Kesoram Industries aims at scaling up operations to refinance debt, return to profitability, ET RealEstate

June 23, 2023

KOLKATA: Cement maker Kesoram Industries Ltd continues to struggle to get out of the woods and aims at scaling up operations and refinance its high-cost debt to return to profitability.

The B K Birla Group company, which has now become a pure cement company after it demerged the tyres and rayon business, was looking at raising Rs 60 crore this fiscal by hiving off its 21 acres of land belonging to Hindustan Heavy Chemicals in West Bengal’s Khardaha, as part of raising resources by disposing of non-core assets.

In FY’23, it posted a net loss of Rs 115 crore and in FY’22 the loss was Rs 130 crore.

Kesoram’s whole-time director and CEO P Radhakrishnan, speaking on the sidelines of the 104th AGM, said that the company was putting its energies into scaling up the operations and was planning to sell 8 million tons of cement in the current fiscal year, up from 7.02 million tons in FY’23.

“We are expecting to be back in black in the next 12-18 months as the worst is over, with costs moderating and improved cement price,” Radhakrishnan said.

In the current fiscal, with improvements in cement prices and higher sales, the company was looking at an EBITDA of Rs 500-550 crore in FY’24, up from Rs 371 crore in FY’23.

Higher cash flow will help it improve its rating, which will increase its bargaining power for refinancing its debt instruments carrying a coupon rate of 19 per cent, which is not sustainable in the long run.

In 2021, Kesoram raised some Rs 1,900 crore in Optionally Convertible Redeemable Preference Shares and Non-Convertible Cumulative Redeemable Preference Shares to pay off bank debt.

The current debt burden on the company is around Rs 1,700 crore. Kesoram’s annual finance cost, including interest, remains elevated at Rs 422 crore in FY’23.

Radhakrishnan stated that at a time when the cement industry was consolidating, no cement company can afford to stay small and said it was also looking at expansion of its installed capacity to 15 million tons in the next five years from 10-11 million tonne now.

The company was looking at options for the best utilisation of the 400 acres of land at Solapur in Maharashtra, which includes contemplating a cement grinding unit there. However, disposal was also not out of the radar, according to sources.

Speaking about improvement in margins, Radhakrishnan said the company was continuously increasing blended cement in the portfolio to 80 per cent in two years from 50 per cent now.

The company has raised Rs 120 crore through fixed deposits out of a window of Rs 200 crore to reduce interest costs.

  • Published On Jun 15, 2023 at 08:19 AM IST

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