 "Deal with JK Group to reduce debt, not exiting tyre business: Tridib Kr Das")
In one of the biggest deals in the tyre industry, BK Birla flagship firm Kesoram Industries decided to sell its tyre manufacturing plant at Laxar to JK Group for Rs 2,200 crore. Tridib Kr Das, CFO, Kesoram Industries tells Arindam Majumder that the deal is to help the company reduce debt and that Kesoram is not exiting the tyre business. Edited excerpts:
Is the deal with JK Group an exit strategy from the tyre business?
No, I would like to make it clear that we are not exiting the tyre business. Tyre business remains with us. We are more than clear that we are strengthening this business by centralising the manufacturing facility at Balasore in Odisha. This will give a boost to our productivity. The deal is for the purpose of reducing our debt and increasing efficiency of our business.
What is your debt at present? How much will this deal help to reduce debt?
Our total debt stands at Rs 4,800 crore. Out of that, Rs 3,800 is long term debt and Rs 1,000 crore from working capital. We expect the term debt to come down by Rs 1,500 crore.
What are the upgradation plans for the Balasore unit?
We are coming up with a passenger car radial tyre facility in Balsore. In next six months, our plant will be up and running for commercial production. We are also executing a two-three tyre unit there. So, basically we are replacing the Laxar unit with Balasore. We are also coming up with a R&D facility there.
But the Haridwar unit accounted for major production work. How will you make up for that?
We may increase our contract manufacturing. Currently, we do it only for tubes and flaps. We will contract manufacture some part of our three-wheeler tyres and commercial vehicle radial tyre, which were produced at Laxar, temporarily. But within two years, we will build up the capacity of Balasore for even radial tyres.
What will be the capacity of the Balasore unit?
At present, the capacity at Balasore stands at 270 tonne/day. We are building up capacity for 85 tonne of passenger car radial tyres, 80 tonne of two-wheelers. After that we would think about radial commercial vehicle tyres. We have all the facilities there. We just have to buy some machinery. So that does not need significant investment. It is just utilisation of our present facility in a more extensive way.
Are you going to concentrate more on the two-three wheeler tyre segment now? Is the product mix going to change?
We will continue to remain focused on the commercial vehicle segment.
Will there be an increased focus on the cement business now? Is that going to become bigger?
I don’t think we are trying to refocus anything. Contribution from the tyre segment will continue to remain the same. This is just a restructuring of our manufacturing facility. We had excess capacity which we have reduced. There will be an improvement of the operational productivity.
What is your strategy in the cement business?
We are making a profit in the cement business. We have concentrated manufacturing in the southern region. We will definitely look into variety of niche products.
The company has not come out with its results for the last two quarters and the AGM has been postponed...
We were waiting for this deal to happen and we have taken an extension for AGM till December 31. Parallely, we will come out with the results for the last two quarters.
