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You are here: Home1 / News2 / Product News3 / Ex-BKT Manager to Join Alliance Takeover-Bid

Ex-BKT Manager to Join Alliance Takeover-Bid

Date: 30th January 2007 Author: Tyrepress Editors Comments: 0

Former Balkrishna Industries Ltd. executive director Yogeshkumar (Yogesh) Mahansaria and his brother Ashokkumar have reportedly quit the fast-growing Indian tyre producer, citing “family differences” as the reason. Yogesh has now teamed up with US equity firm Warburg Pincus to acquire Israel’s Alliance Tire for US$45 million. Alliance has been in negotiations with the two buyers, and the transaction is expected to be completed before June. The Alliance purchase forms part of a new venture that Yogesh Mahansaria has been quoted as saying he intends to float in the near future.

Yogesh joined Balkrishna Tyres (BKT), his family’s struggling scooter tyre company, in 1993 at the age of eighteen. He then spent some time attending trade shows around the world, looking for a niche export market that the company could fill. As a result of his research Balkrishna retooled for the production of agricultural and construction industry tyres, and in the years since 2000 has become a globally competitive player, exporting 95 per cent of all tyres produced. According to Balkrishna’s head financier, BK Bansal, Balkrishna is not in any way involved in the current Alliance deal.

Alliance Tire is and always has been an agricultural tyre specialist, as Balkrishna is today. BKT has skyrocketed into this market during the past few years, leaving behind its humble beginnings as a producer of scooter tyres, and it was Yogesh Mahansaria who took the helm and guided the company to where it is today. These days Balkrishna is one of the top ten tyre manufacturers in India, exporting up to 95 per cent of its production. While in the past Balkrishna also produced bias-ply PC and light truck tyres in its original factory in Waluj (Maharashtra), today it produces OTR and industrial tyres there.

Balkrishna invests heavily

Meanwhile, Balkrishna Industries Ltd. has published its most recent business results for the year 2005/06. This report shows that a purely commercial tyre specialist can conquer a position in the local tyre industry without selling many tyres domestically. By far the largest and most profitable business segment at Balkrishna Industries, next to the production of paper and cardboard, is tyres. At present three factories are dedicated to the production of BKT (Balkrishna Tyres) brand tyres.

In 2004/05 Balkrishna’s tyre division generated an annual turnover of 3.67 billion rupees (£42 million), last year this was 5.11 billion (£58.5 million) representing an impressive growth rate of 39.2 per cent. Today, the tyre division is responsible for 82.4 per cent of the company’s total turnover; the year before this figure was 75.2 per cent. Although the tyre division’s EBIT has also grown strongly, it lags behind the impressive turnover growth rate because of the high cost of raw materials. The tyre division’s EBIT in 2004/05 was 909.2 million rupees (£10.4 million). In 2005/06 the EBIT had increased to a strong 1.13 billion rupees representing a growth rate of 26.6 per cent. Thus the EBIT margin of Balkrishna’s tyre division is at an impressive 22.2 per cent, and it even reached 24.7 per cent the year before. The group’s EBIT margin still it at a very high level of 17.2 per cent, Balkrishna Industries Ltd. states in its latest report.

According to Balkrishna’s annual report the company’s tyre division produced 1,055,857 tyres. In the previous business year they produced 870,830 units, thus annual output has grown by 21.2 per cent. This strong growth rate was mainly fostered by Balkrishna’s production of radial agricultural tyres. These products, sold under the BKT brand, have, according to the tyre maker, had a strong impact on export markets, particularly in Europe. Today Balkrishna exports its tyres to more than 75 countries. The company produced about 29,000 metric tonnes of tyres during 2005/06, which means that the average tyre has a weight of roughly 28 kilogrammes. The company also produces several smaller-sized products such as industrial, ATV or lawnmower tyres in addition to OTR and agricultural tyres.

About 70 per cent of all tyres produced are BKT brand tyres, the company reports. The remaining 30 per cent are tyres that are produced under offtake agreements or as private brands for other companies.
In addition to their original factory in Waluj near Aurangabad (Maharashtra), Balkrishna Industries has operated a second tyre factory in Bhiwadi (Rajahsthan) since 2002. In both factories production capacity has been heavily increased since last year and shall soon reach a combined 60,000 tonnes. This represents a doubling of the 2005/06 output. Balkrishna intends to invest up to 900 million rupees (£10.3 million) into capacity expansion projects. It is chiefly radial agricultural tyre production that will benefit from this.

Furthermore, very recently Balkrishna opened yet another factory. Its third production facility is based in Chopanki, just six kilometres away from the Bhiwadi location. In Chopanki Balkrishna initially erected a central warehouse covering 12,600 square metres, and this has been in operation since July 2005. About a year ago a mixing department was installed at the Bhiwadi site. Following this, Balkrishna’s next move was to begin production of radial agricultural tyres in the factory. As soon as this third location is fully operational about 10,000 tonnes of tyres will be produced there.

Related news:

  1. Michelin Announces a Series of Price Hikes
  2. India’s BEML to Produce OTR Tyres With Apollo & JK Tyres
  3. Indian Figures Show Production Up, Exports Down
  4. Where the Rubber Hits the [Off] Road
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Related Tags

agricultural tyres, India, industrial tyres, OTR tyres, raw materials, truck tyres

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