Basant Kumar Birla-flagship Kesoram Industries Ltd has signed a memorandum of understanding with Futamura Group of Japan to explore a possible joint venture for the transparent paper (TP) business.
The areas of co-operation include an equity investment by the Japanese company, the world’s largest producer of renewable cellulose film, in Cygnet Industries Ltd — the wholly owned subsidiary of Kesoram Industries Ltd.
Futumura could acquire up to a 24 per cent stake in the Kesoram subsidiary as part of a plan to expand the eco-friendly biodegradable transparent paper business in India.
“The transparent paper business has a bright future given the focus on climate change. We have signed an MoU with a Japanese company to take it forward,” P. Radhakrishnan, whole-time director and CEO of Kesoram Industries, said at the sidelines of the company’s 104th annual general meeting.
Cygnet recorded Rs 260.62 crore turnover and Rs 78.61 crore loss in FY23. Futamura’s investment in the company will allow the local outfit to procure balancing equipment to widen its product portfolio and achieve better quality standards.
The transparent paper finds many applications including food-grade packaging material among others.
Dialogue is ongoing between Manjushree Khaitan-led management and the Japanese company about the quantum of investment and equity partnership.
Revival plan
The BK Birla company plans to focus on operations as part of its two-pronged strategy to bring cement maker Kesoram out of the woods. It intends to ramp up sales to 8 million tonnes (mt) and increase the share of value-added premium cement to 60 per cent.
The Calcutta-headquartered company, which has plants in Karnataka and Telangana, had recorded 7mt sales in FY23 and the share of premium blended cement is 54 per cent.
“All our focus should be to increase sales and the share of blended cement which gives better margins. If the company does operationally well, everything else will follow,” Radhakrishnan said.
He was referring to the high-cost borrowing of Rs 1,700 crore which translated to Rs 422.78 crore finance cost for the company in FY23.
Kesoram had borrowed at a high-interest rate from private entities to pay off Indian banks. It had planned to refinance the debt later to a 10-12 per cent coupon rate from the 19 per cent it shells out now.However, the weak cement demand coupled with high fuel costs dented the company’s cash generation, crippling its ability to secure a lower interest rate in the market.
It is hoping to generate at least Rs 500 crore EBIDTA this year (Rs 371.22 crore in FY23) which would take care of the interest payment and depreciation.
“We should be back in black in 18 months. The EBIDTA generation should go up to Rs 650 crore,” he said.
The target is to reduce debt by Rs 500 crore, achieve an average cost of a loan of 10-12 per cent and increase the share of blended cement to 80 per cent and overall sales to 10mt, he added.
Going further, Kesoram may look to take capacity to 15mt.
