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Diversified Kesoram Industries Ltd has reduced a substantial amount of debt after major restructuring.
The restructuring planned and implemented over the last couple of fiscals saw Kesoram shed one of the two tyre units and non-operative chemicals and spun pipe businesses.
Tridib Kumar Das, Whole-time director & CFO of the BK Birla group company, said that sale proceeds had been utilised to pay off short-term and working capital borrowings for bringing down finance cost. The company garnered ₹2,195 crore by selling off Laskar tyre unit in Uttarakhand to JK Tyre and ₹830 crore from sale of investments as well as assets of Hindustan Heavy Chemicals and spun pipe unit.
In 2014-15, the company had short-term borrowing of ₹3,444 crore, which now stands reduced to just ₹19 crore.
“We will now focus on our remaining tyre business at Balasore in Odisha,” Das said. The unit, which currently produces two-wheeler, three-wheeler tyres as well as truck and bus bias tyres, is implementing passenger car radial tyres project.
Andrew Harper, President of the company, told BusinessLine that the company expects to roll out passenger car radial tyres from this plant in the third quarter of this fiscal. Das said that the work for the project got stalled for couple of years because of certain public interest litigation. “Now the court orders have cleared the path for implementation of the project,” he added. It had invested ₹500 crore for the project already and another ₹300 crore of fresh investment have to be made this year.
“We will invest from our internal generation and are unlikely to borrow for the project completion,” Das explained.
The company, however, would outsource truck and bus redial tyres from July to meet the demand and supply gap created by disposal of Lasker unit. “We intend to bring in 20,000 such radial tyres from China every month from July,” said Harper.
The rayon and transparent paper business, which Kesoram transferred to a wholly-owned subsidiary recently, would also bring in cash. The transfer consideration in cash, to be at least ₹430 crore, is likely to be available in June, according to the previously decided arrangements.
Kesoram reported a net profit of ₹348.88 crore in the fourth quarter of 2015-16 on account of profits from sale of assets. It said in a note to the accounts that it made a profit of ₹385.78 crore from sale of Hindustan Heavy Chemicals and spun pipe division’s assets. It also reported a profit from sale of long-term investments of ₹369 crore.
In the comparable quarter last year, the company had shown a profit of ₹409 crore from sale of a subsidiary owning Kesoram’s Uttarakhand unit.
For 2015-16, Kesoram reported net profit of ₹137 crore against a 2014-15 net loss of ₹367 crore.
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