Kesoram Industries hopes to complete ₹200 cr rights issue by November

Shobha Roy Kolkata | Updated on July 12, 2021

Looking to reduce cost of debt

The BK Birla Group company-Kesoram Industries Ltd is hopeful of completing its ₹200 crore rights issue by November this year post which it would look at bringing down the cost of debt by replacing some high cost bonds with lower coupons.

According to P Radhakrishnan, CEO, Kesoram, net debt would be brought down to nearly 3.5 times of the EBIDTA over the next 12 months which would give a strong footing to the company for its next phase of growth and expansion.

The company’s net debt currently stands at around ₹1,890 crore, down from ₹2,000 crore in October 2020. As on March 31, 2021, its EBIDTA was ₹497 crore as per information available in the latest annual report. So, the debt would be typically brought down by around ₹150-160 crore over the next one year.

“Anything close to 3.5 times of EBIDTA is a comfortable debt level. Given that our EBIDTA is going up, we should be able to achieve this level over the next one year. This will give us a strong footing and with the debt being sized down, we will look at the cost of debt before entering into our expansion phase,” Radhakrishnan told BusinessLine.

The company has been striving to reduce high cost debt through a combination of equity and replacing of existing debt with lower coupon. As a step towards that plan, the company’s board had recently approved raising of funds up to ₹600 crore, by way of issuance of securities through one or more modes including by way of a private placement, follow-on public offering, qualified institutions placement or a combination thereof, subject to shareholders’ approval or through a rights issue.

Capacity Expansion

Kesoram, which clocked a total turnover of ₹2415 crore in FY-21, is looking to scale up production capacity to 11-12 million tonne (mt) from the current nine mt in the next two years through de-bottlenecking its existing units.

Plans are afoot to add another three-to-four million tonne capacity, thereby taking the total production to 15 mt in the next five years. The company would explore both organic and inorganic growth possibilities for the expansion.

“Once we are able to bring down debt to nearly 3.5-4 times of EBIDTA our next focus would be on de-bottlenecking our existing capacity. We will look at generating more clinker and take up our production capacity to around 11-12 mt in the next two years,” he said.

Cement Production

There has been a very strong demand for cement given the government’s thrust on infrastructure. This would augur well for the company.

According to the company’s latest annual report, cement production in the country is expected to steadily grow at a CAGR of 5-5.5 per cent.

The company has been focusing on penetrating rural markets in the last couple of years and this approach has resulted in the blended cement sales volume growing in a sustained progression. It is strengthening its footprint in the rural Maharashtra, Karnataka, Telangana and is also looking to tap parts of Tamil Nadu.

“The more you penetrate the rural markets, the better are the margins. The main purpose is to sell more in markets which are closer to the production units,” he said.

The company has also sharpened its drive on the brand positioning in the primary markets and its premium brand Birla Shakti is perched to be on the top quartile in terms of price.

Talking about demand, he said, despite the Covid-19 driven pandemic and the resultant lockdown in several States, the demand has not been affected.

“Demand has not been affected but supply chain has been impacted so we expect the pent up demand to come in by the second quarter of this fiscal,” he said.

Published on July 12, 2021

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