BK Birla's diversified firm Kesoram Industries Ltd has decided to transfer its rayon and transaction paper business for not less than Rs 480 crore (approximately $72 million) to unlisted Cygnet Industries Ltd through a slump sale, according to a stock market disclosure.
As part of the deal, Cygnet is proposed to be converted into a wholly-owned subsidiary once Kesoram Industries acquires its entire share capital starting March 31. Shareholders’ approval would be sought through a postal ballot and the entire transaction is proposed to be completed by June 30, 2016.
The move is part of the company’s plan to trim its diversified business operations as its ownership moves from Basant Kumar Birla to his grandson and chairman of Aditya Birla Group, Kumar Mangalam Birla.
More details about Cygnet could not be immediately found. An email sent to Kesoram Industries seeking more information on the development did not elicit a response.
In financial year 2015, the rayon and transaction paper business—which is Kesoram Industries’ smallest business unit—clocked gross revenues of Rs 257 crore, contributing just 4.68 per cent to the firm’s overall revenues.
The transaction is expected to be completed before June 30, 2016. SBI Capital Markets Ltd has conducted a business valuation of the rayon and transaction paper business.
Recently, Kesoram Industries said it is looking to raise Rs 180 crore (approximately $26 million) through a preferential issue of equity shares to a promoter entity and an issue of optionally convertible preference shares to IndusInd Bank. Its board proposed to raise up to Rs 90 crore through equity issue to Manav Investment and Trading, which is a promoter entity.
Founded in 1909, Kesoram Industries (formerly Kesoram Industries & Cotton Mills Ltd) is engaged in manufacturing and selling cements, tyres, rayon, yarn, transparent papers, spun pipes and heavy chemicals.
In September last year, JK Tyre & Industries Ltd agreed to buy Haridwar tyre plant of Kesoram Industries at an enterprise valuation of Rs 2,195 crore (then $330 million), in one of the biggest acquisitions in the domestic automotive tyre sector.
Meanwhile, Kesoram Industries has said its chief executive officer Arvind Kumar, who has primarily been looking after the tyre division, will be replaced by Enrico Malerba, who has been heading Pirelli Tyres's Romania operations.