Shares of Kesoram Industries dropped as much as 7.8 per cent to Rs 89.60 in the early morning trade on BSE as the investors booked profit after the company said it will spin off its tyre business into a separate entity, which will then become a publicly-traded company.
The board of directors of the company at its meeting held on Tuesday approved the proposal to demerge the tyre business into a new entity, Birla Tyres Ltd., Kesoram Industries said in a regulatory filing. “The demerger proposed is part of an ongoing exercise undertaken by Kesoram over the past few months in further realigning and recalibrating operations.”
The 7.5 million tonne cement business of the company will remain with Kesoram Industries post this demerger.
According to the company official, the nature of risk and competition involved in each of the cement business and tyre business is distinct, necessitating different management approaches and focus, said a Business Standard report. READ MORE
As on September 30, 2018, the promoter holding in the company stood at 53.18 per cent.
The tyre business had always been a cause of worry for the company in the recent past. Citing over-capacity in this vertical and the need to reduce its debt, Kesoram Industries, in 2015, sold off it Laksar tyre unit to JK Tyre for Rs 21.95 billion.
Since November 13, post-September quarter results (Q2FY19), the stock has climbed 61 per cent from Rs 60 to Rs 97 (as of Tuesday's close) against 2.8 per cent rise in the S&P BSE Sensex. Kesoram Industries had reported a net loss of Rs 963 million in Q2FY19 against loss of Rs 1,396 million in the same quarter previous fiscal. It posted a net loss of Rs 634 million in Q1FY19.
At 09:30 am, the stock was trading at Rs 91.95 apiece on BSE, down 5.40 per cent.