Kesoram treads the green mile

There is a major buzz around Kesoram Industries. The flagship of the BK Birla group which makes Birla Tyres has shown an unusually high volume, almost 5 times with the stock currently up almost 19% at Rs.135.80. Its 52-week is at Rs.152.40.

India’s largest tyre maker, MRF is in talks to buy Kesoram’s one tyre unit of the two – the principal unit at Uttarakhand. The news doing the rumour mills is that Birlas are looking at an enterprise value of Rs.2200 crore for this one unit and this is a very steep expectation given that it is sitting on  Rs.4425 crore worth of debt and market cap currently stands at Rs.1491 crore. On the other hand, MRF is looking at Rs.1600 to 1800 crore valuation. Thus the deal now hinges on this valuation – who will blink first.

None of the companies have confirmed the news but if it does go through, it would help deleverage Kesoram’s balance sheet and MRF, which has never a acquired any company till date, will gain additional market share. MRF is already a market leader with 29% market share. Birla Tyres stands at 5%.