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Ceat
(I) inks MoU with AP firm for capacity addition
Subhadip
Sircar & Papiya De
Mumbai, Nov 4: RPG Group controlled tyre major Ceat
India has chalked out a unique strategy to expand its capacity
in two- and three-wheeler tyres. The company has signed a
memorandum of understanding (MoU) with Hyderabad-based Ace
Tyres, formerly Excel Tyres, to market its entire production
at a pre-determined price.
In the first phase, Ace Tyres is setting
up a new plant with a capacity of 1 lakh tyres per month,
which is expected to be operational by July 2002. It can later
be increased to a capacity of 2 lakh tyres. At present, Ceat
has a combined capacity of 1.4 lakh tyres in the two- and
three-wheeler segments, manufactured in its two plants in
Kerala. With this move, its capacity will increase up to 2.40
lakh.
| ...sets eyes
on new export markets to counter slowdown |
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Our Corporate Bureau
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Mumbai, Nov 4: The RPG group
promoted Ceat Ltd is focussing on developing new export
markets to counter the slowdown in domestic tyre sales.
The truck tyre market, which constitutes the bulk of Ceat’s
sales, has continued to remain stagnant with a 1 per cent
growth in April-August this fiscal over the corresponding
period last year.
The company has entered new export markets of Costa Rica,
Guatamela, Yemen, Syria and Malaysia. "We are currently
selling to 36 countries all over the world. While we are
currently manufacturing 1.20 lakh tyres per month across
our facilities, we plan to take it up to 1.25 lakh by
next quarter," according to Ceat Ltd managing director
Paras K Chowdhary.
Ceat, with a Rs 1,200 crore turnover for the last fiscal,
is looking at 30 per cent higher exports for the half-year
ending September 2001, as against the corresponding period
of the previous year.
Ceat is developing tailor made products suitable for different
markets so as to increase the company’s share of exports.
The company is planning to continue with its export thrust
as it believes that the depreciation in the value of the
rupee will make exports an important and profitable segment
for the company.
Mr Chowdhary added that the company was planning to focus
on farm tyre exports which also had a better margin. Ceat’s
tyre exports, however, comprise overwhelmingly of truck
tyres (90 per cent), while the rest comprise light commercial
vehicle (LCV) and farm tyres.
During the last fiscal, Ceat exported 22,000 tyres of
which LCV tyres comprised 3,700 units and tractor tyres
200 units. Export turnover stood at Rs 110 crore.
The company achieved a 7.4 per cent export growth in the
last fiscal as against an industry growth rate of 5.5
per cent.
"We are looking at exporting 8,000 LCV tyres and
800 farm tyres this fiscal," Mr Chowdhary added.
However, the Sri Lankan market, which is a major export
market for the company, has seen a decline in demand coupled
with the devaluation of the local Sri Lankan currency.
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Ceat India managing director Paras K Chowdhary
told The Financial Express: "Under the
MoU, Ceat will provide raw materials and technical support
to Ace Tyres who will manufacture the product under Ceat’s
supervision."
Given the cash crunch, and a high debt-equity ratio, the company
is not in a financial position for any capital expenditure.
This strategy will enable Ceat to increase capacity without
any additional investment.
With its present capacity, Ceat has a market share of 8 per
cent in the two- and three-wheeler segments, lagging way behind
market leader MRF (32 per cent) and TVS Srichakra (22 per
cent). Ceat’s market share has fallen from 14 per cent in
2000-01 because of a reduction in its capacity from 2.32 lakh
tyres to 1.4 lakh tyres. This has happened on account of South
Asia Tyre’s decision to stop production of two- and three-wheeler
tyres. Ceat used to outsource nearly 1 lakh tyres from South
Asia Tyres earlier.
As a part of its endeavour to gain market share, Ceat is also
considering an increase in its radial manufacturing capacity
at Nashik from the present 35,000 to 50,000 tyres. The facility
was set up with an initial investment of Rs 60 crore and began
production in December 2001.
The capacity expansion will entail an additional investment
of Rs 7-8 crore. This capacity of 50,000 radial tyres will
also include light commercial vehicles (LCV) radials.
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