BKT Greenfield Project to Meet Growing Indian Demand

A planned fourth factory is expected to increase Balkrishna Industries’ tyre making capacity by 73 per cent. Indian media sources report the tyre maker plans to establish a new facility in Bhuj, Gujarat state, by the third quarter of the 2013 fiscal year.

“It is a greenfield project, wherein we are planning to invest around Rs1,000-1,200 crore (£141.9 million – £170.4 million) over the next two years,” company vice chairman and managing director Arvind Poddar told Indian news journal DNA. “Originally, the plan was to buy land in an SEZ (special economic zone) in Gujarat. However, the plan did not materialise due to the downturn in global economy. Now we are going for a non-SEZ land, which was acquired during the current financial year.”

Three hundred acres (121 hectares) of land has been obtained for the greenfield project. The plant’s contribution to Balkrishna’s tyre production is expected to increase capacity from its current level of 150,000 tonnes per annum to 260,000 tonnes. Poddar commented that BKT is “seeing a huge demand for speciality tyres in India,” however at present capacity levels this demand cannot be met. In addition to erecting a fourth factory, the company will spend Rs 2 billion (£28.4 million) upgrading its three existing facilities before September 2011 in order to meet this growing demand. External commercial borrowing will fund a portion of this sum, with the balance coming from internal accruals.

Arvind Poddar also told DNA that prices for BKT tyres will most likely increase some time between November and the end of January. “We are majorly hit by the constant increasing rubber and metal prices,” he commented. “Rising raw material prices have increased pressure on our margins, which have reduced seven to ten per cent over the previous year.”