Kesoram Industries is strengthening its tyre business by adding more products to make a ‘complete portfolio’ in this segment, as the flagship company of the BK Birla group...
Kesoram Industries is strengthening its tyre business by adding more products to make a ‘complete portfolio’ in this segment, as the flagship company of the BK Birla group aims to improve tyre sales even after selling its Haridwar manufacturing plant to JK Tyre.
JK Tyre has agreed for the acquisition of the Haridwar plant, which manufactures commercial vehicle radial tyres, bias tyres and two-wheeler tyres, for Rs 2,200 crore. Kesoram decided to monetise the facility to reduce its huge debt burden in order to strengthen the balance sheet. The transaction is currently awaiting Competition Commission of India’s (CCI) approval.
While replying to shareholders’ queries during the company’s annual general meeting on Saturday, Kesoram chief financial officer Tridib Kumar Das said, “Our management has taken a bold decision. Now, restructuring is a daily affair. We are not going out from the tyre business. We will be stronger in this business.”
“I want tell you that we only sold a manufacturing plant, but tyre business is with us. So our topline (in tyre segment) will not be affected due to that,” Das added.
He said the company was aiming to present in all the segment of the tyre business and was planning make its tyre portfolio a complete one. For this purpose the firm was planning to invest an additional Rs 300 crore in the next four-five months in its Balasore plant, while R500 crore capital was work in progress in the facility.
“The company continues to manufacture bias tyre in Balasore. We will be in the radial tyre business as well as the country is slowly converting from bias to radial tyre. For passenger car, the company will manufacture radial tyre at its Balasore factory from next fiscal. Then we will have complete portfolio of tyre business—tyres for truck and bus, two wheeler and passenger car,” he told reporters after the AGM.
At present, the Balasore facility has a tyre manufacturing capacity of 275 metric tonnes per day. Hoever, current capacity utilisation level is 60-65%. The firm’s tyre business went through a difficult year in 2014-15. EBIDTA fell to a negative Rs 167 crore against a positive R212 crore in the previous year.
The company expects its passenger car radials business to begin reaping benefits from the financial year 2016-17. “Our tyre business was in trouble, but we have taken the actions. Going forward tyre sales will improve. We expect more sales in 2016-17,” Das said, adding the company was also strengthening Birla Tyres brand.
In cement segment, the company will invest about Rs 150 crore in the next 12 months. It has two manufacturing faclities—one in Telangana and other in Karnataka.
Currently, the tyre business alone contributes more than 60% to Kesoram’s topline, followed by cement. The company continued to bleed on financial front with the tyre segment making operating losses.