The board of Kesoram Industries has approved a capital raising plan of up to Rs 1,200 crore by way of a rights issue or preferential share allotment to pare debt and make the balance sheet strong.

A committee of the board has been set up to finalise the instrument, which may also include convertible securities and qualified institutional placement, and the timing.

Kesoram, which earns around 87 per cent of its revenue from cement, had earlier indicated to reduce debt by Rs 700 crore over time. It plans to bring down borrowings by Rs 500 crore from Rs 2,000 crore in the next fiscal itself.

A source in the company said the way forward for Kesoram would be to inject non-interest bearing capital in the company. “An enabling resolution encompassing all instruments has been taken so that we don’t have to go to the board for approval time and again,” the source added.

In the past, the promoters have infused Rs 665 crore by way of rights issues and preferential allotment to stabilise the company, the flagship of B.K. Birla Group.

Kesoram, which is under the management control of Manjushree Khaitan, the younger daughter of late B.K. Birla, had recently split the loss making tyre business into a separate listed company Birla Tyres Ltd. The move was aimed at splitting the debt, bring in more focus and make the two companies more worthy for investors.