Kesoram Industries lines up Rs 600-crore capex for 2016-17

BK Birla Group's flagship company Kesoram Industries has lined up a Rs 600-crore capital expenditure plan in the ongoing fiscal year, which will help the company take forward its restructuring agenda.

Of the planned capex, Rs 350 crore will be spent on the tyre business, while the cement business will attract an investment of Rs 250 crore.

In the tyre business, the company will be spending Rs 300 crore to complete commissioning of the passenger car radial tyre business in its plant in Balasore in Odisha, while the rest Rs 50 crore will be invested to make the 2-3-wheeler tyres in the same plant.

"We plan to complete setting up the radial tyre business by the end of this year as our target is to go for commercial production of the same in April 2017," the company's director Tridib Kumar Das said here after concluding the Annual General Meeting.

The company manufactures vehicle tyres under the brand name of Birla Tyres.

So long, the company has invested Rs 500 crore in the radial tyre business whose commercial production is yet to commence and the new planned investment will take the total capex in this segment to Rs 800 crore.

The Balasore unit will manufacture 2.9 million radial tyres every year for the passenger cars segment once it is commissioned, while the investment of Rs 50 crore will help the firm boost production of 2.22 million tyres for the 2-3 wheeler segment. Additionally, it will outsource tyres in the same segment as the need arises.

In the face of falling income from the tyre business, the company has been restructuring this line of business since the last fiscal year. In September last year, Kesoram Industries had divested its entire stake in its tyre manufacturing facility in Laksar in Uttarakhand for Rs 2,195 crore to JK Tyres.

During 2013-14, revenues from the tyre business accounted for Rs 3,151 crore, which fell to Rs 2,633 crore during 2014-15 and went south to Rs 2,140 crore.

"After a close study, we realised that we had more capacity than needed which was a drag on the tyre business. Hence, we decided to sell off the plant while focus our efforts on the Balasore facility," Das said.

Part of the one-time income on account of this sell-off had helped the company pull down its long-term debt burden of Rs 4,300 crore to 2,200 crore. However, with this fiscal year's capex plans lined upto be funded by banks, its total debt will shoot up to Rs. 2,800 crore.

Das, however, isn't worried about debt shooting up as Kesoram Industries has already worked out a deal with the banks by which it has reduced chargeable interest rate by 2%.

In the cements business, which has seen a growth of 3.6% during 2015-16 in revenue terms and a 10% growth in terms of volume, the company is keen to acquire mining rights as well as land around its existing cement plants to streamline production.

Sold under the brand name of Birla Shakti Cement, the company has two cement manufacturing units in Sedam in Karnataka and Vasanth Nagar in Telengana with a consolidated production capacity of 7.25 million tonnes. Currently, it plans to ramp up capacity utilisation in these plants.

"For the long term, our focus will continue to remain on cement, tyre and rayons business," Das said.

This year, Kesoram Industries had hived off its rayon business to Cygnet Industries for an estimated Rs 480 crore. The move has been seen as part of the firm's strategy to reorganise and realign its existing businesses and assets.
 

Brand Revenue	2015-16 (in Rs Crore)	2014-15 (in Rs. Crore)	2013-14 (in Rs. Crore)
Birla Tyres	2140	2633	3151
Birla Shakti Cement	2402	2318	1962
Birla Rayons	323	286	304