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Kesoram Ind RI review (May apply)

Kesoram Industries Limited Logo

•    KIL is a flagship company of B K Birla group and is in the cement and rayon business.
•    The Company is raising money to retire its high-cost debt obligations.
•    Non-steady financial performance raises concerns.
•    Both the segments are poised for bright prospects with liberal policies.
•    Risk seekers/cash surplus investors may park funds for the long term. 

ABOUT COMPANY:
Kesoram Industries Ltd. (KIL) is a part of one of the oldest conglomerates in India and is a flagship company of the B.K Birla group. Though it has been engaged in multiple businesses like cement, tyre, textiles and transparent paper in the past, over the years have concentrated its business interests primarily on cement and rayon.

The company owns and operates two cement manufacturing facilities, located at Sedam, Karnataka (the "Sedam Plant") and Basantnagar, Telangana (the "Basantnagar Plant") (together, the "Manufacturing Facilities"). Its cement business has enjoyed an operating history of over 51 years, as applicable catering to the regional demands in Maharashtra, Goa, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Kerala, Uttar Pradesh and Andhra Pradesh. 

The company's Manufacturing Facilities are located in proximity to its leased limestone deposits in the states of Karnataka and Telangana. Further, KIL's Manufacturing Facilities are also strategically located with rail and road connectivity to key markets in southern and western India. As of June 30, 2021, the production capacity of cement was 10.75 MMTPA. Its cement is marketed under the brand name "Birla Shakti" and "Birla Shakti Cement Shakti+".

KIL has developed a strong distribution network across India comprising 516 active cement agents and a network of 2,669 active cement dealers as of June 30, 2021, who markets its cement products.

The company also manufactures viscose rayon, filament yarn and transparent paper through its subsidiary, Cygnet Industries Limited. KIL's rayon and transparent paper plant are located at Hooghly, West Bengal. The rayon is marketed under the brand name "Kesoram Rayon", while the transparent paper is marketed under the brand name "Kesophane". The company demerged its tyre plant into Birla Tyres Ltd. KIL has a captive power plant of 94.2 MW capacity that meets over 98% of its energy needs.

ISSUE DETAILS:
To part finance its plans for repayment/prepayment of inter-corporate deposits with interest (Rs. 50.00 cr.), part redemption of NCDs (Rs. 55.00 cr.), the redemption of OCDs in full and NCDs in part (Rs. 245.00 cr.) and general corporate purpose (Rs. 44.30 cr.), KIL is coming out with a rights issue in the ratio of 133 shares for every 274 shares held as on the record date of September 17, 2021. The company is issuing 79999665 equity shares of Rs. 10 each at a fixed price of Rs. 50 per share to mobilize Rs. 400 cr. The issue opens for subscription on September 27, 2021, and will close on October 11, 2021. Post allotment, shares will be listed on BSE and NSE. On application Rs. 25 per share is to be paid and the balance of Rs. 25 is to be paid on the first and final call pursuant to the payment method after payment of the application money. KIL will be spending around Rs. 5.70 cr. for this RI process. 

The issue is solely lead managed by DAM Capital Advisor Ltd. (erstwhile known as IDFC Securities Ltd.) and Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post issue KIL's current paid-up equity capital of Rs. 164.81 cr. will stand enhanced to Rs. 244.81 cr. Based on the RI price, the company is looking for a market cap of Rs. 1224.06 cr. As of Jun 30, 2021, the promoter's holding was 45.97%. 

FINANCIAL PERFORMANCE: 
On the financial performance front, KIL has (on a consolidated basis) posted a loss of Rs. 187.53 cr. on a turnover of Rs. 2686 cr. for FY20 and net profit of Rs. 140.11 cr. on a turnover of Rs. 2725 cr. for FY21. As per unaudited results, the company has (on a consolidated basis) reported a turnover of Rs. 861.08 cr. with a net profit of Rs. 12.77 cr. for the first quarter of FY22 ended on Jun 30, 2021. 

DIVIDEND POLICY:
For the last eight years, the company has not paid any dividend and has not adopted any dividend policy so far. It may consider dividends going forward based on its financial performance and future prospects. 

SCRIP PERFORMANCE ON BSE:
The scrip last closed on cum-right basis at Rs. 89.60 on September 15, 2021, and opened ex-right at Rs.79.90 on September 16, 2021. Since then it has marked high/low of Rs. 79.90 / Rs. 70.60 with the last closing price of Rs. 71.75 on September 24, 2021. Based on its last quote, its market cap stands at Rs. 1756.52 cr.  For the last 52 weeks, it has posted a high/low of Rs. 90.22 / Rs. 29.96.


Conclusion / Investment Strategy

Both the segments i.e. textile and cement are having bright prospects going forward. This company is a flagship of B K Birla group and has some name and fame. As the current financial data is not that encouraging, risk seeker/cash surplus investors may opt for a subscription to this RI.

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Sep 25, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

The Kesoram Industries Rights Issue Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Kesoram Industries Rights Issue worth investing. The Kesoram Industries Rights Issue Note sets the Rights Issue expectations in systematic way which tells you if Kesoram Industries Rights Issue good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Kesoram Industries Rights Issue by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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