On the Bombay Stock Exchange, Kesoram is quoting at Rs 41.05; the same level as in April 1998. After the company announced its results for 1998-99, the stock crashed to the Rs 10-11 level from where it has staged a smart turnaround. Technical indicators suggest that thestock should rise to about Rs 50-level before making a retracement. Await a sell-signal before offloading positions. For the long-term, the stock movement will depend on the restructuring programme being carried by the company.

Kesoram Industries has over 2 million tonnes capacity in cement at its two plants at Basantnagar in Andhra and at Sedam in Karnataka. With almost 60 per cent of revenues coming from these plants, Kesoram stands to gain from the improvement in cement realisations. Kesoram's cement division has been faring reasonably well due to its locational advantage. Its Vasavadatta brand of cement, manufactured at the Karnataka plant, commands a good premium in the market. With cement prices in the south improving on the back of good demand, the division has good prospects ahead.

The tyre division is run by a consortium of group companies with Kesoram receiving its share of profit plus the lease rental. In 1998-99, the tyre division added Rs 51.68 crore to Kesoram's kitty (or 7 per cent of totalincome). According to marketmen, this arrangement of a consortium-run unit is likely to be reviewed by the end of the current fiscal. The division's addition to the turnover will depend on how the old scheme is restructured.

Kesoram's decision to hive off its textile division (as part of its recast) into a separate company should augur well for the former as profitability will improve. The move is part of the restructuring scheme prepared by Ernst & Young. Analysts say the company may also consider selling its refractory and transparent paper units, which are nibbling at the profits generated by the cement division. However, the company has so far not confirmed this. The textile unit's performance has been deteriorating in the last two years. The high manufacturing and raw material costs coupled with low selling price for its products have affected the margins of this division.

Industry watchers say Kesoram would have been better off selling the division and using the proceeds to retire some of its highdebt burden. The company has a debt-equity ratio of 1.28. According to them, the decision to hive off the textile division is due to the fact it is located in Calcutta and the industry is in a very bad state. According to the plan worked out by Ernst & Young, the textile division will be hived off to Kesoram Textile Mills (KTML) for Rs 10.46 crore, which will be settled by issue of KTML shares to Kesoram Industries' share-holders.

In 1998-99, Kesoram registered a 74.26 per cent dip in net profit Rs 4.74 crore against Rs 18.42 crore in the previous fiscal. Turnover, including inter-section transfers, stood at Rs 681.69 (indicating a marginal decline of 4.75 per cent compared with over to Rs 719 crore in the previous fiscal).