Defaulter Kesoram Industries To Raise Debt From Stressed Asset Investors 

The company will raise five-year optionally convertible debentures worth Rs 2,100 crore via private placement from a consortium of three investors — Goldman Sachs, Edelweiss Alternative Asset Advisors Ltd. and U.S.-based private equity firm Cerberus Capital Management, according to three people aware of the development, who spoke on condition of anonymity.

Talks are still underway, one of the two people quoted above said while refusing to divulge the rate of interest at which the deal is being done. The second person quoted above said the deal will likely conclude at an interest rate in the range of 18-20%.

The company, as per its exchange filings, secured board approval for the same through a special resolution in a Feb. 12 extraordinary general meeting.

The funds raised through this exercise will help Kesoram Industries settle its dues with bankers, as part of a one-time settlement scheme with banks, the people quoted above said. Domestic lenders to the stressed firm are led by the State Bank of India.

The second person added that the financing arrangement will also provide Kesoram Industries with Rs 200 crore in working capital, which will help the company strengthen its cement business. The higher cost of financing was acceptable to the company in the short term, as it will help clean-up its debt problems and allow it to focus on operations, the second person said.

P Radhakrishnan, CEO and whole-time director at Kesoram Industries declined to comment. Cerberus Capital Management and Goldman Sachs declined to comment. SBI and Edelweiss did not respond to email queries sent on Saturday.

Part of the BK Birla group of companies, Kesoram Industries is involved in cement and rayon manufacturing, which contribute to 88% and 12% of its overall sales respectively. The company operates cement units with an aggregate capacity of 7.25 million tonnes per annum in Karnataka and Telangana. The rayon, paper and chemical businesses are housed under its wholly-owned Kolkata-based subsidiary Cygnet Industries Ltd.

In Nov. 2019, the company got approval from the National Company Law Tribunal for demerging its tyre business from the company, which came into effect from December that year. This demerger had helped the company's financial profile, making it attractive to distressed asset investors.

For nine months ended Dec. 31, the company reported a revenue of Rs 1,791 crore, while it made a profit of Rs 1.47 crore, reversing a loss of Rs 185.49 crore in the year-ago period.

In December, rating agency CRISIL assigned a default rating to the company's Rs 150 crore non-convertible debentures and Rs 400 crore optionally convertible debentures, while further re-affirming default rating on its Rs 1650 crore NCDs.

“Kesoram Industries Ltd has been in default since January 2020. These irregularities are mainly on account of KIL's liquidity mismatch and high leverage,” CRISIL said. The rating agency added that the company has received in-principle approval for a resolution plan from existing lenders. As part of the plan, payment to existing lenders would be funded through proceeds from non-convertible debentures and optionally convertible debentures.

“Fund infusion would help regularise the delays in debt servicing and augment liquidity for working capital and other business needs, and thus would be key monitorables,” CRISIL said.