The market has welcomed back commodity stocks in the last three weeks. Currently cement, petrochemicals and paper stocks have shot back into the reckoning along with others like Kesoram Industries of the SK Birla group. The stock price of Kesoram Industries has appreciated 80 per cent since April 28 when it was at a low of Rs 11 to the current price of Rs 18.50.
The interest is not expected to peter off as the commodity upswing has coincided with an upbeat demand for cement. In case of Kesoram, there is the added benefit of internal restructuring of its textile division and the mandatory dematerialisation of its stock. Beginning today, the stock goes into no delivery for two weeks and one can expect action. A market observer comments that one of the reasons in the 130 per cent rise in the stock price of Century Mills to Rs 51 was that it went into demat last month.
Kesoram operates in three main businesses _ textiles, cement and tyres. The company also has a presence in rayon and transparent paper, spun pipes and refractories. With steel industry in recession, its refractory division has been under a lock-out while paper and spun pipes are doing satisfactory business.
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Kesoram's cement business is of interest to marketmen. Cement brings Rs 397.33 crore to its turnover of Rs 715 crore. It has two cement manufacturing capacities, the Kesoram cement division in Andhra Pradesh and Vasavadatta cement division in Karnataka. The company has invested large amounts periodically for the state-of-art technology in cement divisions. These divisions have captive thermal power plants of 15 MW each.
The indifferent demand for cement in the past few years along with a steep rise in inputs like freight, diesel and declining profits had affected the company's performance adversely. But henceforth things are expected to change for the better. The cement business of Kesoram Industries is expected to do well as the depressed cycle of the cement industry has bottomed out. Consequently the cement industry can expect better realisations from 2001. The company's cement production capacity is 2.1 million tonnes per annum.
Kesoram's textiles business has not done well for past several years due to severe domestic and worldwide recession. Production prices have increased with a rise in prices of raw material while prices of finished goods have fallen. Therefore the company had decided to restructure the textile business. The company is mulling over hiving off its textile unit into a separate company. The move will enable Kesoram to concentrate on its core competency of cement. The textile business is also expected to see an upside in the near future. Its textiles business brings Rs 195 crore to the turnover.
Kesoram's tyre business has been separated into a consortium called Birla Tyres where it holds 20 per cent along with its wholly owned subsidiary Bharat General having another 10 per cent. Century Textiles owns 60 per cent and Jay Shree Tea has 10 per cent in Birla Tyres. Birla Tyres runs and operates the tyre business for Kesoram for a consideration of Rs 45 crore. This arrangement holds good till March 31, 2000. The tyre business has earned substantial revenues for the company. In 1997-98, Kesoram's income from Birla Tyres has more than doubled to Rs 4.37 crore and this is added straight at the operating level.
The tyre business has been doing well for the past several months due to improvement in quality, reduction in scrap generation and increase in overall capacity. Birla Tyres had undertaken capacity expansion of Rs 101 crore in two phases. In the first phase (completed) the production capacity has been increased by 25 per cent. In the second phase it has collaborated with Pirelli to manufacture steel radial LCV and passenger tyres. This plant will start production by December 1999.
Total turnover at Birla Tyres stood at Rs 593.2 crore and exports were Rs 72.37 crore.
The year 1998-99 has not been good with a nominal profit of Rs 0.38 crore for the first nine months. The stock is rising on the hope that higher cement prices will improve profits of Kesoram . The tyre business anyway brings steady returns. There are also rumours of major operators taking fancy to this stock. At the current price of Rs 18.50, the brave-hearted can take a punt, but at their own peril. t in aluminium production, but is also able to export good quality alumina and aluminium as downstream products at very competitive rates to various countries, said S P Shorewala, senior vice-president (sales), Hindalco Industries, in an interview with Devendra Excerpts :">