Companies

Kesoram to focus on passenger radial tyres

Our Bureau Kolkata | Updated on July 26, 2019 Published on July 26, 2019

Kesoram Industries Ltd Chairman Manjushree Khaitan (centre) with the company's board of directors Lee Seow Chuan (left) and Kashi Prasad Khandelwal at the company’s 100th Annual General Meeting, in Kolkata, on Friday (July 26, 2019)

Company will look out for global partnerships

Kesoram Industries Ltd, which is spinning off its tyre vertical into a separate entity, Birla Tyres Ltd (BTL), will focus on the passenger radial tyre segment as it looks to “rebalance the portfolio”.

According to P Radhakrishnan, Chief Financial Officer, Kesoram Industries, commercial segment accounts for nearly 90 per cent of the tyre unit’s total turnover at present. The remaining is from passenger vehicle segment.

The company has already invested close to ₹775 crore to add a fresh line for passenger radial tyres in its existing plant at Balasore in Odisha over the last three-to-four years. It is likely to infuse an additional ₹225-250 crore on the unit. The new investments will be through a mixture of debt and internal accruals.

“We are currently skewed highly towards the commercial segment, and, will now focus on the consumer segment to rebalance our portfolio,” he told newspersons after the company’s 100th annual general meeting here, on Friday.

The tyre business is also in the process of looking for global partnerships and clarity on it may emerge later. “This (partnership) is expected to catapult the tyre business into the global market space within three-to-four years while further propagating the Birla Tyres brand,” the company said in a press statement.

A number of global players were looking for ready capacity in the passenger car tyres segment in India, he said, adding that the company might also explore the option of contract manufacturing if that helps add value to the business.

The BK Birla Group flagship Kesoram Industries will also seek a nod from shareholders, secured and unsecured creditors for the proposed demerger. Approvals from all the three will be taken separately, as directed by the National Company Law Tribunal, on August 6. Company officials expect the demerger to be complete by this calendar year-end.

Cement business

The company’s cement business will look at geographical diversification and work on cost reduction measures to boost profitability. Plans are also afoot to increase the share of blended cement to its total sales for better realisation.

“Blended cement accounts for around 40-45 per cent of our sales at present, we would like to take it to 80-85 per cent in the next few years,” Radhakrishnan said.

Cement accounts for nearly ₹2,581 crore or over 65 per cent per cent of Keshoram’s revenue from operations. Revenues stood at ₹3,878 crore in FY19.

Debt

The debt of Kesoram Industries Ltd, which stands at around ₹3,000 crore, would be split between the cement and tyres businesses, to be formed post the demerger.

While a debt of ₹2,000 crore would accrue to the cement entity, around ₹1,000 crore will come to the tyre company post-demerger.

“The demerger will help focus on both the businesses and create more value for the shareholders,” he said, adding that debt reduction will happen once “value is created” across the two entities.

 

Published on July 26, 2019
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