Foreign institutional investors (FIIs) seem to have partially replaced Indian insurance company LIC in B K Birla flagship, Kesoram Industries Ltd. Sources in the market informed Business Standard reporters that LIC is in the process of offloading four per cent stake in Kesoram, which is more than half of its exposure of 7.90 per cent in the company as of December 1. In fact, the insurance major has already sold around 3 per cent in the open market in two tranches in the last 10-15 days.
“LIC has informed the company about the development,” sources in the market said. It further added that a major portion of that has been picked up by 2-3 unnamed foreign institutional investors. A company official said that LIC has offloaded a part of its holding. “We do not know anything more,” said the official.
This has assumed significance because the exposure of FIIs in most of the cement outfits are very high. Cement constitutes more than one third of the turnover of Kesoram but the FII exposure in the company was only 2.75 per cent till September 30, 2004.
On the contrary, the FII holding in almost all the leading Indian cement outfits is nearing 24 per cent upper limit. FIIs hold around 22.94 per cent in ACC, 23 per cent in Gujarat Ambuja and around 21 per cent in Grasim.
According to market experts, FIIs are entering Kesoram because investment opportunity in other cement outfits are now limited by sectoral investment cap. “With the outlook for cement being rosy, FIIs are looking for bigger exposure into the industry,” a leading broker said.
Incidentally, Kesoram Industries is a multi-product company with major exposure in tyres and cement. The turnover from cement sector for Kesoram in the quarter ended September 30, 2004 was Rs 155 crore, out of its total turnover of Rs 411 crore.
Incidentally, B K Birla group is investing around Rs 425 crore in Kesoram for increasing cement capacity and for captive power plant. The cement capacity of Kesoram will increase from 2.9Mt to 4.5Mt following the expansion.
Commenting on the LIC decision, sources in LIC said that the main objective is profit taking and it has nothing to do with the sector or the management. “We are booking profit because the cost of acquisition of Kesoram was quite low compared with the price now prevailing,” added the official. Kesoram reached a 52-week high of Rs123 on December 23. The price was at the lower Rs90-91 level in October and November.