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Kesoram gets NCLT nod to demerge tyre business

The B K Birla group company decided to demerge its tyre vertical into a separate entity - Birla Tyres Ltd - to create and unlock value for both the businesses. Outstanding debt of Rs 3,000 crore will also be split between the two entities. While K...

ET Bureau|
Updated: Nov 13, 2019, 10.29 AM IST
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After the demerger, the tyre business will be listed as Birla Tyres, Radhakrishnan said.
Kolkata: Kesoram Industries, a BK Birla Group company, said on Tuesday that it has got the approval of the National Company Law Tribunal (NCLT) for demerging its tyre business, which would now be listed separately.

"The demerger will be effective from January 1, 2019, and every shareholder of Kesoram Industries will get one share of Birla Tyres for each share of Kesoram Industries held by them,” said P Radhakrishnan, CFO, Kesoram Industries.

"This way, Birla Tyres will start off with a similar shareholding pattern as that of Kesoram Industries."

After the demerger, the tyre business will be listed as Birla Tyres, Radhakrishnan said.

clear-focus


"The idea is to turn both Kesoram Industries and Birla Tyres into financially strong listed entities," he added.

The B K Birla group company decided to demerge its tyre vertical into a separate entity - Birla Tyres Ltd - to create and unlock value for both the businesses. Outstanding debt of Rs 3,000 crore will also be split betwe-en the two entities. While Kesoram Industries will retain Rs 2,000 crore of debt, the new tyre entity would be servicing Rs 1,000 crore of debt.

Of the total asset base of Rs 5,038.20 crore, the tyre entity will be inheriting around Rs 1,700 crore worth of assets and the rest will be retained by Kesoram Industries for the cement and rayon lines of businesses.

Birla Tyres will focus on the passenger-car radial tyre segment, which would help re-balance its portfolio. Currently, the commercial segment accounts for nearly 90% of the tyre unit’s total turnover.

The company has invested close to Rs 775 crore for setting up a fresh line for passenger radial tyres at its existing plant in Balasore (Odisha) over the past three-four years. It plans to further invest Rs 225-250 crore in the new facility, which will have an annual installed capacity to roll out 4 million tyres.

"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,” said Radhakrishnan. “There are a number of global players that are looking for ready (tyre) capacity in India.
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