Fis Caveat To Kesoram On Fund-Raising

Birla Tyres, the division in which the money will be invested.

The consortium of four group associates which has taken Birla Tyres division on lease are Century Textiles, Jayashree Tea and Bharat General & Textile Industries and Kesoram Industries.

At a board meeting of Kesoram Industries held yesterday, it was decided that the lease, which was to expire in fiscal 1996-97, should be extended for another year to the year-ending March 31, 1998, subject to approval of the consortium

partners.

The Industrial Development Bank of India (IDBI) and Industrial Credit & Investment Corporation of India (ICICI) have insisted that since the pattern of funding a division by utilising the borrowing powers of group companies is not widely followed, they would prefer lending straight to Kesoram.

 

Birla Tyres, a loss-making tyre divison of the Rs 594-crore Kesoram Industries, was hived off in 1994 as it was responsible for Kesoram declaring a substantial loss of about Rs 24 crore in 1992-93.

The management decided to lease the ailing tyre division to group companies which can support the unit better on the advice of financial institutions and company's bankers at the time. The company is now planning to enhance its units capacity by 10 per cent from its current capacity of 1 million tonne per annum. The institutions have, however, sanctioned Rs 130 crore, which will include institutional loans and external commercial borrowings of $9 million to Kesoram Industries.

The company's minimum requirement for its expansion is only Rs 100 crore and has to decide how to disburse the Rs 30 crore sanctioned by financial institutions.

"We will either have to reduce the loan sanctioned or change the expansion plan to a certain extent. A decision on the issue is yet to be taken," a company official said.

The board of Kesoram Industries, which met yesterday to adopt the company's half-yearly results, has decided to extend the consortium arrangement for Birla Tyres with its four group associates by another year to March 31, 1998.

"This will, however, become effective on the arrangement getting similar approval from the other three consortium members to whom the once-ailing company had been leased out," said a company official.

The annual lease rent from Birla Tyres against the extended one-year period will be Rs 42 crore against Rs 39 crore.

The company registered a profit of Rs 9 crore in the first half of 1996-97 against a loss of Rs 2 crore in the corresponding period last year.

Kesoram Industries has registered a 45 per cent rise in net profit to Rs 22.28 crore over the corresponding half of 1995-96.

Net sales of the companyduring the said period stood at Rs 300.83 crore (Rs 288.39 crore in the six months ended September 1995).

The company reduced its interest burden by Rs 6 crore due to repayment of loans, redemption of debentures and better management of working capital.

The company's minimum requirement for its expansion is only Rs 100 crore and it has to decide how to disburse the Rs 30 cr sanctioned by financial institutions