KESAR ENTERPRISES LTD.

Gaurav Maheshwari
CMP Rs. 102 th
8 Jan 10 Harish Vasudevan

Getting sweeter….

COMPANY OVERVIEW

Key Management

Kesar belongs to Kilachand group & was established in 1933. Company is headed by
Mr. Harsh Kilachand. He graduated in Commerce and then went on to complete C.B.M.
and Post Graduation in Business Management from the University of California, L.A.
(U.S.A).

Kesar Terminal Infrastructure Ltd (KTIL) is headed by Mr. Devgupta, is a veteran & has
deep understanding having an experience of over 20 years in Cargo & logistics business.

Background

Kesar has primarily been into sugar business for over more than 5 decades with diverse
portfolio of businesses viz. Spirits, Agrotech, Liquid storage and Logistics. These businesses
enjoy synergies and complement each other well. With a crushing capacity of 7200 TCD
company has established itself as a premium quality sugar producer.

However, after very long time within the group some corporate developments are taking
centre stage. Now that Kesar has set its eyes on Logistics infrastructure business,
management is all set to accomplish their set objective to gain a strong foothold in the
Cargo & liquid storage space.

FINANCIAL SNAPSHOT (Figs. In crs)

NET SALES (08-09) : 298 MARKET CAP : 77crs

EBIDTA : 31 EQUITY : 6.79

NET PROFIT (08-09) : 9.01 FACE VALUE : Rs. 10

52 WEEK H/L : 118/33

Gaurav Maheshwari & Harish Vasudevan

RECENT DEVELOPMENTS

Kesar Enterprises

• Kesar is demerging its subsidiary company Kesar Terminal & Infrastructure Ltd (KTIL)
which is into Logistics infrastructure and will be transferring liquid storage business
to KTIL.

• Company has an enabling resolution to raise Rs.125crs for sugar division and
thereafter demerger money would be raised in KTIL.

• Kesar plans to set up 45 MW Bagasse based cogeneration plant

Demerger Details ;

- Demerger ratio is 7 shares of KTIL on every 10 shares held in the company.

- The equity stands of Kesar will remain as it is and equity of KTIL will be Rs.
5.25 crs

Kesar Terminal & Infrastructure Ltd.

• Company has 2 liquid terminals at Kandla port with 3 jetty lines ensuring
concurrent discharge of cargo from more than one vessels having total capacity
of 1,27,000 KL. Terminal 1 is having 29 tanks & Terminal 2 is having 35 tanks,
capacity ranging right from 250KL to 4500KL with heating & insulation tanks for
specialty chemicals.

• Company has bought 15 acres of land at Pipavav port which it would be

developing for container freight station and liquid storage.

• 10 acres of land has been allotted on lease at Kakinada port by the Andhra
government where preliminary & ground level work is already progressing for
setting up a bulk liquid terminal & container freight station.

• Company is considering and evaluating a proposal to purchase land at Jaigarh

Port owned by Jindal group, which is to commence operations from second
week of January 2010.

• Dry bulk warehouses will be primarily for Capital goods (inland equipments, oil
rigs, and other water equipments).

• KTIL will be raising funds for capex either by way of private placement, rights issue
or FCCB.

• After demerger KTIL equity will stand at Rs. 5.25 crs including 5 lacs shares already
owned by the management and will be listed separately on the BSE & NSE

• KTIL will have a of Debt of Rs.13 crs will be transferred from Kesar Enterprises which
includes working capital and term loan for the business.

Gaurav Maheshwari & Harish Vasudevan

 CAPEX

Company Plans to invest total of 150 crs in next 3 years

1st Phase

Pipavav Port investment of Rs. 30crs in next one year

Kakinada Port investment of Rs. 15crs in next one year

BETWEEN THE LINES

Group has realigned their business strategy with a clear and single minded focus on
Logistics infrastructure business by demerging Kesar & KTIL. Company has already
appointed senior level management team for their Logistics business. Management is
very upbeat and believes KTIL will become face of the group in the times to come.

Total market cap of Kesar Enterprises stands at Rs. 77crs whereas company is looking to
raise to the extent of Rs. 125crs. Since Logistics infrastructure is a capital intensive
business, large amount of money will flow by way of fresh equity & debt into KTIL. Also, if
we assign a conservative PE of 10 which is far below logistic industry PE of 18-20, KTIL
alone would be equal to Kesar enterprises in terms of value.

Going by 2008-09 balance sheet company’s liquid storage division is already generating
good amount of cash and has a turnover of Rs. 13 crs before factoring in the latest
capacity addition & PBT of Rs. 7.3 crs. The debt stands at Rs. 13crs of liquid storage
division.

This demerger would unlock value for all the stake holders, as sugar sector commands a
PE of 4-6 whereas Logistics sector is commanding a PE in excess of 18 times.

In last 2 years several PE funds have raised capital over $1.5bn to invest in Logistics
infrastructure sector. Also, after GST coming into play logistics sector as a whole will get
re-rated and logistics infrastructure companies would be benefited at large. Given the
size of opportunity in the logistics space, strong parentage & renewed focus, there stands
a great chance that KTIL will emerge as a larger entity than Kesar Enterprises.

Strategy

We suggest Kesar Enterprises provides excellent opportunity before the demerger issue as
its primary business sugar is already in best of the times and before demerger gives an
opportunity to be a part of KTIL which could give windfall returns on the listing. Eventually,
after demerger one may decide to keep or exit Kesar enterprises as the demerger would
not impact have the material impact on the valuations of the company.

* * *

Gaurav Maheshwari & Harish Vasudevan

Further details & discussions contact;

Gaurav Maheshwari gauravm16@gmail.com +91 9892003039

Harish Vasudevan hv@svssec.com +91 9821018164

Disclaimer : Adequate precaution has been taken to prepare this report. This Report(s) is based on the
Fundamentals/Technicals, Future events, Corporate developments of the company(s) which may or may not happen.
Therefore, clients are advised to act on this note/research report at their own risk/sole discretion. Analyst/company will
have no liability whatsoever in case of loss or erosion of wealth caused while acting on any report/recommendations for
any reasons whatsoever. Investors are also advised to read disclaimer before acting on this report

Gaurav Maheshwari & Harish Vasudevan