Kesoram Industries shares surged over 18 per cent intraday on Thursday after a rating agency Credit Analysis & Research Ltd (CARE) revised long/short-term bank facilities of Kesoram Industries from CARE A minus to CARE A2 plus and removed it from credit watch.
At 3.18 pm, shares of Kesoram Industries were trading 14.63 per cent up at Rs 126.90. The scrip opened at Rs 112 and has touched a high and low of Rs 131 and Rs 111.10, respectively, in trade so far.
Later, the scrip closed 13.14 per cent up at Rs 125.25.
The revision in ratings and removal of credit watch on the ratings assigned to the bank facilities of Kesoram Industries Ltd (KIL) is on account of improvement in the financial risk profile of the company following successful completion of transfer of Cavendish Industries Ltd (CIL-99% subsidiary of KIL having a tyre unit at Laksar) to JK Tyre industries Limited for a consideration of Rs.2,145 crore, the proceeds of which have been utilised for reduction of high debt levels.
The company has also undertaken various measures by the way of divestment of various non-core assets which has led to significont improvement in the liquidity profile of the company.
The ratings continue to derive comfort from the long established track record of the promoters, satisfactory performance of the cement division arising from the operation efficiency through backward integration in the form of limestone and power. However, the ratings are constrained by high gearing (though improved), losses in the tyre division, risk of volatility in raw material prices and competition from the established players in the market for the tyre division.
Ability to improve the profitability of the tyre division and improvement in the capitol structure would remain the key rating sensitivity.