The PK Ruia group is planning to set up a new facility for Falcon Tyres Ltd to manufacture either off-the-road tyres (OTRs) or aero tyres. It will use the Dunlop brand to market the products.
Group chairman Pawan Ruia said he wanted the new facility to be set up in a tax-saving area and would invest up to Rs 175 crore. The company may opt for a follow on public offer to fund its new project.
The group’s Dunlop India Ltd currently makes OTRs at its unit in Sahagunj in West Bengal. Aero tyres can also be made in the same unit.
Ruia said although Dunlop would continue to make OTRs at Sahagunj and start making aero tyres there in another two months, it wanted Falcon to have such product lines to increase its profitability.
Falcon’s net profit was 3% of its turnover of Rs 328 crore in 2006-07, which, according to Ruia, was ‘very sensitive’. A little change in the production cost will affect the company’s bottom line.
Falcon’s Mysore facility currently makes tyres and tubes for two- & three-wheelers, passenger cars, light commercial vehicles and farm vehicles. The company uses the Falcon brand for marketing two- & three-wheeler tyres but uses the
Dunlop brand against a royalty for marketing four-wheeler tyres.
Ruia said Falcon’s product lines, at present, were low-margin, but if it started making either OTRs or aero tyres, the company could gain comfortable margins. This would also give rise to competition between the two group companies.
While Falcon is in expansion mode, Dunlop’s facilities in Sahaganj and Ambattur are yet to stabilise so far as production is concerned.
Ruia said the Sahaganj unit was currently producing 45 tonne a day but would attain the 130-tonne production target by the end of the fiscal. The unit in Ambattur could restart operations once the dispute relating to encroachment on factory land was settled.
The Mysore facility is increasing its production capacity from 485,000 tyres to 750,000 tyers and 250,000 tubes to 375,000 tubes a month at an investment of around Rs 100 crore. The expansion will be completed by November. It is also installing a 6mw co-generation plant at a cost of Rs 30 crore to save cost as well as earn by pushing 2.5mw to the grid. It will earn on carbon credit as well, Ruia said.