Kesoram Industries to hive off its Haridwar unit

Kesoram Industries, the flagship company of the BK Birla group, is planning to hive off its tyre manufacturing plant in Haridwar to reorganise the business.

In a regulatory filing, the company said the committee of directors, constituted on June 26 last year, had advised it to monetise some of its assets to reduce its debt burden.

The company, which sells tyres under the Birla tyres brand, has five tyre units —  four at Haridwar, Uttarakhand, and one at Balasore, Odisha. The tyre business accounts for around 60 per cent of Kesoram’s topline.

“The committee has recommended that the board consider reorganisation of the company’s tyre business through transfer of the business’s tyre manufacturing facility at Haridwar into a subsidiary,” the company said in the filing to the Bombay Stock Exchange.

Hiving off the tyre plant to a subsidiary will help the monetisation exercise and increase the company’s net worth. According to analysts, Kesoram industries has a debt pile of over Rs 4,000 crore.

Officials close to the development said the company planned the facilities that could be used an outsourcing model for the industry. At present, the tyres are sold as Birla Tyres, but going forward, if it so demanded it could be manufactured at the existing facilities and sold under a different brand name.

Asked if the company was planning to sell a majority stake in the tyre subsidiary, officials said, it was not ruled out, but the outsourcing model could come up immediately.

The company notice said, "The committee, upon deliberating several options, was of the considered view that the company should continue in all the businesses that it was presently engaged in, ie., tyres, cement and rayon. Indeed these businesses required further strengthening to enhance their efficiency."

There have been speculations that the company might exit the tyre business.

The Kesoram Industries scrip closed at Rs 127.95 -- a dip by 7.68 per cent, while the benchmark Sensex was down by 1.71 per cent.