Kesoram, one of India’s leading industrial conglomerates, has announced the successful completion of the refinancing of its high-cost debt. The company has managed to refinance nearly Rs 19 billion, resulting in a significant benefit of approximately 800 basis points in interest rates.
Refinancing of High-Cost Debt
In March 2021, Kesoram had borrowed a substantial sum of money from a group of investors in the form of Non-Convertible Debentures (NCDs) and Optionally Convertible Debentures (OCDs). The interest rate at that time stood close to 19 percent, which was considered high.
Redemption and Refinancing Details
However, the company recently announced the redemption of the entire outstanding NCD amount, totalling Rs 14.87 billion, before its maturity. It stated that the OCDs had been redeemed earlier. This move marks a significant step towards reducing Kesoram’s debt burden. Refinancing Partners Kesoram’s whole-time director & CEO, P Radhakrishnan, informed PTI that the company managed to secure refinancing of approximately Rs 15 billion from the Tata Capital group. In addition to this, Hero Finance provided an additional Rs 3.5 billion in refinancing. Such funding sources have allowed Kesoram to lower its overall cost of debt. Reduction in Interest Burden and Positive Impact With the completion of debt refinancing, Kesoram’s average cost of debt has significantly decreased from over 19 percent to approximately 11.25 percent. This reduction in interest rates will lead to a substantial decrease in the company’s interest burden, estimated to be more than Rs 300 million on a quarterly basis.
Sale Process of Cement Business to UltraTech Cement
Apart from the debt refinancing, Kesoram has made significant progress in the sale process of its cement business to UltraTech Cement. In an all-share deal valued at around Rs 76 billion, including debt, UltraTech Cement is set to acquire Kesoram Industries’ cement business. Effective Date and Regulatory Approvals While the effective date of the acquisition remains scheduled for April 2024, Kesoram’s CEO, Radhakrishnan, acknowledged that there may be delays in obtaining all regulatory approvals. These formalities, although time-consuming, are essential to ensure a smooth transition for both companies involved.
Key Details of the Cement Business
The cement business operated by Kesoram currently consists of two integrated cement units located in Sedam, Karnataka, and Basantnagar, Telangana. These units have a total installed capacity of 10.75 million metric tonnes per annum (MTPA). Additionally, Kesoram operates a 0.66 MTPA packing plant in Solapur, Maharashtra.
Turnover from Cement Operations
In the financial year 2022-23, Kesoram’s turnover from its cement operations amounted to approximately Rs 35.33 billion. The sale of the cement business to UltraTech Cement is expected to have a significant impact on Kesoram’s overall financials in the long run.
