Kesoram Industries rallies over 18% on reports to sell its tyre unit to MRF

NEW DELHI: Kesoram Industries Ltd rallied as much as 18.1 per cent in trade on Tuesday, after media reports suggested that MRF is in advance discussion with Kesoram to acquire its main tyre unit out of the two of Birla Tyres for a value that's far higher than the market capitalization of the entire diversified Birla conglomerate, said multiple sources involved.

At 09:27 a.m.; Kesoram Industries was trading 16.8 per cent higher at Rs 133.60. It hit a low of Rs 130.65 and a high of Rs 136.50 in trade today.

The deal, once completed will be the 69-year old MRF's first ever acquisition and consolidate its manufacturing presence in the north Indian market, ET reported. It will also help to get a stronger grip over the commercial vehicles tyre segment where it is the second largest player after Apollo, added the report.

For Kesoram, selling its principal unit in Laksar, Uttrakhand would delevarge its balance sheet significantly that has been burdened by a ballooning debt pile of Rs 4425 crore, at end of the Sept 2014 quarter and free up working capital for other operations.

The tyre business contributed almost half of its FY14 EBITDA. Even though the discussions are still live, sources said Birlas are expecting a minimum enterprise valuation of Rs 2200 crore and for this facility alone, added the report.