Calcutta, March 26: Kesoram Industries Ltd has decided to transfer the rayon and transparent paper business to unlisted Cygnet Industries in the latest round of restructuring that began with the sale of the tyre plant in Haridwar to JK Tyres in 2015.

The company said the transfer to Cygnet, which will eventually become a wholly owned subsidiary, was aimed at bringing in efficiency and accountability at the loss-making rayon and transparent paper unit.

Located in Kuntipara, Hooghly, the rayon undertaking had a turnover of Rs 257 crore as on March 31, 2015 and an operational loss of Rs 28 crore. "This is a strategic move to streamline the business. We want the rayon undertaking to become a sustainable operation on its own," Gautam Ganguly, company secretary of Kesoram, said.

Kesoram, which earns most of its revenues from cement and tyre, is going through a massive restructuring drive. In December, the company sold its spun pipe and heavy chemical division to Camden Industries for Rs 150 crore. Earlier this week, Kesoram sold stocks in various listed firms, including Century Textiles and Grasim Industries, worth Rs 428.53 crore to Camden as well.

It all began with the decision of the company to sell the Uttarakhand plant to JK Tyre for Rs 2,195 crore to pare debt. The deal was approved by the Competition Commission in February and would close soon. Kesoram, the flagship of Basant Kumar Birla stable, had taken loans worth Rs 4,800 crore from various financial institutions, including a term loan of Rs 3,800 crore.

Cygnet deal

In a notice to the bourses, Kesoram said it would transfer the rayon undertaking to Cygnet through a slump sale for not less than Rs 480 crore. SBI Capital Markets did the valuation of the business. At the time of the announcement of the deal, Cygnet remains an unrelated entity as per Companies Act 2013 though its registered office shares the same address as that of Kesoram.

Kesoram will invest Rs 50 crore in the equity capital of Cygnet, indicating that the remaining Rs 430 crore will flow in as cash. However, going forward, Cygnet will be wholly owned by Kesoram, which means it has to pay off the promoters of Cygnet for the rayon undertaking's assets.

The deal is expected to close by June 30. By then, the transaction with JK Tyre should be complete, enriching Kesoram with sale proceeds that may be used to buy Cygnet shares.

Meanwhile, the Kesoram board has appointed Enrico Malerba as the chief business officer after the impending exit of CEO Arvind Kumar Singh.

Singh will move out by first week of May. Moreover, Tridib Kumar Das, chief financial officer of the firm, will join the board on April 1, 2016 for three years. K.C. Jain, who is a whole time director now, will cease to become one by March 31, 2016.