UPDATE1-Bajaj Hind, Balrampur deny stake reports

* Balrampur, Bajaj separately deny stake talks

* Balrampur shares slump, Bajaj ends flat

* Sector heading for consolidation, analysts say

(Adds details, analysts' and company comments, share)

By Swati Pandey

MUMBAI, Nov 3 (Reuters) - Sugarmakers Balrampur Chini Mills (BACH.BO) and Bajaj Hindusthan (BJHN.BO) on Tuesday denied that they were in stake sale talks, sending the former's shares down as much as 11.25 percent.

Local media including Economic Times, the paper's channel ET Now and Hindu Business Line among others reported last week that Bajaj was in talks with Balrampur Chini to buy 36.5 percent stake from its founders for 24 billion rupees.

The reports had prompted traders to build long positions in Balrampur, anticipating the deal would happen at 180-200 rupees a share, analysts and dealers said.

"As the deal is not happening, selling pressure has emerged in Balrampur. People are squaring off their positions," Pranshu Mittal, sector analyst with Centrum Broking said.

"For Bajaj, it is good the deal didn't happen or it would have meant financial strain for the company for another two years," he added.

Meanwhile, a senior Kolkata-based official at Balrampur, who is also a board member, told Reuters it was not in discussions with anyone for the sale.

"We have no plans to sell stake right now," he told Reuters under condition of anonymity. "We are not in talks with anyone either."

However, the company said in its statement to the stock exchange it held some talks with Bajaj to discuss "future business strategies."

The sugar industry, which is highly fragmented at present, may see some consolidation in 2010 as soaring prices have left bigger players with surplus cash.

"Sugar companies will perform very well in 2010 due to higher prices of sugar so they will have surplus cash in their book for buyouts," Vikaram Suryavanshi, sector analyst at Karvy Comtrade said.

"There are huge numbers of smaller players in this sector. The fragmented nature of the industry will lead to consolidation in the future," he added.

Shares in Balrampur Chini finished 10.05 percent lower at 134.3 rupees while Bajaj Hindusthan ended flat at 196.55 rupees in a weak Mumbai market. (Additional reporting by Niladri Bhattacharya from KOLKATA; Editing by Ramya Venugopal)