Kesoram eyes tie-up with global tyre firm, plans to hive off business

Kesoram Industries aims to partner with a global tyre company to make its tyre business global within three to four years.

The process for demerging the tyre business is currently underway. The new company, Birla Tyres, will be independently listed. Of the company's two businesses, while the cement business has been consistently returning a positive EBIDTA, the tyre business - now in consolidation mode - has been incurring losses in the past few years. 

Addressing shareholders at the company's 100th annual general meeting, chief financial officer, P Radhakrishnan, said that the endeavour was to create value for shareholders in cement and tyres. "If we have to create value then both businesses have to perform," he said. 

Later, Manjushree Khaitan, chairman Kesoram, said that details on the contours of the two companies would be shared once the demerger was completed. 

The company has improved its performance for the year to a lower loss of Rs 253 crore on income from operations of Rs 3,988 crore as against a loss of Rs 465 crore on income from operations of Rs 3,933 crore in the previous year. In the final quarter the company posted a profit.

Debt, too, has been brought down from Rs 3,460 crore to Rs 2,948 crore. 

Radhakrishnan said that the cement business would roughly have a debt of Rs 2,000 crore and the tyre business, Rs 1,000 crore, post-demerger, in response to a shareholder query.

While Kesoram is eyeing a partnership for the tyre business, it is also working on scaling up the business. 

Kesoram has already invested Rs 775 crore for passenger car radial project which is yet to commence commercial operations. A balance investment of Rs 225-250 crore is required to complete the funding for the project which could be a combination of debt and equity.

Radhakrishnan didn't want to comment whether discussions with global tyre majors had already been initiated for a partnership. 

He, however, said that there were clear plans to take the tyre business forward. "There are a number of entities globally that are looking for ready capacity in the passenger car segment. If a partner comes in, we will go along, otherwise we are well geared to scale our tyre business," he said.