On a Roll
India’s third largest tyre manufacturer, JK Tyre & Industries Ltd (JK Tyre), has made no secret of its plans to increase domestic market share in key segments and to seek out new export markets, but bringing these goals to fruition requires the expansion of the company’s existing production capacities. Therefore JK Tyre has its eye on making an investment of somewhere between £60 million and £75 million in this area over the next three years.
President of JK Tyre, Mr. Arun K. Bajoria, recently spoke to the respected Indian daily publication Hindu Business Line regarding the steps his company was making towards realising its aims. “The expansion will be across the four existing facilities and the investments would be spread over the next three years,” he stated. “But in the next 12 months we would be first investing around Rs 120 crore (£15 million) for increasing the capacity by around 50 per cent in the off the road tyres segment used by the mining, cement, coal and earth-moving sectors.”
This expansion will come on the heels of recently implemented £28 million increases in passenger car and truck radial capacities, which Mr. Bajoria stated had increased truck radial production by about 50 per cent to the current figure of some 400,000 tyres per year. And the company’s substantial boost in passenger car radial production was achieved in two stages. “We have expanded our production capabilities by around 30 per cent last fiscal and then further expanded it by around 35 per cent during the current financial year (October to September),” said Mr. Bajoria, adding that this second increase will be completed in the near future, giving JK Tyre the capacity to produce 4.4 million passenger car radials annually.
Overwhelmingly positive quarterly financial figures indicate JK Tyre is on the right track with its current plans. For the quarter ending March 31, 2007 the tyremaker posted a net profit of £27 million compared with £4.4 million for the same period a year earlier. Net sales increased almost 20 per cent to £932.4 million. This jump in both sales and profits can, according to Mr. Bajoria, be attributed to two factors. “With heavy investment in infrastructure and accelerated economic activity, the road transport sector and tyre industry are the natural beneficiaries,” he said. “And the benefits of the expansion of truck radial and passenger radial capacities completed last year are now being realised.”
Currently JK Tyre holds just under a quarter of domestic market share in the passenger and light commercial vehicle radial markets and almost four fifths of the truck and bus radial market segment. On top of this healthy Indian market activity the company exports to about 70 countries, and Mr. Bajoria disclosed that around 17 to 18 per cent of revenue comes from these exports. And he would like to see this increase – “Though it is too early to say which markets we would like to enter, we are looking at expanding our export business,” Mr. Bajoria added.
And while the latest financials reveal that JK Tyre is doing well, the company’s expansion plans are ambitious. So how will JK Tyre fund its latest investment? According to Mr. Bajoria, “some portion of the total funds required would be raised from internal accruals and the rest from debt.” Reassuringly he added that, despite their forward-looking plans, JK Tyre have no plans to raise their prices in the near future.