However, the buildup was largely speculative and the scrip retreated on the last day of the settlement which ended on June 10 when volumes peaked at 155,781 shares and the stock closed lower at Rs 31.50.

Since then, the scrip has begun its downward movement and it closed at Rs 29 on Monday, June 14. Market reports suggest that BSE brokers who had picked up a substantial chunk of Kesoram last year are again active in the counter. In the absence of delivery-based buying and overall cautious sentiment, an immediate improvement in the stock price is ruled out, saymarket sources.

The rally, in the first place, was on expectations that the company would benefit from more focussed operations in cement and tyres. Kesoram Industries has over 2 million tonne capacity in cement at its two plants in Basantnagar, Andhra Pradesh and Sedam in Gulbarga district of Karnataka.

The tyre division is still being run by a consortium of group companies with Kesoram receiving its share of profit (Rs 6.68 crore in 1998-99) besides lease rental of Rs 45 crore. This arrangement will be reviewed by the end of the current financial year.

Kesoram's operations suffered a setback in 1998-99 with both sales and profitability down compared to the previous year. Sales fell to Rs 681.70 crore in 1998-99 from Rs 715.34 crore while gross profit declined to Rs 48.83 crore from Rs 56.50 crore in the previous year.

With nearly 60 per cent of its revenues coming from cement, Kesoram stands to gain from any improvement in cement realisations. Besides, the textiles division which contributed hardly15 per cent to the company turnover was reporting losses which will now be part of the new company's accounts.

The scheme of arrangement worked out in consultation with Ernst & Young envisages hiving off the textile division of Kesoram as a going concern to Kesoram Textile Mills Ltd (KTML) for a consideration of Rs 10.46 crore which will be settled by issue of KTML shares to Kesoram Industries Ltd (KIL) shareholders.

The scheme proposes issue of KTML shares of Rs 2 each to KIL shareholders as fully paid up in the ratio of 1:1 or alternatively issue of one equity share of Rs 10 of KTML as fully paid up for every 5 shares held in KIL.