Kesoram intends to expand activities in order to pay off debt and become profitable again

15 Jun 2023 , 09:40 AM

Kesoram Industries Ltd, a maker of cement, is still fighting to get out of trouble and plans to expand operations and refinance its expensive debt in order to turn a profit. In order to raise money by selling off non-core assets, the B K Birla Group company, which has since demerged its tire and rayon businesses, was looking to sell 21 acres of land to Hindustan Heavy Chemicals in West Bengal’s Khardaha in order to raise Rs 60 crore this fiscal.

It reported a net loss of Rs 115 crore in FY’23 and Rs 130 crore in FY’22.

Speaking on the sidelines of the 104th AGM, Kesoram’s full-time director and CEO P Radhakrishnan stated to ET that the firm was focusing its efforts on scaling up operations and that it planned to sell 8 million tons of cement in the current fiscal year, up from 7.02 million tons in FY’23.

The worst is passed, costs are decreasing, and the price of cement has improved, so Radhakrishnan predicted that in 12 to 18 months, the company will be back in the black.

With increasing cement prices and sales during the current fiscal year, the company anticipated an increase in EBITDA from Rs 371 crore in FY23 to Rs 500–550 crore in FY24.

Improved rating will give it more negotiating power when refinancing debt instruments with 19% coupon rates, which are unsustainable over the long term. Higher cash flow will aid in this process.

To pay off bank debt, Kesoram generated over Rs 1,900 crore in 2021 through the sale of optionally convertible redeemable preference shares and non-convertible cumulative redeemable shares.

The corporation currently owes about Rs 1,700 crore in debt. At Rs 422 crore in FY’23, Kesoram’s yearly financing cost—including interest—remains high.

No cement company, according to Radhakrishnan, can afford to remain small at a time when the market is consolidating. He added that the company was also considering increasing its installed capacity from 10 to 11 million tons to 15 million tons over the course of the next five years.

The company was considering other possibilities for how to effectively utilize the 400 acres of land in Solapur, Maharashtra, including the possibility of establishing a cement grinding facility there. Disposal, though, wasn’t completely off the radar, per the.

In response to a question about margin improvement, Radhakrishnan stated that the company was steadily extending the portfolio of blended cement, which will go from 50% to 80% in two years.

In order to lower interest costs, the company raised Rs 120 crore through fixed deposits out of a total of Rs 200 crore.

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