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BK Birla group’s diversified outfit Kesoram Industries Ltd has restructured its tyres division to make it profitable.
The company said it has put in place a new management team for the division. According to the directors’ report for 2011-12, “This team is aggressively spearheading EBIDTA positive initiatives and will take ownership for the structural changes.”
The new team is led by a CEO and has four other officials. It replaced the earlier 10-member management team.
Kesoram said the team took charge in the second half of 2011-12. It said calibrated changes were made to the sales mix in favour of profitable products and there was greater focus on two and three-wheeler tyres.
The first positive result was seen in Q4 of 2011-12 as operating margins rose almost four per cent. “Going forward, EBIDTA margins are expected to improve further and the tyre business looks to the future with confidence,” the report said.
Though during FY’12 revenues grew by nine per cent to Rs 3,922 crore, pressure on margins forced the tyre business’s EBIDTA to decline significantly. It reported a negative EBIDTA or an operating loss at Rs 428 crore, up from an operating loss of Rs 15 crore in the previous year.
The truck and bus tyres market, the division’s mainstay, remained flat, growing at 2.5 per cent. “In view of the stagnant demand during 2011-12, sales to the profitable replacement market segment also remained flat,” the report said.
Kesoram said the division was also rolling out standard operating procedures and amalgamating with an ERP system.
The annual report, uploaded recently on the Web, did not mention the appointment of McKinsey in January 2011, which was hired to map out the future course of action for Kesoram, which reported a net loss of Rs 379.4 crore (Rs 210.21 crore).
Meanwhile, Kesoram proposed to increase the borrowing limit to Rs 6,000 crore from Rs 4,000 crore. The resolution will be considered at the AGM on July 11 as the proposed limit exceeds the company’s paid-up capital and free reserves (excluding temporary bank and institutional loans).
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