Kesoram Industries looking for debt partner to infuse fresh liquidity

Shobha Roy Kolkata | Updated on October 02, 2020

Partner may pick up marginal equity in the company

The Manjushree Khaitan-led Kesoram Industries Ltd is looking to rope in a debt partner to infuse fresh liquidity into the company and to replace the existing legacy debt with new debt.

The partner is likely to pick up a marginal equity in the company, P Radhakrishnan, CEO, Kesoram, told BusinessLine.

Kesoram’s outstanding debt as on date stands at a little over ₹2,000 crore and the company plans to bring it down in a phased manner to nearly four times of its EBITDA. The company is hopeful of firming up the debt partner by this month-end.

Also read: Birla Tyres in talks with multiple partners for strategic collaboration

“We are trying to ensure that debt is about four times of our EBITDA to start with. So if we make around ₹400 crore then the debt should be about ₹1,600 crore. It may not be possible (to bring it down) overnight but we have plans for it,” Radhakrishnan said.

The debt, which is at close to ₹2,000 crore, should come down to ₹1,800 crore to begin with and then come down to around ₹1,400 crore in the next 24-36 months and then it would be four times EBITDA.

“We are predominantly looking for a debt oriented partner with some component of equity but not very large dilution,” he said.

Bets on infra sector

Kesoram, which is into the cement business, is expecting demand to recover backed by growth in infrastructure sector. Birla Shakti, which is one of its key brands, would be given a strong thrust moving forward. The company is also looking to expand its geographical footprint.

Also read: Kesoram Industries awaits NCLT nod for demerging tyres business

“Infrastructure has to grow with the kind of thrust the government is laying. We are seeing some greenshoots,” he said.

The ₹2,300-crore Kesoram witnessed an improvement in its operating profit margin in the June quarter to 9.97 per cent this year, as against 4.21 per cent same period last year. The net profit margin also improved to 4.43 per cent (0.77 per cent) during the June 2020 quarter.

In a recent notification to stock exchanges, the company informed that it is almost cash neutral for FY-20 despite the onset of pandemic and consequent lockdowns.

Kesoram’s subsidiary Cygnet Industries has entered into an agreement with Futamura Chemical of Japan, which would give it a global reach for its transparent paper products business, it said.

Futamara is a global leader in the manufacturing and distribution of cellulose films. Its unique product offerings would allow to serve a wide range of markets running the spectrum from food to medical, to industrial applications, the company said.

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Published on October 02, 2020
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