Basanth Kumar Birla owned Kesoram Industries has hired Swiss bank UBS to sell off its tyre division in a bid to cut its debt. The bank is in talks with three players to sell off the loss-making division of the company.
Banking sources say the deal is expected to be finalized by the end of the current fiscal. The fall in crude oil prices and rubber prices is expected to help the company’s margins but dumping of tyres by Chinese companies is impacting Indian tyre makers including Kesoram.
The Kesoram board has appointed a three member committee of directors to oversee the sale. Of the three, two directors are independent directors. A UBS insider said they are on the job and they are in talks with potential buyers. Reply from Kesoram is awaited.
The tyre division’s sales are around 3,000 crore but it is not making profits. The company reported Rs 5,100 crore of revenues for fiscal 2014 but made a loss of Rs 515 crore. For the September quater the loss was Rs 250 crore on sales of Rs 1,192 crore. The company’s debt are at around Rs 6,000 crore.
Kesoram is currently managed by Manjushree Khaitan, daughter of BK Birla who is the Vice Chairman of the company. She is not in the realignment committee.The Kesoram stock is up 37% this year to date on the restructuring news. On Friday the stock closed 7% up to Rs 107 on news that the sale of the tyre division is imminent.
The realignment of Kesoram’s businesses comes after another BK Birla group company Century Textiles announcing that it will make an preferential offer of shares to promoter companies belonging to Kumar Mangalam Birla.
With the allotment, the shareholding of Kumar Mangalam Birla’s holding companies will go up by 17% adding to promoter’s current holding of 40%.