Kesoram Industries seeks new debt partner
Kesoram Industries is likely to get a new debt partner soon with the aim to inject fresh liquidity in the company.
Industry sources say the company has received term sheets from at least two potential partners and a deal may be inked as early as in October. Names of US-based financial behemoth Goldman Sachs and India’s Edelweiss Group are doing the rounds. The potential partner may also pick token equity — 2-3 per cent — in Kesoram. In the past, it held discussions with US-based fund Farallon Capital as well.
The Manjushree Khaitan-led company, which earns almost the entire revenue from cement, has an outstanding debt of Rs 2,100 crore. The plan is to replace the existing legacy debt with the new debt, hoping that it would bring more flexibility to the management.
“The first priority for the management is to run the plant efficiently, for which we need liquidity. With a new debt partner, this will be a reality and Kesoram can perform much better profitably,” P. Radhakrishnan, CEO of Kesoram, said. Going forward, the company plans to retire some of the debt by injecting fresh cash by way of equity and internal generation.
“The debt level of Kesoram should be 4-4.5 times of EBIDTA,” Radhakrishnan added.
The company also informed the bourses that subsidiary Cygnet Industries has entered into an agreement with Futamura Chemical of Japan, a global leader in the manufacturing of cellulose films. Kesoram has a unit which makes transparent paper products. The Japanese firm is expected to market Kesoram’s products.
Birla Tyre may spin off its under-construction passenger car tyre business into a separate entity in its efforts to induct a strategic partner.
The company, which was carved out of Kesoram last year, makes trucks and bus tyres. However, it is unable to perform well because of lack of liquidity. Also on the cards is contract manufacturing of OTR and other tyres in order to leverage the 25-year old Birla Tyre brand.