The Telegraph
Since 1st March, 1999
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FIs up Kesoram stake by 8%

Calcutta, April 11: Financial institutions (FIs) have raised their stake in Kesoram Industries, the flagship company of the Basant Kumar Birla group, to 24.86 per cent.

For the first time, the FIs will hold more than the promoters' stake of 23.53 per cent.

The increase in the FI stake was triggered by market purchases in the January-March quarter, which saw their holding go up 8.06 percentage points from 16.8 per cent earlier.

Observers say the increase is an indication of the confidence they have in the present promoters and the existing management.

The stake buildup creates a strong bulwark to head off corporate predators who have sniffed around the company in the past. It may be recalled that a non-resident investment cartel led by Dubai-based Shiv Kumar had made an abortive takeover attempt in early 2001.

Genesis International, a boutique investment outfit owned by Kumar, had snapped up 12 per cent in the company.

Kesoram warded off that threat and the promoters resorted to an equity buyback to fortify their holdings in the company.

Corporate predators will be deterred by the formidable 48.39 per cent stakeholding that the promoters and the FIs now jointly have in the company.

Kumar had mounted his abortive bid four years ago at a time when raiders launched hostile bids for Bombay Dyeing, Gesco Corporation and VST Industries.

A top Kesoram official said the increase in FI stake was a vote of confidence in the promoter and management. 'The institutions were always supportive of us. They have full confidence in the way the company is run,' the official told The Telegraph.

Industry observers said FIs historically have backed the management in any hostile bid. 'Their principle has been not to destabilise the management if it is performing well,' they added.

Kesoram is a diversified company with business interests in tyre, cement, rayon, chemicals and spun pipes. It was a major beneficiary in the recent budget, which gave away sops to tyre firms.

The company's cement division, which accounts for 38 per cent of its turnover, is also expected to do well this quarter due to improved price realisation.

Kesoram suffered a loss of Rs 4.97 crore during the quarter ended December 31, 2004 compared with a profit of Rs 10.49 crore in the year-ago period. In 2003-04, the company had posted a net profit of Rs 62.9 crore on net sales of Rs 1,302.8 crore.

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