Kumar Mangalam Birla may turn White Knight at Kesoram

As BK Birla group's flagship company Kesoram Industries goes deeper into financial woes, there are now speculations of his grandson Kumar Mangalam Birla stepping in by joining the management of the firm formally by taking up a Board seat.

KM Birla is also expected to bring in the much-needed funds soon to protect the financially stressed cement and tyre maker from further rating downgrades.

Aditya Birla group head Kumar Mangalam has now ownership control of Kesoram by steadily raising his stake through preferential allotment and through Pilani Investment and Industries Corp, the BK Birla group holding company now controlled by his grandson.

The promoters currently own 46.49% stake in the company with KM Birla investment firms like Manav Investment holding 12.93% and Plani controlling 21.91%, among other entities.

But Kumar Mangalam has so far stayed away from managing Kesoram directly, which is now being day-to-day managed by BK Birla's daughter Manjushree Khaitan.

Reacting to the speculations by a section of market players, Kesoram scrip, which otherwise has been languishing, shot up close to 5% during Monday.

Kesoram officially denied any such development.

"We cannot stop rumours from circulating. But rumours are rumours. No truth whatsoever," a spokesperson told DNA Money.

Kesoram desperately needs capital to protect its leveraged balance-sheet and prevent any further cut in ratings.

Credit rating firm CARE, while downgrading the credit profile by one notch in September, called for equity infusion into the company.

"Going forward, ability of the company to increase the capacity utilisation of tyre division, improve its profitability margin and overall capital structure through infusion of equity would remain key rating sensitivities," CARE said while downgrading Kesoram from A to A-.

The rating would only go up if the profitability of the tyre division improves or promoters or other investors put in money.

"The outlook may be revised to stable in the event of improvement in profitability of tyre division or substantial improvement in capital structure through equity infusion," the rating rationale had said.

Even as the performance of its cement division improved with the stable outlook of the industry, the rating companies considered deterioration in the performance of the tyre division which led to losses in Q1FY18 coupled with leveraged capital structure, risk of volatility in raw material prices of tyres and high competition.

Kesoram has been trying to reduce its debt and last year cut half of its Rs 4,300 crore debt via proceeds from the sale of a tyre plant to JK Tyre.

Apart from reducing its debt, Kesoram also needs capital to feed its expansion plans.

It is planning to expand its cement capacity spread over Karnataka and Telangana catering to the markets of South and West to cash in on its limestone mining rights at Gulbarga in Karnataka. Kesoram also has expansion plans for its biodegradable transparent paper business which, along with its rayon business, was earlier transferred to a wholly-owned subsidiary.

...& ANALYSIS

• KM Birla is also expected to bring in the much-needed funds to protect the company from further rating downgrades
   
• Aditya Birla group head Kumar Mangalam has now ownership control of Kesoram by steadily raising his stake through preferential allotment and through Pilani Investment and Industries Corp