The Hindu Business Line : MRF plans Rs 600 cr for capacity expansion

Mr K. M. Mammen, Chairman and Managing Director, MRF, and Mr Philip Eapen, Director (Marketing), addressing a press conference in Chennai on Wednesday.

Chennai , Dec 20

MRF plans to spend Rs 500-600 crore over the next two years to expand production capacities at three of its factories, according to Mr K.M. Mammen, Chairman and Managing Director.

Speaking to newspersons to announce the company's results, he said that the expansion programme would be at Puducherry, Arakonam and Medak. The expansion would be funded mainly from internal accruals.

MRF has three more units at Tiruvottiyur in Chennai, Kottayam and Goa.

Mr Mammen said that MRF needs to look at "expansions in a big way," with the automotive market booming.

Greenfield projects are expensive. The company is also exploring opportunities for an overseas production facility. But no immediate projects are in the pipeline.

The proposed expansion at Puducherry, where the company makes radial tyres, would add about 100,000 to the existing capacity of about 300,000 a year.

At Arakonam, where it makes two-wheeler tyres, production would go up by about one lakh from the current capacity of about five lakh; and at Medak, MRF will add about 15,000-20,000 light commercial vehicle tyres to the current capacity of about 80,000.

The tyre industry, driven by the automobile industry, is buoyant with the passenger car market growing by about 20-25 per cent.

In commercial vehicles there is a product mix change, with the growth in multi-axle vehicles keeping the number of trucks down, he said.

MRF has the widest product range among the domestic tyre companies as it makes tyres for all class of vehicles from trucks to two-wheelers and go-karts.

According to Mr Philip Eapen, Executive Director (Marketing), over 45-50 per cent of its production is accounted for by truck tyres.

Rubber and oil prices continue to be a cause for concern. But MRF, which has positioned itself as a premium product commanding premium prices, has been relatively insulated as compared with other lower-cost tyre manufacturers.

It has absorbed about 75-80 per cent of its raw material cost in product prices.

The company has grown to a `nearly billion-dollar company.'

The buoyancy in the trucks and cars segment has contributed to topline growth and the company would soon exceed the $1-billion mark. Its expansion programme would add Rs 1,000 crore to turnover, he said.

RESULTS

MRF has reported net profit of Rs 79.91 crore on income of Rs 4,248.31 crore for the year ended September 30.

During the previous year the company reported net profit of Rs 40.31 crore on income of Rs 3,453.48 crore.

The company today announced a final dividend of Rs 14 (140 per cent), taking the total dividend for 2005-06 to Rs 20 (200 per cent).

On the NSE, the MRF scrip opened at Rs 4,399 and closed at Rs 4,309.45.