The Hindu Business Line : JK Tyre plans Rs 600-cr investment

Plans ahead
In the next 12 months the company plans investing around Rs 120 crore for increasing the capacity by around 50 per cent in the Off The Road (OTR) tyres segment.
The company is looking at newer markets to export its tyres.

New Delhi May 8 JK Tyre & Industries Ltd (JKTI) is looking to expand its existing capacities. The company for this purpose is looking at investing between Rs 500 crore to Rs 600 crore spread over the next three years.

Speaking to Business Line, Mr Arun K. Bajoria, President, JKTI, said, "The expansion will be across the four existing facilities and the investments would be spread over the next three years. But in the next 12 months we would be first investing around Rs 120 crore for increasing the capacity by around 50 per cent in the Off The Road (OTR) tyres segment used by the mining, cement, coal and earth-moving sectors. Some portion of the total funds required would be raised from internal accruals and the rest from debt."

The company has just concluded the expansion of truck radial and passenger radial capacities. "The truck radial capacity has gone up by around 50 per cent to around 4 lakh tyres per year. In the passenger radial segment we have expanded our production capabilities by around 30 per cent last fiscal and then further expanded it by around 35 per cent during the current financial year (JKTI follows a October-September financial year) which will be completed shortly," Mr Bajoria said.

Once completed, the company would have a capacity to produce 4.4 million tyres per year in the passenger radial segment. JKTI has invested Rs 225 crore to complete both these expansions.

Performance

JKTI, for the second quarter ended March 31, 2007, posted a net profit of Rs 21.66 crore as compared to Rs 3.56 crore in the corresponding previous quarter. Net sales for the period increased 19.48 per cent to Rs 746.84 crore as against Rs 625.04 crore registered in the corresponding previous quarter.

For the first half of the current fiscal, the company's net profit was at Rs 13.75 crore as compared to Rs 3.59 crore posted during the first six months of 2005-06 fiscal. Net sales were up 17.13 per cent to Rs 1,592.01 crore from Rs 1,359.1 crore.

"With heavy investment in infrastructure and accelerated economic activity, the Road Transport Sector and Tyre Industry are the natural beneficiaries. And the benefits of the expansion of truck radial and passenger radial capacities completed last year are now being realised," Mr Bajoria said.

While in the passenger radial segment JKTI enjoys a market share of around 24 per cent, in the truck and bus radial segment its market share is close to 80 per cent. In the light truck radial segment the company enjoys close to 25 per cent market share and in the truck nylon segment it has close to 23 per cent market share.

New export markets

Mr Bajoria also said that the company is looking at newer markets to export its tyres. "At the moment, around 17 to 18 per cent of our revenue comes from the 70 countries that we export our products to. Though it is too early to say which markets we would like to enter, we are looking at expanding our export business," Mr Bajoria said.

According to him, the company is on track to improve both its sales and profitability in the next six months. He also said that since the price of rubber has come down from around Rs 118-120 per kilogram to around Rs 92-95 per kilogram, there is no question of increasing prices in the near future.

"Even when the prices of raw materials increased, the entire burden was not passed on to the customers because of some internal measures. So, since the raw material costs have come down substantially, we do not see an immediate need in hiking the prices," Mr Bajoria said.