Kesoram Industries shines on cement and tyres

Kesoram Industries Limited, the flagship company of the B.K. Birla Group, has done well during 2008-09 even while it had to contend with slowdown in the economy and an unprecedented liquidity crunch. The company with significant presence in cement and automobile tyre sectors earned a net profit of Rs 378.74 crore on a turnover of Rs 4,292 crore and EPS of Rs 82.80 per share. It is paying a total dividend of Rs 5.50 per share, including an interim of Rs 2.25 per share for 2008-09.

Both Vasavadatta Cement and Kesoram Cement not only achieved record production of clinker and cement but they also with a great degree of success initiated a number of efficiency measures in the face of rising cost of inputs, particularly coal.  Vasavadatta Cement stepped up production of cement to 39.25 lac metric tons from 32.78 lac metric tons in 2007-08. In the case of Kesoram Cement, cement production was up from 11.99 lac metric tons to 15.12 lac metric tons.

As the two units have benefited from higher production of blended cement, the company’s focus on quality and reinforcing of the brand “Birla Shakti” have helped in achieving customer loyalty. Vasavadatta Cement has now completed expansion of cement capacity by 1.65 million metric tons at an investment of Rs 650 crore. In the meantime, capacity of Kesoram Cement was raised by 3 lac metric tons to 1.5 million metric tons in the year 2008-09. Cement sales constitute about 48 per cent of the company’s revenue.

Though most of the last year proved to be difficult for the automobile industry and original equipment manufacturers, including the tyre industry, Kesoram’s tyre section managed to come out with flying colours with its domestic market share rising to 15 per cent from 10 per cent. The section is going through some major expansion. Its Greenfield project involving an investment of Rs 759 crore at Laksar near Haridwar in Uttarkhand has started commercial production in phases.

The work on the radial tyre project with 100 metric tons per day capacity and Bias tyres with 125 metric tons per day capacity is progressing well. The board of directors has further given its approval to a 70 metric tons per day capacity motor cycle tyre project involving an investment of Rs 190 crore. The Commercial production at the two projects should start by January 2010. The tyre section, with a share of about 45 per cent of the company’s sales revenue, on completion of all expansion programmes, will have an overarching presence being a market leader in Truck Tyre segment.

The company’s prospects for the current year are encouraging as the government has promised allocation of greater resources for the infrastructure sector. This should create better demand for cement. At the same time, the outlook for the Indian automobile industry is steadily improving.