.00
Reserve & Surplus H.O 0.00
Unit 9.24
LOAN FUND
Secured Loan H.O 0.00
Unit 8.42
Unsecured Loan H.O 692.57
Unit 13.30
TOTAL : Rs. 743.53
APPLICATION OF FUNDS:
FIXED ASSETS:
Gross Block H.O 0.16
Unit 32.09
Less : Depreciation H.O 0.12
Unit 19.39
Net Block 12.74
Capital Work in Progress 1.19
Investments H.O 0.00
Unit 0.20
Current Asset , Loans & Advances
Inventories H.O 0.00
Unit 13.13
Sundry Debtors H.O 0.00
Unit 1.61
Cash & Bank Balance H.O 0.23
Unit 1.47
Loans & Advances H.O 306.64
Unit 54.40
TOTAL : (A) 377.48
Less : Current Liabilities & Provisions H.O 3.28
Liabilities Unit 455.60
TOTAL : (B) 458.88
NET CURRENT ASSETS : (A-B) (81.40)
Suspense Account (Head Office) 0.10
Suspense Account (Goraul Office) 0.08


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The details of the unsecured loans are as follows:
Rs. Crores
Particulars Amount
Loan from Government of Bihar against Share capital 0.35
Loan from Government of Bihar 288.19
Interest accrued & due on above Loan 395.21
Penal interest accrued on Government Loan 8.79
Evolving fund for Cane Development 0.03
Total 692.57

BSSC is not operating and is functionally defunct. The liabilities of the
corporation to Government of Bihar are in the form of unsecured loan. The
details of the various units are as under:

Sl
No
Unit Name Name of the
Previous Owner
Date
Of
Establishment
Capacity
(tcd)

Acquisition by
Government of
Bihar
Date of
Closure
1. Samastipur Samastipur Sugar
Central Sugar
Limited
1920-21 808 1977 1997-98
2. Ryam Tirhut Co-
operative Sugar Co.
Limited
1914-15 925 1977 1994-95
3. Goraul Sheetal Sugar
Works Limited
1932-33 800 1977 1994-95
4. Siwan S.K.G. Sugar
Limited
1932-33 1000 1985 1993-94
5. Guraru Guraru Chini Mill
Limited
1932-33 850 1979 1991-92
6. New Siwan New Siwan Sugar
& Gur Refining
Company
1918-19 935 1979 1991-92
7. Lohat Darbhanga Sugar
Co. Limited
1914-15 1320 1977 1997-98
8. Bihta South Bihar Sugar
Mills Limited
1932-33 1240 1977 1991-92
9. Sugauli Sugauli Sugar
Works Limited
1933-34 900 1985 1997-98
10. Hathua S.K.G. Sugar
Limited
1933-34 1728 1985 1997-98
11. Lauria S.K.G. Sugar
Limited
1905-06 1626 1985 1997-98
12. Motipur Motipur Sugar
Factory
1933-34 1219 1985 1997-98
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13. Sakri Darbhanga Sugar
Co. Ltd.
1933-34 782 1977 1997-98
14. Banmankhi Purnea Co-
operative Sugar
Factory Limited
1970-71 1000 1977 1997-98
15. Warisaliganj Warisaliganj Co-
operative Sugar
Mills
1933-34 700 1977 1993-94
16. Hathua-
Distlillery
S.K.G. Sugar
Limited
Not available 60 Klpd 2002 2002-03
17. Lauriya
Distillery
S.K.G. Sugar
Limited
Not available 90 Klpd 2002 2002-03


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3. Approach and Methodology Adopted
The approach and methodology adopted for executing the assignment has been
detailed below:
Diagnostic Study


On obtention of the above information a Revival Strategy has been adopted. The
framework of the same is as follows:
Unit Visit
Collection of
Preliminary information
Unit Valuation-Assets
Analysis of the existing
liabilities
Litigation Status against
BSSC/units
Land Title Deed
SBICAP Team along with
Sugarcane Industries
Department
To assess the status of the sugar
units
Sugarcane Industries
Department
To understand the details about
the financial position of the
respective sugar units.
To assess the current value &
remaining life of the assets.
Through Chartered
Engineers: K.S. Projects &
Process Engineers Private
Limited.
To suggest measures of
settlement/waiver of liabilities.
Reports submitted by the
SID.
Through Land valuer

To assess the value of land .
To understand the legal
implications in case of
reorganization of units amid
existing pending cases.
Through Legal Consultant.

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Unitwise Analysis
Viable Units Un-Viable Units
Suggestions for
unitwise strategy
Proposal submitted to
SID, GoB for
approval/suggestions
Approval from GoB
along with
suggestions/alterations
and appropriate
strategy
Invitation for Bids
(RFP-RFQ)
Selection of Investor
Preparation of
Transfer Documents
Handholding Support
to SID for transfer of
units to Investors
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Section II

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4. The Sugar Industry

4.1 Nature of Industry and Current Trend
Sugar is a cyclical Industry. The cycle is pictorially explained below:



At present the Indian Sugar Industry is passing through the phase of recession.
Sugar production in India is expected to cross 27 mt in SY07 taking closing
inventories (end September 07) to over 50% of the forward demand. Therefore,
domestic prices are expected to remain subdued and it is expected that current
levels of sugar price of Rs.13.5 per kg (UP) would be continuing in the near
future as well.

Further, export market profitability remains muted because of low international
prices and the rupee being strong export subsidy is unlikely to help the
industry in a meaningful manner.
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This brings us to the view that standalone sugar mills would always be
vulnerable when the Industry go downward, as compared to integrated units.

4.2 Possible business models for a sugar company

1) Sugar Mollases Bagasse Model - Only sugar manufacturing & selling by-
products without any value addition

2) Sugar Alcohol Bagasse Model Sugar manufacturing and molasses being
again converted into alcohol & further to ethanol and bagasse is sold without any
further value addition.

3) Sugar Molasses Power Model Sugar manufacturing and bagasse based
co-generation, however, molasses is sold without any value addition.

4) Sugar alcohol power model This is the integrated and most widely
preferred model wherein apart from the sugar manufacturing even the by-
products are further processed to manufacture alcohol/ ethanol and generate
power. An integrated model helps in protecting revenues and improving
profitability during periods of downturn in core sugar business. For e.g. sugar
prices fell sharply due to oversupply in the market but alcohol/ power sprices
were relatively stable and contributed heavily to the profitability.

4.3 Revival of Mandatory Ethanol-Blending Programme

The policy has again got revived and a national programme to blend 5% ethanol
with petrol has become effective from November 01, 2006. The programme has
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SBI Capital Markets Ltd. 15
been extended to the entire country except the states in North-east, J&K,
Lakshadweep and Andaman and Nicobar islands. However, the programme has
not been made mandatory and oil companies have been given freedom to protect
their commercial interests at arriving at a viable ethanol pricing. It is estimated
that by 2010-11, around 2500 mn ltr of alcohol/ ethanol will be required to meet
the demand for blending and for industrial, potable and other purposes. In the
event 10% blending becomes mandatory than around 3500 mn lts of alcohol/
ethanol will be required to satisfy the demand. In the event, even if the entire
molasses produced is processed into alcohol, the quantity of molasses required to
meet the projected demand will be 11.3 mn tones and 15.5 mn tones at 5% and
10% blending respectively .

4.4 Status of sugarcane based industry in Bihar Vs. other states

In 1930s, State of Bihar contributed around 30% of the total sugar production of
country which has now come down to 2% [Chart given below]. In 1930s 35 sugar
mills existed as against 28 in 1980s and 9 in 2006. Sugar mills are mostly
concentrated in two districts viz. West Champaran and Gopalganj.

STATEMENT SHOWI NG NET BI HAR SUGAR PRODUCTI ON % TO
ALL I NDI A PRODUCTI ON ( 5 YERS AVERAGE) FROM 1931- 36 TO 2001- 06
31.74
25.21
2.02 2.07
2.76 3.40
3.73
4.21
4.89
7.79
10.77
14.13
16.37
18.67 18.41
0
5
10
15
20
25
30
35
1931-
36
1936-
41
1941-
46
1946-
51
1951-
56
1956-
61
1961-
66
1966-
71
1971-
76
1976-
81
1981-
86
1986-
91
1991-
96
1996-
01
2001-
06

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The downfall of the sugar industry in the state of Bihar was mainly due to non-
availability of sufficient quantity of sugarcane on account of lack of infra-
structure such as main and village link, lack of irrigation facilities, non-
availability of power, water logging in the absence of drainage etc. and non-
availability of good sugarcane varieties on a regular basis.

In Bihar the intensity of cane is not as high as compared to several sugarcane
producing regions in North India and the main reason for the same is that out of
the total cultivable area a sizeable portion is low-lying area which is not suitable
for cultivation of sugarcane in the absence of drainage facilities. The productivity
of sugarcane i.e. yield is 41.4 tonne per hectare in Bihar is much lower than the
national average of 59.4 tonne per hectare (Source- Co-operative Sugar, Nov.,06).

Among other major sugar producing states, sugar factories of Uttar Pradesh are
facing Cane War since new factories have been allowed to be established in
close proximity to existing sugar factories. In Tamil Nadu, the sugar factories
normally bring sugarcane from distance ranging from 50 to 60 kms and in some
cases even from distances upto 100 kms. In Maharashtra, the main cause for
sickness in the sugar sector is the establishment of sugar factories in the close
proximity of each other resulting in lack of availability of sufficient quantity of
sugarcane to each factory.

An effort has been made to map the status of sugarcane based industry in State
of Bihar vis--vis various others Indian states based on the various parameters to
understand the hidden and upside potential of sugarcane based industry in
Bihar. It may be mentioned that the data down below in the tables is upto 2004-
05 during which period it was draught in the state of Maharashtra and
Karnataka and a slight distortions and the decline in performance and
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parameters has been seen in respect of these two states which may be considered
as temporary.

4.4.1 Area under cultivation in State of Bihar

The area under sugarcane cultivation in Bihar as compared to states which are
not much larger in size is very small and thus there is a great potential for
enlargement of the sugarcane growing area. This should be considered in the
perspective of the fact that Bihar has very fertile land and also has some
perennial rivers flowing through it there is very heavy rainfall in the state. All
this further underscores the potential of Bihar to emerge as a major sugarcane
growing state.

Table 1: State wise area under cultivation (in '000 hectares)
Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P
State
Maharashtra 460 530 590 595 578 573 443 324
Uttar Pradesh 1985 1975 2011 1938 2035 2149 2030 1955
Karnataka 310 339 373 417 407 383 243 178
Tamil Nadu 283 306 316 315 231 261 192 232
Bihar 108 107 97 94 113 107 104 104

4.4.2 Annual production of sugar in State of Bihar

The annual sugar production in the state is also very low when compared to
other states. This is mainly due to the very small area under sugarcane
cultivation but also due to less scientific way in which sugarcane is grown in
Bihar. This can be significantly improved by bringing in more area under
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sugarcane cultivation and cultivating high yielding varieties of sugarcane in the
state.
Table 2: State wise annual production (in 000 tonnes)
Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P
State
Maharashtra 38174 47151 53143 49589 45140 42167 25668 20475
Uttar
Pradesh 129267 116483 115419 106068 117982 120948 112754 118715
Karnataka 28332 34771 37567 42924 33017 32485 16015 14276
Tamil Nadu 30183 33765 34285 33188 32620 24165 17656 23396
Bihar 4960 5101 4089 3988 5211 4521 4286 4112

4.4.3 Yield of sugarcane production in State of Bihar

The yield per hectare is much below that of other sugar producing states,
highlighting the fact that cultivation is not done in a very scientific manner and
that hybrid high yielding varieties that are currently in cultivation in other states
are most probably not grown in the state. However, this indicates that there is
scope for great improvement.

Table 3: State wise yield (tonnes per hectare)
Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P
State
Maharashtra 83 89 90.1 83.3 78.1 74.4 57.9 63.2
Uttar Pradesh 65.1 59 57.4 54.7 58 56.3 55.5 60.7
Karnataka 91.5 102.6 100.7 102.9 81.1 84.9 65.8 80.2
Tamil Nadu 106.7 110.3 108.4 105.3 101.6 92.4 91.9 100.8
Bihar 45.9 47.7 42 42.6 46 42.1 41.4 39.5
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4.4.4 Sugarcane crushed in State of Bihar

Table 4: State-wise sugarcane crushed ('000 tonnes)
Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P
State
Maharashtra 34584 47897 57079 57649 48387 53441 29077 19456
Uttar Pradesh 40907 41270 48788 48961 55209 59271 46352 51472
Karnataka 9110 13108 14815 14930 14450 17303 10942 10283
Tamil Nadu 14593 19594 18693 18479 19141 16645 9282 11492
Bihar 3118 3016 3994 3161 3898 4537 2932 2650

4.4.5 Duration of crushing season in State of Bihar
The sugarcane growing season is also of a smaller duration than other sugarcane
growing states which means that the sugar mills would remain in operation only
during a small part of the year. This in turn reduces the viability of standalone
sugar mills and emphasizes the importance of both increasing the duration of the
crushing season and establishing integrated mills that can remain profitable
during the time of the year when crushing is not possible.

Table 5: State wise duration of crushing season (days)
State /Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P
Maharashtra 139 160 174 146 125 122 76 67
Uttar Pradesh 116 114 132 125 150 158 114 117
Karnataka 127 171 174 157 142 157 105 100
Tamil Nadu 171 207 182 180 195 173 111 143
Bihar 112 108 130 103 117 125 81 82

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4.4.6 Recovery Rate in State of Bihar
When we take a look at the sugar recovery rate in Bihar we find that it is not very
bad compared to the other states, which means that a sugar industry in Bihar is
operating at almost comparable efficiency as the other states. The state thus has
the potential of becoming a major sugarcane producer and thus can generate
revenues for the state and direct - indirect local employment for thousands of
people once the sugarcane based industry is revived. But then as mentioned in
the other paragraphs, concrete steps have to be taken to grow adequate quantity
of good quality of sugarcane so that any new unit set up does not suffer from
supply constraints.

Table 6: State wise sugar recovery rate (%)
State /Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P
Maharashtra 11.12 11.14 11.39 11.63 11.6 11.64 10.92 11.39
Uttar Pradesh 9.78 9.04 9.34 9.71 9.52 9.53 9.82 9.79
Karnataka 10.52 10.47 10.64 10.75 10.72 10.79 10.19 10.11
Tamil Nadu 8.42 8.83 9.2 9.64 9.61 9.88 9.92 9.64
Bihar 9.51 8.54 9.2 9.11 8.78 9.0 9.33 9.58

It may be concluded from the above six tables that there is lot remains to be done
with respect to sugarcane based industry in State of Bihar. It is evident from the
above that the efficiency in terms of yield etc can be improved drastically with a
well thought strategies and programme. The chart below shows the 5 years
average recovery in State of Bihar vis--vis all India recovery since 1931.



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8.74
8.86
9.40
9.44
10.60
10.06
10.22
9.93
10.08
9.88
9.54
9.85
9.38
9.86
9.50
9.70
8.89
9.81
9.11
9.84
9.07
9.96
9.08
9.93
9.09
10.02
9.11
10.08
9.23
10.25
8.00
8.50
9.00
9.50
10.00
10.50
11.00
1931-
36
1936-
41
1941-
46
1946-
51
1951-
56
1956-
61
1961-
66
1966-
71
1971-
76
1976-
81
1981-
86
1986-
91
1991-
96
1996-
01
2001-
06
STATEMENT SHOWING SEASON-WISE
(5 YEARS AVERAGE) BIHAR AND ALL INDIA RECOVERY FROM 1931-36 TO 2001-06
BI HAR RECOVERY% ALL I NDI A RECOVERY%


4.5 STUDY OF EXISTING SCENARIO IN STATE OF BIHAR

a) Number of units in operations
Year No. of sugar mills Crushing capacity (tonnes)
1980 28 34000
2006 9 34450

It is evident from the table above that the crushing capacities have remained the
same mainly due to the fact that most of the units have closed and the existing
units have increased their capacities. The mills who have ploughed back their
profits in ramping up the capacities have survived and rest others have closed.

b) Capacities Ramp up by existing mills

S.No. Factory Crushing capacity
1980 2005
1 Harinagar 1920 8500
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2 Bagaha 1100 2500
3 Narkatiaganj 1500 5000
4 Majhaulia 2000 3500
5 Riga 1300 3500
6 Hasanpur 1300 1750
7 Harkhua 1300 5000
8 Sidhwalia 1100 2500
9 Sasamusa 1100 2200
TOTAL 12620 34450

Going forward, ramping up of capacities backed by the adequate availability of
sugarcane for feeding mills and achieving economies of scale would be
important consideration in reviving the sick sugar mills.

c) Distance Criteria

The Central Government vide its recent notification has specified that no sugar
factory shall be set up within the range of 15 kms of an existing sugar factory or
another new sugar factory, provided that the State Government may with prior
approval of the Central Government, notify such minimum distance higher than
15 kms in their respective States.

The above distance criteria of 15 kms in the case of sugar factories in Bihar may
considered to be highly inadequate, in view of both low intensity of sugarcane
and low productivity of sugarcane due to reasons mentioned above. As a result
the sugar factories have historically faced the chronic problem of lack of
availability of adequate quantity of cane commensurate with their crushing
capacity resulting in large scale sickness in the industry due to which out of
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twenty eight factories in 1980, nineteen factories have closed down and only nine
factories in the private sector are presently working.

In this connection it may be mentioned that Tuteja Committee (set up by the
Food Ministry under the Chairmanship of Shri S.K. Tuteja secretary, Department
of Food and Public Distribution in March, 2004 for suggesting measures for
revitalization of sugar industry) has also recommended a minimum radial
distance of 25 km between two sugar factories, based on the availability of
sugarcane for a 5000 TCD plant.
4.6 Conclusion
To attain the long term sustainability / viability of sugar mills, the focus should
be to create the large capacities integrated sugar complexes. Further it needs to
be ensured that the mills getting revived under this package could eventually
expand their capacities to 10000 tcpd each. It is therefore essential, in the larger
interest of these mills (getting revived), to identify the command area which
could eventually cater to above capacities of sugar mills.

Accordingly, GoB should adopt the policy of long term reservation of cane areas.
Once the units are confident that the given area would remain with them on a
permanent basis, they can undertake intensive cane development work which
would help in improving the productivity of sugarcane, which will ultimately
benefit the sugarcane farmers and the mills.
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5 Sugar Units-Locational Map



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Section III


R
R
R
E
E
E
V
V
V
I
I
I
V
V
V
A
A
A
L
L
L


P
P
P
L
L
L
A
A
A
N
N
N


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6 Scope of Work
As per the work order awarded by Government of Bihar (GoB), a diagnostic
study on as is where is basis, which inter alia included valuation of assets,
analysis for future viability based on operational and financial parameters, and
suggestions for revival plans. Accordingly, technical consultants & valuers were
appointed to value the assets and analyse the units health on as is where is basis.
Further, financial analysis of the units has been done by SBICAP based on the
internal audit report of the units provided. The viability and unviability of the
operations have been discussed in detail in the unitwise report, however,
summary of the same is given below:

Unitwise Summary Plan
S. No. Unit Name Remarks
1 Banmankhi Can be expanded to 2500 TCPD + 60 KLPD distillery +
12 MW Co-Gen plant with an additional investment of
Rs. 164 crore approximately. However, it is felt that
since there is no sugar mill in the close vicinity,
therefore cane growing area suitably be allocated to
take care of the future expansions.

The unit also has a farm land area of 55 acres which
may also be given alongwith the transfer of unit. The
colony land may be allowed to be converted into
factory land for immediate or future expansions. The
adjacent farm land, if any, may be allowed to be used
as factory land.

There is no sugar unit in the vicinity and therefore it is
proposed that GoB shall allocated a can growing area
based on the proposed investment plans of the
potential investor which may even be sufficient to cater
to the integrated sugar complex with a capacity of
10000 TCPD.
2 Bihta The unit is located about 35 kms from Patna. The plant
was installed in 1938 and condition of the plant is
dilapidated. No substantial expansion is possible since
Private &Confidential Viability Report

SBI Capital Markets Ltd. 27
land area including colony is only 24 acres only, which
is located in the town area. The unit may be used for
other industrial/ commercial purposes.

A Greenfield plant may be considered in the farm land
(located at Jinneswargarh) based on the availability of
sugarcane in the area.
3 Goraul A juice based distillery of 90 klpd can be planned
taking into account the milling capacity of the existing
plant for which a boiler, TG and a distillery will have
to be installed. The estimated cost of the project would
be around Rs. 140 crore. The unit also has a farm land
area of around 6.83 acres which may also be given
alongwith the transfer of unit.

The colony land may be allowed to be converted into
factory land for immediate or future expansions. The
adjacent farm land, if any, may be allowed to be used
as factory land.

4 Guraru The plant is very old and of small capacity. It is also in
poor condition and cannot be expanded in a small area
and can be explored for alternative commercial /
industrial uses.
5 Hathua &
Hathua
Distillery
Located in Gopalganj district, where three private
sugar mills are operating with a total capacity of 9700
TCPD. The unit may be expanded to 2500 TCPD
alongwith 12 MW Co-gen plant. Hathua distillery of 60
KLPD may be used for production of alcohol/ ethanol
out of the juice produced from Hathua unit. The
estimated cost of the unit would be Rs. 164 crore
approximately. The attachment of Hathua distillery
with Hathua sugar unit will improve the viability and
thereby investors interest.

The unit also has a farm land area of around 10 acres
which may also be given alongwith the transfer of unit.
The colony land may be allowed to be converted into
factory land for immediate or future expansions. The
adjacent farm land, if any, may be allowed to be used
as factory land.

As indicated above, GoB can allocate the maximum
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SBI Capital Markets Ltd. 28
possible cane growing area to this unit taking into
account the requirement of existing units and their
expansion plans, if any.
6 Lauria &
Lauriya
Distillery
Located in West Champaran district, where four
private sugar mills are operating with a total capacity
of 21000 TCPD. The unit may be expanded to 1500-
2000 TCPD to cater to juice based distillery of 90 KLPD.
The estimated cost for refurbishment of the sugar unit
would be around Rs.140 crore approximately.

Lauriya distillery of 60 KLPD may be used for
production of alcohol/ ethanol out of the juice
produced from the Sugar unit initially. The other 30
KLPD old distillery has become technically obsolete
and therefore may be scraped.

The attachment of Lauriya distillery with Lauriya
sugar unit will improve the viability and thereby
investors interest.

The unit also has a farm land and outcentre land area
of around 164 acres which may also be given
alongwith the transfer of unit. The colony land may be
allowed to be converted into factory land for
immediate or future expansions. The adjacent farm
land, if any, may be allowed to be used as factory land.

As indicated above, GoB can allocate the maximum
possible cane growing area to this unit taking into
account the requirement of existing units and their
expansion plans, if any.
7 Lohat There are two more sick units Sakri & Ryam which are
located adjacent to the Lohat unit. Sakri is located at a
distance of 15 km and Ryam is approximately 20 km
from the unit.

Can be expanded immediately to 2500 TCPD + 60
KLPD distillery + 12 MW co-gen plant with an
additional investment of Rs.164 crore approximately.

Lohat has a factory & colony land area of around 95
acres which augers well for future expansion. Given
the potential of Lohat, it is proposed that Sakri may not
Private &Confidential Viability Report

SBI Capital Markets Ltd. 29
be revived for sugarcane based industry, which is aunit
in the vicinity.

Therefore cane growing area be suitably allocated to
take care of the future expansions of capacity of the
mill.

The unit also has a farm land area of 115 acres which
may also be given alongwith the transfer of unit. The
colony land may be allowed to be converted into
factory land for immediate or future expansions. The
adjacent farm land, if any, may be allowed to be used
as factory land.

8 Motipur Can be expanded immediately to 2500 TCPD + 60
KLPD distillery + 12 MW co-generation plant with an
additional investment of Rs. 164 crore approximately.

Motipur has a factory & colony land area of around 66
acres which augers well for future expansion and
accordingly cane growing area be suitably allocated.

The unit also has a farm land area of 1297 acres out of
which 300 acres may be given along with the transfer
of unit. The colony land may be allowed to be
converted into factory land for immediate or future
expansions. The adjacent farm land, if any, may be
allowed to be used as factory land.

9 New Siwan The unit is inside the town of New Siwan. Transport of
cane through the township is difficult. The unit can be
used for other commercial / industrial purposes.
10 Ryam Ryam has a land area of around 26 acre which is very
small and possibility of reviving may be difficult since
Lohat unit, having better potential for revival is in
close proximity. The unit can be used for other
commercial / industrial purposes. However if there is
no potential bidder for Lohat, Ryam may be looked for
revival.
11 Sakri The unit is inside the town of Sakri and is near to Lohat
(which has a bigger potential of revival). Thus while
Lohat may be revived, Sakri may not be used as Sugar
unit. The unit can be used for other commercial /
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SBI Capital Markets Ltd. 30
industrial purposes.
12 Samastipur The unit is inside the town of Samastipur. Transport of
cane through the township is difficult. The unit can be
used for other commercial / industrial purposes.
13 Siwan The unit is inside the town of Siwan. Transport of cane
through the township is difficult. The unit can be used
for other commercial / industrial purposes.
14 Suguali Located in East Champaran district with a land area of
82 acres and farm land area of around 319 acres. Can
be expanded immediately to 1500 TCPD + 90 KLPD
distillery + 7 MW co-generation plant with an
additional investment of Rs. 140 crore approximately.


Suitable cane growing area be allocated to take care of
the units requirement.

The farm land of 200 acres out of 319 acres may also be
given alongwith the transfer of unit. The colony land
may be allowed to be converted into factory land for
immediate or future expansions. The adjacent farm
land, if any, may be allowed to be used as factory land.

15 Warisaliganj Can be expanded immediately to 1500 TCPD + 90
KLPD distillery + 7 MW co-generation plant with an
additional investment of Rs. 140 crore approximately.
The unit also has a farm land area of 36 acres which
may also be given alongwith the transfer of unit. The
colony land may be allowed to be converted into
factory land for immediate or future expansions. The
adjacent farm land, if any, may be allowed to be used
as factory land.
Note :

1) The above estimated cost has been worked out considering the usable plant & machinery of
the respective unit. The actual investment may differ from the suggested investment based on
the capacities ad configuration of machinery, as per the plan of the new investor. Thus the
costs are only indicative in nature.

2) It is proposed that Farm Land which is not given to the Investor along with the unit may
be used by the Government for some other industrial or agricultural purpose. Alternatively
the GoB may decide to allocate the entire farm Land and outcentre Land to the investor along
with the units which have been proposed viable for sugarcane based industry.
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7 Appropriate Transfer Model

7.1 Mode of Transfer
The Government had acquired the units to protect the labor and cane growers
from hardship, which they were facing due to units not doing well during those
times. The acquisition was primarily oriented at ensuring continued production
of sugar and other goods, safeguard the interest of the sugarcane farmers and
laborers engaged therein. Therefore, any transfer model shall primarily ensure
the well being of cane growers as also the labours. The various transfer models
has been discussed hereunder:

The units can be transferred to the successful bidder in three possible ways.

i. Outright Sale of the Unit
The first option of outright Sale of the unit may invite litigation as the purpose of
the Government at the time of acquisition was revival of the units and thereby
outright sale of the units to private owners may lead to difficulty in transfer.

ii. Public Private Partnership (PPP)
While Public private partnership has been successful in infrastructure sector, in
manufacturing sector, the investors generally like to run the unit free from any
possible external interferences. Secondly, accepting the shareholding by carving
out a unit under PPP model would also tantamount to sale (equity holding of
BSSC in JV Company being consideration for land, building and Plant &
machinery) and may lead to legal hurdles. In addition to the above, conversion
for the value assets into equity may not bring direct cash flow which would be
required for settlement of some of the liabilities.


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iii. Long Term Lease of the Unit
In case of opting for long term lease the ultimate ownership of the Land
remains with the BSSC/Government. Again the investors may also benefit for
having access to land with adequate infrastructure for sugar mill/ industrial
production. The Government has right and option to renew the Lease after
the Lease period.
In view of the above, it is proposed to adopt the Lease Model for successfully
transferring the assets for smooth revival of the units.

7.2 Rationale of Leasing Model
a) GoB will be the actual owner of the land, and its only the right of use is
being transferred to the investor on lease basis.
b) In an event when the Investors have not been able to implement the
project in specified time then the GoB would reserve the right to take back the
unit after providing adequate time and paying adequate compensation.
c) The lease model would avoid the possible litigations as indicated above.
d) The Lease model shall be adopted for sugarcane based industries in case of
revival or else the Land would be leased out for commercial or industrial
activity.

7.3 Lease Period for Land
A lease period of 60 years (further renewable for 30 years) is being proposed
for the consideration of GoB. The above lease period is being proposed
because of the following reasons:

a) It has become generally accepted norm of offering lease of land on Long
Term basis to provide continuity.
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b) Long term lease provides a comfort to the lenders community for purpose
of creating mortgages.

c) Investment in manufacturing sector is generally made with a long term
horizon. Once substantial investment has been made, the investors needs
longer period to get adequate return on the investment. If the lease period is
short, long term investment may not be viable for the investor. Thus a long
term lease may be more attractive to the investor for considering substantial
investment in the unit.

d) Discussions were carried out with the prospective investors who had
earlier shown interest in investing in sugar sector in the state, and they were
comfortable only on outright sale basis, and thus it is felt that any lesser
period of Lease may not attract potential bidders for Long Term investment
in the state.

It may be mentioned that farm land attached to the unit have not been offered in the
bid process management. In order to enhance the attractiveness of the bid process, it
may be recommended to allot a portion of farm land preferably as suggested in the
table below to the potential investors in sugarcane based industry only the prices for
which has not been considered in the fair value. The farm land would be allotted on
lease basis for the similar period of 60 years and would be utilized only for the sugar
industry. The balance farm land may be utilized by Government of Bihar for other
agricultural/ industrial/ commercial purpose.





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The details of the available land as provided by the GoB are as follows:

Sl No. Unit Name Factory
and
Colony
Land
(Acres)
Farm
Land &
Outcenter
land
(Acres)
Farm land
proposed to
be transferred
1 Banmankhi 64.00 55.00 55.00
2 Bihta 23.78 0 0
3 Goraul 47.58 6.83 6.83
4 Guraru 24.51 0 0
5
Hathua &
Hathua
Distillery
67.36 10.36 10.36
6
Lauria &
Lauriya Dist
61.34 164.28 164.28
9 Lohat 92.00 116.00 116.00
10 Motipur 66.00 1297.40 300.00
11 New Siwan 28.30 0.00 0.00
12 Ryam 26.02 0 0.00
13 Sakri 32.23 47.82 0.00
14 Samastipur 20.90 0.00 0.00
15 Siwan 30.38 2.20 0.00
16 Suguali 89.37 341.40 200.00
17 Warisaliganj 37.90 35.68 35.68


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8 Valuation & Fair Value

8.1 Valuation
The valuation of a unit is normally done on running concern basis or fair value of
the assets. All the units of BSSC are inoperative and therefore the basis of
valuation have broadly been fair value of the assets. Valuation of both land and
plant & machinery have been done by the independent valuers and the land
valuation has been done based on both market and government rates while the
valuation of plant & machinery have been done based on the usable and scrap
value of equipment.

a) Land : Land have been valued at both market rates as also based on the
government rates. Generally, it has been observed that value as per market rate
have been more than that as per government rate and that the aggregate market
value for all the 17 units is more than the aggregate government value.

b) Plant & Machinery: An effort has been made to segregate plant & machinery
into usable and scrap items and accordingly have been valued by the
independent Chartered Engineer. The valuation report has been provided in the
unitwise reports.

8.2 Fair Value
Sugar industry in India is facing a downturn cycle due to steep fall in prices of
sugar. Further in Bihar, the cane growers have shifted to alternate crops and
although are keen to see the revival of these units to cash on this cash crop viz.
sugarcane, but at the same time are jittery as the units have remained closed for
long. From the point of view of investors, they would need to create the complete
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SBI Capital Markets Ltd. 36
infrastructure for running the sugar mill successfully, which would include right
from starting of development of sugarcane cultivation to ensure the availability
of sugarcane required for the mill.

In light of the above backdrop, it is felt that attracting the investor in the current
industry scenario would be difficult unless some attractive pricing structure is
framed for luring the investments in the State so that the deal becomes attractive
for the prospective investors.

The basis of arriving at Fair Value that may be considered during Bid
evaluation process has been separately discussed and suggested.
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9 Settlement Process, Sacrifice & Utilisation of the Proceeds

9.1 Settlement process
The settlement process is based on the fact that the new investors would be
interested only if the units are handed over to him free from all encumbrances
and liabilities settled before the units are actually handed over. The annual
reports of the units (internal audit) have been analysed and it has been observed
that all possible liabilities as prevalent in any closed unit are there. However, for
the purpose of settlement of liabilities of these units, we have considered labour
and secured liabilities (bank dues) as the basic liabilities which are expected to be
settled out of the bid proceeds. Apart from the labour and secured liabilities
(bank dues) all other liabilities would either be waived or settled by GoB.
Further, government would indemnify the potential investor of all such liabilities
which may accrue in future as a result of takeover.

It may be mentioned that while the Land has been proposed to be offered on Long term
Lease, the ownership for Plant and Machinery including scrap is to transferred to the
Investors who would have right to sale or use the same as per their convenience.

9.2 Sacrifices
As indicated above, not all the liabilities can be met out of proceeds and therefore
certain liabilities have to be waived or met by GoB. The liabilities which have
been identified and is expected to come up in course of revival is given in the
table below. Besides certain other unidentified liabilities may also arise because
of certain court decrees or other reasons, which would also need to be settled by
GoB.

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The liabilities which are to be settled and the mode of settlement /sacrifice are as
follows:
SL.
No.
Nature of
Liability
Settlement
Process
Reasons/Remarks Possible
Problems
1. Labour Dues

To be settled out
of the bid
realization
proceeds
The claims of labour
including settlement
claims need to be
satisfied before
transferring the units
to the investors for
smooth transition of
the revival package.
In case shortfall
from the
proceeds, the full
settlement may
not take place
and thereafter,
GoB has to settle
the liabilities.
2. Payment
arising due to
Court Order
May be settled
out of the
remaining
surplus
(Proceeds-1)
The amount is
contingent upon award
of any compensation to
any aggrieved party by
Court of Law and
therefore the amount
cannot be estimated
currently.
In case the
amount cannot
be paid out of
the surplus, the
same has to be
settled by GoB.
3. Secured
Loans
To be settled out
of the remaining
(Proceeds -1-2)
The secured loans are
generally from
Banks/SDF/Co-
Operative Banks who
have charge on the
assets of the unit.
In case of
shortfall, the
Government has
to settle the
liability.
4. Cane
Growers
Settled/in the
process of
As per the information
provided to us, the
No difficulty
envisaged
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Dues settlement by
GoB
same has been settled
by GoB.
5. Unsecured
Loans
To be waived off The unsecured loans
are by GoB and may be
waived off since the
proceeds would not be
able to service the
same.
No difficulty
envisaged
6. Other
Liabilities
(State
Government)
To be waived off Any amount due to the
GoB may required to
be waived off, since
sufficient inflow from
the investor towards
settling the same may
not be available.
No difficulty
envisaged
7. Other
Liabilities
To be settled by
GoB
If any other liability
exists or accrues in the
process of bidding, the
same is suggested to be
taken care of by GoB.
There might be
legal issues
involved during
the bidding
process from any
aggrieved party.
The same has to
be managed
appropriately by
GoB.
8 Excise dues
Hathua
Distillery
To be waived off
by GoB
Hathua & Lauriya
distillery have been
attached to the
Liabilities needs
to be waived by
GoB as excise on
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SBI Capital Markets Ltd. 40
Rs.64.72 crore
and Lauriya
Dstillery Rs.
42 crore
respective units in the
bidding process and
therefore settlement of
excise liabilities is
important without
which Hathua and
Lauriya units could not
be put on bidding
process.
distillary is a
state subject.

9.3 Utilisation
Once the bid price is decided (of the possible alternatives provided separately)
by the appropriate authority, the same may be considered as the Reserve Price
for the unit in the Bid documents.

However the proceeds from the above may not be able to satisfy the entire
liabilities of the units and it is proposed that the proceeds may be utilized for the
following priority payments:

a. Settlement of Labor Liabilities including compulsory retirement.
b. Settlement of Bank/SDF dues to the extent of principal amount
only.
c. Settlement of dues for any claim for which Court may/has ordered
for payment of any specific amount or guided any method of
calculation for payment of such amount.

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However, in an event where the proceeds from the bidding is lower than the
above claims, the Government has to make necessary arrangement for settlement
of the above dues. The liabilities shall not be transferred to the asset transferee.
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10 Litigations and Settlements

10.1 Litigations

An effort was made by the Legal Counsel to identify the legal cases pending
against Bihar State Sugar Corporation/ GoB with respect of the above units,
which have been mentioned in the reports of individual units. Apart from those
there are certain other major legal cases, which has the propensity to adversely
affect the entire revival process. The legal opinion on these cases is detailed as
under:

i. Settlement of Labour Issues
As per section 11(2) of Bihar Sugar Undertakings Acquisition Act, 1985 all
persons who were workmen within the meaning of Industrial Disputes Act, 1947
engaged under the scheduled undertakings on or before 29.10.1978 became
employee of the State Sugar Corporation and there services legally deemed to be
continued without any break.

It may be worthwhile to mention that any investor would be interested to invest
only if the units are offered to him free from all encumbrances, litigations as also
the liabilities (including labour liabilities).

The units of BSSC (excluding the two distilleries) employs 1574 labours/ staffs/
officers as on February 2007. The unitwise labour liabilities both in terms of
arrears as also the settlement (based on 15 days for each completed year of
service and 45 days for the remaining service period) has been provided by the
officials of the respective units. It may be mentioned that the settlement terms
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SBI Capital Markets Ltd. 43
was based as per the provisions of Section 25F of the Industrial Disputes Act,
1947.

ii. Settlement of Pending Suits
It has been observed that majority of the pending legal cases are from aggrieved
labors for payment of their dues. The same would be settled once the proceeds
from the bids are allocated towards settling their dues. As per the legal opinion
the above type of issues would not be affecting the transfer process. The unit
wise litigation cases has been separately discussed in the unitwise reports and
more specifically provided in the report submitted by the Legal Counsel and
provided hereto. Besides certain erstwhile owners have also filed suit against the
GoB.

iii) Excise Matter
Excise on distillery is a state subject payable to the department of excise, GoB and
therefore the GoB can very well fix a moratorium, waive or otherwise deal with
these dues.
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11 Suggested Plan of Action
a) The model suggested in this report is required to be approved by
appropriate authority of GoB, with/without suggestions/ modifications.
Thereafter, permission from the High Court is required to be taken since
Liquidation petition is pending before the Honorable Court.
b) Legal opinion regarding Winding up Petition Already Filed:
Since no winding up order is yet been passed and no Official Liquidator is
appointed, it is within the powers of the corporation to file application for
closure and / or negotiate the matter with the concerned parties. But once
winding up order is passed and Official Liquidator is appointed then nothing
can be done unless consented and permitted by the Company Judge.
However as the Honbe Company Judge is in the seisin of the matter, the
Court should be apprised about all the steps including unit wise bidding and
order be obtained so that the winding up petition remain pending in the
court

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12 Tendering/Bidding Process
Once the plan is approved by Honorable High Court, bids shall be invited from
various parties for Long Term Lease of the units. The investors shall have the
right to utilise/sell the existing plant and machineries to their satisfaction. The
investor would not have right to sell the land. The investor would however be
allowed to mortgage the land and other assets to its lenders for arranging debt
for the unit.
The Tendering Process shall be as follows:

a. An advertisement will be issued by GoB in major dailies with regard to
the proposed Revival package and asking the potential bidders for about
the package and units being offered.
b. The Bid documents shall also be uploaded on Government of Bihar
website.
c. The bidders shall be given a time period of 30 days for submission of the
Bid.
d. The Bid selection criteria shall be described in the Bid documents.
e. The successful Bidder has to submit a Bank Guarantee for the balance bid
proceeds at the time of execution of transfer agreements.

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13 Selection Criteria

The Bidding shall be carried out in two separate parameters
i. Technical Bid
ii. Financial Bid
The eligibility of the technical part shall be the first stage of selection. The basis
of selection of Technical Bid has been enumerated in the table below.
SL No. Criteria Legend Weightage (%)
1. Group turnover <25 Crore-0
Rs. 25-100 Crore-5
>Rs.100 Crores-10
20%
2. PBT of the Group <1 Crore-0
Rs. 1-10 Crore-5
>Rs. 10 Crores-10
15%
3. Net worth of the
Group
<50 Crore-0
Rs.50-100 Crore-5
>Rs.100 Crores-10
20%
4. Proposed Total
Investment #
<Rs25 Crores-0
Rs.25-50 Crores-2.5
Rs. 50-100 Crores-5
Rs.100-150 Crores-7.5
>Rs. 150 Crores-10
20%
5. Management
Capability
Experience in Sugar
Manufacturing=> 3 Years-10
Experience in other
Manufacturing Sector=>5
years-10
Business experience in Other
15%
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than manufacturing Sector
>10 Years -10
None-0
6. Proposal for
setting up sugar
unit in Bihar
already approved
by GoB
Yes 10
No 0
10%
# Performance guarantee of 5% of the investment amount as indicated in the bid documents to be
furnished at the time of execution of transfer agreements. The guarantee will be released once the
80% of the investment proposed is made and the unit becomes operational.

The Minimum selection Criteria value shall be 3.75 based on the selection criteria
above. However in case the same is not met by sufficient number of bidders, the
minimum selection base may be further relaxed after analyzing the quality of the
bids received.

Once the Bidder is selected on the above criteria, the H1 Bidder shall be selected
based on the Highest Bid Value. The names of H2 and H3 Bidders shall also be
announced and in case of non-performance of the obligations of H1 bidder for
payment of fees, the units would be offered to the next highest bidder. However,
in case there is a tie in the financial bids then bidder with highest score in
technical evaluation will be declared as the winner.

The Bidders shall also have to submit Earnest Money Deposit of Rs.10 lakh with
their bids. The EMD of the unsuccessful Bidders shall be released after the
announcement of the H1, H2 and H3 Bidders. The EMD of H2 and H3 would be
released after part payment by H1 in a specified time. In case H1 has failed the
payment of the Bid value, the unit would be automatically allotted to H2 at a
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SBI Capital Markets Ltd. 48
price of H1 and EMD of H1 shall be forfeited. Similarly H3 will be considered in
case H2 fails under the bid process management.

The successful bidder would have to arrange for Bank guarantee for the unpaid
bid amount, before the documentation of the handing over of units. The signing
of lease/transfer documents would complete the process.

However in case of failure on payment by all the three Bidders above, GoB may
take appropriate decision.

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14 Transfer Process
The transfer of units to be done through the following process:
a. The Bihar State Sugar Corporation/GoB shall enter into a Lease
Agreement of the unit with the Investor for a period of 60 Years to be
renewed further for 30 years.
b. The Lease Deed shall provide for Government consent for subleasing the
Land. However the initial lock in period shall be 20 years before which the
Land cannot be transferred to any other party other than to the GoB.
c. Lease deed shall provide mortgageable rights.
d. The Investor shall make the payment of the Bid amount as per follows:
Sl No. Stage % Payment Payment Time Line
1. At the time of award
of selection
10% of the Bid
Value
Payment to be made within
one month from the date of
such award
2. At the time of Signing
of the Transfer
Agreement
40% of the Bid
Value
Payment to be made on the
day of signing the Transfer
Documents
3. After 1 year from the
signing of the
Transfer Agreements
25% of the Bid
Value
To be made on the 13
th

month of the signing of the
Transfer Agreements
4. After 2 years from
signing of the
Transfer Agreements
25% of the Bid
Value
To be made in the 24
th

month of the signing of the
Transfer Agreement

The investor shall be required to submit a Bank Guarantee to the extent of
balance amount of the Bid value to GoB (i.e. 50%) at the time of signing of
Transfer Agreement. The BG shall be released proportionately at the time of
payment of the balance Bid amount as per the above schedule.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 50

e. The Labour liabilities for each unit shall be settled by the proceeds from
the Bid amount. The payment may be structured in a phased manner
based on the receipt of the proceeds. However an agreement to this effect
has to be entered with the Labour Unions by the GoB whereby the
Government has to undertake the payment as per a specified schedule.
f. Depending on the success of Bids, the units for which investors are not
interested may be suitably used for some other commercial / industrial
purposes.
g. GoB may decide on identifying a nodal agency for assisting the units,
collection of lease premium and appropriating the same towards payment
of the liabilities.
h. The Government may consider to dispose of the assets of the units for
which no interest is being received from investors and may Lease the
Land for alternate commercial/ industrial / any other purposes.
i. GoB shall indemnify the potential investor for losses incurred in the event
of transfer process not being successful even after the investor meeting his
obligations in entirety. Further, GoB shall indemnify any unidentified
liabilities / events which may tend to disrupt the implementation/
operations of the unit.
j. GoB shall transfer the unit free from all encumberances to the successful
bidder within 3 months from the date of award of the unit and the initial
payment received by GoB, failing which GoB will have to pay an interest
of 15% p.a. for next 3 months on the amounts received from the investor.
If GoB fails to handover the unit in the above six months then either with
mutual agreement the time frame for handing over the land can be
extended or GoB shall refund the amount alongwith interest to the
investor.

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15 Suggestions for additional incentives for inclusion in Sugar Policy
Sugar industry has been a politically sensitive industry and governmental
intervention is frequent to control on the supply as well as the prices of sugar. It
is evident that sugar industry in Bihar is lagging both in sugarcane cultivation as
also the yield because of which there has not been any substantial investment in
the recent past. Further, governmental support to promote the sugar industry in
the state was also not very visible so far. As a result, canegrowers have shifted to
alternate crop making the things more difficult for the government. It is therefore
advised to formulate a comprehensive sugarcane policy to exploit the sugarcane
growing potential of the state as also to promote the industrial development in
the state. The revival of closed sugar mills is a step in the right direction.
However, these units are closed for more than a decade and a substantial
support /concessions would need to be granted to these units to see the effective
revival of the units. It is therefore suggested that the following measures may be
considered by GoB for an overall inclusive growth and attract Investors in the
state on the continuous basis :

i. Decontrol of Molasses: Considering a downturn in Sugar Industry, the
investors shall be considering economically viable alternatives for
sustainable growth. The control on sale of molasses might act as a
hinderance to the independent sugar producing units. The
Government may approve decontrol of molasses produced by sugar
mills. Further free sale of molasses produced in the state to any other
state should be allowed. The Alcohol manufactured in the state should
also be permitted to be exported outside the state.
ii. Decontrol of Bagasse Disposal: The Baggase Disposal Policy may be
suitably framed to allow the companies to sale the Bagasse
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SBI Capital Markets Ltd. 52
interstate/intrastate without any control. Again the same should also
be free from any trade tax.
iii. Capital Subsidy: Presently the Government is providing 10% subsidy
on plant and Machinery subject to a maximum of Rs. 10.00 crores. To
attract bigger investment the maximum ceiling should be removed and
the subsidy may be 10% of the Plant and Machinery.
iv. For captive power plant/cogen, the current capital incentive is to the
extent of 10% which may be increased to 50% as per the present
industrial policy.
v. The State Electricity Board has to enter into a firm PPA with Co-
generation owners for excess sale. The payment mechanism may be
guaranteed by the Government of Bihar for generating interest and
better security mechanism i.e. By way of revolving Letter of Credits
which is generally followed by most of the states.
vi. Permission should be granted to sugar mills to manufacture
alcohol/ethanol from cane juice directly at the choice of manufacturer.
vii. The government may formulate proper policy for enhancing irrigation
support to the farmers by providing subsidies and equipment.
viii. It is highly recommended that the Government should provide
commitment to the investors by allocating an area of minimum 30 km
of radius directly to the new sugar unit and restriction on setting of
any other new unit in the designated area. The same is required to be
announced in the Bid document and at the time of tender process to
elicit interest from the investors.
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SBI Capital Markets Ltd. 53
16 Recommendations
Based on the analysis indicated above, it is proposed that GoB may approve the
following:
1. Revival plan for units and suggested course of action.
2. GoB shall approve the reserve price and Bid criteria as also the Bid Process
Management.
3. GoB shall approve the estimated cost of revival scheme and means of finance
and shall agree to fund the deficit, if any from its own sources.
4. GoB shall agree to indemnify the investor against all the present and future
liabilities which may arise out of these units in course of revival process.
5. GoB shall agree to transfer the land within 3 months failing which it would
pay interest for next 3 months @ 15% p.a. and further extension would be only
with mutual consent.
6. GoB shall waive all the unsecured loans owed by the unit and shall also agree
to settle / waive excise liabilities, sales tax, any other tax liabilities and other
liabilities.
7. GoB shall settle all the labour issues and litigations related to labour as also
other issues. Any further liability arising out of these settlements shall also be
borne by GoB directly.
8. GoB shall allow conversion of residential and colony Land for industrial
purpose and in case farm land is attached, the farm Land to be used for factory
purpose.
8. GoB shall assure the investors that they would be given single window
clearance as is being done presently by few other State Governments including
Central government in case of Ultra Mega Power Project.
9. GoB shall ensure infrastructural support to the units viz. flood control, roads,
power, irrigation and other related issues as present or support for any other
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SBI Capital Markets Ltd. 54
such issues which may hinder the implementation process as also the operations
of the unit.
10. GoB shall agree to lease the land for a period of 60 years (further renewable
for 30 years) and attach the farm land to the concerned unit as suggested above,
the price of which does not form part of the bid price. Incidentally, the farm land
so attached would also be on lease basis, the usage of which would be restricted
to sugarcane based industry including setting of the Greenfield unit (sugarcane
based).
11. GoB may consider providing exemptions/ incentives etc as indicated above
in the note and such exemptions shall be continued on continuous basis.
12. It is proposed to provide suitable approving powers to Industrial
Development Commissioner or any other appropriate authority for approving
various documents relating to the Bid process Management such as Tendering,
Request for Qualification, Lease Agreement and other Transfer Agreements
including modifications in the Bid process criteria and any other Act which may
be necessary for smooth revival of the units.







BANMANKHI

TABLE OF CONTENTS
1. BRIEF BACKGROUND.................................................................................................. 2
2. LOCATIONAL MAP : BANMANKHI, DISTRICT- PURNIA, BIHAR ................... 3
3. TECHNICAL SNAPSHOT............................................................................................. 4
4. FINANCIAL POSITION................................................................................................. 5
4.1 Details of Liabilities......................................................................................................... 6
5. PROPOSED REVIVAL PLAN........................................................................................ 9
6. SACRIFICE/WAIVER/SETTLEMENT...................................................................... 11
7. UTILISATION OF PROCEEDS IN THE SETTLEMENT PROCESS....................... 13
8. LITIGATION CASES .................................................................................................... 14
9. CONCLUSIONS AND RECOMMENDATIONS...................................................... 16
Private &Confidential Viability Report

SBI Capital Markets Ltd. 2 Unit-Banmankhi

1. Brief Background

The Banmankhi Sugar Unit is located 500 mtrs away from nearest Banmankhi
Railway Station of Purnia District and 38 Km away from District Town of Purnia.
The factory is situated at a distance of 2 Km from approach road of Purnia-
Saharsa Road. No other Sugar Unit is located in the radius of 15 km from this
unit.

The Banmankhi Sugar Unit with 1000 TCD capacity, was incorporated in 1970 by
Purnia Co-operative Sugar Factory Limited. In 1977 it was taken over by Bihar
State Sugar Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition)
Acts. 1977.

The unit has land of 64 acres which is being used as Factory Premises-cum-
Colony Premises. It has also 55 acres of land as Farm Land.

After the take over of the unit by BSSC, the maximum cane of 10.68 lakh quintal
was crushed in the year 1982-83 (Assuming the no. of crushing days as 180 days,
capacity utilization during that year was 59%). The unit was operational till 1996-
97 but the management of BSSC took the decision of closure of the mill due to
continuous losses.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 3 Unit-Banmankhi


2. Locational Map : Banmankhi, District- Purnia, Bihar









BANMANKHI Sugar Unit
Private &Confidential Viability Report

SBI Capital Markets Ltd. 4 Unit-Banmankhi
3. Technical Snapshot
SBI Capital Markets Ltd. appointed K.S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy. The
detailed Technical Report submitted by KSPL has been attached to this report. A
brief snapshot of the technical report is provided below:

Crushing Capacity 1000 TCD Per day
Make of Plant consisting of Milling Unit: Crushing
capacity 1000 TCD, Boiler Station, Power House,
Clarification Section and Boiling House
Triveni Engineering
Value of the Usable Mill House Rs.3.51 crore
Value of the boiler house equipments Rs.0.91crore
Value of the boiling house equipments Rs.1.32 crore
Value of the clarification house equipments Rs.0.37 crore
Value of the power house equipments Rs.0.88 crore
Value of the other equipments (incl. Boiling House
Structure & Weigh Bridge)
Rs.1.64 crore
Scrap Value of material including spares Rs.0.51 crore
Land Value (Valuation report enclosed) Rs. 17.00 crore

Land
The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled as
valuer with various Banks and Institutions including State Bank of India. The
Land value has been considered at government rates prevailing in the district.
(Rs. Crore)
Land Details Area ( Acres) Govt value Mkt. Value
Factory & Colony Premises 64 17.00 17.00
Private &Confidential Viability Report

SBI Capital Markets Ltd. 5 Unit-Banmankhi
4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of the Banmankhi unit as on March 31,
2006 is as follows:
Break up of Liabilities [Rs. Crore]
PARTICULARS 2006
Rs.
SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital
Reserve & Surplus 0.08
LOAN FUND 0.08
Secured Loan 0.09
Unsecured Loan 9.04
9.13
TOTAL : Rs. 9.21

APPLICATION OF FUNDS:
FIXED ASSETS:
Gross Block 2.37
Less : Depreciation 2.17
Net Block 0.20
Capital Work in Progress
INVESTMENTS :
CURRENT ASSET , LOANS & ADVANCES
Inventories 0.79
Sundry Debtors 0.01
Cash & Bank Balance 0.22
Loans & Advances 4.03

TOTAL : (A) 5.05
LESS : CURRENT LIABILITIES &
PROVISIONS
Liabilities 41.89
Provisions 0.96
TOTAL : (B) 42.85
NET CURRENT ASSETS : (A-B) (37.80)

a)Miscellaneous Expenditure to the extent
Private &Confidential Viability Report

SBI Capital Markets Ltd. 6 Unit-Banmankhi
not written off or adjusted
Profit & Loss Account 46.81
Suspense Account
TOTAL :Rs. 9.21

4.1 Details of Liabilities
The above dues are based on the Internal Audit report as on March 31,
2006.
a.Secured Loan
PARTICULARS Rs. in Crore
Sugar Development Fund 0.09

It may be mentioned that these lenders may have some charge on the existing
assets of the unit for their respective dues.
b.Unsecured Loan
Particulars Rs. in Crore
Working Capital 0.36
Clean Loan 0.98
Revolving Fund Loan 0.06
Loan from BSFC Patna 0.20
Loan from Co-Op Bank, Patna 0.25
Investment accrued & Due 7.19
TOTAL : Rs. 9.04

The unsecured loans were infused at the time of takeover and are currently
outstanding. It has been informed that no interest is being charged on the same.

c. Cane Growers Dues
Rs Crore
Cane Growers 0.50

It has been informed by SID that as on May 2007 there is no such O/s dues to the
cane growers and all the dues under the above head has been settled.
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SBI Capital Markets Ltd. 7 Unit-Banmankhi
d. Electricity Dues
Rs. Crore
Electricity Nil

As per the Internal Audit Report, there are no dues under the above head.

e. Labour Dues
The labour dues position based on the information submitted by the unit is as
under:










Data as on Mar 2007
Labour Age Profile
Age No. of labour
Above 60 11
50 to 60 95
40 to 50 13
30 to 40 0
Records not available 1
Total 120
Liability Profile (Rs. In crore)
General Labour
Basic Wages 8.60
PF incl. interest 12.40
Overtime 0.05
Bonus 0.88
Leave Encashment 1.52
Retention Allowance 1.14
Total 24.59
Exit Scheme for all Employees 2.70
Total Liabilities including Exit Scheme 27.29
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SBI Capital Markets Ltd. 8 Unit-Banmankhi

f. Other Liabilities
The break up of other liabilities appearing in the internal audit report are as
follows:
Particulars

Rs. Crore
Creditors for goods supplied 0.12
Statutory deduction 2.25
Inter unit transaction 0.02
Other liabilities 8.95
Current A/c with Hqrs. 22.36
TOTAL: Rs. 33.70

The details of inter-unit transaction and current account with headquaters has
not been verified. The SID may further require to confirm that there is no other
liability other than shown in the Internal Audit Report as on March 31, 2006.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 9 Unit-Banmankhi
5. Proposed Revival Plan
Based on the technical assessment, the Banmankhi unit has available
infrastructure to enable it to be expanded to 2500 TCD. The Plant can be further
diversified/integrated by setting up Cogeneration plant of 12 MW and Distillery
of 60 KLPD using B Hy molasses.

The expansion process would require an implementation period of about 15-18
months. Hence it can be inferred that the unit is viable with above proposed
expansion. However, to revive the unit, sugarcane an appropriate command area
would required to be notified and necessary support from GOB would be
needed.

The unit enjoys an excellent locational & infrastructure advantage, adequate cane
growing area. It also has the required land for expansion.

The viability of the unit may further be enhanced if the farm land of 55 acre
attached to the factory and colony premises is converted into industrial land for
doing the expansion of the unit. This shall provide more land for further
expansion of the unit. It is also proposed that the colony land may be allowed for
usage for expansion of unit, if required. The colony may be shifted to some other
location. However in case of further expansion the allotment of sugarcane
command area would also need to be suitably increased.

Considering the revival possibility with expansion to 2500 TPD with
Cogeneration plant of 12 MW and Distillery of 60 KLPD using B Hy molasses, an
incremental cost of Rs. 164 crores would be required, if some of the usable
machineries of the existing mill are refurbished and used. For efficient operation
Private &Confidential Viability Report

SBI Capital Markets Ltd. 10 Unit-Banmankhi
of the unit post-revival, and considering such additional amount to be invested,
it may be worthwhile to invite private players for running the unit.

The Land along with other assets of the unit may be offered on a Long Term
Lease, (say 60 years) extendable by further 30 years to the prospective investor
for setting up of Sugar Unit, Co-generation unit and Distillery. The investor
should operate the unit for the above specified purpose.


Private &Confidential Viability Report

SBI Capital Markets Ltd. 11 Unit-Banmankhi

6. Sacrifice/Waiver/Settlement
a. Secured Loans (Rs.0.09 Cr.)
It may be mentioned that the unit would need to be transferred to the potential
investors free from encumbrances and free of charge on the assets, NOC from the
existing lenders has to be obtained. Considering the same, the above liabilities
have to be negotiated and settled by the Department prior to the bid process.

b. Un-Secured Loans (Rs.9.04 Cr)
The unsecured loans are from Government of Bihar. Under the current stage it
would be difficult to get back any recovery of the loan. Considering the state of
affairs of the Corporation, it is proposed to be waived off by GoB.

3. Cane Growers Dues (Rs.0.50 Cr)
As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that it would not be practical to recover the dues, if any, from the new
investor. Considering the same, it is suggested that liability, if any, under the
above head, may be settled by the Government of Bihar.

d) Labour Dues (Rs.27.29 Cr)
No investors would normally like to takeover the unit along with any obligation
(including the labour liability) and with regard to appointment of existing
employees, investors may have the right of appointment. It may be further
mentioned that the new investor would be averse to recruiting the existing
labour based on their own screening process.

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SBI Capital Markets Ltd. 12 Unit-Banmankhi
Hence an amicable settlement on all the labour issues i.e. Payment of arrears, Exit
scheme, etc has to be arrived between the Labour unions and the BSSCL before
transferring the unit to the new investor. It may be mentioned that BSSCL has
already estimated an amount of Rs.2.70 cr in the event exit scheme is offered to
all its employees. It is desirable that an Exit Policy scheme may be framed
preferably by engaging the HR consultants.

The payment of compensation structure to labour may be structured in
installment basis that may need to be paid over a period of time. Further it may
be ensured that after the change of management, the existing employees shall be
retained/employed at the sole discretion of the new management.

e. Other Liabilities ( Rs 33.70 crore)
All other liabilities (including contingent liabilities), but not limited to Sales Tax,
Income Tax, Service Tax, Excise Duty, Custom duty, any penalty imposed and
liabilities towards any Government body/ Statutory Liability, etc that may be
claimed/accrued in future has to be settled/negotiated/ waived by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 13 Unit-Banmankhi

7. Utilisation of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on the
Bid Criteria, the Transfer Agreements have to be drafted and executed.
On realization of the bid proceeds from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions incl. SDF loan,
if any.
3. Balance, if any would be transferred to BSSCL A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory liabilities
and therefore the same has not been considered in the priority payments.

Based on the above value, the liabilities of the labour under the Exit Scheme may
be settled. Any other liability including Government dues, Cane Growers Dues,
Bank dues, and tax arrears may be waived/settled by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 14 Unit-Banmankhi
8. Litigation Cases

SBICAP has appointed M/s Alok Agarwal as the Legal consultant to verify the
current litigation/petitions against BSSCL for the unit.

As per the information provided by the legal advisor, there is no pending
suits/cases for recovery of compensation by the erstwhile owner. However the
following cases are pending before various Courts:
1. C.W.I.C No. 15906 of 2005 (Sri Shyamdeo Sharma vs. Bihar State Sugar
Corp. & ors.)
2. M.S. No 24 of 1995 (M/s Minakshi Enterprises, Muzaffarpur) pending in
the court of Muzaffarpur for payment of dues against the supplies of
different articles to the Godown of the Unit.
3. M.S. No 23 of 1995 (M/s Vaishali Distributors, Muzaffarpur) pending in
the court of Muzaffarpur for payment of dues against the supplies of
different articles to the Godown of the Unit.
4. M.S.No 1 of 2006 ( Food Corporation of India vs The State of Bihar and
Others) pending in the court of Sub-ordinate Judge, Purnea for payment
of difference of Levy Sugar price of Rs.21,26,936/- together with interest
@12% p.a. The case is still pending.
5. A demand of Rs.4,20,87,703.23 of the Employees Provident Fund
Organisation and for non payment of which an order of attachment of
immovable property of the unit was ssued vide letter no.
BGP/BR/RRC/1983/2006/10596 dated 13.06.2006. The dues is still
outstanding.
6. Case No. 2 of 1989 (Sri Madhav Prasad Singh, Lab Chemist) pending in
the court of Purnea relating to promotion.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 15 Unit-Banmankhi
The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible litigation
for the erstwhile owner / Previous Employees (for whom the settlement has
been made as per the above scheme) and due to reasons of the above litigation, if
the implementation of the revival scheme cannot be progressed during the
construction phase or stoppage of work during the operation phase, the
Government may need to address the legal issues arising if any.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 16 Unit-Banmankhi

9. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. Based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit has a potential for revival. Therefore we
suggest SID, GoB to consider the revival scheme as suggested in the proposed
Revival Plan.




BIHTA

TABLE OF CONTENTS
1. BRIEF BACKGROUND............................................................................................ 2
2. LOCATIONAL MAP: BIHTA, DISTRICT - PATNA, BIHAR............................. 3
3. TECHNICAL SNAPSHOT....................................................................................... 4
4. FINANCIAL POSITION........................................................................................... 5
4.1 Details of Liabilities................................................................................................... 6
a. Secured Loan ................................................................................................................. 6
c. Cane Growers Dues ........................................................................................................ 6
d. Electricity Dues ............................................................................................................... 6
e. Labour Dues..................................................................................................................... 7
f. Other Liabilities ............................................................................................................... 7
5. ASSESSMENT OF THE UNIT ................................................................................. 9
6. ALTERNATE STRATEGY.........................................................................................10
7. SACRIFICE/WAIVER/SETTLEMENT.................................................................11
8. UTILIZATION OF PROCEEDS IN THE SETTLEMENT PROCESS.................13
9. LITIGATION CASES ...............................................................................................14
10. CONCLUSIONS AND RECOMMENDATIONS.................................................15
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 2 Unit- Bihta
1. Brief Background

The Bihta Sugar Unit is located 200 m away from Bihta Railway Station of
Patna District and 40 km away from District Town of Patna, the capital of
Bihar. The factory is situated at a distance of 1 km from approach road of
Patna-Paliganj Road. No other Sugar Unit is located in the radius of 15 km
from this unit.

The Bihta Sugar Unit with 1240 TCD capacity, was incorporated in 1934 by
South Bihar Sugar Mills Limited and after 43 years of its operation i.e. in 1977
it was taken over by Bihar State Sugar Corporation (BSSC) under Bihar Sugar
Undertakings (Acquisition) Acts 1977.

The unit has a huge land of 593.22 acres out of which 23.78 acres of land is
being used as Factory Premises, 531.59 acres of land as Farm Land at
Jineshwargarh and 28.31 at Khedalpura. They have only 9.54 acres of land as
Out Centre Land. It has also a huge Sugarcane Area of land of approximately
37650 acres.

After the take over of the unit by BSSC, the maximum cane of 4.34 lakh
quintal was crushed in the year 1981-82 (Assuming the no. of crushing days
as 180 days, capacity utilisation during the year was 59%). The unit was
operational till 1990-91 but the management of BSSC took the decision of
closure of mills due to poor cash management and continuous losses due to
non-disposal of sugar & molasses etc.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 3 Unit- Bihta
2. Locational Map: Bihta, District - Patna, Bihar






Bihta Sugar Unit
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 4 Unit- Bihta
3. Technical Snapshot

SBI Capital Markets Ltd. appointed K. S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy.
The detailed Technical Report submitted by KSPL has been enclosed. A brief
of the technical report is provided below:

Crushing Capacity 1240 TCD
Make of Plant consisting of-Mill Unit, Boiler
Station, Power House, Clarification Section,
Boiling House, Effluent treatment Plant
Herry Meriolle,
Delatters, France
Scrap value of the equipments Rs. 4.32 Crore
Land Value (valuation report enclosed) Rs. 16.39 Crore


Land
The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled
as valuer with various Banks and Institutions including State Bank of India.
The Land value has been considered at market rates prevailing in the district.

Land Details Area ( Acres) Value (Rs. Crore)
Factory & Colony
Premises
23.78 16.39
TOTAL 23.78 16.39

Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 5 Unit- Bihta

4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of the Bihta unit as on March 31,
2006 is as follows:

Break up of Liabilities
Amount (Rs. crores)
PARTICULARS 2006
SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital
Reserve & Surplus 0.01 0.01
LOAN FUND
Secured Loan 0.08 0.08
Unsecured Loan 1.21 1.21
TOTAL 1.30
APPLICATION OF FUNDS:
FIXED ASSETS:
Gross Block 0.03
Less : Depreciation 0.01
Net Block 0.02
Capital Work in Progress 0.15
INVESTMENTS :
CURRENT ASSET , LOANS & ADVANCES
Inventories 0.17
Sundry Debtors 0.09
Cash & Bank Balance 0.03
Loans & Advances 1.02
TOTAL 1.31
LESS : CURRENT LIABILITIES &
PROVISIONS
Liabilities 19.40
Provisions 0.04
TOTAL 19.44
NET CURRENT ASSETS : (18.13)
a)Miscellaneous Expenditure to the extent not
written off or adjusted
Profit & Loss Account 19.24
TOTAL 1.30



Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 6 Unit- Bihta
4.1 Details of Liabilities
The dues are based on the Internal Audit report as on March 31, 2006:
a. Secured Loan
PARTICULARS Rs Crore
Bihar State Financial Corporation Ltd, Patna 0.07
TOTAL : 0.07

It may be mentioned that these lenders may have some charge on the existing
assets of the unit for their respective dues.

b. Unsecured Loans
PARTICULARS Rs Crore
Other loans 0.24
TOTAL: 0.24

c. Cane Growers Dues
Rs Crore
Cane Growers 0.03

It has been informed by SID that as on May 2007 there is no such O/s dues to
the cane growers and all the dues under the above head has been settled.
d. Electricity Dues
Rs. Crore
Electricity Nil

As per the Internal Audit Report, there are no dues under the above head.





Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 7 Unit- Bihta
e. Labour Dues
As far as the records are available from the Internal Audit Report for the FY
2005-06 an amount of Rs 6.81 crores is due to the employees consisting of 32
permanent employees. However based on the subsequent information
collected from BSCC the due to labour as on February 2007 is as under:

















f. Other Liabilities

The break up of other liabilities appearing in the internal audit report are as
follows:
PARTICULARS 2006
Statutory deduction 0.99
Old Management 1.73
Liability for expenses 0.28
Creditor for goods supplied 0.29
Loan A/C HO Patna 11.61
TOTAL: 14.90
Data as on Mar 2007
Labour Age Profile
Age No of Labour
Above 60 0
50 to 60 24
40 to 50 3
30 to 40 1
Unknown 0
Total 28
Liability Profile
General Labour Rs. in crores
Basic Wages 4.60
PF incl interest 0.80
Other O/s Allowance 1.38
Gratuity 0.78
Bonus 0.51
Total 8.07
Exit Scheme-considering All Employees 0.57
Net Dues including Exit policy settlement 8.64
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 8 Unit- Bihta
The details of interunit transaction and current account with headquaters has
not been verified. The SID may further require to confirm that there is no
other liability other than shown in the Internal Audit Report as on March 31,
2006.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 9 Unit- Bihta

5. Assessment of the unit
An attempt was made to understand the technical competence of the unit to
be financially viable in the current market scenario as also going forward. It is
felt that the unit is both technically incompetent and financially unviable. In
this connection, it may be mentioned that given the prevailing sugar industry
parameters, sugar units are surviving mainly because of integrated Co-
generation unit and distillery. In light of above, the broad reasons for the
Bihta unit being unviable is as under:

a. The total land area including the colony area is 23.78 acre would not be
sufficient for setting up or expanding the sugar unit. Further the unit
has come within the township area.
b. The unit is located in an area where there is currently not much of
sugarcane area under cultivation. The area is also developing as an
industrial hub for other industries.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 10 Unit- Bihta

6. Alternate Strategy
Considering the above facts, it is recommended that the available land may be
used for the following Industrial/ Commercial Activity such as:

a. Food Processing Zone
b. Commercial Complex
c. Handicraft Park
d. Warehouse/Cold Storage

The above is only indicative and it is felt that it should be best left to the
investors to take up any of the commercial activity not restricted to as
indicated above.

For creation of economic activity and generation of new investment
opportunities, the premises of the above unit may be used but not restricted
to the above purpose. For the same, it is understood that the land may be
leased to private investors on a long term basis. The valuation of a unit is
broadly done on going concern basis or fair value of the assets. The above unit
is not running and therefore the basis would be based on the fair value of the
assets. Again the new investors may not be willing to undertake any of the
existing liabilities of the unit. Based on the above, the liabilities may be
suitably waived/settled/adjusted/negotiated by Government of Bihar and
the unit may be transferred to the potential investor free from all
encumbrances and the investor should pay for the assets being acquired.

Therefore, the Land would need to be handed over on long term lease basis
and the existing machineries would need to be sold through a bidding process
to the prospective investor based on a minimum Reserve price. Liabilities etc.
would need to be settled accordingly to generate the investors interest.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 11 Unit- Bihta

7. Sacrifice/Waiver/Settlement
The unit may not be revived as sugarcane based unit due to difficulties
envisaged and noted above. Therefore the same has to be developed for other
industrial purpose some of which has been mentioned above. However the
liabilities for existing dues has to be satisfied.

a. Secured Loans (Rs. 0.07 Cr.)

It may be mentioned that the unit would need to be transferred to the
potential investors free from encumbrances and free of charge on the assets,
NOC from the existing lenders has to be obtained. Considering the same, the
above liabilities have to be negotiated and settled by the Department prior to
the bid process.

The dues from Bihar State Financial Corporation Ltd as on date has to be
settled/waived and necessary initiative has to be taken by the Sugarcane
Industries Department.

b. Unsecured loans (Rs. 0.24 Cr)

The unsecured loans are from GoB. Under the current stage it would be
difficult to get back any recovery of the loan. Considering the state of affairs
of the corporation, it is proposed to be waived off by GoB.

c. Cane Growers Dues (Rs. 0.03 Cr)

As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that it would not be practical to recover the dues, if any, from the
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 12 Unit- Bihta
new investor. Considering the same, it is suggested that liability if any under
the above head may be settled by the Government of Bihar.

d. Labour Dues (Rs. 8.64 Cr)

As indicated above, even if the unit is unviable from Sugar perspective, it
would be necessary to settle the dues in order to explore the other options for
making the effective utilization of the industrial land.

Therefore, an amicable settlement on all the labour issues i.e. Payment of
arrears, VRS, etc has to be arrived between the Labour unions and the BSSCL
before transferring the Land to the new investor. It is desirable that an Exit
Policy scheme has to be framed preferably by engaging the HR consultants.
The payment of compensation structure to labour may be structured in
installment basis.

e. Other Liabilities (Rs. 14.90 Cr)

All other liabilities (including contingent liabilities), but not limited to Sales
Tax, Income Tax, Service Tax, Excise Duty, Custom duty, any penalty
imposed and liabilities towards any Government body/ Statutory Liability,
etc that may be claimed/accrued in future has to be settled/negotiated/
waived by the GoB.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 13 Unit- Bihta

8. Utilization of Proceeds in the Settlement Process
Once the Biding process starts and the potential Investor is selected based on
the Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the price from the highest bidders, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks, Financial Institutions and SDF, if any (in
case not settled by the Government of Bihar),
3. Balance, if any would be transferred to BSSCL A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory
liabilities and therefore the same has not been considered in the priority
payments. However in case the labour liabilities are not being able to settled
from the above realization, the balance has to be settled by the Government of
Bihar.

Based on the above value, the liabilities of the labour under the Exit Scheme
may be settled. Any other liability including Government dues, Cane Growers
Dues, Bank dues, and tax arrears may be waived/settled by the GoB.

Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 14 Unit- Bihta

9. Litigation Cases

SBI Caps has appointed M/s Alok Agarwal as the Legal consultant to verify
the current litigation/petitions against BSSCL for the unit.

As per the information provided by the legal advisor, there is no pending
suits/cases for recovery of compensation by the erstwhile owner. However
the possibility of the same way not be ruled out.

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible
litigation for the erstwhile owner / Previous Employees (for whom the
settlement has been made as per the above scheme) and due to reasons of the
above litigation, and if the implementation of the construction cannot be
progressed during the construction phase or stoppage of work during the
operation phase, the Government shall make good the losses suffered if any.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 15 Unit- Bihta

10. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. However based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit does not have an investment
attractiveness for sugarcane based industry. Therefore we suggest SID, GoB to
consider the rehabilitation scheme as suggested in the proposed Plan.




GORAUL


TABLE OF CONTENTS
1. BRIEF BACKGROUND.................................................................................................. 2
2. LOCATIONAL MAP : GORAUL, DISTRICT- VAISHALI, BIHAR......................... 3
3. TECHNICAL SNAPSHOT............................................................................................. 4
4. FINANCIAL POSITION................................................................................................. 5
4.1 Details of Liabilities......................................................................................................... 6
5. PROPOSED REVIVAL PLAN........................................................................................ 8
6. SACRIFICE/WAIVER/SETTLEMENT...................................................................... 10
7. UTILISATION OF PROCEEDS IN THE SETTLEMENT PROCESS....................... 12
8. LITIGATION CASES .................................................................................................... 13
9. CONCLUSIONS AND RECOMMENDATIONS...................................................... 14
Private &Confidential Viability Report

SBI Capital Markets Ltd. 2 Unit- Goraul

1. Brief Background

The Goraul Sugar Unit is located approximately 3 Km. away from approach road
of National Highway and 1 Km. from Goraul Railway Station. It is situated
around 25 Km from District Town Hazipur of Vaishali District, Bihar. The Unit is
adjoined by another BSSC owned Sugar Factory i.e. Motipur Sugar Unit.

The Goraul Sugar Unit with 800 TCD was incorporated in 1933 under the banner
of M/s. Sheetal Sugar Works Limited. After 44 years of its operation i.e. in 1977 it
was taken over by BSSC under Bihar Sugar Undertakings (Acquisition)
Ordinance 1977. The BSSC was incorporated as a wholly owned Government
Company in December 1974 without having its own Sugar Mills.
The unit has land area of approximately 54.41 acres. Out of which 47.58 acres of
land was being used for Factory Premises and Colony Premises and 6.83 acres of
land as Farm Land.
After the take over of the unit by BSSC, the maximum cane was crushed in 1982-
83 season that was 7.23 lac quintal. The unit was operational till 1993-94 but the
management of BSSC took the decision of closure of mills due to continuous
losses.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 3 Unit- Goraul


2. Locational Map : Goraul, District- Vaishali, Bihar









Goraul Sugar Unit
Private &Confidential Viability Report

SBI Capital Markets Ltd. 4 Unit- Goraul
3. Technical Snapshot
SBI Capital Markets Ltd. appointed K.S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy. The
detailed Technical Report for Goraul submitted by KSPL has been attached to
this report. A brief snapshot of the technical report is provided below:
Crushing Capacity 800 TCD
Make of Plant consisting of-Mill Unit, Boiler Station,
Power House, Clarification Section, Boiling House
Buckau Wolf Krupp,
Germany
Scrap Value of the equipments Rs 3.44 Crore
Land Value (Valuation report enclosed) Rs. 23.79 Crore

Land
(Rs. Crore)
Land Details Area ( acres) Govt. Value Market Value
Factory Premises &
Colony Premises
47.58 20.42 23.79


The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled as
valuer with various Banks and Institutions including State Bank of India. The
Land value above has been considered at government rates prevailing in the
district.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 5 Unit- Goraul
4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of the Goraul unit as on March 31, 2006
is as follows:

Break up of Liabilities
Amount (Rs. crore)
PARTICULARS 2006
SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital -
Reserve & Surplus -
LOAN FUND
Secured Loan 0.28
Unsecured Loan 0.38
TOTAL : Rs. 0.66
APPLICATION OF FUNDS:
FIXED ASSETS:
Gross Block 0.22
Less : Depreciation 0.07
Net Block 0.15
Capital Work in Progress
INVESTMENTS :
CURRENT ASSET , LOANS & ADVANCES
Inventories 0.55
Sundry Debtors 0.01
Cash & Bank Balance 0.04
Loans & Advances 1.29
Total Current Assets 1.89
LESS : CURRENT LIABILITIES &
PROVISIONS
Liabilities 27.37
Provisions 0.64
NET CURRENT ASSETS : (26.12)

Profit & Loss Account 26.55
Suspense A/c 0.08
TOTAL :Rs. 0.66

Private &Confidential Viability Report

SBI Capital Markets Ltd. 6 Unit- Goraul
4.1 Details of Liabilities
The above dues are based on the Internal Audit report as on March 31, 2006.

a. Secured Loan
Rs Crore
Sugar Development Fund Loan 0.28

It may be mentioned that these lenders may have some charge on the existing
assets of the unit for their respective dues.
b. Unsecured Loan
Rs Crore
Loan from GoB 0.38

The unsecured loan was infused at the time of takeover of these units by BSSC
and are currently outstanding. It has been informed by BSSC that no interest is
being charged on the same.

c. Cane Growers Dues
Rs Crore
Cane Growers 0.05

It has been informed by SID that as on May 2007 there is no such O/s dues to the
cane growers and all the dues under the above head has been settled/ in the
process of settlement.
d. Electricity Dues
Rs Crore
Electricity Nil

There are no dues under the above head.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 7 Unit- Goraul

e. Labour Dues
The labour dues position based on the information submitted by the unit is as
under:









f. Other Liabilities
The break up of other liabilities are as follows:
PARTICULARS Rs. in Crores
Loan A/c Ho, Patna 17.25
Statutory Deduction 1.76
Inter Unit Transaction 0.02
Other current liabilities 8.34
TOTAL 27.37

The details of inter-unit transaction and current account with head quarters has
not been verified.
Data as on Mar 2007
Labour Age Profile
Age No
Above 60 0
50 to 60 86
40 to 50 42
30 to 40 1
Unkonwn 0
Total 129
Liability Profile Rs. in Crore
General Labour
Basic Wages 6.69
Bonus 0.75
Overtime 0.02
Leave Encashment 0.14
Retention Allowance 0.45
Total 8.05
Exit Scheme for all Employees 2.30
Total labour liabilities including Exit Scheme 10.35
Private &Confidential Viability Report

SBI Capital Markets Ltd. 8 Unit- Goraul
5. Proposed Revival Plan
The Goraul Sugar plant is an old plant. Based on the technical assessment it was
suggested that except the milling tandem most of the equipment needs to be
replaced. The unit may be expended to 1500 TPD with a distillery based on juice.
For this a boiler, Turbine Generator Set and a distillery have to be installed. The
entire unit shall be converted to an electric driven plant and mills may have to be
relocated and driven by individual drives provided with rake type inter carriers,
Donnelley chutes etc. The capacity distillery may be around 90 KLPD. Hence it
can be inferred that the unit is viable with the above proposed expansion.
However, to revive the unit, sugarcane an appropriate command area would
required to be notified and necessary support from GOB would be needed.

The unit enjoys an excellent locational & infrastructure advantage, adequate cane
growing area. It also has the required land for expansion.

The viability of the unit may further be enhanced if portion of the farm land
attached to the factory, if any, and colony premises is converted into industrial
land for doing the expansion of the unit. This shall provide more land for further
expansion of the unit. It is also proposed that the colony land may be allowed for
usage for expansion of unit, if required. The colony may be shifted to some other
location. However in case of further expansion the allotment of sugarcane
command area would also need to be suitably increased.

Considering the revival possibility with expansion to 1500 TPD with a 90 KLPD
distillery based on juice, an incremental cost of Rs.140 crores would be required,
if some of the usable machineries of the existing mill are refurbished and used.
For efficient operation of the unit post-revival, and considering such additional
amount to be invested, it may be worthwhile to invite private players for
running the unit.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 9 Unit- Goraul

The Land along with other assets of the unit may be offered on a Long Term
Lease, (say 60 years) extendable by further 30 years to the prospective investor
for setting up of Sugar Unit, Co-generation unit and Distillery. The investor
should operate the unit for the above specified purpose.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 10 Unit- Goraul

6. Sacrifice/Waiver/Settlement
a) Secured Loans (Rs.0.28 cr)
It may be mentioned that the unit would need to be transferred to the potential
investors free of charge on the assets; NOC from the existing lenders has to be
obtained. Considering the same, the above liabilities have to be negotiated and
settled by the SID prior to the bid process.

b. Un-Secured Loans (Rs. 0.38 cr)
The unsecured loans are from Government of Bihar. Under the current scenario
it would be difficult for the unit to pay back the above loan. Therefore, it may
have to be waived off by GoB.

c. Cane Growers Dues (Rs.0.05 cr)
As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that it would not be practical to recover the dues, if any, from the new
investor. Considering the same, it is suggested that liability, if any, under the
above head, may be settled by the Government of Bihar.

d. Labour Dues (Rs.10.35 cr)
No investors would willing to takeover the unit along with any obligation
(including the labour liability), and with regard to appointment of existing
employees, investors may have the right of appointment. It may be further
mentioned that the new investor would be averse to recruiting the existing
labour based on their own selection process.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 11 Unit- Goraul
Hence an amicable settlement on all the labour issues i.e. Payment of arrears, Exit
Scheme etc has to be arrived between the Labour unions and the BSSCL before
transferring the unit to the new investor. It may be mentioned that BSSCL has
already estimated an amount of Rs. 2.30 cr in the event of Exit Scheme is offered
to all its employees. It is therefore desirable that an Exit Policy scheme may be
framed preferably by engaging the HR consultants.

The payment of compensation structure to labour may be structured in
installment basis that may need to be paid over a period of time. Further it may
be ensured that after the change of management, the existing employees may be
retained/employed at the sole discretion of the new management.

e. Other Liabilities (Rs. 27.37 cr)
All other liabilities (including contingent liabilities), but not limited to Sales Tax,
Income Tax, Service Tax, Excise Duty, Custom duty, any penalty imposed and
liabilities towards any Government body/ Statutory Liability, etc that may be
claimed/accrued in future has to be settled/negotiated/ waived by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 12 Unit- Goraul

7. Utilisation of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on the
Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the bid proceeds from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions incl. SDF loan,
if not settled by BSSCL.
3. Balance, if any would be transferred to BSSCL A/c. for meeting
liabilities of other units.
It is assumed that the GoB would settle/ waive all the other statutory liabilities
and therefore the same has not been considered in the priority payments.

Based on the above value, the liabilities of the labour under the Exit Scheme may
be settled. Any other liability including Government dues, Cane Growers Dues,
Bank dues, and tax arrears may be waived/settled by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 13 Unit- Goraul
8. Litigation Cases

SBICAP has appointed M/s Alok Agarwal as the Legal consultant to verify the
current litigation/petitions against BSSCL for the unit.

As per the information provided by the legal advisor, there are no pending
suits/cases for recovery of compensation by the erstwhile owner. However the
following cases are pending at various courts:
1. Certificate Case No. 1/ 1996-97, pending before District Certificate Officer,
Hazipur, Vaishali against the Unit for electrical dues filed by Executive
Engineer BSEB, Muzaffarpur for certificate dues of Rs.17,90,705.92/-
2. Complaint Case No.135/2001, files by Ex-Employee, Gonour Ram for
retirement dues.
The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible litigation
for the erstwhile owner / Previous Employees (for whom the settlement has
been made as per the above scheme) and due to reasons of the above litigation, if
the implementation of the revival scheme cannot be progressed during the
construction phase or stoppage of work during the operation phase, the
Government may need to address the legal issues arising if any.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 14 Unit- Goraul

9. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. Based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit has a potential for revival. Therefore we
suggest SID, GoB to consider the revival scheme as suggested in the proposed
Revival Plan.




GURARU

TABLE OF CONTENTS
1. BRIEF BACKGROUND............................................................................................ 2
2. LOCATIONAL MAP: GURARU, DISTRICT- GAYA, BIHAR ........................... 3
3. TECHNICAL SNAPSHOT....................................................................................... 4
4. Financial Position ...................................................................................................... 5
4.1 Details of Liabilities................................................................................................... 6
a. Secured Loan ................................................................................................................. 6
b. Unsecured Loans ............................................................................................................ 6
d. Electricity Dues ............................................................................................................... 6
e. Labour Dues..................................................................................................................... 7
f. Other Liabilities ............................................................................................................... 7
5. ASSESSMENT OF THE UNIT ................................................................................. 8
6. ALTERNATE STRATEGY........................................................................................ 9
7. SACRIFICE/WAIVER/SETTLEMENT.................................................................10
8. UTILIZATION OF PROCEEDS IN THE SETTLEMENT PROCESS.................12
9. LITIGATION CASES ...............................................................................................13
10. CONCLUSIONS AND RECOMMENDATIONS.................................................14
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 2 Unit- Guraru

1. Brief Background

The Guraru Sugar Unit is located 0.5 km away from Gaya Railway Station
and is very near the District Town and National Highway Road.

The Guraru Sugar Unit with 808 TCD capacity, was incorporated in 1933
under the ownership of Guraru Chini Mill Limited, later on after 46 years of
its operation i.e. in 1979 it was taken over by Bihar State Sugar Corporation
(BSSC) under Bihar Sugar Undertakings (Acquisition) Ordinance 1977. The
BSSC was incorporated as a wholly owned Government Company in
December 1974 without having its own Sugar Mills.

The unit has only a land of 24.51 acres which is being used as Factory
Premises-cum-Colony Premises and 2.85 acres as Farm Land.

After the take over of the unit by BSSC, the maximum cane was crushed in
1981-82 that was 4.48 lakh quintal in 1981-82 season. The unit was operational
till 1990-91 but the management of BSSC took the decision of closure of mills
due to poor cash management and continuous losses.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 3 Unit- Guraru

2. Locational Map: Guraru, District- Gaya, Bihar









Guraru Sugar Unit
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 4 Unit- Guraru
3. Technical Snapshot
SBI Capital Markets Ltd. appointed K. S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy.
The detailed Technical Report submitted by KSPL has been enclosed. A brief
of the technical report is provided below:

Crushing Capacity 808 TCD
Make of Plant consisting of-Mill Unit, Boiler
Station, Power House, Boiling House
Krup Wolf
Scrap Value of material including spares Rs. 2.83 Crore
Land Value (valuation report enclosed) Rs. 2.81Crore


Land

The Land valuation has been done by M/s. Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled
as valuer with various Banks and Institutions including State Bank of India.
The Land value has been considered at market rates prevailing in the district.

Land Details Area ( Acres) Value (Rs. Crore)
Factory Premises &
Colony Premises
24.51 2.81

Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 5 Unit- Guraru
4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of the Guraru unit as on March 31,
2006 is as follows:
Break up of Liabilities
Amount (Rs. crores)
PARTICULARS 2006
SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital -
Reserve & Surplus
LOAN FUND
Secured Loan
Unsecured Loan 0.63 0.63

TOTAL : Rs. 0.63

APPLICATION OF FUNDS:
FIXED ASSETS:
Gross Block 0.41
Less : Depreciation 0.00
Net Block 0.41
Capital Work in Progress

INVESTMENTS :
CURRENT ASSET , LOANS & ADVANCES
Inventories 0.07
Sundry Debtors
Cash & Bank Balance 0.02
Loans & Advances 0.39

TOTAL : RS. 0.48

LESS : CURRENT LIABILITIES &
PROVISIONS
Liabilities 13.70
Provisions 0.36

TOTAL : RS. 14.06

NET CURRENT ASSETS : -13.58

a)Miscellaneous Expenditure to the extent
not written off or adjusted
Profit & Loss Account 13.80

TOTAL :Rs. 0.63
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 6 Unit- Guraru

4.1 Details of Liabilities
The above dues are based on the Internal Audit report as on March 31,
2006.
a. Secured Loan

PARTICULARS Rs Crore
Secured Loan Nil
TOTAL : Nil

It may be mentioned that these lenders may have some charge on the existing
assets of the unit for their respective dues.
b. Unsecured Loans
Rs. Crore
PARTICULARS 2006
Loan from GoB 0.55
Revolving Fund 0.01
Agriculture Development Loan 0.02
Interest Accrued & Due 0.05
TOTAL : 0.63

c. Cane Growers Dues
Rs Crore
Cane Growers Nil

It has been informed by SID that as on May 2007 there is no such O/s dues to
the cane growers and all the dues under the above head has been settled/ in
the process of settlement.
d. Electricity Dues
Rs. Crore
Electricity Nil

As per the Internal Audit Report, there are no dues under the above head.

Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 7 Unit- Guraru
e. Labour Dues
We have collected the latest age profile and dues position which is as under:

















The above labour details are based on the Internal Audit Report submitted by
SID and further information collected from the unit. We have prepared the
above details and O/s dues based on the information submitted by them.
f. Other Liabilities

The break up of other liabilities appearing in the internal audit report are as
follows:
PARTICULARS 2006
Security Deposit 0.01
Inter Unit Transaction 0.09
Current account with HO 7.79
TOTAL: 7.89
Data as on Mar 2007
Labour Age Profile
Age No of Labourers
Above 60 0
50 to 60 38
40 to 50 8
30 to 40 0
Unknown 1
Total 47
Liability Profile
General Labour Rs. in crores
Basic Wages 3.40
PF 1.20
Upadhan 0.96
Leave Encashment 0.19
Retention Allowance 0.00
Total 5.89
Exit Scheme-considering All Employees 0.70
Net Dues including Exit Scheme
settlement
6.59
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 8 Unit- Guraru
5. Assessment of the Unit
An attempt was made to understand the technical competence of the unit to
be financially viable in the current market scenario as also going forward. It is
felt that the unit is both technically incompetent and financially unviable. In
this connection, it may be mentioned that given the prevailing sugar industry
parameters, sugar units are surviving mainly because of integrated Co-
generation unit and distillery. In light of above, the broad reasons for the
Goraru unit being unviable are as under:

1. The plant is very old and of small capacity. It is also in poor condition
and can not be expanded in a small area that it has.
2. Given the milling size, the crushing capacity can be increased to 1500
TCPD, however the crushing unit of this size would need a 90 klpd
distillery for which there is no space in the factory;
3. The plant is very congested and the equipment is placed on brick
structure.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 9 Unit- Guraru

6. Alternate Strategy
Considering the above, it is recommended to use the Land for some other
Industrial/Commercial Activity such as:

1. Food Processing Zone
2. Commercial Complex
3. Handicraft Park
4. Warehouse/Cold Storage

The above is only indicative and it is felt that it should be best left to the
investors to take up any of the commercial activity not restricted to as
indicated above.

For creation of economic activity and generation of new investment
opportunities, the premises of the above unit may be used but not restricted
to the above purpose. For the same, it is understood that the land may be
leased to private investors on a long term basis. The valuation of a unit is
broadly done on going concern basis or fair value of the assets. The above unit
is not running and therefore the basis would be based on the fair value of the
assets. Again the new investors may not be willing to undertake any of the
existing liabilities of the unit. Based on the above, the liabilities may be
suitably waived/settled/adjusted/negotiated by Government of Bihar and
the unit may be transferred to the potential investor free from all
encumbrances and the investor should pay for the assets being acquired.

Therefore, the Land would need to be handed over on long term lease basis
and the existing machineries would need to be sold through a bidding process
to the prospective investor based on a minimum Reserve price. Liabilities etc.
would need to be settled accordingly to generate the investors interest.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 10 Unit- Guraru

7. Sacrifice/Waiver/Settlement

a. Secured Loans (Nil)

It may be mentioned that the unit would need to be transferred to the
potential investors free from encumbrances and free of charge on the assets,
NOC from the existing lenders has to be obtained. Considering the same, the
above liabilities have to be negotiated and settled by the Department prior to
the bid process.

b. Un-Secured Loans (Rs. 0.63 Cr)

The unsecured loans are from Government of Bihar. Under the current stage
it would be difficult to get back any recovery of the loan. Considering the
amount of loan, it is proposed to be waived off by GoB.

c. Cane Growers Dues (Nil)

As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that is would not be practical to recover the dues, if any, from the
new investor. Considering the same, it is suggested that liability if any under
the above head may be settled by the Government of Bihar.

d. Labour Dues (Rs. 6.59 Cr)

As indicated above, even if the unit is unviable from Sugar perspective, it
would be necessary to settle the dues in order to explore the other options for
making the effective utilization of the industrial land.

Therefore, an amicable settlement on all the labour issues i.e. Payment of
arrears, VRS, etc has to be arrived between the Labour unions and the BSSC
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 11 Unit- Guraru
before transferring the Land to the new investor. It is desirable that an Exit
Policy scheme has to be framed preferably by engaging the HR consultants.
The payment of compensation structure to labour may be structured in
installment basis.

e. Other Liabilities (Rs 7.89 Cr)

All other liabilities (including contingent liabilities), but not limited to Sales
Tax, Income Tax, Service Tax, Excise Duty, Custom duty, any penalty
imposed and liabilities towards any Government body/ Statutory Liability,
etc that may be claimed/accrued in future has to be settled/negotiated/
waived by the GoB.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 12 Unit- Guraru

8. Utilization of Proceeds in the Settlement Process
Once the Biding process starts and the potential Investor is selected based on
the Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the price from the highest bidders, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks, Financial Institutions and SDF, if any (in
case not settled by the Government of Bihar),
3. Balance, if any would be transferred to BSSC A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory
liabilities and therefore the same has not been considered in the priority
payments. However in case the labour liabilities are not being able to settled
from the above realization, the balance has to be settled by the Government of
Bihar.

Based on the above value, the liabilities of the labour under the Exit Scheme
may be settled. Any other liability including Government dues, Cane Growers
Dues, Bank dues, and tax arrears may be waived/settled by the GoB.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 13 Unit- Guraru

9. Litigation Cases

SBI Caps has appointed M/s Alok Agarwal as the Legal consultant to verify
the current litigation/petitions against BSSC for the unit.

As per the information provided by the legal advisor, there is no pending
suits/cases for recovery of compensation by the erstwhile owner. However
the following cases are still pending at various courts:
1. Certificate Case No. 121/1993 94, pending in the court of Certificate
Officer, Gaya filed by the Bihar State Electricity Board, for Electrical
Dues and the demand notice for certificate dues of Rs. 16,37,679.24 plus
interest thereon a total demand of Rs. 29,34,380.76 is issued which is
still pending.
2. C.W.J.C. No. 4606 of 2006 (ram Balak Vs. SugarCorp. And ors.)
Service Matter. Retirement Dues
3. C.W.J.C. No. 5028 of 2000 (Krishna Kumar Vs. Bihar State Sugar Corp.)
Service Matter

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible
litigation for the erstwhile owner / Previous Employees (for whom the
settlement has been made as per the above scheme) and due to reasons of the
above litigation, and if the implementation of the construction cannot be
progressed during the construction phase or stoppage of work during the
operation phase, the Government shall make good the losses suffered if any.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 14 Unit- Guraru

10. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. However based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit does not have a investment attractiveness
for sugar unit Therefore we suggest SID, GoB to consider the revival scheme
as suggested in the proposed Revival Plan.




HATHUA

TABLE OF CONTENTS
1. BRIEF BACKGROUND............................................................................................ 2
2. LOCATIONAL MAP: HATHUA, DISTRICT- GOPALGANJ, BIHAR.............. 3
3. TECHNICAL SNAPSHOT....................................................................................... 4
4. FINANCIAL POSITION........................................................................................... 5
4.1 Details of Liabilities................................................................................................... 6
5. PROPOSED REVIVAL PLAN (HATHUA SUGAR UNIT AND DISTILLERY)9
6. SACRIFICE/WAIVER/SETTLEMENT.................................................................11
7. UTILIZATION OF PROCEEDS IN THE SETTLEMENT PROCESS.................13
8. LITIGATION CASES ...............................................................................................14
9. CONCLUSIONS AND RECOMMENDATIONS.................................................16
Private &Confidential Viability Report

SBI Capital Markets Ltd. 2 Unit- Hathua & Hathua Distillery

1. Brief Background

Sugar Unit
The Hathua Sugar Unit is located 1 km away from nearest Hathua Railway
Station of Gopalgunj District and 20 km away from District Town and 1.5 km
distance from National Highway approach road on Siwan-Gopalgunj Road.
The Unit is adjoined by another private sector owned Sugar Unit i.e.
Gopalgunj Sugar Unit which is at a distance of 20 km approximately.
The Hathua Sugar Unit with 1728 TCD capacity, was incorporated in 1933
under the ownership of S. K. G. Sugar Limited, it was taken over by Bihar
State Sugar Corporation (BSSC) under Bihar Sugar Undertakings
(Acquisition) Acts 1985. The BSSC was incorporated as a wholly owned
Government Company in December 1974 without having its own Sugar Mills.
The unit has an area of 55.24 acres, out of which 25.96 acres of land is for
Factory Premises and 18.92 acres of land as Colony Premises.

Distillery
The Hathua Distillery of 30 KLPD capacity was under the ownership of S.K.G.
Sugar Limited till 1981. Thereafter the same was sold to United Distillery
Private Limited (UB Group). In 1986 it was taken over by Bihar State Sugar
Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition) Acts. 1985.
The acquisition was challenged by UB Distillery Ltd. in the Honbe Supreme
Court mainly on the ground that vesting under Section 3(1) of the Act 1985 is
only for the Sugar Schedule undertaking and not for the Distillery and vide
interim order dated 7.02.1986, the Honbe Supreme Court stayed the take over
of the Distillery and allowed the company to operate the Distillery. However
as per the final judgment of the Honbe Supreme Court dated 18.02. 2003, the
Distillery became the undertaking of BSSC.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 3 Unit- Hathua & Hathua Distillery


2. Locational Map: Hathua, District- Gopalganj, Bihar









Hathua Sugar Unit
& Distillery
Private &Confidential Viability Report

SBI Capital Markets Ltd. 4 Unit- Hathua & Hathua Distillery
3. Technical Snapshot
A. Hathua Sugar
SBI Capital Markets Ltd. appointed K. S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy.
A brief snapshot of the technical and valuation report is provided below:

Particulars Capacity
Hathua Unit 1728 TCD
Make of Plant consisting of-Mill Unit, Boiler
Station, Power House, Clarification Section,
Boiling House, Effluent treatment Plant
Henry Merielle, France
and A.W. Smith & Co.,
Glasgow
Value of the Usable Mill House Rs 4.92 Crore
Value of the boiling house equipments Rs 4.03 Crore
Value of the other equipments Rs 3.03 Crore
Scrap Value of material including spares Rs 1.83 Crore
Land Value-at market rates (Valuation report
enclosed)
Rs. 32.19 Crore
Hathua Distillery 30 KLPD
Make of Plant CVL
Value of the Plant Rs 8.47 Crore
Scrap Value of material including spares Rs 0.29 Crore
Land Value-at market rates (Valuation report
enclosed)
Rs. 17.22 Crore

Land
The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled
as valuer with various Banks and Institutions including State Bank of India.
The Land value has been considered at government rates prevailing in the
district.
(Rs. in Crore)
Land Details Area ( Acres)
1
Govt. Value Market Value
Hathua Sugar Unit 44.88 25.55 32.19
Hathua Distillery 22.48 13.10 17.22

1
The unit area has been provided by GoB .
Private &Confidential Viability Report

SBI Capital Markets Ltd. 5 Unit- Hathua & Hathua Distillery

4. Financial Position
As per the Internal Audit Report made available, the break up of Balance
Sheet of Hathua unit as on March 31, 2006 and that for Distillery as on March
31, 1999 is as follows:
Break up of Liabilities-Sugar Mill/ Distillery
Amount (Rs. crores)
PARTICULARS Hathua Hathua Distillery
2006 1999

SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital 0.00
Reserve & Surplus -2.02

LOAN FUND
Secured Loan 2.25
Unsecured Loan 1.02 1.02
TOTAL 1.02 0.23
APPLICATION OF FUNDS:
FIXED ASSETS:
Gross Block 5.74 6.07
Less : Depreciation 5.26 2.89
Net Block 0.48 3.18
Capital Work in Progress 0.00

INVESTMENTS : 0.21
CURRENT ASSET , LOANS & ADVANCES
Inventories 1.86 5.59
Sundry Debtors 0.73 9.17
Cash & Bank Balance 0.01 2.59
Loans & Advances 3.28 1.59
TOTAL 5.88 18.94

LESS : CURRENT LIABILITIES &
PROVISIONS
Liabilities 50.22 22.10
Provisions 1.39
TOTAL 51.61 22.10
NET CURRENT ASSETS : (45.73) -3.16
a)Miscellaneous Expenditure to the extent not
written off or adjusted
Profit & Loss Account 46.27 0
TOTAL 1.02 0.23

Private &Confidential Viability Report

SBI Capital Markets Ltd. 6 Unit- Hathua & Hathua Distillery
4.1 Details of Liabilities

The dues in Hathua unit are based on the Internal Audit report as on March
31, 2006 while in case of Hathua distillery it is based on Internal Audit report
as on March 31, 1999 submitted by BSSC.
a. Secured Loan
Unit PARTICULARS Rs. in Crore
Hathua Bihar State Co-operative Bank Limited
(31.03.2006) 1.02
Hathua
Distillery
Bihar State Co-operative Bank Limited
(31.03.1999) 2.25
TOTAL 3.27

It may be mentioned that these lenders may have some charge on the existing
assets of the unit for their respective dues.
b. Cane Growers Dues
Rs. Crore
Cane Growers 2.21

It has been informed by SID that as on May 2007 there is no such O/s dues to
the cane growers and all the dues under the above head has been settled.

c. Electricity Dues
Rs. Crore
Hathua Sugar Unit Nil
Hathua Distillery 1.59
TOTAL 1.59


d. Labour Dues
Based on the Internal Audit Report for the financial year 2001-2002, an
amount of Rs. 6.34 crore was due to all the employees. However, we have
collected the latest age profile and dues position which is given below.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 7 Unit- Hathua & Hathua Distillery
Hathua unit







Hathua Unit










Hathua Distillery







The above details are based on the information provided by the unity and has
not been backed by written confirmation.


2
The above liability is only indicative based on information provided and may vary with the actuals.
Data as on March 2007
Labour Age Profile
Age No. of Labour
Above 60 8
50 to 60 87
40 to 50 28
30 to 40 0
Unknown 1
Total 124
Labour Dues Break-Up Rs. in crores
General Labour
Basic Wages 5.29
PF incl interest 4.28
Gratuity 2.37
Bonus 0.88
Retention Allowance 0.00
Total 12.82
Exist Scheme for All Employees 1.47
Total Liabilities including Exit Scheme settlement 14.29
Liability Profile Rs. in Crores
General Labour
Total o/s salary including PF, Gratuity, Bonus,
Retention Allowance
15.00
Total 15.00
Exit Scheme for All Employees 3.00
Total Liabilities including Exit Scheme 18.00
2

Private &Confidential Viability Report

SBI Capital Markets Ltd. 8 Unit- Hathua & Hathua Distillery
e. Other Liabilities

The break up of other liabilities appearing in the internal audit report are as
follows:
Hathua Unit
PARTICULARS Rs. in Crores
Statutory deduction 3.21
Contractors 0.01
Creditors for cane supplied (year wise) 2.21
Cane Grower Advance 0.02
Current A/c with Hqrs 33.32
Vendor account
Cane commission (year wise) 0.13
TOTAL 38.90

The details of interunit transaction and current account with headquaters has
not been verified. The SID may further require to confirm that there is no
other liability other than shown in the Internal Audit Report as on March 31,
2006.

Hathua Distillery
PARTICULARS Rs. in Crores
Sundry Creditors 22.03
Sales Excise Liability 64.72
TOTAL 86.75

Private &Confidential Viability Report

SBI Capital Markets Ltd. 9 Unit- Hathua & Hathua Distillery

5. Proposed Revival Plan (Hathua Sugar Unit and Distillery)
Based on the technical assessment, the Hathua unit has available
infrastructure to enable it to be expanded to 2500 TCD along with a new 12
MW Co-generation Power Plant. The expansion process would require an
implementation period of about 16-18 months. In this connection it may be
mentioned that a sugar mill is expected to have a minimum economic size of
2500 TCD. Hence it can be inferred that the unit is viable with above proposed
expansion. It may also be suggested that the existing Hathua Distillery of
capacity 30 KLPD to be combined along with the Sugar unit to attract the
investors and enhance the viability of the unit.

The unit enjoys an excellent locational & infrastructure advantage, adequate
cane growing area. It also has the required land for expansion.

The viability of the unit may further be enhanced if portion of the farm land
attached to the factory, if any, and colony premises is converted to industrial
land. This shall provide more land for further expansion of the unit. It is also
proposed that the colony land may be allowed for usage for expansion of unit,
if required. The colony may be shifted to some other location. However in
case of further expansion the allotment of sugarcane command area would
also need to be suitably increased.

Considering the revival possibility with expansion to 2500 TPD with a 12 MW
Co Generation Plant, an incremental cost of Rs. 164 Crore would be required,
if some of the usable machineries of the existing mill are refurbished and
used. For efficient operation of the unit post-revival, and considering such
additional amount to be invested, it may be worthwhile to invite private
players for running the unit.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 10 Unit- Hathua & Hathua Distillery
The Land along with other assets of the unit may be offered on a Long Term
Lease, (say 60 years) extendable by further 30 years to the prospective
investor for setting up of Sugar Unit, Co-generation unit and Distillery. The
investor should operate the unit for the above specified purpose.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 11 Unit- Hathua & Hathua Distillery

6. Sacrifice/Waiver/Settlement
Hathua Sugar / Hathua Distillery Unit

a. Secured Loans (Rs. 3.27 Crore)

It may be mentioned that the unit would need to be transferred to the
potential investors free from encumbrances and free of charge on the assets,
NOC from the existing lenders has to be obtained. Considering the same, the
above liabilities have to be negotiated and settled by the Department prior to
the bid process.

b. Cane Growers Dues (Rs. 2.21 Crore)

As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that is would not be practical to recover the dues, if any, from the
new investor. Considering the same, it is suggested that liability if any under
the above head may be settled by the Government of Bihar.

c. Labour Dues (Rs. 32.92 Crore)

No investors would normally like to takeover the unit along with any
obligation (including the labour liability) and with regard to appointment of
existing employees, investors may have the right of appointment.

Hence an amicable settlement on all the labour issues i.e. Payment of arrears,
Exit Scheme, etc has to be arrived between the Labour unions and the BSSC
before transferring the unit to the new investor. It may be mentioned that
BSSC has already estimated an amount of Rs 4.74 crore in the event of exit
Private &Confidential Viability Report

SBI Capital Markets Ltd. 12 Unit- Hathua & Hathua Distillery
scheme is offered to all its employees. It is desirable that an Exit Policy
scheme may be framed preferably by engaging the HR consultants.

The payment of compensation structure to labour may be structured in
installment basis that may need to be paid over a period of time. It may be
further mentioned that the new investor would not be averse to recruiting the
existing labour based on their own screening process.

e. Other Liabilities (Rs. 38.90 Crore)

All other liabilities (including contingent liabilities) in case of Hathua unit, but
not limited to Sales Tax, Income Tax, Service Tax, Excise Duty, Custom duty,
any penalty imposed and liabilities towards any Government body/
Statutory Liability, etc that may be claimed/accrued in future has to be
settled/negotiated/ waived by the GoB. The other liabilities also include
current account with Head office of Rs. 33.32 crore which has been infused as
capital.

f. Sundry Creditors (Rs. 22.03 Crore)

The detailed break up of the creditors is not available through the Balance
Sheet of Hathua distillery. However the above liability being substantial in
nature, the claims cannot e taken care out of the bid proceed and may be
settled/waived by the GoB.

g. Excise liability of Hathua Distillery (Rs. 64.72 Crore)

The amount is statutory in nature. However it is unlikely that the bid value
would be able to clear this liability. Excise on distillery is a state subject
payable to the department of excise, GoB and therefore the GoB can waive or
otherwise deal with the dues.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 13 Unit- Hathua & Hathua Distillery
7. Utilization of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on
the Bid Criteria, the Transfer Agreements have to be drafted and executed.
On realization of the bid proceeds from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions incl. SDF
loan, if any.
3. Balance, if any would be transferred to BSSCL A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory
liabilities and therefore the same has not been considered in the priority
payments.

Based on the above value, the liabilities of the labour under the Exit Scheme
may be settled. Any other liability including Government dues, Cane Growers
Dues, Bank dues, and tax arrears may be waived/settled by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 14 Unit- Hathua & Hathua Distillery

8. Litigation Cases

SBICAP has appointed M/s Alok Agarwal as the Legal consultant to verify
the current litigation/petitions against BSSCL for the unit.

The following cases have been found against the Hathua Sugar unit:
1. Misc. case No. 215 of 2004 (United bank of India Vs. SKG Sugar Ltd &
others) disposed off vide order dated 5.10.2005 by the Member Board of
revenue cum authorized Officer, Bihar by which a Compensation of Rs. 5.48
Crore was awarded against the GoB/BSSC.

In the present case United Bank of India, filed a claim for compensation
amount to be paid to S.K.G. Sugar Ltd under section 7 of the Acquisition Act
1985 and after detailed hearing, the Member board of revenue cum prescribed
Authority under the Act has passed the order dated 5.10.2005 for payment of
compensation of Rs. 5.48 Crore to S.K.G. Sugar Ltd.

In the above case any surplus is generated after meeting the liabilities of the
unit, the same is required to be used for the payment of the above claim.

The following cases have been found against the Hathua Distillery unit:
1. CWJC 1152 of 2003 (S.K.G. Sugar Mill Labour Union, Distillery Unit
(Mirganj) Vs. The State of Bihar & others.
The case is in the nature of Public Interest Litigation filed by the Labour
Union of Distillery unit for payment of their wages and is not a hurdle in the
process of bidding.
2. Title Suit No. 423 of 2003 (McDowell & company Vs. The State of Bihar &
others) pending in the court of Sub Judge-I, Gopalganj, seeking relief that the
assets and properties i.e. plant and machinery valued about Rs. 23. 7 Lac are
the absolute properties of plaintiff and the defendants including BSSC has no
Private &Confidential Viability Report

SBI Capital Markets Ltd. 15 Unit- Hathua & Hathua Distillery
right or title of the assets and further seeking directions for directing the State
of Bihar to hand over the assets and properties set out in the Schedule
Annexure I to the plaint.
The Plaintiff claim certain machineries given under the Schedule of the plaint
as its own which they claim, never vested I the State of Bihar. The case does
not seem sustainable; however the case has to be taken care of so that no
adverse order is passed.

The Legal Advisor has also verified the title deeds pertaining to the Land as
opined that the BSSC has marketable Title over the property. However some
of the Title deeds were not available and therefore the valuation has been
based on the area confirmed by GoB.

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible
litigation for the erstwhile owner / Previous Employees (for whom the
settlement has been made as per the above scheme) and due to reasons of the
above litigation, and if the implementation of the construction cannot be
progressed during the construction phase or stoppage of work during the
operation phase, the Government may undertake to make good the losses
suffered if any.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 16 Unit- Hathua & Hathua Distillery

9. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. Based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit along with the Distillery has a potential
for revival. Therefore we suggest SID, GoB to consider the revival scheme as
suggested in the proposed Revival Plan.




LAURIYA

TABLE OF CONTENTS
1. BRIEF BACKGROUND............................................................................................ 2
2. LOCATIONAL MAP: LAURIA, DISTRICT- WEST CHAMPARAN, BIHAR.. 4
3. TECHNICAL SNAPSHOT....................................................................................... 5
4. FINANCIAL POSITION........................................................................................... 7
4.1 Details of Liabilities................................................................................................... 8
5. PROPOSED REVIVAL PLAN (LAURIA SUGAR UNIT AND DISTILLERY).12
6. SACRIFICE/WAIVER/SETTLEMENT.................................................................13
7. UTILISATION OF PROCEEDS IN THE SETTLEMENT PROCESS..................15
8. LITIGATION CASES ...............................................................................................16
9. CONCLUSIONS AND RECOMMENDATIONS................................................17
Private &Confidential Viability Report

SBI Capital Markets Ltd. 2 Unit- Lauria & Lauria Distillery

1. Brief Background

Sugar Unit
The Lauria Sugar Unit is located on the Bettiah Main Road, 25 km from
Bettiah Railway Station Town of West Champaran District of Bihar, adjoining
by three other major Private Sector Sugar Units viz. Bagaha Sugar Unit (40
km), Harinagar Sugar Unit (20 Km) and Narkatiaganj Sugar Unit (20 km).

The captioned Lauria Sugar Unit with 1626 TCD capacity, was incorporated
in 1905 under the banner of M/s. S.K.G. Sugar Limited; after 80 years of its
operation i.e. in 1985 it was taken over by Bihar State Sugar Corporation
(BSSC) under Bihar Sugar Undertakings (Acquisition) Acts 1977 and 1985.
The BSSC was incorporated as a wholly owned Government Company in
December 1974.

The unit has substantial land approximately 225.72 acres. Out of which 17.27
acres of land is being used for Factory Premises, 31.47 acres for Colony
Premises and 45.65 acres of land for its Agricultural use. Moreover, 118.63
acres of land is there as Out Center Land and 12.70 acres of land for its
Distillery Production.

After the take over of the unit, the maximum cane of 21.96 lac quintal was
crushed in 1990-91 season. The unit was operational till 1996-97 but the
management of BSSC took the decision of closure of mills due to receivables
management and continuous losses due to non disposal of sugar & molasses
etc.





Private &Confidential Viability Report

SBI Capital Markets Ltd. 3 Unit- Lauria & Lauria Distillery

Distillery

The Lauria Distillery of 90 KLPD capacity was under the ownership of S. K.
G. Sugar Limited till 1986. In 1986 it was taken over by Bihar State Sugar
Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition) Acts. 1985.
The acquisition was challenged by S. K. G Sugar Ltd. in the Honbe Supreme
Court mainly on the ground that vesting under Section 3(1) of the Act 1985 is
only for the Sugar Schedule undertaking and not for the Distillery and vide
interim order dated 7.02.1986, the Honbe Supreme Court stayed the take over
of the Distillery and allowed the company to operate the Distillery. However
as per the final judgment of the Honbe Supreme Court dated 18.02. 2003, the
Distillery became the undertaking of BSSC.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 4 Unit- Lauria & Lauria Distillery

2. Locational Map: Lauria, District- West Champaran, Bihar









Lauria Sugar Unit
& Distillery
Private &Confidential Viability Report

SBI Capital Markets Ltd. 5 Unit- Lauria & Lauria Distillery
3. Technical Snapshot
A. Lauria Sugar
SBI Capital Markets Ltd. appointed K.S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy.
A brief snapshot of the technical and valuation report is provided below:
Particulars
Lauria Unit Crushing Capacity 1728 TCD
Make of Plant consisting of Milling Unit: Crushing
capacity 1626 TCD, Boiler Station, Power House,
Clarification Section Boiling House, Centrifugal
and Grading Section
Stork Workspoor,
Holland
Value of the Usable Mill House Rs.2.59 Crore
Value of the boiler house equipments Rs.2.48 Crore
Value of the clarification house equipments Rs.0.33 Crore
Value of the power house equipments Rs.0.58 Crore
Value of the other equipments (incl. Centrifugal
and Grading Section, Boiling House Structure &
Weigh Bridge)
Rs. 1.39 Crore
Scrap Value of material including spares Rs.1.40 Crore
Land Value-at market rates (valuation report
enclosed)
Rs 15.78 Crore
Lauria Distillery Capacity 90 KLPD
Make of Plant Alfa Level, Thermax &
Kirloskar
Value of the Plant Rs 3.47 Crore
Scrap Value of material including spares Rs 0.43 Crore
Land Value-at market rates (valuation report
enclosed)
Rs. 1.18 Crore

Private &Confidential Viability Report

SBI Capital Markets Ltd. 6 Unit- Lauria & Lauria Distillery
Land
The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled
as valuer with various Banks and Institutions including State Bank of India.
The Land value has been considered at government rates prevailing in the
district.
(Rs. in Crore)
Land Details Area ( Acres)
1
Govt. Value Market Value
Lauria Sugar Unit 48.74 14.33 15.78
Lauria Distillery 12.60 0.98 1.18


1
The unit area has been provided by GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 7 Unit- Lauria & Lauria Distillery

4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheets of Lauria sugar units as on March
31, 2006 and of Lauria Distillery as on March 2001 are as follows:
Break up of Liabilities-Sugar Mill/ Distillery
Amount (Rs. crores)
PARTICULARS Lauria Sugar Unit
Lauria
Distillery
2006 2001
SOURCES OF FUND:
I. SHAREHOLDERS FUND:
Capital 1.20
Reserve & Surplus 5.44
II. LOAN FUND:
Secured Loan 6.58 1.91
Unsecured Loan 1.61 0.02
TOTAL: RS. 8.19 8.57
APPLICATION OF FUNDS:
I. FIXED ASSETS:
Gross Block 1.61 27.51
Less: Depreciation 1.49 13.27
Net Block 0.12 14.24
II. INVESTMENTS: 0.33
III. CURRENT ASSETS, LOANS & ADVANCES
Inventories 2.56 8.39
Sundry Debtors 0.31 4.22
Cash &Bank Balance 0.08 1.84
Loans & Advances 5.60 16.94
Interest accrued 0.40

TOTAL : RS. 8.55 31.79
IV. LESS: CURRENT LIABILITIES & PROVISIONS
Liabilities 45.50 42.91
Provisions 1.89 4.86 47.77
NET CURRENT ASSETS: (38.85) (15.98)
V. a) Miscellaneous Expenditure to the extent not
written off or adjusted
Profit & Loss Account 46.92 9.99
TOTAL : Rs. 8.19 8.57

Private &Confidential Viability Report

SBI Capital Markets Ltd. 8 Unit- Lauria & Lauria Distillery

4.1 Details of Liabilities
The dues in Lauria unit are based on the Internal Audit report as on March 31,
2006 while in case of Lauria distillery the are based on Audited Report as on
March 31, 2001.

a. Secured Loan
Unit
PARTICULARS
Rs. in
Crore
Lauria Sugar
Unit
Bihar State Co-operative Bank Limited
(31.03.2006) 6.58
Lauria
Distillery Not available 1.91
TOTAL: 8.49

It may be mentioned that these lenders may have some charge on the existing
assets of the unit for their respective dues.

b. Unsecured Loan
Rs. Crore
Particulars 2006
Sugar unit-Revolving Fund 0.03
Distillery 0.02
TOTAL : Rs. 0.05

As per the internal report prepared by BSSCL, the above loans pertain to
March 31, 2006 and March 2001 for the sugar unit and for distillery
respectively.

c. Cane Growers Dues
Rs. Crore
Cane Growers 2.74

Private &Confidential Viability Report

SBI Capital Markets Ltd. 9 Unit- Lauria & Lauria Distillery
It has been informed by SID that as on May 2007 there is no such O/s dues to
the cane growers and all the dues under the above head has been settled/ in
the process of settlement.

d. Electricity Dues
Rs Crore
Electricity Nil

As per the Internal Audit Report, there are no dues under the above head.

e. Labour Dues
Based on the subsequent information collected from BSCC the due to labour
as on February 2007 is as under:

Name of the Unit: Lauria
Data as on Mar 2007
Labour Age Profile
Age No of Labour
Above 60 11
50 to 60 88
40 to 50 17
30 to 40 1
Total 117


Liability Profile
(Rs. In Crore)
General Labour
Basic Wages 8.42
Overtime 0.24
Bonus 0.19
Gratuity 1.78
Retention Allowance 0.00
Total 10.64
Estimated cost of Exit Scheme 3.33
Net Dues including Exit Scheme 13.97
Private &Confidential Viability Report

SBI Capital Markets Ltd. 10 Unit- Lauria & Lauria Distillery
The above labour details are based on the information submitted by SID and
further information collected from the unit. We have prepared the above
details and O/s dues based on the information submitted by them.

Lauria Distillery







The above information for distillery is based on the information provided by
the unit. However no written confirmation for the same has been received
and therefore may vary.

e. Other Liabilities
The break up of other liabilities appearing in the internal audit report are as
follows:
Particulars Amount
Liabilities for Expenses 7.28
Statutory deduction 2.66
Inter unit transaction 0.12
Other liabilities 0.03
Current A/c with HO 26.40
Lauria Distillery 14.99
TOTAL: Rs. 51.48

The details of inter-unit transaction and current account with headquarters
has not been verified. The current account with HO pertains to the capital
infused by BSSC.


2
The above liability is only indicative based on information provided and may vary with the actuals.
Liability Profile Rs. in Crores
General Labour
Total o/s salary including PF, Gratuity, Bonus,
Retention Allowance
7.50
Total 7.50
Exit Scheme for All Employees 1.50
Total Liabilities including Exit Scheme 9.00
2

Private &Confidential Viability Report

SBI Capital Markets Ltd. 11 Unit- Lauria & Lauria Distillery
Lauria Distillery

PARTICULARS Rs. in Crores
Sales Excise Liability
3
42.00
TOTAL: 42.00


3
The Excise Liability is indicative only and may vary from the actual.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 12 Unit- Lauria & Lauria Distillery

5. Proposed Revival Plan (Lauria Sugar Unit and Distillery)

Located in West Champaran district, where four private sugar mills are
operating with a total capacity of 21000 TCPD. The unit may be expanded to
1500-2000 TCPD to cater to juice based distillery.

Lauriya distillery of 60 KLPD may be used for production of alcohol/ ethanol
out of the juice produced from the Sugar unit. The other 30 KLPD old
distillery has become technically obsolete and therefore may be scraped.

The attachment of Lauriya distillery with Lauriya sugar unit will improve the
viability and thereby investors interest.

The unit also has a farm land area and outcenter land of around 164.28 acres
which may also be given alongwith the transfer of unit. The colony land may
be allowed to be converted into factory land for immediate or future
expansions. The adjacent farm land, if any, may be allowed to be used as
factory land.

As indicated above, GoB can allocate the maximum possible cane growing
area to this unit taking into account the requirement of existing units and their
expansion plans, if any.

The Land along with other assets of the unit may be offered on a Long Term
Lease, (say 60 years) extendable by further 30 years to the prospective
investor for setting up of Sugar Unit, Co-generation unit and Distillery. The
investor should operate the unit for the above specified purpose.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 13 Unit- Lauria & Lauria Distillery

6. Sacrifice/Waiver/Settlement
Lauria Sugar Unit and Lauria Distillery

a. Secured Loans (Rs.8.49 Cr)
It may be mentioned that the unit would need to be transferred to the
potential investors free from encumbrances and free of charge on the assets;
NOC from the existing lenders has to be obtained. Considering the same, the
above liabilities have to be negotiated and settled by the Department prior to
the bid process.

The dues of Bihar State Co-operative Bank Ltd. and of others in case of
Distillery as on date has to be settled/waived and necessary initiative has to
be taken by the Sugarcane Industries Department.

b. Un-Secured Loans (Rs.0.05 Cr)
The unsecured loans are from Government of Bihar. Under the current stage
it would be difficult to get back any recovery of the loan. Considering the
amount of loan, it is proposed to be waived off by GoB.

c. Cane Growers Dues (Rs. 2.47 Cr)
As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that it would not be practical to recover the dues, if any, from the
new investor. Considering the same, it is suggested that liability if any under
the above head may be settled by the Government of Bihar.




Private &Confidential Viability Report

SBI Capital Markets Ltd. 14 Unit- Lauria & Lauria Distillery
d. Labour Dues (Rs. 22.97 Cr)
No investors would normally like to takeover the unit along with any
obligation (including the labour liability) and with regard to appointment of
existing employees, investors may have the right of appointment.

Hence an amicable settlement on all the labour issues i.e. Payment of arrears,
Exit Scheme, etc has to be arrived between the Labour unions and the BSSC
before transferring the unit to the new investor. It may be mentioned that
BSSC has already estimated an amount of Rs 4.83 crore in the event of exit
scheme is offered to all its employees. It is desirable that an Exit Policy
scheme may be framed preferably by engaging the HR consultants.

The payment of compensation structure to labour may be structured in
installment basis that may need to be paid over a period of time. It may be
further mentioned that the new investor would not be averse to recruiting the
existing labour based on their own screening process.

e. Other Liabilities (Rs. 36.49 Cr)
All other liabilities (including contingent liabilities), but not limited to Sales
Tax, Income Tax, Service Tax, Excise Duty, Custom duty, any penalty
imposed and liabilities towards any Government body/ Statutory Liability,
etc that may be claimed/accrued in future has to be settled/negotiated/
waived by the GoB.

f. Excise liability of Lauria Distillery (Rs. 42 Crore)
The amount is statutory in nature. However it is unlikely that the bid value
would be able to clear this liability. Excise on distillery is a state subject
payable to the department of excise, GoB and therefore the GoB can waive or
otherwise deal with the dues.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 15 Unit- Lauria & Lauria Distillery
7. Utilisation of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on
the Bid Criteria, the Transfer Agreements have to be drafted and executed.
On realization of the bid proceeds from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions incl. SDF
loan, if any.
3. Balance, if any would be transferred to BSSCL A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory
liabilities and therefore the same has not been considered in the priority
payments.

Based on the above value, the liabilities of the labour under the Exit Scheme
may be settled. Any other liability including Government dues, Cane Growers
Dues, Bank dues, and tax arrears may be waived/settled by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 16 Unit- Lauria & Lauria Distillery

8. Litigation Cases
SBICAP has appointed M/s Alok Agarwal as the Legal consultant to verify
the current litigation/petitions against BSSCL for the unit.

The following cases have been found against the Lauria Sugar unit:
1. CWJC No 4792 of 1999 (Purushottam Mishra Vs. The State of Bihar &
others0 pending in the High Court, Patna relating to the Payment of wages.
2. CWJC No 10989 of 2004 (N.E.C.D. Union Secretary Vs. The State of Bihar)
pending in the High Court, Patna relating to the cane price payment.
3. CWJC No 98452 of 2003 (S.N Mishra Vs. The State of Bihar & others)
pending in the High Court, Patna relating to the Payment of dues of emloyees.

The following cases have been found against the Lauria Sugar unit:
1. Cr. Rev 96 of 1994 ( Sri Girish Shankar Ex- Managing Director vs The State
of Bihar) matters relates to filing a criminal case by the Excise Department
(the case has no relevance at the moment)

The Legal Advisor has also verified the title deeds pertaining to the Land as
opined that the BSSC has marketable Title over the property. However some
of the Title deeds were not available and therefore the valuation has been
based on the area confirmed by GoB.

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible
litigation for the erstwhile owner / Previous Employees (for whom the
settlement has been made as per the above scheme) and due to reasons of the
above litigation, and if the implementation of the construction cannot be
progressed during the construction phase or stoppage of work during the
operation phase, the Government may undertake to make good the losses
suffered if any.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 17 Unit- Lauria & Lauria Distillery
9. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. Based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit along with the Distillery has a potential
for revival. Therefore we suggest SID, GoB to consider the revival scheme as
suggested in the proposed Revival Plan.




LOHAT


TABLE OF CONTENTS
1. BRIEF BACKGROUND.................................................................................................. 2
2. LOCATIONAL MAP : LOHAT, DISTRICT- MADHUBANI, BIHAR..................... 3
3. TECHNICAL SNAPSHOT............................................................................................. 4
4. FINANCIAL POSITION................................................................................................. 5
4.1 Details of Liabilities......................................................................................................... 6
5. PROPOSED REVIVAL PLAN........................................................................................ 9
6. SACRIFICE/WAIVER/SETTLEMENT...................................................................... 11
7. UTILISATION OF PROCEEDS IN THE SETTLEMENT PROCESS....................... 13
8. LITIGATION CASES .................................................................................................... 14
9. CONCLUSIONS AND RECOMMENDATIONS...................................................... 15
Private &Confidential Viability Report

SBI Capital Markets Ltd. 2 Unit-Lohat

1. Brief Background

The Lohat Sugar Unit is located 8 Km from Pandaul Railway Station of
Madhubani District and 10 Km. away from National Highway approach road of
Pandaul. The Unit is adjoined by another BSSC owned closed down Sugar Unit
i.e. Sakri Sugar Unit (15 Km).

The Lohat Sugar Unit with 1320 TCD capacity, was incorporated in 1914 under
the ownership of Darbhanga Maharaj as Darbhanga Sugar Co. Limited, in 1977 it
was taken over by Bihar State Sugar Corporation (BSSC) under Bihar Sugar
Undertakings (Acquisition) Acts. 1977.

The unit has a substantial 207 acres of land, out of which 62 acres of land is being
used for Factory Premises, 30 acres as Colony Premises. It has also 115 acres of
land as Farm Land and 6 acres of land for residential purpose.
After the take over of the unit by BSSC, the maximum cane of 7.20 lakh quintal
was crushed in the year 1978-79 (Assuming the no. of crushing days as 180 days,
capacity utilization during that year was 59%). The unit was operational till 1996-
97 but the management of BSSC took the decision of closure of the mill due to
continuous losses.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 3 Unit-Lohat


2. Locational Map : Lohat, District- Madhubani, Bihar









LOHAT Sugar Unit
Private &Confidential Viability Report

SBI Capital Markets Ltd. 4 Unit-Lohat
3. Technical Snapshot
SBI Capital Markets Ltd. appointed K.S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy. The
detailed Technical Report submitted by KSPL has been provided in Annexure II
of this report. A brief snapshot of the technical report is provided below:

Crushing Capacity 1270 TCD
Make of Plant consisting of-Mill Unit, Boiler Station,
Power House, Clarification Section, Boiling House,
Effluent treatment Plant
Mirless Watson, George
fletcher, Babcok & Wilcok
Value of the Usable Mill House & Boiling house
equipments.
Rs 7.28 Crore
Value of the other equipments Rs 1.71 Crore
Scrap Value of material including spares Rs 0.25 Crore
Land Value (valuation report enclosed) Rs. 16.90 Crore


Land
The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled as
valuer with various Banks and Institutions including State Bank of India. The
Land value has been considered at government rates prevailing in the district.
(Rs. in Crore)
Land Details Area ( Acres) Govt. Value Market Value
Factory 62.00 6.89 12.40
Colony Premises 30.00 2.90 4.50

Private &Confidential Viability Report

SBI Capital Markets Ltd. 5 Unit-Lohat
4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of the Lohat unit as on March 31, 2006
is as follows:
Break up of Liabilities Amount (Rs. crores)
PARTICULARS 2006
SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital
Reserve & Surplus 0.02 0.02
LOAN FUND
Secured Loan 0.51 0.51
Unsecured Loan
TOTAL 0.53
APPLICATION OF FUNDS:
FIXED ASSETS:
Gross Block 1.71
Less : Depreciation 1.47
Net Block 0.24
Capital Work in Progress 0.15
INVESTMENTS :
CURRENT ASSET , LOANS &
ADVANCES
Inventories 0.41
Sundry Debtors 0.01
Cash & Bank Balance 0.03
Loans & Advances 4.95
TOTAL 5.40
LESS : CURRENT LIABILITIES &
PROVISIONS
Liabilities 45.30
Provisions 0.02
TOTAL 45.32
NET CURRENT ASSETS : (39.92)
a)Miscellaneous Expenditure to the extent
not written off or adjusted
Profit & Loss Account 40.06
TOTAL 0.53

Private &Confidential Viability Report

SBI Capital Markets Ltd. 6 Unit-Lohat
4.1 Details of Liabilities
The above dues are based on the Internal Audit report as on March 31,
2006.

a. Secured Loan
PARTICULARS Rs. in Crore
Cash Credit from Rahika Central cooperative
bank, Madhubani 0.51

It may be mentioned that these lenders may have some charge on the existing
assets of the unit for their respective dues.
b. Cane Growers Dues
Rs Crore
Cane Growers 1.10

It has been informed by SID that as on May 2007 there is no such O/s dues to the
cane growers and all the dues under the above head has been settled.

c. Electricity Dues
Rs. Crore
Electricity Nil

As per the Internal Audit Report, there are no dues under the above head.







Private &Confidential Viability Report

SBI Capital Markets Ltd. 7 Unit-Lohat
d. Labour Dues
The labour dues position based on the information submitted by the unit is as
under:










f. Other Liabilities
The break up of other liabilities appearing in the internal audit report are as
follows:
PARTICULARS Rs. in Crores
Statutory deduction 1.56
Contractors 0.01
Liability for expenses 10.91
Creditor for goods supplied 0.97
Other liabilities 27.11
TOTAL 40.56

Data as on Mar 2007
Labour Age Profile
Age No of Labour
Above 60 2
50 to 60 48
40 to 50 22
30 to 40 2
Unknown 9
Total 83
Liability Profile
General Labour
Rs. in crores
Basic Wages 8.80
PF incl. interest 1.39
Gratuity 0.04
Bonus 0.72
Retention Allowance 1.72
Total 12.67
Exit Scheme for all Employees 1.70
Net Dues including Exit Scheme 14.37
Private &Confidential Viability Report

SBI Capital Markets Ltd. 8 Unit-Lohat
The details of inter-unit transaction and current account with headquaters has
not been verified. The SID may further require to confirm that there is no other
liability other than shown in the Internal Audit Report as on March 31, 2006.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 9 Unit-Lohat
5. Proposed Revival Plan
Based on the technical assessment, the Lohat unit has available infrastructure to
enable it to be expanded to 2500 TCD along with a 60 KLPD Distillery and 12
MW Co-generation Power Plant. The expansion process would require an
implementation period of about 16-18 months. In this connection it may be
mentioned that a sugar mill is expected to have a minimum economic size of
2500 TCD. Hence it can be inferred that the unit is viable with above proposed
expansion. However, to revive the unit, sugarcane an appropriate command area
would required to be notified and necessary support from GOB would be
needed.

The unit enjoys an excellent locational & infrastructure advantage, adequate cane
growing area. It also has the required land for expansion.

The viability of the unit may further be enhanced if portion of the farm land
attached to the factory, if any, and colony premises is converted into industrial
land for doing the expansion of the unit. This shall provide more land for further
expansion of the unit. It is also proposed that the colony land may be allowed for
usage for expansion of unit, if required. The colony may be shifted to some other
location. However in case of further expansion the allotment of sugarcane
command area would also need to be suitably increased.

Considering the revival possibility with expansion to 2500 TPD alongwith 60
KLPD Distillery and a 12 MW Co Generation Plant, an incremental cost of Rs.164
crores would be required, if some of the usable machineries of the existing mill
are refurbished and used. For efficient operation of the unit post-revival, and
considering such additional amount to be invested, it may be worthwhile to
invite private players for running the unit.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 10 Unit-Lohat


The Land along with other assets of the unit may be offered on a Long Term
Lease, (say 60 years) extendable by further 30 years to the prospective investor
for setting up of Sugar Unit, Co-generation unit and Distillery. The investor
should operate the unit for the above specified purpose.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 11 Unit-Lohat

6. Sacrifice/Waiver/Settlement
a. Secured Loans (Rs.0.51 Cr.)
It may be mentioned that the unit would need to be transferred to the potential
investors free from encumbrances and free of charge on the assets, NOC from the
existing lenders has to be obtained. Considering the same, the above liabilities
have to be negotiated and settled by the Department prior to the bid process.

b. Cane Growers Dues (Rs.1.10 Cr)
As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that it would not be practical to recover the dues, if any, from the new
investor. Considering the same, it is suggested that liability, if any, under the
above head, may be settled by the Government of Bihar.

c) Labour Dues (Rs.14.37 Cr)
No investors would normally like to takeover the unit along with any obligation
(including the labour liability) and with regard to appointment of existing
employees , investors may have the right of appointment. It may be further
mentioned that the new investor would be averse to recruiting the existing
labour based on their own screening process.

Hence an amicable settlement on all the labour issues i.e. Payment of arrears, exit
scheme, etc has to be arrived between the Labour unions and the BSSCL before
transferring the unit to the new investor. It may be mentioned that BSSCL has
already estimated an amount of Rs 1.70 cr in the event of exit scheme is offered to
Private &Confidential Viability Report

SBI Capital Markets Ltd. 12 Unit-Lohat
all its employees. It is desirable that an Exit Policy scheme may be framed
preferably by engaging the HR consultants.

The payment of compensation structure to labour may be structured in
installment basis that may need to be paid over a period of time. Further it may
be ensured that after the change of management, the existing employees shall be
retained/employed at the sole discretion of the new management.

e. Other Liabilities ( Rs 40.56 crore)
All other liabilities (including contingent liabilities), but not limited to Sales Tax,
Income Tax, Service Tax, Excise Duty, Custom duty, any penalty imposed and
liabilities towards any Government body/ Statutory Liability, etc that may be
claimed/accrued in future has to be settled/negotiated/ waived by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 13 Unit-Lohat

7. Utilisation of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on the
Bid Criteria, the Transfer Agreements have to be drafted and executed.
On realization of the bid proceeds from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions incl. SDF loan,
if any.
3. Balance, if any would be transferred to BSSCL A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory liabilities
and therefore the same has not been considered in the priority payments.

Based on the above value, the liabilities of the labour under the Exit Scheme may
be settled. Any other liability including Government dues, Cane Growers Dues,
Bank dues, and tax arrears may be waived/settled by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 14 Unit-Lohat
8. Litigation Cases

SBICAPS has appointed M/s Alok Agarwal as the Legal consultant to verify the
current litigation/petitions against BSSCL for the unit.

As per the information provided by the legal advisor, there are no pending
suits/cases for recovery of compensation by the erstwhile owner. However the
possibility of the same may not be ruled out.

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible litigation
for the erstwhile owner / Previous Employees (for whom the settlement has
been made as per the above scheme) and due to reasons of the above litigation, if
the implementation of the revival scheme cannot be progressed during the
construction phase or stoppage of work during the operation phase, the
Government may need to address the legal issues arising if any.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 15 Unit-Lohat

9. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. Based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit has a potential for revival. Therefore we
suggest SID, GoB to consider the revival scheme as suggested in the proposed
Revival Plan.




MOTIPUR


TABLE OF CONTENTS
1. BRIEF BACKGROUND.................................................................................................. 2
2. LOCATIONAL MAP : MOTIPUR, DISTRICT- MUZAFFARPUR, BIHAR............ 3
3. TECHNICAL SNAPSHOT............................................................................................. 4
4. FINANCIAL POSITION................................................................................................. 5
4.1 Details of Liabilities......................................................................................................... 6
5. PROPOSED REVIVAL PLAN........................................................................................ 9
6. SACRIFICE/WAIVER/SETTLEMENT...................................................................... 11
7. UTILISATION OF PROCEEDS IN THE SETTLEMENT PROCESS....................... 13
8. LITIGATION CASES .................................................................................................... 14
9. CONCLUSIONS AND RECOMMENDATIONS...................................................... 15
Private &Confidential Viability Report

SBI Capital Markets Ltd. 2 Unit-Motipur

1. Brief Background

The Motipur Sugar Unit is located on the National Highway and at a distance of
1 Km. from Motipur Railway Station and 30 Km distance from District Town of
Muzaffarpur of Bihar. The Unit is adjoined by another private sector Sugar
Factory i.e. Chakia Sugar Unit which is at a distance of 20 Km approximately.
The Motipur Sugar Unit with 1219 TCD capacity, was set up in 1933 as Motipur
Sugar Factory; in 1985 it was taken over by Bihar State Sugar Corporation (BSSC)
under Bihar Sugar Undertakings (Acquisition) Ordinance 1977 and Bihar Sugar
Undertakings (Acquisition) Act 1985.
The unit has substantial got substantial area of land (approximately 1363.40
acres), out of which 50 acres of land is being used for Factory Premises, 16 acres
for Colony Premises and 1297.40 acres as Farm Land. After the take over of the
unit by BSSC, the maximum cane was crushed was 7.10 lac quintal in 1988-89
season [assuming the number of crushing days to be 180 days capacity utilization
works out to around 33%]. The unit was operational till 1996-97 but the
management of BSSC took the decision of closure of mills due to continuous
losses.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 3 Unit-Motipur


2. Locational Map : Motipur, District- Muzaffarpur, Bihar









MOTIPUR Sugar Unit
Private &Confidential Viability Report

SBI Capital Markets Ltd. 4 Unit-Motipur
3. Technical Snapshot
SBI Capital Markets Ltd. appointed K.S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy.
The detailed Technical Report submitted by KSPL has been attached to this
report. A brief snapshot of the technical report is provided below:

Crushing Capacity 1250 TCD Per day
Make of Plant consisting of Milling Unit: Crushing
capacity 1250 TCD, Boiler Station, Power House,
Clarification Section, Boiling House, Effluent
treatment Plant
Stork Workspoor,
Netherlands
Value of the Usable Plant & Machineries Rs.5.64 Crore
Scrap Value of material including spares Rs.2.11 Crore
Land Value (Valuation Report enclosed) Rs.47.62 Crore

Land
The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled as
valuer with various Banks and Institutions including State Bank of India. The
Land value has been considered at government rates prevailing in the district.
(Rs. in Crore)
Land Details Area ( Acres) Land Value Market Value
Factory Premises 50.00 40.00 42.50
Colony premises 16.00 4.80 5.12

Private &Confidential Viability Report

SBI Capital Markets Ltd. 5 Unit-Motipur
4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of the Motipur unit as on March 31,
2006 is as follows:
Break up of Liabilities
PARTICULARS 2005-06
Rs. Crore
SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital
Reserve & Surplus 0.06 0.06
LOAN FUND
Secured Loan 0.53
Unsecured Loan 1.17 1.70
TOTAL : 1.76
APPLICATION OF FUNDS:
FIXED ASSETS:
Gross Block 1.45
Less : Depreciation 1.27
Net Block 0.18
Capital Work in Progress 0.95
INVESTMENTS :
CURRENT ASSET , LOANS & ADVANCES
Inventories 0.95
Sundry Debtors 0.10
Cash & Bank Balance 0.11
Loans & Advances 11.50
TOTAL : (A) 12.66
Liabilities 50.95
Provisions 1.05
TOTAL : (B) 52.00
NET CURRENT ASSETS : (A-B) (39.34)
Profit & Loss Account (Dr bal) 39.97
TOTAL : 1.76

Private &Confidential Viability Report

SBI Capital Markets Ltd. 6 Unit-Motipur
4.1 Details of Liabilities
The above dues are based on the Internal Audit report as on March 31,
2006.
a. Secured Loan
PARTICULARS Rs. in Crore
Muzaffarpur Central Co-operative Bank Ltd. 0.43
Sugar Development Fund From Central Govt. 0.10
TOTAL : 0.53

It may be mentioned that these lenders may have some charge on the existing
assets of the unit for their respective dues.
b. Unsecured Loan
Particulars Rs. in Crore
Other Loans 0.04
Loan from Govt. of Bihar (Honorable Justice Uday Sinha
Committee) 1.13
TOTAL : Rs. 1.17

The unsecured loans were infused at the time of takeover and are currently
outstanding. It has been informed that no interest is being charged on the same.

c. Cane Growers Dues
Rs. Crore
Cane Growers 0.74

It has been informed by SID that as on May 2007 there is no such O/s dues to the
cane growers and all the dues under the above head has been settled.

d. Electricity Dues
Rs. Crore
Electricity Nil

Private &Confidential Viability Report

SBI Capital Markets Ltd. 7 Unit-Motipur
As per the Internal Audit Report, there are no dues under the above head.

e. Labour Dues
The labour dues position based on the information submitted by the unit is as
under:










Data as on Mar 2007
Labour Age Profile
Age No. of Labour
Above 60 5
50 to 60 35
40 to 50 13
30 to 40 4
Records not available 3
Total 60
Liability Profile (Rs. In crore)
General Labour
Basic Wages (Factory) 10.71
Basic Wages (Farm) 0.41
Gratuity 2.53
Bonus 1.33
PF (Factory) 2.73
PF (Farm) .10
Overtime 0.08
Retention Allowance 1.75
Total 19.64
Exit Scheme for all Employees 1.20
Total Liabilities including Exit Scheme 20.84
Private &Confidential Viability Report

SBI Capital Markets Ltd. 8 Unit-Motipur

f. Other Liabilities
The break up of other liabilities appearing in the internal audit report are as
follows:
Particulars Rs. in Crores
Creditors for goods supplied 0.44
Statutory deduction 2.44
Other liabilities 0.85
Current a/c with Hqrs. 33.83
Vendor account 3.13
Cane commission (year wise ) 0.08
TOTAL: Rs. 40.77

The details of inter-unit transaction and current account with headquaters has
not been verified. The SID may further require to confirm that there is no other
liability other than shown in the Internal Audit Report as on March 31, 2006.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 9 Unit-Motipur
5. Proposed Revival Plan
Based on the technical assessment, the Motipur unit has available infrastructure
to enable it to be expand to 2500 TCD along with a new 12 MW Co-generation
Power Plant and a Distillery of 60 KLPD. The expansion process would require
an implementation period of about 15-18 months. Hence it can be inferred that
the unit is viable with above proposed expansion. However, to revive the unit,
sugarcane an appropriate command area would required to be notified and
necessary support from GOB would be needed.

The unit enjoys an excellent locational & infrastructure advantage, adequate cane
growing area. It also has the required land for expansion.

The viability of the unit may further be enhanced if portion of the farm land
attached to the factory (app 300 acres out of 1297 acres) and colony premises is
converted to industrial land for doing the expansion of the unit. This shall
provide more land for further expansion of the unit. It is also proposed that the
colony land may be allowed for usage for expansion of unit, if required. The
colony may be shifted to some other location. However in case of further
expansion the allotment of sugarcane command area would also need to be
suitably increased.

Considering the revival possibility with expansion to 2500 TPD with a new 12
MW Co-generation Power Plant and a Distillery of 60 KLPD, an incremental cost
of Rs. 164 crores would be required, if some of the usable machineries of the
existing mill are refurbished and used. For efficient operation of the unit post-
revival, and considering such additional amount to be invested, it may be
worthwhile to invite private players for running the unit.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 10 Unit-Motipur
The Land along with other assets of the unit may be offered on a Long Term
Lease, (say 60 years) extendable by further 30 years to the prospective investor
for setting up of Sugar Unit, Co-generation unit and Distillery. The investor
should operate the unit for the above specified purpose.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 11 Unit-Motipur

6. Sacrifice/Waiver/Settlement
a. Secured Loans (Rs.0.53 Cr.)
It may be mentioned that the unit would need to be transferred to the potential
investors free from encumbrances and free of charge on the assets, NOC from the
existing lenders has to be obtained. Considering the same, the above liabilities
have to be negotiated and settled by the Department prior to the bid process.The
dues of Muzaffarpur Central Co-operative Bank Ltd as on date has to be
settled/waived and necessary initiative has to be taken by the Sugarcane
Industries Department.

b. Un-Secured Loans (Rs.1.17 Cr)
The unsecured loans are from Government of Bihar. Under the current stage it
would be difficult to get back any recovery of the loan. Considering the state of
affairs of the Corporation, it is proposed to be waived off by GoB.

3. Cane Growers Dues (Rs.0.74 Cr)
As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that it would not be practical to recover the dues, if any, from the new
investor. Considering the same, it is suggested that liability, if any, under the
above head, may be settled by the Government of Bihar.

d) Labour Dues (Rs.20.84 Cr)
No investors would normally like to takeover the unit along with any obligation
(including the labour liability) and with regard to appointment of existing
employees, investors may have the right of appointment. It may be further
Private &Confidential Viability Report

SBI Capital Markets Ltd. 12 Unit-Motipur
mentioned that the new investor would be averse to recruiting the existing
labour based on their own screening process.

Hence an amicable settlement on all the labour issues i.e. Payment of arrears, Exit
Scheme, etc has to be arrived between the Labour unions and the BSSCL before
transferring the unit to the new investor. It may be mentioned that BSSCL has
already estimated an amount of Rs.1.20 cr in the event of Exit Scheme is offered
to all its employees. It is desirable that an Exit Policy scheme may be framed
preferably by engaging the HR consultants.

The payment of compensation structure to labour may be structured in
installment basis that may need to be paid over a period of time. Further it may
be ensured that after the change of management, the existing employees shall be
retained/employed at the sole discretion of the new management.

e. Other Liabilities ( Rs 40.77 crore)
All other liabilities (including contingent liabilities), but not limited to Sales Tax,
Income Tax, Service Tax, Excise Duty, Custom duty, any penalty imposed and
liabilities towards any Government body/ Statutory Liability, etc that may be
claimed/accrued in future has to be settled/negotiated/ waived by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 13 Unit-Motipur

7. Utilisation of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on the
Bid Criteria, the Transfer Agreements have to be drafted and executed.
On realization of the bid proceeds from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions incl. SDF loan,
if any.
3. Balance, if any would be transferred to BSSCL A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory liabilities
and therefore the same has not been considered in the priority payments.

Based on the above value, the liabilities of the labour under the Exit Scheme may
be settled. Any other liability including Government dues, Cane Growers Dues,
Bank dues, and tax arrears may be waived/settled by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 14 Unit-Motipur
8. Litigation Cases

SBICAP has appointed M/s Alok Agarwal as the Legal consultant to verify the
current litigation/petitions against BSSCL for the unit.

As per the information provided by the legal advisor, there are no pending
suits/cases for recovery of compensation by the erstwhile owner. However the
possibility of the same may not be ruled out.

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible litigation
for the erstwhile owner / Previous Employees (for whom the settlement has
been made as per the above scheme) and due to reasons of the above litigation, if
the implementation of the revival scheme cannot be progressed during the
construction phase or stoppage of work during the operation phase, the
Government may need to address the legal issues arising if any.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 15 Unit-Motipur

9. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. Based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit has a potential for revival. Therefore we
suggest SID, GoB to consider the revival scheme as suggested in the proposed
Revival Plan.




NEW SIWAN

TABLE OF CONTENTS
1. BRIEF BACKGROUND............................................................................................ 2
2. LOCATIONAL MAP: NEW SIWAN, DISTRICT- SIWAN, BIHAR................... 3
3. TECHNICAL SNAPSHOT....................................................................................... 4
4. FINANCIAL POSITION........................................................................................... 5
4.1 Details of Liabilities................................................................................................... 6
a. Secured Loan ................................................................................................................. 6
b. Details of Unsecured Loans - Nil.................................................................................. 6
c. Cane Growers Dues ........................................................................................................ 6
d. Electricity Dues ............................................................................................................... 6
e. Labour Dues..................................................................................................................... 7
f. Other Liabilities ............................................................................................................... 7
5. ASSESSMENT OF THE UNIT ................................................................................. 8
6. ALTERNATE STRATEGY........................................................................................ 9
7. SACRIFICE/WAIVER/SETTLEMENT.................................................................10
8. UTILIZATION OF PROCEEDS IN THE SETTLEMENT PROCESS.................12
9. LITIGATION CASES ...............................................................................................13
10. CONCLUSIONS AND RECOMMENDATIONS.................................................14
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 2 Unit- New Siwan

1. Brief Background

The New Siwan Sugar Unit is located 2 km away from nearest Siwan Railway
Station of Siwan District and 3 km away from Siwan Town. The Mill is at a
distance of 3 km from approach road of National Highway. The Unit is
adjoined by Siwan Sugar Unit which is at a distance of 3 km approximately.

The New Siwan Sugar Unit with 935 TCD capacity, was incorporated in 1918
under the ownership of New Savan Sugar & Gur Refining Company. After 61
years of its operation i.e. in 1979 it was taken over by Bihar State Sugar
Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition) Acts 1977.
The BSSC was incorporated as a wholly owned Government Company in
December 1974 without having its own Sugar Mills.

The unit has only 28.30 acres of land as Factory Premises and they do not
have any other land to be used as Colony, Farm Land or Out Centre Land. It
has a huge Sugarcane Area of land of approximately 36173 acres.

After the take over of the unit by BSSC, the maximum cane was crushed in
1981-82 (7.61 lac quintal). The unit was operational till 1990-91 but the
management of BSSC took the decision of closure of mills due to poor cash
management and continuous losses due to non-disposal of sugar & molasses
etc.

Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 3 Unit- New Siwan

2. Locational Map: New Siwan, District- Siwan, Bihar







New Siwan Sugar Unit
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 4 Unit- New Siwan
3. Technical Snapshot

SBI Capital Markets Ltd. appointed K.S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy.
The detailed Technical Report submitted by KSPL has been enclosed. A brief
of the technical report is provided below:

Crushing Capacity 935 TCD
Make of Plant consisting of - Mill Unit, Boiler
Station, Power House, Boiling House
Not Known
Scrap Value of material including spares Rs 0.64 Crore
Land Value (valuation report enclosed) Rs. 37.35 Crore


Land

The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled
as valuer with various Banks and Institutions including State Bank of India.
The Land value has been considered at market rates prevailing in the district.

Land Details Area ( Acres) Value (Rs. Crore)
Factory Premises &
Colony premises
28.30 37.35








Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 5 Unit- New Siwan
4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of the New Siwan unit as on March
31, 2006 is as follows:

Break up of Liabilities

Amount (Rs. crores)
PARTICULARS 2006
Rs. in Crores
SOURCES OF FUND :
SHAREHOLDERS FUND :
Capital
Reserve & Surplus
LOAN FUND :
Secured Loan 0.08
Unsecured Loan
0.08
TOTAL : RS. 0.08

APPLICATION OF FUND :
FIXED ASSETS
Gross Block 3.65
Less : Depreciation 3.52
Net Block 0.13
Capital work in progress 0.06

CURRENT ASSETS, LOANS & ADVANCES :
Inventory 0.54
Sundry Debtors
Cash & Bank Balances 0.05
Loans & Advances 2.41
3.00

LESS : CURRENT LIABILITIES AND PROVISIONS
Liabilities 31.66
Net Current Assets (28.66)
Suspense Account (0.46)
Miscelleneous Expenses
(to the extent not written off or adjusted)
Profit and Loss Account 29.01
Net Current Assets
TOTAL : RS. 0.08 0.08
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 6 Unit- New Siwan
4.1 Details of Liabilities
The above dues are based on the Internal Audit report as on March 31,
2006 submitted by BSSC.
a. Secured Loan
PARTICULARS Rs Crore
Sugar Development Fund 0.08
TOTAL : 0.08

The above dues are based on the Internal Audit report as on March 31, 2006
submitted by BSSC It may be mentioned that these claimants may have some
charge on the existing assets of the unit for their respective dues.

The SID may further require to confirm that there is no other liability other
than shown in the Internal Audit Report as on March 31, 2006.
b. Details of Unsecured Loans - Nil
c. Cane Growers Dues
Rs Crore
Cane Growers 0.04

It has been informed by SID that as on May 2007 there is no such O/s dues to
the cane growers and all the dues under the above head has been settled/ in
the process of settlement.
d. Electricity Dues
Rs. Crore
Electricity Nil

As per the Internal Audit Report, there are no dues under the above head.



Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 7 Unit- New Siwan
e. Labour Dues

















The above labour details are based on the Internal Audit Report submitted by
SID and further information collected from the unit. We have prepared the
above details and O/s dues based on the information submitted by them.
f. Other Liabilities
The break up of other liabilities appearing in the internal audit report are as
follows:
PARTICULARS 2006
Current A/c HO, Patna 12.26
Statutory Deduction 0.45
Inter Unit Transaction 0.03
Other current liabilities 6.48
TOTAL: 19.22
The details of interunit transaction and current account with headquaters has
not been verified.
Data as on Mar 2007
Labour Age Profile
Age No of Labour
Above 60 1
50 to 60 37
40 to 50 9
30 to 40 1
Unknown 0
Total 48
Liability Profile
General Labour Rs. in crores
Basic Wages 3.38
PF incl interest 0.21
Other O/s Allowance 0.29
Gratuity 0.95
Bonus 0.55
Total 5.38
Exit Scheme-considering All Employees 0.75
Net Dues including Exit Scheme
settlement
6.13
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 8 Unit- New Siwan
5. Assessment of the Unit
An attempt was made to understand the technical competence of the unit to
be financially viable in the current market scenario as also going forward. It is
felt that the unit is both technically incompetent and financially unviable. In
this connection, it may be mentioned that given the prevailing sugar industry
parameters, sugar units are surviving mainly because of integrated Co-
generation unit and distillery. In light of above, the broad reasons for the New
Siwan unit being unviable is as under:

1. The factory falls in the town area of Siwan.
2. Transportation of Cane and Sugar to and from the unit may be
difficult.
3. The Land is not enough for further expansion.

















Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 9 Unit- New Siwan
6. Alternate Strategy

Considering the above, it is recommended to use the Land for some other
Industrial/Commercial Activity such as:

1. Food Processing Zone
2. Commercial Complex
3. Handicraft Park
4. Warehouse/Cold Storage
5. Hospitals, Schools

The above is only indicative and it is felt that it should be best left to the
investors to take up any of the commercial activity not restricted to as
indicated above.

For creation of economic activity and generation of new investment
opportunities, the premises of the above unit may be used but not restricted
to the above purpose. For the same, it is understood that the land may be
leased to private investors on a long term basis. The valuation of a unit is
broadly done on going concern basis or fair value of the assets. The above unit
is not running and therefore the basis would be based on the fair value of the
assets. Again the new investors may not be willing to undertake any of the
existing liabilities of the unit. Based on the above, the liabilities may be
suitably waived/settled/adjusted/negotiated by Government of Bihar and
the unit may be transferred to the potential investor free from all
encumbrances and the investor should pay for the assets being acquired.

Therefore, the Land would need to be handed over on long term lease basis
and the existing machineries would need to be sold through a bidding process
to the prospective investor based on a minimum Reserve price. Liabilities etc.
would need to be settled accordingly to generate the investors interest.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 10 Unit- New Siwan
7. Sacrifice/Waiver/Settlement

The unit may not be revived due to difficulties envisaged and noted above.
Therefore the same has to be developed for other industrial purpose some of
which has been mentioned above. However the liabilities for existing dues
has to be satisfied.

a. Secured Loans (Rs. 0.08 Cr.)

It may be mentioned that to transfer the land to the potential investors free
from encumbrances and free of charge on the assets, NOC from the existing
lenders has to be obtained. However the investors would not be willing to
take this liability. Considering the same, the above liabilities have to be
negotiated and settled by the Department prior to the bid process.

b. Un-Secured Loans (Nil)

As per the information provided to us, there are no unsecured loans as on
date.

c. Cane Growers Dues (Nil)

As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that is would not be practical to recover the dues, if any, from the
new investor. Considering the same, it is suggested that liability if any under
the above head may be settled by the Government of Bihar.

d. Labour Dues (Rs. 6.13 Cr)

As indicated above, even if the unit is unviable from Sugar perspective, it
would be necessary to settle the dues in order to explore the other options for
making the effective utilization of the industrial land.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 11 Unit- New Siwan

Therefore, an amicable settlement on all the labour issues i.e. Payment of
arrears, VRS, etc has to be arrived between the Labour unions and the BSSC
before transferring the Land to the new investor. It is desirable that an Exit
Policy scheme has to be framed preferably by engaging the HR consultants so
that the total amount under this scheme shall not exceed the actual amount
overdue as calculated above and furnished by BSSC in their internal report for
the unit. The payment of compensation structure to labour may be structured
in installment basis that would be paid over a minimum period.

e. Other Liabilities (Rs 19.22 Crore)

All other liabilities (including contingent liabilities), but not limited to Sales
Tax, Income Tax, Service Tax, Excise Duty, Custom duty, any penalty
imposed and liabilities towards any Government body/ Statutory Liability,
etc that may be claimed/accrued in future has to be settled/negotiated/
waived by the GoB.















Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 12 Unit- New Siwan

8. Utilization of Proceeds in the Settlement Process
Once the Biding process starts and the potential Investor is selected based on
the Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the price from the highest bidders, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks, Financial Institutions and SDF, if any (in
case not settled by the Government of Bihar),
3. Balance, if any would be transferred to BSSC A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory
liabilities and therefore the same has not been considered in the priority
payments. However in case the labour liabilities are not being able to settled
from the above realization, the balance has to be settled by the Government of
Bihar.

Based on the above value, the liabilities of the labour under the Exit Scheme
may be settled. Any other liability including Government dues, Cane Growers
Dues, Bank dues, and tax arrears may be waived/settled by the GoB.





Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 13 Unit- New Siwan
9. Litigation Cases
SBI Caps has appointed M/s Alok Agarwal as the Legal consultant to verify
the current litigation/petitions against BSSC for the unit.

As per the information provided by the legal advisor, there is no pending
suits/cases for recovery of compensation by the erstwhile owner. However
the possibility of the same way not be ruled out.

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible
litigation for the erstwhile owner / Previous Employees (for whom the
settlement has been made as per the above scheme) and due to reasons of the
above litigation, and if the implementation of the construction cannot be
progressed during the construction phase or stoppage of work during the
operation phase, the Government may assist in the settlement of cases.














Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 14 Unit- New Siwan
10. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. However based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit does not have a investment attractiveness
for sugar unit. Therefore we suggest SID, GoB to consider the rehabilitation
scheme as suggested in the proposed Revival Plan.




RYAM

TABLE OF CONTENTS
1. BRIEF BACKGROUND............................................................................................ 2
2. LOCATIONAL MAP: RYAM, DISTRICT- DARBHANGA, BIHAR.................. 3
3. TECHNICAL SNAPSHOT....................................................................................... 4
4. FINANCIAL POSITION........................................................................................... 5
4.1 Details of Liabilities................................................................................................... 6
a. Secured Loan ................................................................................................................. 6
b. Unsecured Loans ............................................................................................................ 6
c. Cane Growers Dues ........................................................................................................ 6
d. Electricity Dues ............................................................................................................... 6
e. Labour Dues..................................................................................................................... 7
f. Other Liabilities ............................................................................................................... 8
5. ASSESSMENT OF THE UNIT ................................................................................. 9
6. ALTERNATE STRATEGY.......................................................................................10
7. SACRIFICE/WAIVER/SETTLEMENT.................................................................11
8. UTILIZATION OF PROCEEDS IN THE SETTLEMENT PROCESS.................13
9. LITIGATION CASES ...............................................................................................14
10. CONCLUSIONS AND RECOMMENDATIONS.................................................15
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 2 Unit- Ryam

1. Brief Background

The Ryam Sugar Unit is located at about 20 km from the railway station of
Tarsarai and 25 km from Darbhanga District Township. The nearest sugar
factory is a BSSC unit - Sakri, which is about 20 km from this Unit.

The Ryam Sugar Unit with 808 TCD capacity was incorporated in 1914 under
the banner of M/s. Tirhut Co-operative Sugar Co. Ltd. After 64 years of its
operation i.e. in 1977 it was taken over by Bihar State Sugar Corporation
(BSSC) under Bihar Sugar Undertakings (Acquisition) Acts. 1977.

The unit has only 8.10 acres of land which is being used for Factory Premises.
Colony Premises has 17.92 acres of land. The Unit possesses a Sugarcane Area
of land of approximately 28000 acres.

After the take over of the unit by BSSC, the maximum cane was crushed in
1978-79 that was 6.04 Lac quintal. The unit was operational till 1993-94 but the
management of BSSC took the decision of closure of mills due to poor cash
management and continuous losses.

Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 3 Unit- Ryam

2. Locational Map: Ryam, District- Darbhanga, Bihar









Ryam Sugar Unit
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 4 Unit- Ryam
3. Technical Snapshot
SBI Capital Markets Ltd. appointed K. S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy.
The detailed Technical Report submitted by KSPL has been enclosed. A brief
snapshot of the technical report is provided below:

Crushing Capacity 808 TCD
Make of Plant consisting of - Mill Unit, Boiler
Station, Power House, Boiling House and
Clarification House
Mirless Watson Co. Ltd
Scrap Value of material including spares Rs. 4.13 Cr
Land Value (valuation report enclosed) Rs. 4.22 Cr

Land

The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled
as valuer with various Banks and Institutions including State Bank of India.
The Land value has been considered at market rates prevailing in the district.

Land Details Area ( Acres) Value (Rs. Crore)
Factory Premises &
Colony Premises
26.02 4.22









Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 5 Unit- Ryam

4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of the Ryam unit as on March 31,
2006 is as follows:

Break up of Liabilities
Amount (Rs. crores)
PARTICULARS 2006
RS.
SOURCES OF FUND :
SHAREHOLDERS FUND :
Capital
Reserve & Surplus 0.04
LOAN FUND :
Unsecured Loan 1.10
TOTAL : RS. 1.14
APPLICATION OF FUND :
FIXED ASSETS
Gross Block 0.23
Less : Depreciation
Net Block 0.23
Capital work in progress
CURRENT ASSETS, LOANS & ADVANCES :
Inventory 0.60
Sundry Debtors 0.01
Cash & Bank Balances 0.09
Loans & Advances 0.79
TOTAL: RS. 1.49
LESS : CURRENT LIABILITIES AND
PROVISIONS
Liabilities 26.44
Net Current Assets (24.95)
Miscellaneous Expenses
(to the extent not written off or adjusted)
Profit and Loss Account 25.86
TOTAL: RS. 1.14





Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 6 Unit- Ryam
4.1 Details of Liabilities
The detailed break up of liabilities is as follows:
a. Secured Loan
Rs. Crore
Secured Loans Nil

It may be mentioned that these lenders may have some charge on the existing
assets of the unit for their respective dues.
b. Unsecured Loans
Rs. Crore
PARTICULARS
Loan From Govt. of Bihar 0.71
Interest Accrued & Due on Govt. Loan 0.39
Total 1.10

As per the internal report prepared by BSSC, the above loan pertains to march
31, 2006. The same were infused at the time of takeover and are currently
outstanding. It has been informed that no interest is being charged on the
same.
c. Cane Growers Dues
Rs. Crore
Cane Growers Dues Nil


It has been informed by SID that as on May 2007 there is no such O/s
dues to the cane growers and all the dues under the above head has
been settled/ in the process of settlement.
d. Electricity Dues
Rs. Crore
Electricity Nil
As per the Internal Audit Report, there are no dues under the above head.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 7 Unit- Ryam
e. Labour Dues

As far as the records are available from their Internal Audit Report for the
financial year 2001-2002, an amount of Rs. 5.75 crore is still due to all the
employees consisting of 44 Permanent Employees. However, we have been
furnished the latest labour dues position which is as under:


















The above labour details are based on the Internal Audit Report submitted by
SID and further information collected from the unit.





Data as on Mar 2007
Labour Age Profile
Age No of Labour
Above 60 0
50 to 60 39
40 to 50 4
30 to 40 0
Unknown 0
Total 43
General Labour Amount
Basic Wages 4.60
PF incl. Interest 1.25
Adhikal 0.03
Bonus 0.08
Upadhan 1.48
Retention Allowance 0.07
Leave Encashment 0.04
Total 7.55
Exit Settlement Scheme 0.85
Total Payable including Exit Scheme 8.40
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 8 Unit- Ryam
f. Other Liabilities

The break up of other liabilities appearing in the internal audit report are as
follows:
Rs. Crore
Particulars Amount
Liabilities for Expenses 3.95
Statutory Deductions 1.16
Inter unit Account 0.09
Current Account with H.O. 16.88
Bihar Govt. through High Court Patna 2.23
TOTAL: RS. 24.31

As per the internal report prepared by BSSC, the above loans pertain to March
31, 2006. The same were infused at the time of takeover and are currently
outstanding. It has been informed that no interest is being charged on the
same.
















Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 9 Unit- Ryam
5. Assessment of the Unit
An attempt was made to understand the technical competence of the unit to
be financially viable in the current market scenario as also going forward. It is
felt that the unit has small area of land and thereby it may be difficult to
revive the same. In this connection, it may be mentioned that given the
prevailing sugar industry parameters, sugar units are surviving mainly
because of integrated Co-generation unit and distillery. In light of above, the
broad reasons for the Ryam unit being unviable is as under:

1. The factory is a very old plant and with a small piece of land that it has,
cannot be used for any sort of expansion/ modernization and there for
is unviable.
2. The unit is very near to Lohat where there is a possibility of revival and
therefore Cane may not be sufficient for this unit.

However in case the investors are not interested in Lohat, Ryam may be made viable.























Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 10 Unit- Ryam
6. Alternate Strategy
In the present context, it is felt that the space should be best utilized for
Commercial Activity and not industrial activity viz.

1. Handicraft Park
2. Warehouse/Cold Storage
3. Hospital
4. Dairy

The above is only indicative and it is felt that it should be best left to the
investors to take up any of the commercial activity not restricted to as
indicated above.

For creation of economic activity and generation of new investment
opportunities, the premises of the above unit may be used but not restricted
to the above purpose. For the same, it is understood that the land may be
leased to private investors on a long term basis. The valuation of a unit is
broadly done on going concern basis or fair value of the assets. The above unit
is not running and therefore the basis would be based on the fair value of the
assets. Again the new investors may not be willing to undertake any of the
existing liabilities of the unit. Based on the above, the liabilities may be
suitably waived/settled/adjusted/negotiated by Government of Bihar and
the unit may be transferred to the potential investor free from all
encumbrances and the investor should pay for the assets being acquired.

Therefore, the Land would need to be handed over on long term lease basis
and the existing machineries would need to be sold through a bidding process
to the prospective investor. Liabilities etc. would need to be settled
accordingly to generate the investors interest.

Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 11 Unit- Ryam
7. Sacrifice/Waiver/Settlement

a. Secured Loans (Nil)

As per the Internal Audit Report, there are no dues under this head. However
in case of due of similar nature, the same has to be negotiated and settled by
the Department prior to the bid process.

b. Unsecured Loans (Rs. 1.10 Cr)

The unsecured loans are from Government of Bihar and it is proposed that
GoB may consider waiving it in the larger interest.

c. Cane Growers Dues (Nil)

As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that is would not be practical to recover the dues, if any, from the
new investor. Considering the same, it is suggested that liability if any under
the above head may be settled by the Government of Bihar.

d. Labour Dues (Rs. 8.40 Cr)

As indicated above, even if the unit is unviable from Sugar perspective, it
would be necessary to settle the dues in order to explore the other options for
making the effective utilization of the industrial land.

Therefore, an amicable settlement on all the labour issues i.e. Payment of
arrears, VRS, etc has to be arrived between the Labour unions and the BSSC
before transferring the Land to the new investor. It is desirable that an Exit
Policy scheme has to be framed preferably by engaging the HR consultants so
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 12 Unit- Ryam
that the total amount under this scheme shall not exceed the actual amount
overdue as calculated above and furnished by BSSC in their internal report for
the unit. The payment of compensation structure to labour may be structured
in installment basis that would be paid over a minimum period.

e. Other Liabilities (Rs 24.31 Crore)

All other liabilities (including contingent liabilities), but not limited to Sales
Tax, Income Tax, Service Tax, Excise Duty, Custom duty, any penalty
imposed and liabilities towards any Government body/ Statutory Liability,
etc that may be claimed/accrued in future has to be settled/negotiated/
waived by the GoB.



















Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 13 Unit- Ryam
8. Utilization of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on
the Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the reserve price from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions including
SDF loan, if any.
3. Any liability payable by an order of Court.
4. Balance, if any would be transferred to BSSC A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory
liabilities and therefore the same has not been considered in the priority
payments.

Based on the above value, the liabilities of the labour under the Exit Scheme
may be settled. Any other liability including Government dues, Cane Growers
Dues, and tax arrears may be waived/settled by the GoB.






Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 14 Unit- Ryam
9. Litigation Cases
SBI Caps has appointed M/s Alok Agarwal as the Legal consultant to verify
the current litigation/petitions against BSSC for the unit.

As per the information provided by the legal advisor, there is no pending
suits/cases for recovery of compensation by the erstwhile owner. However
the following case is pending before a court:
1. Money Suit No. 1/2006, (Food Corporation of India Vs. BSSC, Ryam)
for refund of excess payment with respect to Sugar.

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible
litigation for the erstwhile owner / Previous Employees (for whom the
settlement has been made as per the above scheme) and due to reasons of the
above litigation, and if the implementation of the construction cannot be
progressed during the construction phase or stoppage of work during the
operation phase, the Government shall make good the losses suffered if any.












Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 15 Unit- Ryam
10. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. However based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit may not be revived since the nearby unit
Lohat has better potential of revival. However in case Lohat is not being
revived, the possibility of revival of this unit may be explored. Therefore we
suggest SID, GoB to consider the revival scheme as suggested in the proposed
Revival Plan.




SAKRI

TABLE OF CONTENTS
1. BRIEF BACKGROUND............................................................................................ 2
2. LOCATIONAL MAP: SAKRI, DISTRICT- MADHUBANI, BIHAR .................. 3
3. TECHNICAL SNAPSHOT....................................................................................... 4
4. FINANCIAL POSITION........................................................................................... 5
4.1 Details of Liabilities................................................................................................... 6
a. Secured Loan ................................................................................................................. 6
b. Details of Unsecured Loans - Nil.................................................................................. 6
c. Cane Growers Dues ........................................................................................................ 6
d. Electricity Dues ............................................................................................................... 6
e. Labour Dues..................................................................................................................... 7
e. Other Liabilities............................................................................................................... 7
5. ASSESSMENT OF THE UNIT ................................................................................. 8
6. ALTERNATE STRATEGY........................................................................................ 9
7. SACRIFICE/WAIVER/SETTLEMENT.................................................................10
8. UTILIZATION OF PROCEEDS IN THE SETTLEMENT PROCESS.................12
9. LITIGATION CASES ...............................................................................................13
10. CONCLUSIONS AND RECOMMENDATIONS.................................................14
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 2 Unit- Sakri

1. Brief Background

The Sakri Sugar Unit is located 500 m away from Sakri Railway Station and 25
Km. away from District Town Madhubani. The Unit is 1.5 km away from
National Highway approach road of Darbhanga. The Unit is adjoined by
another two BSSC owned closed down Sugar Units i.e. Ryam Sugar Unit (20
km) and Lohat Sugar Unit (15 km).

The Sakri Sugar Unit with 762 TCD capacity, was incorporated in 1933 under
the ownership of Darbhanga Maharaj as Darbhanga Sugar Co. Limited, later
on after 44 years of its operation i.e. in 1977 it was taken over by Bihar State
Sugar Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition) Acts
1977. The BSSC was incorporated as a wholly owned Government Company
in December 1974 without having its own Sugar Mills.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 3 Unit- Sakri

2. Locational Map: Sakri, District- Madhubani, Bihar









Sakri Sugar Unit
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 4 Unit- Sakri
3. Technical Snapshot
SBI Capital Markets Ltd. appointed K. S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy.
The detailed Technical Report submitted by KSPL has enclosed. A brief of the
technical report is provided below:

Crushing Capacity 762 TCD
Make of Plant consisting of - Milling Unit, Boiler
Station, Power House, Boiling House, Clarification
House, Grading Section and Effluent Treatment
Plant
Mirless Watson
Scrap Value of material including spares Rs 4.26 Crore
Land Value (valuation report enclosed) Rs 13.94 Crore


Land

The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled
as valuer with various Banks and Institutions including State Bank of India.
The Land value has been considered at market rates prevailing in the district.

Land Details Area ( Acres) Value (Rs. Crore)
Factory Premises &
Colony premises
32.23 13.94







Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 5 Unit- Sakri
4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of the Sakri unit as on March 31,
2006 is as follows:
Break up of Liabilities
Amount (Rs. crores)
PARTICULARS 2006
SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital
Reserve & Surplus
LOAN FUND :
Secured Loan 0.21
Unsecured Loan
TOTAL : RS. 0.21

APPLICATION OF FUND :
FIXED ASSETS :
Gross Block 1.71
Less : depreciation 1.49
Net Block 0.21
Capital work in progress

CURRENT ASSETS, LOANS & ADVANCES
:
Inventories 0.46
Sundry Debtors 0.05
Cash & Bank Balance 0
Loans & Advances 3.23
TOTAL : RS. 3.74
LESS : CURRENT LIABILITIES &
PROVISIONS
Liabilities 33.39
Provision 0.77
Net Current Assets (30.42)

Miscellaneous Expenditures
(To the extent not written off or adjusted)
Profit and Loss Account 30.42
TOTAL : RS. 0.21



Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 6 Unit- Sakri
4.1 Details of Liabilities
The detailed breaks of liabilities are as follows:
a. Secured Loan
PARTICULARS Rs Crore
R.C.C Bank 0.21
TOTAL : 0.21

The above dues are based on the Internal Audit report as on March 31, 2006
submitted by BSSCL It may be mentioned that these claimants may have
some charge on the existing assets of the unit for their respective dues.

The SID may further confirm that there is no other liability other than shown
in the Internal Audit Report as on March 31, 2006.
b. Details of Unsecured Loans - Nil
c. Cane Growers Dues
Rs Crore
Cane Growers 0.98

It has been informed by SID that as on May 2007 there is no such O/s dues to
the cane growers and all the dues under the above head has been settled/ in
the process of settlement.
d. Electricity Dues
Rs. Crore
Electricity Nil

As per the Internal Audit Report, there are no dues under the above head.





Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 7 Unit- Sakri
e. Labour Dues
We have collected the latest age profile and dues position which is as under:














The above labour details are based on the Internal Audit Report submitted by
SID and further information collected from the unit. We have prepared the
above details and O/s dues based on the information submitted by them.
e. Other Liabilities
The break up of other liabilities appearing in the internal audit report are as
follows:
PARTICULARS 2006
Current A/c with H.O (Capital) 20.12
Statutory deduction 2.91
Inter Unit Transaction 0.04
Other current liabilities 8.26
TOTAL 31.33

The details of interunit transaction and current account with headquaters has
not been verified. The SID may further require to confirm that there is no
other liability other than shown in the Internal Audit Report as on March 31,
2006.
Data as on Mar 2007
Labour Age Profile
Age No of Labour
Above 60 3
50 to 60 51
40 to 50 22
30 to 40 1
Unknown 0
Total 77
Liability Profile
General Labour Rs. in crores
Basic Wages 5.21
Leave Encashment 1.10
PF incl interest 2.51
Total 8.82
Exit Scheme-considering All Employees 1.02
Net Dues including Exit Scheme
settlement
9.84
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 8 Unit- Sakri
5. Assessment of the Unit
An attempt was made to understand the technical competence of the unit to
be financially viable in the current market scenario as also going forward. It is
felt that the unit is both technically incompetent and financially unviable. In
this connection, it may be mentioned that given the prevailing sugar industry
parameters, sugar units are surviving mainly because of integrated Co-
generation unit and distillery. In light of above, the broad reasons for the
Sakri unit being unviable is as under:

1. The factory falls in the town area of Siwan.
2. Given the milling size, the crushing capacity can be increased to 1500
TCPD, however the crushing unit of this size would need a 90 KLPD
distillery for which there is no space in the factory;
3. The Land is not enough for further expansion.
4. The unit is very close to Lohat and Ryam unit which is at a distance of
approximately 15-20 km.





















Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 9 Unit- Sakri
6. Alternate Strategy
Considering the above, it is recommended to use the Land for some other
Industrial/Commercial Activity such as:

1. Food Processing Zone
2. Commercial Complex
3. Handicraft Park
4. Warehouse/Cold Storage

The above is only indicative and it is felt that it should be best left to the
investors to take up any of the commercial activity not restricted to as
indicated above.

For creation of economic activity and generation of new investment
opportunities, the premises of the above unit may be used but not restricted
to the above purpose. For the same, it is understood that the land may be
leased to private investors on a long term basis. The valuation of a unit is
broadly done on going concern basis or fair value of the assets. The above unit
is not running and therefore the basis would be based on the fair value of the
assets. Again the new investors may not be willing to undertake any of the
existing liabilities of the unit. Based on the above, the liabilities may be
suitably waived/settled/adjusted/negotiated by Government of Bihar and
the unit may be transferred to the potential investor free from all
encumbrances and the investor should pay for the assets being acquired.

Therefore, the Land would need to be handed over on long term lease basis
and the existing machineries would need to be sold through a bidding process
to the prospective investor based on a minimum Reserve price. Liabilities etc.
would need to be settled accordingly to generate the investors interest.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 10 Unit- Sakri
7. Sacrifice/Waiver/Settlement

The unit may not be revived due to difficulties envisaged and noted above.
Therefore the same has to be developed for other industrial purpose some of
which has been mentioned above. However the liabilities for existing dues
has to be satisfied.

a. Secured Loans (Rs.0.21 Cr.)

It may be mentioned that to transfer the land to the potential investors free
from encumbrances and free of charge on the assets, NOC from the existing
lenders has to be obtained. However the investors would not be willing to
take this liability. Considering the same, the above liabilities have to be
negotiated and settled by the Department prior to the bid process.

b. Cane Growers Dues (Rs. 0.98 Cr)

As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that is would not be practical to recover the dues, if any, from the
new investor. Considering the same, it is suggested that liability if any under
the above head may be settled by the Government of Bihar.

c. Labour Dues (Rs.9.84 Cr)

As indicated above, even if the unit is unviable from Sugar perspective, it
would be necessary to settle the dues in order to explore the other options for
making the effective utilization of the industrial land.

Therefore, an amicable settlement on all the labour issues i.e. Payment of
arrears, VRS, etc has to be arrived between the Labour unions and the BSSCL
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 11 Unit- Sakri
before transferring the Land to the new investor. It is desirable that an Exit
Policy scheme has to be framed preferably by engaging the HR consultants so
that the total amount under this scheme shall not exceed the actual amount
overdue as calculated above and furnished by BSSCL in their internal report
for the unit. The payment of compensation structure to labour may be
structured in installment basis that would be paid over a minimum period.

d. Other Liabilities (Rs 31.33 Cr)

All other liabilities (including contingent liabilities), but not limited to Sales
Tax, Income Tax, Service Tax, Excise Duty, Custom duty, any penalty
imposed and liabilities towards any Government body/ Statutory Liability,
etc that may be claimed/accrued in future has to be settled/negotiated/
waived by the GoB.

















Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 12 Unit- Sakri
8. Utilization of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on
the Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the reserve price from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions including
SDF loan, if any.
3. Any liability payable by an order of Court.
4. Balance, if any would be transferred to BSSCL A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory
liabilities and therefore the same has not been considered in the priority
payments.

Based on the above value, the liabilities of the labour under the Exit Scheme
may be settled. Any other liability including Government dues, Cane Growers
Dues, and tax arrears may be waived/settled by the GoB.







Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 13 Unit- Sakri
9. Litigation Cases

SBI Caps has appointed M/s Alok Agarwal as the Legal consultant to verify
the current litigation/petitions against BSSCL for the unit.

1. As per the information provided by the legal advisor, there is no
pending suits/cases for recovery of compensation by the erstwhile
owner.

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible
litigation for the erstwhile owner / Previous Employees (for whom the
settlement has been made as per the above scheme) and due to reasons of the
above litigation, and if the implementation of the construction cannot be
progressed during the construction phase or stoppage of work during the
operation phase, the Government shall make good the losses suffered if any.














Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 14 Unit- Sakri
10. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. However based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit does not have a investment attractiveness
for sugar unit. Therefore we suggest SID, GoB to consider the revival scheme
as suggested in the proposed Revival Plan.




SAMASTIPUR

TABLE OF CONTENTS
1. BRIEF BACKGROUND............................................................................................ 2
2. LOCATIONAL MAP: SAMASTIPUR, DISTRICT- SAMASTIPUR, BIHAR..... 3
3. TECHNICAL SNAPSHOT....................................................................................... 4
4. FINANCIAL POSITION........................................................................................... 5
4.1 Details of Liabilities................................................................................................... 6
a. Secured Loan ................................................................................................................. 6
b. Unsecured Loans ............................................................................................................ 6
c. Cane Growers Dues ........................................................................................................ 6
d. Electricity Dues ............................................................................................................... 6
e. Labour Dues..................................................................................................................... 7
f. Other Liabilities ............................................................................................................... 7
5. ASSESSMENT OF THE UNIT ................................................................................. 8
6. ALTERNATE STRATEGY........................................................................................ 9
7. SACRIFICE/WAIVER/SETTLEMENT.................................................................10
8. UTILIZATION OF PROCEEDS IN THE SETTLEMENT PROCESS.................12
9. LITIGATION CASES ...............................................................................................13
10. CONCLUSIONS AND RECOMMENDATIONS.................................................14
Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 2 Unit- Samastipur

1. Brief Background

The Samastipur Sugar Unit is located in Samastipur Town itself which is
approximately 200 m from National Highway and 1 km from Samastipur
Railway Station. The Unit is adjoined by another private sector Sugar Factory
i.e. Hasanpur Sugar Unit.

The Samastipur Sugar Unit with 808 TCD capacity was incorporated in 1920
under the banner of M/s. Sastipur Sugar Central Sugar Limited; later on after
57 years of its operation i.e. in 1977 it was taken over by Bihar State Sugar
Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition) Acts 1977.

The unit has only 20.90 acres of land which is being used for Factory Premises
and Colony Premises which actually falls in the town of Samastipur. The Unit
possesses a Sugarcane Area of land of approximately 11814 acres.

After the take over of the unit by BSSC, the maximum cane was crushed in
1982-83 that was 7.63 lakh quintal in 1982-83 season [i.e. around 52% capacity
utilisation. The unit was operational till 1996-97 but the management of BSSC
took the decision of closure of mills due to poor cash management and
continuous losses.
Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 3 Unit- Samastipur

2. Locational Map: Samastipur, District- Samastipur, Bihar








Samastipur Sugar Unit
Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 4 Unit- Samastipur
3. Technical Snapshot
SBI Capital Markets Ltd. appointed K. S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy.
The detailed Technical Report submitted by KSPL has been enclosed. A brief
of the technical report is provided below:

Crushing Capacity and Unit Value 808 TCD
Make of Plant consisting of - Mill Unit, Boiler
Station, Power House, Boiling House
Mirless Watson Co. Ltd,
George Fletcher, Babcok
& Wilcok
Scrap Value of material including spares (Report
Provided in Annexure I)
Rs 3.80 Crore
Land Value (valuation report enclosed) Rs. 22.99 Crore


Land
The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled
as valuer with various Banks and Institutions including State Bank of India.
The Land value has been considered at market rates prevailing in the district.

Land Details Area ( Acres) Value (Rs. Crore)
Factory Premises &
Colony Premises
20.90 22.99






Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 5 Unit- Samastipur
4. Financial Position
As per the Internal Audit Report made available to us by the Cane
Development Department, the Balance Sheet of the Samastipur unit as on
March 31, 2006 is as follows:
Break up of Liabilities
Amount (Rs. crores)
PARTICULARS 2006
SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital
Reserve & Surplus 0.03 0.03
LOAN FUND
Secured Loan 1.01
Unsecured Loan 1.97
2.98
TOTAL : Rs. 3.01

APPLICATION OF FUNDS:
FIXED ASSETS:
Gross Block 1.78
Less : Depreciation 1.60
Net Block 0.18
Capital Work in Progress 0.04

INVESTMENTS :
CURRENT ASSET , LOANS & ADVANCES
Inventories 0.47
Sundry Debtors 0.03
Cash & Bank Balance 0.01
Loans & Advances 5.07

TOTAL : (A) 5.58

LESS : CURRENT LIABILITIES &
PROVISIONS
Liabilities 39.03
Provisions 1.37

TOTAL : (B) 40.4

NET CURRENT ASSETS : (A-B) -34.82

Unreconciled amount 0.404

a)Miscellaneous Expenditure to the extent
not written off or adjusted
Profit & Loss Account 37.21

TOTAL :Rs. 3.01
Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 6 Unit- Samastipur
4.1 Details of Liabilities
The detailed break up of liabilities is as follows:
a. Secured Loan
PARTICULARS Rs Crore
Secured Loan 1.01
TOTAL : 1.01
The further break up of secured loans was not available. The above dues are
based on the Internal Audit report as on March 31, 2006 submitted by BSSC. It
may be mentioned that these claimants may have some charge on the existing
assets of the unit for their respective dues.

The Sugarcane Industries Department (SID) may further require to confirm
that there is no other liability other than shown in the Internal Audit Report
as on March 31, 2006.
b. Unsecured Loans
Rs. Crore
Unsecured Loans 1.97
The further break up of unsecured loans was not available. As per the internal
report prepared by BSSC, the above loan pertains to march 31, 2006. The same
were infused at the time of takeover and are currently outstanding. It has
been informed that no interest is being charged on the same.
c. Cane Growers Dues
Rs. Crore
Cane Growers Nil
It has been informed by SID that as on May 2007 there is no such O/s dues to
the cane growers and all the dues under the above head has been settled/ in
the process of settlement.
d. Electricity Dues
Rs. Crore
Electricity Nil
As per the Internal Audit Report, there are no dues under the above head.
Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 7 Unit- Samastipur
e. Labour Dues
Based on the Internal Audit Report for the financial year 2001-2002, an
amount of Rs. 8.47 crore was due to all the employees. However, we have
collected the latest age profile and dues position which is as under:















The above labour details are based on the Internal Audit Report submitted by
SID and further information collected from the unit.

We have prepared the above details and O/s dues based on the information
submitted by them.
f. Other Liabilities
The break up of other liabilities appearing in the internal audit report are as
follows:
PARTICULARS 2006
Other Current Liabilities 28.27
TOTAL 28.27

The detailed break up of the above is not available presently.
Data as on Mar 2007
Labour Age Profile
Age No of Labour
Above 60 8
50 to 60 66
40 to 50 10
30 to 40 1
Unknown 4
Total 89
Liability Profile
General Labour Rs. in crores
Basic Wages 6.83
PF incl interest 1.88
Upadhan 2.00
Retention Allowance 0.77
PF on RA 0.18
Total 11.66
Exit Scheme-considering All Employees 0.90
Net Dues including Exit Scheme
settlement
12.56
Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 8 Unit- Samastipur
5. Assessment of the unit
An attempt was made to understand the technical competence of the unit to
be financially viable in the current market scenario as also going forward. It is
felt that the unit is both technically incompetent and financially unviable. In
this connection, it may be mentioned that given the prevailing sugar industry
parameters, sugar units are surviving mainly because of integrated Co-
generation unit and distillery. In light of above, the broad reasons for the
Samastipur unit being unviable is as under:
1. Given the milling size, the crushing capacity can be increased to 1500
TCPD, however the crushing unit of this size would need a 90 KLPD
distillery for which there is no space in the factory;
2. Further, the unit is located in the heart of the town and given the
pollutants being emitted by the distillery it would not be advisable to
set up a distillery unit in the midst of the township.














Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 9 Unit- Samastipur
6. Alternate Strategy
Samastipur is a junction town well linked to other parts of the country
through railways. The town is populated and there is dearth of space. In view
of the above, in the present context, it is highly felt that the space should be
best utilized for Commercial Activity and not industrial activity viz.
1. Handicraft Park
2. Warehouse/Cold Storage
3. Hospital
4. Setting up of world class B / Engineering schools etc. on the lines of
IIT Kharagpur/ BITs Pilani/ IIM (Indore) etc. with independent
management.
The above is only indicative and it is felt that it should be best left to the
investors to take up any of the commercial activity not restricted to as
indicated above.

For creation of economic activity and generation of new investment
opportunities, the premises of the above unit may be used but not restricted
to the above purpose. For the same, it is understood that the land may be
leased to private investors on a long term basis. The valuation of a unit is
broadly done on going concern basis or fair value of the assets. The above unit
is not running and therefore the basis would be based on the fair value of the
assets. Again the new investors may not be willing to undertake any of the
existing liabilities of the unit. Based on the above, the liabilities may be
suitably waived/settled/adjusted/negotiated by Government of Bihar and
the unit may be transferred to the potential investor free from all
encumbrances and the investor should pay for the assets being acquired.

Therefore, the Land would need to be handed over on long term lease basis
and the existing machineries would need to be sold through a bidding process
to the prospective investor. Liabilities etc. would need to be settled
accordingly to generate the investors interest.
Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 10 Unit- Samastipur
7. Sacrifice/Waiver/Settlement

As indicated above, even if the unit is unviable from the perspective of
operating it as sugar unit but it is felt that interest of the investors could be
invited for taking up commercial activity. Accordingly, the liabilities as
indicated above would need to be settled. The liabilities may be settled as
follows:

a. Secured Loans (Rs. 1.01 Cr.)

It may be mentioned that to transfer the land to the potential investors free
from encumbrances and free of charge on the assets, NOC from the existing
lenders has to be obtained. However the investors would not be willing to
take this liability. Considering the same, the above liabilities have to be
negotiated and settled by the Department prior to the bid process.

b. Unsecured Loan (Rs. 1.97 Cr)

The unsecured loans are from Government of Bihar and it is proposed that
GoB may consider waiving it in the larger interest.

c. Cane Growers Dues (Nil)

As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that is would not be practical to recover the dues, if any, from the
new investor. Considering the same, it is suggested that liability if any under
the above head may be settled by the Government of Bihar.



Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 11 Unit- Samastipur
d. Labour Dues (Rs. 12.56 Cr)

As indicated above, even if the unit is unviable from Sugar perspective, it
would be necessary to settle the dues in order to explore the other options for
making the effective utilization of the industrial land.

Therefore, an amicable settlement on all the labour issues i.e. Payment of
arrears, VRS, etc has to be arrived between the Labour unions and the BSSC
before transferring the Land to the new investor. It is desirable that an Exit
Policy scheme has to be framed preferably by engaging the HR consultants so
that the total amount under this scheme shall not exceed the actual amount
overdue as calculated above and furnished by BSSC in their internal report for
the unit. The payment of compensation structure to labour may be structured

e. Other Liabilities (Rs. 28.27 Cr)

All other liabilities (including contingent liabilities), but not limited to Sales
Tax, Income Tax, Service Tax, Excise Duty, Custom duty, any penalty
imposed and liabilities towards any Government body/ Statutory Liability,
etc that may be claimed/accrued in future may be settled/negotiated/
waived by the GoB.










Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 12 Unit- Samastipur
8. Utilization of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on
the Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the reserve price from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:
1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions including
SDF loan, if any.
3. Any liability payable by an order of Court.
4. Balance, if any would be transferred to BSSC A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory
liabilities and therefore the same has not been considered in the priority
payments.

Based on the above value, the liabilities of the labour under the Exit Scheme
may be settled. Any other liability including Government dues, Cane Growers
Dues, and tax arrears may be waived/settled by the GoB.








Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 13 Unit- Samastipur
9. Litigation Cases

SBI Caps has appointed M/s Alok Agarwal as the Legal consultant to verify
the current litigation/petitions against BSSC for the unit.

As per the information provided by the legal advisor, there is no pending
suits/cases for recovery of compensation by the erstwhile owner. However
the possibility of the same way not be ruled out.

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible
litigation for the erstwhile owner / Previous Employees (for whom the
settlement has been made as per the above scheme) and due to reasons of the
above litigation, and if the implementation of the construction cannot be
progressed during the construction phase or stoppage of work during the
operation phase, the Government shall make good the losses suffered if any.













Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 14 Unit- Samastipur
10. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. However based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit does not have a investment attractiveness
for sugar unit. Therefore we suggest SID, GoB to consider the rehabilitation
scheme as suggested in the proposed Plan.




SIWAN

TABLE OF CONTENTS
1. BRIEF BACKGROUND............................................................................................ 2
2. LOCATIONAL MAP: SIWAN, DISTRICT- SIWAN, BIHAR ............................. 3
3. TECHNICAL SNAPSHOT....................................................................................... 4
4. FINANCIAL POSITION........................................................................................... 5
4.1 Details of Liabilities................................................................................................... 6
a. Secured Loan ................................................................................................................... 6
b. Unsecured Loans ............................................................................................................ 6
c. Cane Growers Dues ........................................................................................................ 6
d. Electricity Dues ............................................................................................................... 6
e. Labour Dues..................................................................................................................... 7
f. Other Liabilities ............................................................................................................... 8
5. ASSESSMENT OF THE UNIT ................................................................................. 9
6. ALTERNATE STRATEGY.......................................................................................10
7. SACRIFICE/WAIVER/SETTLEMENT.................................................................11
8. UTILISATION OF PROCEEDS IN THE SETTLEMENT PROCESS..................13
9. LITIGATION CASES ...............................................................................................14
10. CONCLUSIONS AND RECOMMENDATIONS.................................................15
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 2 Unit- Siwan

1. Brief Background

The Siwan Sugar Unit is located on the National Highway and 3 km from
Sugauli Railway Station keeping 3 km distance from District Town of Siwan
of Bihar. The Unit is adjoined by another closed down Sugar Unit i.e. New
Siwan Sugar Unit which is at a distance of 3 km approximately.

The Siwan Sugar Unit with 800 TCD capacity, was incorporated in 1932 under
the banner of M/s. S.K.G. Sugar Limited; later on after 53 years of its
operation i.e. in 1985 it was taken over by Bihar State Sugar Corporation
(BSSC) under Bihar Sugar Undertakings (Acquisition) Acts 1985. The BSSC
was incorporated as a wholly owned Government Company in December
1974 without having its own Sugar Mills.

The unit has land area of approximately 32.58 acres, out of which 21.48 acres
of land is being used for Factory Premises, 8.90 acres for Colony Premises.
Moreover, 2.20 acres of land covering Pond, Temple & Pancing is there as Out
Center Land. The unit is also having a Sugarcane Area of land of 32000 acres.

After the take over of the unit by BSSC, the maximum cane was crushed in
1977-78 that was 9.58 lac quintal in 1977-78 season. The unit was operational
till 1992-93 but the management of BSSC took the decision of closure of mills
due to poor cash management and continuous losses.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 3 Unit- Siwan

2. Locational Map: Siwan, District- Siwan, Bihar









Siwan Sugar Unit
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 4 Unit- Siwan
3. Technical Snapshot

SBI Capital Markets Ltd. appointed K. S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy.
The detailed Technical Report submitted by KSPL has been enclosed. A brief
of the technical report is provided below:

Crushing Capacity 800 TCD
Make of Plant consisting of - Mill Unit, Boiler
Station, Power House, Boiling House
Mirless Watson Co. Ltd.-
ScotLand
Scrap Value of material including spares Rs 2.60 Cr
Land Value (valuation report enclosed) Rs. 37.19 Cr


Land

The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled
as valuer with various Banks and Institutions including State Bank of India.
The Land value has been considered at market rates prevailing in the district.

Land Details Area ( Acres) Value (Rs. Crore)
Factory Premises &
Colony premises
30.38 37.19








Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 5 Unit- Siwan
4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of Siwan unit as on March 31, 2006
is as follows:
Break up of Liabilities
Amount (Rs. crores)
PARTICULARS Amount

2005-06

SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital
Reserve & Surplus
LOANS - FUND:
Secured Loan
Un - secured Loan 0.20
TOTAL : Rs. 0.20
APPLICATION OF FUND:
FIXED ASSETS:
Gross Block 0.63
Less : Depreciation 0.51
Net Block 0.12
Capital Work -In Progress
INVESTMENTS:
CURRENT ASSETS, LOANS & ADVANCES
Inventories 0.35
Sundry Debtors
Cash & Bank Balance 0.01
Loans & Advances 2.15
TOTAL : RS. 2.50
LESS: CURRENT LIABILITIES &
PROVISIONS
Liabilities 20.20
Provisions 0.35
NET CURRENT ASSETS (18.05)
a) Miscellaneous Expenditure to the extent not written
off or adjusted
Profit & Loss account 18.13

TOTAL : Rs. 0.20





Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 6 Unit- Siwan
4.1 Details of Liabilities

The above dues are based on the Internal Audit report as on March 31,
2006 submitted by BSSCL.
a. Secured Loan

Secured Loan Nil

b. Unsecured Loans

PARTICULARS Rs Crore
Government of Bihar 0.20
TOTAL : 0.20

c. Cane Growers Dues
Rs Crore
Cane Growers 0.05

d. Electricity Dues
Rs. Crore
Electricity 0.11










Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 7 Unit- Siwan
e. Labour Dues

Based on the Internal Audit Report for the financial year 2001-2002, an
amount of Rs. 8.47 crore was due to all the employees. However, we have
collected the latest age profile and dues position which is as under:

















The above labour details are based on the Internal Audit Report submitted by
CDD and further information collected from the unit. We have prepared the
above details and O/s dues based on the information submitted by them.





Data as on Mar 2007
Labour Age Profile
Age No of Labour
Above 60 2
50 to 60 28
40 to 50 9
30 to 40 0
Unknown 0
Total 39
Liability Profile
General Labour Rs. in crores
Basic Wages 4.87
PF 2.26
Bonus 0.61
Upadhan 1.59
Misc 0.05
Retention Allowance 0.06
Total 9.98
Exit Scheme-considering All Employees 0.27
Net Dues including Exit Scheme
settlement
10.25
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 8 Unit- Siwan
f. Other Liabilities

The break up of other liabilities appearing in the internal audit report are as
follows:

PARTICULARS in Rs. Cr
Credit for goods supplers 0.34
Liabilities for expenses 0.31
Statutory Deduction 1.27
Other Liabilities 3.71
Current Account with H.O. 12.85
Cane Commission 0.02
Gratuity 1.43
Bonus 0.47
TOTAL 20.40

The details of interunit transaction and current account with headquaters has
not been verified. The SID may further require to confirm that there is no
other liability other than shown in the Internal Audit Report as on March 31,
2006.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 9 Unit- Siwan

5. Assessment of the Unit
An attempt was made to understand the technical competence of the unit to
be financially viable in the current market scenario as also going forward. It is
felt that the unit is both technically incompetent and financially unviable. In
this connection, it may be mentioned that given the prevailing sugar industry
parameters, sugar units are surviving mainly because of integrated Co-
generation unit and distillery. In light of above, the broad reasons for the
Siwan unit being unviable are as under:

1. Thus the revival of the sugar unit is not possible due to the following
reasons:
2. The factory falls in the town area of Siwan.
3. The Land is not enough for further expansion.
4. The unit is very close to New Siwan unit which is at a distance of
approximately 3 km.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 10 Unit- Siwan

6. Alternate Strategy
Considering the above, it is recommended to use the Land for some other
Industrial/Commercial Activity such as:
1. Food Processing Zone
2. Commercial Complex
3. Handicraft Park
4. Warehouse/Cold Storage
5. Educational Institute
6. Hospital
The above is only indicative and it is felt that it should be best left to the
investors to take up any of the commercial activity not restricted to as
indicated above.

For creation of economic activity and generation of new investment
opportunities, the premises of the above unit may be used but not restricted
to the above purpose. For the same, it is understood that the land may be
leased to private investors on a long term basis. The valuation of a unit is
broadly done on going concern basis or fair value of the assets. The above unit
is not running and therefore the basis would be based on the fair value of the
assets. Again the new investors may not be willing to undertake any of the
existing liabilities of the unit. Based on the above, the liabilities may be
suitably waived/settled/adjusted/negotiated by Government of Bihar and
the unit may be transferred to the potential investor free from all
encumbrances and the investor should pay for the assets being acquired.

Therefore, the Land would need to be handed over on long term lease basis
and the existing machineries would need to be sold through a bidding process
to the prospective investor based on a minimum Reserve price. Liabilities etc.
would need to be settled accordingly to generate the investors interest.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 11 Unit- Siwan

7. Sacrifice/Waiver/Settlement

a. Secured Loans (Nil)

b. Unsecured Loans (Rs. 0.20 Cr)

The unsecured loans are from Government of Bihar. Under the current stage
it would be difficult to get back any recovery of the loan. Considering the
amount of loan, it is proposed to be waived off by GoB.

c. Cane Growers Dues (Rs. 0.05 Cr)

As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that is would not be practical to recover the dues, if any, from the
new investor. Considering the same, it is suggested that liability if any under
the above head may be settled by the Government of Bihar.

d. Labour Dues (Rs. 10.25 Cr)

As indicated above, even if the unit is unviable from Sugar perspective, it
would be necessary to settle the dues in order to explore the other options for
making the effective utilization of the industrial land.

Therefore, an amicable settlement on all the labour issues i.e. Payment of
arrears, VRS, etc has to be arrived between the Labour unions and the BSSCL
before transferring the Land to the new investor. It is desirable that an Exit
Policy scheme has to be framed preferably by engaging the HR consultants.
The payment of compensation structure to labour may be structured in
installment basis.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 12 Unit- Siwan
e. Other Liabilities (Rs 20.40 Crore)

All other liabilities (including contingent liabilities), but not limited to Sales
Tax, Income Tax, Service Tax, Excise Duty, Custom duty, any penalty
imposed and liabilities towards any Government body/ Statutory Liability,
etc that may be claimed/accrued in future has to be settled/negotiated/
waived by the GoB. The other liabilities also include current account with
Head office of Rs. 21.92 crores which has been infused as capital.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 13 Unit- Siwan

8. Utilization of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on
the Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the reserve price from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions including
SDF loan, if any.
3. Any liability payable by an order of Court.
4. Balance, if any would be transferred to BSSCL A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory
liabilities and therefore the same has not been considered in the priority
payments.

Based on the above value, the liabilities of the labour under the Exit Scheme
may be settled. Any other liability including Government dues, Cane Growers
Dues, and tax arrears may be waived/settled by the GoB.
Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 14 Unit- Siwan

9. Litigation Cases

SBI Caps has appointed M/s Alok Agarwal as the Legal consultant to verify
the current litigation/petitions against BSSCL for the unit.

As per the information provided by the legal advisor, there is no pending
suits/cases for recovery of compensation by the erstwhile owner. However
the following cases are pending before various courts:

Before the Honble High Court, Patna
1. C.W.J.C. No. 5784 of 2006 (Makmul Hoda Vs. The State of Bihar & ors.)
(Matters relates to Retirement Benefits and for payment of other dues)

Before the Civil Court & Other Court
1. Title Suit No. 6 of 2000 (General Manager, Bihar State Sugar
Corporation Ltd. Vs. Dr. Haroon and others)
2. Certificate Case No. 2 of 1994 (Bihar Electricity Board, Chapra Vs.
General Manager, Bihar State Sugar Corp. Ltd., Siwan)
3. M.S. No. 12 of 1993 (Central Excise Vs. General Manager, Bihar State
Sugar Corp. Ltd, Siwan)

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible
litigation for the erstwhile owner / Previous Employees (for whom the
settlement has been made as per the above scheme) and due to reasons of the
above litigation, and if the implementation of the construction cannot be
progressed during the construction phase or stoppage of work during the
operation phase, the Government shall make good the losses suffered if any.

Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 15 Unit- Siwan
10. Conclusions and Recommendations
The objective of GoB is to revive/rehabilitate the unit. However based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit does not have a investment attractiveness
for sugar unit. Therefore we suggest SID, GoB to consider the rehabilitation
scheme as suggested in the proposed Plan.




SUGAULI

TABLE OF CONTENTS

1. BRIEF BACKGROUND.................................................................................................. 2
2. LOCATIONAL MAP : SUGAULI, DISTRICT- EAST CHAMPARAN, BIHAR..... 3
3. TECHNICAL SNAPSHOT............................................................................................. 4
4. FINANCIAL POSITION................................................................................................. 5
4.1 Details of Liabilities......................................................................................................... 6
5. PROPOSED REVIVAL PLAN........................................................................................ 8
6. SACRIFICE/WAIVER/SETTLEMENT...................................................................... 10
7. UTILISATION OF PROCEEDS IN THE SETTLEMENT PROCESS....................... 12
8. LITIGATION CASES .................................................................................................... 13
9. CONCLUSIONS AND RECOMMENDATIONS...................................................... 14
Private &Confidential Viability Report

SBI Capital Markets Ltd. 2 Unit- Sugauli

1. Brief Background

The Sugauli Sugar Unit is located at 1 Km. from National Highway and 5 Kms.
from Sugauli Railway Station and around 25 Km from District Town of East
Champaran District of Bihar. There are two private sugar units viz. Majhaulia
Sugar Unit (15 Km) and Motihari Sugar Unit (25 Km) located close to the Sugauli
unit.
The Sugauli Sugar Unit with 900 TCD capacity, was incorporated in 1933 in the
name of M/s. Sugauli Sugar Works Limited. It was taken over in 1985 by Bihar
State Sugar Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition)
Acts. 1985. The BSSC was incorporated as a wholly owned Government
Company in December 1974.
The unit has substantial land approximately 430.77 acres. Out of which 73.13
acres of land is being used for Factory Premises, 16.24 acres for Colony Premises
and 319.64 acres of land for its Agricultural use.
After take over of the unit by BSSC, the maximum cane of 9.19 lakh quintal was
crushed in the year 1991-92 (Assuming the no. of crushing days as 180 days,
capacity utilization during that year was 59%). The unit was operational till 1996-
97 but the management of BSSC took the decision of closure of the mill due to
continuous losses.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 3 Unit- Sugauli


2. Locational Map : Sugauli, District- East Champaran, Bihar









Sugauli Sugar Unit
Private &Confidential Viability Report

SBI Capital Markets Ltd. 4 Unit- Sugauli
3. Technical Snapshot
SBI Capital Markets Ltd. appointed K.S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy. The
detailed Technical Report submitted by KSPL has been provided in this report. A
brief snapshot of the technical report is provided below:
Crushing Capacity 900 TCD
Make of Plant consisting of-Mill Unit, Boiler Station,
Power House, Clarification Section, Boiling House,
Effluent treatment Plant
Milling Unit: M/s Krupp
Megdeberg, Germany
Realisable value of the Mill House, Boiling house
equipments and other spares
Rs 1.22 Crore
Land Value (valuation report enclosed) Rs. 44.18 Crore

Land
The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled as
valuer with various Banks and Institutions including State Bank of India. The
Land value has been considered at government rates prevailing in the district.
(Rs. in Crore)
Land Details Area ( Acres) Govt. Value Market Value
Factory and colony
Premises
89.37 41.82 44.18







Private &Confidential Viability Report

SBI Capital Markets Ltd. 5 Unit- Sugauli
4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of Sugauli unit as on March 31, 2006 is
as follows:
Break up of Liabilities
Amount (Rs. crores)
PARTICULARS Amount

2005-06

SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital 0.01
Reserve & Surplus
LOANS - FUND:
Secured Loan 0.75
Un - secured Loan
TOTAL : Rs. 0.75
APPLICATION OF FUND:
FIXED ASSETS:
Gross Block 1.51
Less : Depreciation 1.37
Net Block 0.14
Capital Work -In Progress 0.03
INVESTMENTS:
CURRENT ASSETS, LOANS & ADVANCES
Inventories 0.55
Sundry Debtors 0.17
Cash & Bank Balance 0.06
Loans & Advances 3.08
TOTAL : RS. 3.86
LESS: CURRENT LIABILITIES &
PROVISIONS
Liabilities 33.22
Provisions 0.81
NET CURRENT ASSETS (30.17)
a) Miscellaneous Expenditure to the extent not written
off or adjusted
Profit & Loss account 30.75

TOTAL : Rs. 0.75

Private &Confidential Viability Report

SBI Capital Markets Ltd. 6 Unit- Sugauli
4.1 Details of Liabilities
The above dues are based on the Internal Audit report as on March 31,
2006.
a. Secured Loan

PARTICULARS Rs Crore
Bihar State Cooperative Bank Ltd 0.73
Sugar Development Fund 0.02
TOTAL : 0.75

It may be mentioned that these lenders may have some charge on the existing
assets of the unit for their respective dues.
b. Cane Growers Dues
Rs Crore
Cane Growers 1.03

It has been informed by SID that as on May 2007 there is no such O/s dues to the
cane growers and all the dues under the above head has been settled.

c. Electricity Dues
Rs. Crore
Electricity Nil

As per the Internal Audit Report, there are no dues under the above head.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 7 Unit- Sugauli
d. Labour Dues
The labour dues position based on the information submitted by the unit is as
under:
















e. Other Liabilities
The break up of other liabilities appearing in the internal audit report are as
follows:
PARTICULARS 2006
Statutory deduction 1.97
Liability for expenses 6.58
Creditor for goods supplied 0.10
Current A/c with H.O (Capital) 21.93
Other Liabilities 0.02
TOTAL 30.60
The details of interunit transaction and current account with headquaters has not
been verified. The SID may further require to confirm that there is no other
liability other than shown in the Internal Audit Report as on March 31, 2006.
Data as on Mar 2007
Labour Age Profile
Age No of Labour
Above 60 2
50 to 60 37
40 to 50 35
30 to 40 4
Unknown 15
Total 93
Liability Profile
General Labour Rs. in crores
Basic Wages 4.02
PF incl interest 1.51
Other O/s Allowance 1.35
Gratuity 0.42
Bonus 0.72
Total 7.31
Exit Scheme- Amount considering All
Employees 1.82
Net Dues including Exit Scheme 9.13
Private &Confidential Viability Report

SBI Capital Markets Ltd. 8 Unit- Sugauli
5. Proposed Revival Plan

The Unit located in East Champaran district with a land area of 89 acres and
farm land area of around 319 acres. The unit can be expended to 1500 TPD with a
distillery based on juice along with a cogen of 7 MW. For this a boiler, TG set and
a distillery shall have to be installed. Complete plant shall be converted to an
electric driven plant and mills shall have to be relocated and driven by
individual drives and provided with rake type inter carriers, Donnelley chutes
etc. Remaining equipment except some can be disposed off. The distillery
capacity shall be 90 KLPD. The expansion process would require an
implementation period of about 15-18 months. Hence it can be inferred that the
unit is viable with above proposed expansion. The incremental cost has been
estimated at around Rs. 140 crores.

Suitable cane growing area may be allocated to take care of the units
requirement.

The farm land of 200 acres may also be given alongwith the transfer of unit. The
colony land may be allowed to be converted into factory land for immediate or
future expansions. The adjacent farm land, if any, may be allowed to be used as
factory land.

The unit enjoys an excellent locational & infrastructure advantage, adequate cane
growing area. It also has the required land for expansion.

The viability of the unit may further be enhanced if portion of the farm land
attached to the factory, if any, and colony premises is converted into industrial
land for doing the expansion of the unit. This shall provide more land for further
Private &Confidential Viability Report

SBI Capital Markets Ltd. 9 Unit- Sugauli
expansion of the unit. It is also proposed that the factory colony may be allowed
for usage for expansion of unit. The colony may be shifted to some other
location, preferably the nearest farm land subject to necessary approvals.
However in case of further expansion the allotment of sugarcane command area
would also need to be suitably increased.

The Land along with other assets of the unit may be offered on a Long Term
Lease, (say 60 years) extendable by further 30 years to the prospective investor
for setting up of Sugar Unit, Co-generation unit and Distillery. The investor
should operate the unit for the above specified purpose.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 10 Unit- Sugauli

6. Sacrifice/Waiver/Settlement
a. Secured Loans (Rs.0.75 Cr.)
It may be mentioned that the unit would need to be transferred to the potential
investors free from encumbrances and free of charge on the assets, NOC from the
existing lenders has to be obtained. Considering the same, the above liabilities
have to be negotiated and settled by the Department prior to the bid process.

b. Cane Growers Dues (Rs.1.03 Cr)
As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that it would not be practical to recover the dues, if any, from the new
investor. Considering the same, it is suggested that liability, if any, under the
above head, may be settled by the Government of Bihar.

c) Labour Dues (Rs.9.13 Cr)
As per the discussions and feedback received from various investors, they would
not like to takeover the unit along with any obligation (including the labour
liability) and with regard to appointment of existing employees, investors may
have the right of appointment. It may further be mentioned that the new investor
would be averse to recruiting the existing labour based on their own screening
process.

Hence an amicable settlement on all the labour issues i.e. Payment of past
arrears, Exit Scheme, Settlement, etc has to be arrived between the Labour unions
and the BSSC before transferring the unit to the new investor. It may be
mentioned that BSSC has already estimated an amount of Rs 1.70 crore in the
event of Settlement scheme (Exit Scheme) is offered to all its employees. It is
Private &Confidential Viability Report

SBI Capital Markets Ltd. 11 Unit- Sugauli
desirable that an Exit Policy scheme may be framed preferably by engaging the
HR consultants.

The payment of compensation structure to labour may be structured in
installment basis that may need to be paid over a period of time. Further it may
be ensured that after the change of management, the existing employees shall be
retained/employed at the sole discretion of the new management.

d. Other Liabilities (Rs.30.60 Crore)

All other liabilities (including contingent liabilities), but not limited to Sales Tax,
Income Tax, Service Tax, Excise Duty, Custom duty, any penalty imposed and
liabilities towards any Government body/ Statutory Liability, etc that may be
claimed/accrued in future has to be settled/negotiated/ waived by the GoB. The
other liabilities also include current account with Head office of Rs. 21.92 crores
which has been infused as capital.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 12 Unit- Sugauli


7. Utilisation of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on the
Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the bid proceeds from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions including SDF
loan, if any.
3. Any liability payable by an order of Court.
4. Balance, if any would be transferred to BSSCL A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory liabilities
and therefore the same has not been considered in the priority payments.

Based on the above value, the liabilities of the labour under the Exit Scheme may
be settled. Any other liability including Government dues, Cane Growers Dues,
and tax arrears may be waived/settled by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 13 Unit- Sugauli

8. Litigation Cases

SBICAP has appointed M/s Alok Agarwal as the Legal consultant to verify the
current litigation/petitions against BSSCL for the unit.

As per the findings of the Legal Advisor and as mentioned in the report, there
are no litigation cases against the above Mill as on date.

The Legal Advisor has also verified the title deeds pertaining to the Land as
opined that the BSSC has marketable Title over the property.

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible litigation
for the erstwhile owner / Previous Employees (for whom the settlement has
been made as per the above scheme) and due to reasons of the above litigation,
and if the implementation of the construction cannot be progressed during the
construction phase or stoppage of work during the operation phase, the
Government may undertake to make good the losses suffered if any.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 14 Unit- Sugauli
9. Conclusions and Recommendations
The objective of GoB is to revive/rehabilitate the unit. Based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit has a potential for revival. Therefore we
suggest SID, GoB to consider the revival scheme as suggested in the proposed
Revival Plan.




WARSALIGANJ

TABLE OF CONTENTS

1. BRIEF BACKGROUND.................................................................................................. 2
2. LOCATIONAL MAP : WARSALIGANJ, DISTRICT- NAWADA, BIHAR............. 3
3. TECHNICAL SNAPSHOT............................................................................................. 4
4. FINANCIAL POSITION................................................................................................. 5
4.1 Details of Liabilities......................................................................................................... 6
5. PROPOSED REVIVAL PLAN........................................................................................ 8
6. SACRIFICE/WAIVER/SETTLEMENT...................................................................... 10
7. UTILISATION OF PROCEEDS IN THE SETTLEMENT PROCESS....................... 12
8. LITIGATION CASES .................................................................................................... 13
9. CONCLUSIONS AND RECOMMENDATIONS...................................................... 15
Private &Confidential Viability Report

SBI Capital Markets Ltd. 2 Unit- Warsaliganj

1. Brief Background

The Warisaliganj Sugar Unit is located 2 Km away from Warisaliganj Railway
Station of Nawada District, 20 Km away from District Town and 20 Km distance
from National Highway approach road on Nawada-Barbigha Road. No other
Sugar Unit is located near this Unit.

The Warisaliganj Sugar Unit with 700 TCD capacity, was incorporated in 1933
under the ownership of Warisaliganj Co-operative Sugar Mills i.e. in the year
1977 it was taken over by Bihar State Sugar Corporation (BSSC) under Bihar
Sugar Undertakings (Acquisition) Acts. 1977. The BSSC was incorporated as a
wholly owned Government Company in December 1974.

The unit has a substantial land of 37.90 acres, out of which 32.85 acres of land is
being used for Factory Premises and 5.05 acres of land as Colony Premises.

After the take over of the unit by BSSC, the maximum cane of 7.43 lakh quintal
was crushed in the year 1981-82 (Assuming the no. of crushing days as 180 days,
capacity utilization during that year was 59%). The unit was operational till 1992-
93 but the management of BSSC took the decision of closure of the mill due to
continuous losses.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 3 Unit- Warsaliganj

2. Locational Map : Warsaliganj, District- Nawada, Bihar








Warsaliganj Sugar Unit
Private &Confidential Viability Report

SBI Capital Markets Ltd. 4 Unit- Warsaliganj
3. Technical Snapshot
SBI Capital Markets Ltd. appointed K.S. Projects & Process Engineers Private
Limited (KSPL) for detailed technical assessment of the unit. KSPL have an
experience of more than two and half decades in sugar industry consultancy. The
detailed Technical Report submitted by KSPL has been provided in this report. A
brief snapshot of the technical report is provided below:
Crushing Capacity 661 TCD Per day
Make of Plant consisting of Milling Unit: Crushing
capacity 661 TCD, Boiler Station, Power House,
Clarification Section Boiling House, Centrifugal and
Grading Section
M/s. Duncon Stewert &
Co. Glassgow
Scrap Value of material including Spares Rs.2.39 crore
Land Value (valuation report enclosed) Rs. 14.15 crore


Land
The Land valuation has been done by M/s Bhartia & Associates, Chartered
Engineer, Patna. He is a Government registered valuer and also empanelled as
valuer with various Banks and Institutions including State Bank of India. The
Land value has been considered at government rates prevailing in the district.
(Rs. in lacs)
Land Details Area ( Acres) Govt. Value Market Value
Factory and colony
Premises
37.90 12.56 14.15







Private &Confidential Viability Report

SBI Capital Markets Ltd. 5 Unit- Warsaliganj
4. Financial Position
As per the Internal Audit Report made available to us by the Sugarcane
Industries Department, the Balance Sheet of the Warisaliganj unit as on March
31, 2006 is as follows:

Break up of Liabilities
PARTICULARS 2006 Total
Rs. In Crores Rs. In Crores
SOURCES OF FUND:
SHAREHOLDERS FUND:
Capital
Reserve & Surplus 9.00 9.00
LOAN FUND
Secured Loan 0.23
Unsecured Loan 0.84 1.07
TOTAL : Rs. 10.07
APPLICATION OF FUNDS:
FIXED ASSETS:
Gross Block
Less : Depreciation
Net Block 9.01
Capital Work in Progress
INVESTMENTS :
CURRENT ASSET , LOANS & ADVANCES
Inventories 0.42
Sundry Debtors 0.10
Cash & Bank Balance 0.10
Loans & Advances 0.73
TOTAL : RS. 1.35
LESS : CURRENT LIABILITIES &
PROVISIONS
Current Liabilities 0.64
Outstanding Liabilities 3.53
Other Liabilities 11.00
Provisions 1.47
TOTAL : RS. 16.64
NET CURRENT ASSETS : (15.29)
a)Miscellaneous Expenditure to the extent not
written off or adjusted
Profit & Loss Account 16.35
TOTAL :Rs. 10.07


Private &Confidential Viability Report

SBI Capital Markets Ltd. 6 Unit- Warsaliganj
4.1 Details of Liabilities
The above dues are based on the Internal Audit report as on March 31,
2006.
a. Secured Loan
PARTICULARS Rs Crore
N.C.C Bank CC Account 0.23

It may be mentioned that these lenders may have some charge on the existing
assets of the unit for their respective dues.
b. Unsecured Loan
Particulars Rs Crore
Loan from Govt. of Bihar 0.65
Interest Accrued & Due on Loan Govt. of Bihar 0.19
TOTAL : Rs. 0.84

The loan was infused at the time of takeover and are currently outstanding. It has
been informed that no interest is being charged on the same.
c. Cane Growers Dues
Rs Crore
Cane Growers 0.06

It has been informed by SID that as on May 2007 there is no such O/s dues to the
cane growers and all the dues under the above head has been settled.

d. Electricity Dues
Rs. Crore
Electricity Nil

As per the Internal Audit Report, there are no dues under the above head.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 7 Unit- Warsaliganj
e. Labour Dues
The labour dues position based on the information submitted by the unit is as
under:
Data as on Mar 2007
Labour Age Profile
Age No of Labour
Above 60 1
50 to 60 28
40 to 50 2
Total 31










f. Other Liabilities
The break up of other liabilities appearing in the internal audit report are as
follows:
(Rs. In Crores)
Particulars Amount
Other liabilities 0.02
TOTAL: Rs. 0.02

The details of interunit transaction and current account with headquaters has not
been verified. The SID may further require to confirm that there is no other
liability other than shown in the Internal Audit Report as on March 31, 2006.

Liability Profile (Rs. In crore)
General Labour
Basic Wages 2.76
PF 0.74
Bonus 0.23
Upadhan 0.92
Arrear 0.04
Total 4.69
Cost of Exit Scheme for All Employees 0.42
Gross Total 5.11
Private &Confidential Viability Report

SBI Capital Markets Ltd. 8 Unit- Warsaliganj
5. Proposed Revival Plan
Based on the technical assessment, the Warisaligunj unit is a very old plant
having low pressure boilers and except the milling tandem, most of the
equipment will have to be replaced. The unit can be expended to 1500 TPD with
a distillery based on juice along with a cogen of 7 MW. For this a boiler, TG set
and a distillery shall have to be installed. Complete plant shall be converted to an
electric driven plant and mills shall have to be relocated and driven by
individual drives and provided with rake type inter carriers, Donnelley chutes
etc. Remaining equipment except some can be disposed off. The distillery
capacity shall be 90 KLPD. The expansion process would require an
implementation period of about 15-18 months. Hence it can be inferred that the
unit is viable with above proposed expansion.

The unit enjoys an excellent locational & infrastructure advantage, adequate cane
growing area. It also has the required land for expansion.

The viability of the unit may further be enhanced if portion of the farm land
attached to the factory, if any, and colony premises is converted into industrial
land for doing the expansion of the unit. This shall provide more land for further
expansion of the unit. It is also proposed that the factory colony may be allowed
for usage for expansion of unit. The colony may be shifted to some other
location, preferably the nearest farm land subject to necessary approvals.
However in case of further expansion the allotment of sugarcane command area
would also need to be suitably increased.

Considering the revival possibility with expansion to 1500 TPD with a distillery
based on juice, an incremental cost of Rs. 140 crores would be required, if some
of the usable machineries of the existing mill are refurbished and used. For
efficient operation of the unit post-revival, and considering such additional
Private &Confidential Viability Report

SBI Capital Markets Ltd. 9 Unit- Warsaliganj
amount to be invested, it may be worthwhile to invite private players for
running the unit.

The Land along with other assets of the unit may be offered on a Long Term
Lease, (say 60 years) extendable by further 30 years to the prospective investor
for setting up of Sugar Unit, Co-generation unit and Distillery. The investor
should operate the unit for the above specified purpose.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 10 Unit- Warsaliganj

6. Sacrifice/Waiver/Settlement

a. Secured Loans (Rs.0.23 Crore)
It may be mentioned that the unit would need to be transferred to the potential
investors free from encumbrances and free of charge on the assets, NOC from the
existing lenders has to be obtained. Considering the same, the above liabilities
have to be negotiated and settled by the Department prior to the bid process.

b. Unsecured Loans (Rs 0.84 Crore)
The unsecured loans are from Government of Bihar. Under the current stage it
would be difficult to get back any recovery of the loan. Considering the state of
affairs of the Corporation, it is proposed to be waived off by GoB.

c. Cane Growers Dues (Rs.0.06 Crore)
As per the information provided by the Department, as on May 2007, all the
liabilities pertaining to the cane growers has been settled. However no
independent assessment of the existing dues has been made. It may be
mentioned that it would not be practical to recover the dues, if any, from the new
investor. Considering the same, it is suggested that liability, if any, under the
above head, may be settled by the Government of Bihar.

c) Labour Dues (Rs.5.11 Crore)
No investors would normally like to takeover the unit along with any obligation
(including the labour liability) and with regard to appointment of existing
employees, investors may have the right of appointment. It may be further
mentioned that the new investor would be averse to recruiting the existing
labour based on their own screening process.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 11 Unit- Warsaliganj

Hence an amicable settlement on all the labour issues i.e. Payment of arrears, Exit
Scheme, etc has to be arrived between the Labour unions and the BSSCL before
transferring the unit to the new investor. It may be mentioned that BSSCL has
already estimated an amount of Rs 0.42 crore in the event of Exit Scheme is
offered to all its employees. It is desirable that an Exit Policy scheme may be
framed preferably by engaging the HR consultants.

The payment of compensation structure to labour may be structured in
installment basis that may need to be paid over a period of time. Further it may
be ensured that after the change of management, the existing employees shall be
retained/employed at the sole discretion of the new management.

e. Other Liabilities ( Rs 0.02 crore)
All other liabilities (including contingent liabilities), but not limited to Sales Tax,
Income Tax, Service Tax, Excise Duty, Custom duty, any penalty imposed and
liabilities towards any Government body/ Statutory Liability, etc that may be
claimed/accrued in future has to be settled/negotiated/ waived by the GoB.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 12 Unit- Warsaliganj

7. Utilisation of Proceeds in the Settlement Process
Once the Biding process starts and the potential investor is selected based on the
Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the bid proceeds from the investors, the same may be
appropriated into a nominated account for the unit. The priority of payment
from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme
2. Payment of Dues to Banks and Financial Institutions including SDF
loan, if any.
3. Any liability payable by an order of Court.
4. Balance, if any would be transferred to BSSCL A/c. for meeting
liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory liabilities
and therefore the same has not been considered in the priority payments.

Based on the above value, the liabilities of the labour under the Exit Scheme may
be settled. Any other liability including Government dues, Cane Growers Dues,
and tax arrears may be waived/settled by the GoB.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 13 Unit- Warsaliganj
8. Litigation Cases
SBICAP has appointed M/s Alok Agarwal as the Legal consultant to verify the
current litigation/petitions against BSSCL for the unit.

As per the findings of the Legal Advisor and as mentioned in the report, the
following cases have been found;
Hon.ble High Court ,Patna
1. M.J.C. No. 699 of 2002 (Mahendra Prasad Singh Vs the Bihar State Sugar
Corporation Limited) (Arising out of C.W.J.C. No. 8754 of 2001) -
Contempt matter.
2. M.J.C. No. 1204 of 2004 (Mahendra Prasad Singh Vs. the Bihar State Sugar
Corp. Ltd.)-Contempt matter.
3. C.W.J.C. No. 14565 of 2005 (Shri Gokul Choudhary & anr.Vs. the Bihar
State Sugar Corp.Ltd.) -Service Matter against Termination of Service.
4. C.W.J.C. No. 13827 of 2006 (Balmiki Singh & anr. Vs. the Bihar State Sugar
Corp. Ltd.) -Service Matter for Regularization of Service.
Cases pending in the other courts:
5. Complaint Case No. 113 of 2006 (Bimla Singh w/o Late Balram Singh Vs.
the Bihar State sugar Corp.Ltd.) pending before Consumer Forum at
Madhubani.
6. T.S. No. 188 of 2004 (Bhagwat Mahto Vs. the Bihar State Sugar Corp. Ltd)
7. Certificate Case No. 12/96-97 pending before the Certificate Officer,
Nawada for realization of certificate dues of Rs. 16,92,811/- by Certificate
Holder, Bihar State Electricity Board.
Note: None of the cases are in the way in the present process of bidding.

The Legal Advisor has also verified the title deeds pertaining to the Land as
opined that the BSSC has marketable Title over the property.
Private &Confidential Viability Report

SBI Capital Markets Ltd. 14 Unit- Warsaliganj

The Government of Bihar may assure that the units shall be transferred to the
potential buyers Free from All Encumbrances. In case of any possible litigation
for the erstwhile owner / Previous Employees (for whom the settlement has
been made as per the above scheme) and due to reasons of the above litigation,
and if the implementation of the construction cannot be progressed during the
construction phase or stoppage of work during the operation phase, the
Government may undertake to make good the losses suffered if any.

Private &Confidential Viability Report

SBI Capital Markets Ltd. 15 Unit- Warsaliganj
9. Conclusions and Recommendations
The objective of GoB is to revive/rehabilitate the unit. Based on our
assessment/examination of the information provided by SID, GoB on the unit
and further taking into account the technical, legal, financial aspect we have
arrived to a conclusion that the unit has a potential for revival. Therefore we
suggest SID, GoB to consider the revival scheme as suggested in the proposed
Revival Plan.