Kesoram Gets An Approval Of NCLT To Demerge Tyre Business

The outstanding debt will also be divided between the two bodies and the amount of debt is Rs 3,000 crore

Kesoram Gets An Approval Of NCLT To Demerge Tyre Business

Operating under the flagship ‘B K Birla Group Of Companies’, Kesoram Industries announced on Tuesday that it had received the permission of the National Company Law Tribunal (NCLT) for dividing its tyre business and would now be listed independently. According to the CFO of Kesoram Industries, P Radhakrishnan, after the merger the tyre  business will be listed as Birla Tyres.

He also added “Every shareholder of Kesoram Industries will get one share of Birla Tyres for each share of Kesoram Industries held by them. This way, Birla Tyres will start off with a similar shareholding pattern as that of Kesoram Industries.”

The strategy behind this move is to turn both Birla Tyres and Kesoram Industries into financially secure listed entities. In order to generate and unhitch benefit for both the businesses, B K Birla group has concluded to demerge this tyre venture into an independent entity. In addition to that, the outstanding debt will also be divided between the two bodies and the amount of debt is Rs 3,000 crore.

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The new tyre entity will retain Rs 1,000 crore of debt; however, Kesoram industries would be sustaining Rs 2,000 crore of debt. Radhakrishnan said “The focus is on getting the passenger-car radial tyre facility at Odisha up and running and thereafter, hold advanced talks with global tyre majors for partnerships. There are a number of global players that are looking for ready (tyre) capacity in India.”

Moving to the total asset base, the tyre entity will be receiving around Rs 1,700 crore out of Rs 5,038.20 crore and the rest of the amount will be obtained by Kesoram Industries for the rayon and cement lines of businesses. In order to rebalance the portfolio, Birla tyres have decided to focus on the passenger-car tyre segment.

Over the past three to four years, the tyre maker has also invested around Rs 775 crore to set up a new range of passenger radial tyres, which will be manufactured at its existing factory in Balasore, Odisha. It now plans to invest Rs 225-250 crore in the new plant, which flaunts an annual installed capacity to manufacture four million tyres.

Source: Economic Times

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