KM Sugar Mills received NCLT Allahabad Bench approval on August 19, 2026, for the demerger of its Distillery Division into KM Spirits and Allied Industries Limited, with an appointed date of April 1, 2026.

The company disclosed on August 22, 2026 that the NCLT order is now available on the tribunal's portal, fulfilling the earlier commitment to submit the document to exchanges once accessible. The scheme was processed under Sections 230-232 of the Companies Act, 2013, governing compromises, arrangements, and amalgamations. The disclosure was made pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and follows earlier intimations dated July 7, 2026 and August 20, 2026.

Shareholder and creditor approval

The scheme received overwhelming support from equity shareholders and unsecured creditors of the demerged company. Equity shareholders cast 5,80,99,694 valid votes, with 99.99% in favour through remote e-voting prior to the meeting. Among unsecured creditors, all 85 valid votes cast — representing a value of 4,96,74,045 — were in favour, with zero votes against.

Statutory authority responses

The Registrar of Companies, Ministry of Corporate Affairs, Uttar Pradesh, confirmed in its report dated July 8, 2026 that KM Spirits and Allied Industries Limited is a wholly owned subsidiary of KM Sugar Mills Limited, and that the distillery division is being transferred on a going concern basis. The Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi, noted in its representation affidavit dated July 12, 2026 that no prosecution was filed or pending against the petitioner company as per the RoC report.

The Income Tax Department raised observations regarding outstanding tax demands against KM Sugar Mills Limited across multiple assessment years. The department noted that the scheme must satisfy conditions under Section 2(19AA) of the Income Tax Act and that both companies shall remain jointly and severally liable for tax liabilities relating to the demerged undertaking for the period prior to the appointed date.

KM Sugar Mills filed rejoinder affidavits on August 4, 2026 and August 12, 2026 clarifying the status of each demand. The company stated that demands for assessment years 2015-16 through 2020-21 are under appellate proceedings and have not attained finality, while the demand for assessment year 2024-25 of ₹1,51,245 has already been paid. A separate Income Tax Department report dated August 5, 2026 confirmed no pending assessment, reassessment, penalty, or prosecution proceedings in that office against either petitioner company, and stated no objection to the proposed scheme.

Share entitlement ratio and transfer terms

Under the sanctioned scheme, KM Spirits and Allied Industries Limited will issue and allot equity shares to shareholders of KM Sugar Mills in the following ratio:

• 1 equity share of face value ₹10 each in the Resulting Company for every 5 equity shares of face value ₹2 each held in the Demerged Company.

Upon the scheme becoming effective from the appointed date, all assets, liabilities, legal proceedings, and employees of the Distillery Division will stand transferred to KM Spirits and Allied Industries Limited. All tax liabilities, statutory dues, and proceedings attributable to the demerged undertaking for the period prior to the appointed date will also vest in the Resulting Company. The Resulting Company is required to file modified income tax returns, if any, within six months from the end of the month of the order, in accordance with Section 314(1) of the Income Tax Act, 2025.

Compliance obligations post-sanction

The petitioner companies are required to supply legible printouts of the scheme and the schedule of assets to the NCLT Registry within three weeks from the date of pronouncement. Within thirty days of receiving the certified copy of the order, the companies must deliver it to the Registrar of Companies, Kanpur, for registration. The Resulting Company must also file a revised memorandum and articles of association with the concerned Registrar of Companies and make requisite payments for any differential fee arising from enhancement of authorised capital.

KM Sugar Mills reported a net profit of ₹7.83 crore for the quarter ended June 30, 2026 (Q1FY26), a significant decline from the ₹13.13 crore earned in the corresponding quarter of FY25. The downturn reflects the seasonal nature of the sugar business, with revenue from operations dropping 8.79% year-on-year to ₹189.93 crore from ₹208.23 crore. Despite the lower top-line growth, the company maintained profitability across both its sugar and distillery segments, though margins faced pressure from higher inventory changes.

The Board of Directors approved the unaudited standalone and consolidated financial results on August 07, 2026, pursuant to Regulation 30 and Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The results were reviewed by the Audit Committee and subjected to a limited review by Mehrotra & Mehrotra, Chartered Accountants, the statutory auditors of the company. The consolidated figures include the results of its wholly-owned subsidiary, K M Spirits & Allied Industries Limited, which remains non-operational with negligible financial impact.

Financial Performance Overview

The company’s total income decreased to ₹193.90 crore in Q1FY26, compared to ₹210.32 crore in Q1FY25. This contraction was primarily driven by a reduction in revenue from operations, while other income saw a modest increase to ₹3.97 crore from ₹2.09 crore. Total expenses rose slightly to ₹183.13 crore from ₹192.44 crore, largely due to variations in cost of materials consumed and changes in inventories.

Profit before tax fell to ₹10.77 crore from ₹17.88 crore in the previous year. Tax expense amounted to ₹2.94 crore, comprising ₹2.61 crore in current tax and ₹0.33 crore in deferred tax, compared to ₹4.75 crore in total tax expense during Q1FY25. Earnings per share (basic and diluted) declined to ₹0.85 from ₹1.43.

Segment-wise Analysis

The sugar segment, which constitutes the bulk of the company’s business, generated revenue of ₹169.12 crore, down from ₹191.77 crore in Q1FY25. However, the distillery segment showed resilience, with revenue rising to ₹28.80 crore from ₹24.33 crore, an increase of 18.37%.

Segment results before tax, finance costs, and exceptional items totaled ₹14.34 crore, compared to ₹22.93 crore in the prior year. The sugar segment contributed ₹11.92 crore to this figure, while the distillery segment added ₹2.42 crore. Finance costs remained relatively stable at ₹3.57 crore.

What the Numbers Show

A key observation from the filing is the divergence between segment revenue trends and overall profitability. While the distillery segment demonstrated strong top-line growth, the sugar segment’s decline dragged down overall performance. Notably, the company recorded a positive change in inventories of finished goods, by-products, and work-in-progress amounting to ₹146.09 crore, compared to ₹154.62 crore in Q1FY25. This indicates that despite lower sales, inventory management remained tight. The company highlighted that sugar being a seasonal industry leads to quarter-to-quarter performance variations, suggesting that current results may not reflect full-year potential.

The subsidiary, K M Spirits & Allied Industries Limited, continues to be non-operational, with total assets of ₹5.47 lakh and negligible revenue and profit contributions. As such, the consolidated and standalone financial results remain nearly identical. Investors should monitor upcoming quarters for signs of recovery in the sugar segment as the season progresses.