The Hindu Business Line : Kesoram plans tyre unit in Uttarakhand

Greenfield plant: Mr B K Birla Chairman, Kesoram Industries Ltd, and other board members at the 88th annual general meeting of the company in Kolkata on Friday.

Our Bureau

Kolkata, June 29 Kesoram Industries has proposed to set up a greenfield tyre project in Uttarakhand as part of a massive expansion drive. The project, the first phase of which will start production towards the end of 2008-09, will involve an outlay of Rs 650-700 crore.

The company, which is finalising loans from lending institutions for funding the project, intends to manufacture truck tyres at the proposed plant. A capacity of 250 million tonnes (mt) per day has been projected.

The Uttarakhand site, said Mr B.K. Birla, Chairman, will allow Kesoram Industries to enjoy certain tax breaks. The project is expected to add critically to the company’s competitive edge, he added.

“We hope to start in about a year’s time. Orders for important plant and machinery have been finalised,” he told shareholders at the company’s 88th AGM on Friday.

Birla Tyres had elsewhere worked out an expansion programme of 128 mt per day in three phases – of this 33 mt has been achieved during 2006-07 The entire programme will be wrapped up by December this year, it is expected.

The company’s tyres, the Chairman noted, are preferred in the export market; they also compete well with other manufacturers in the domestic market. The gross turnover of Birla Tyres, incidentally, stood at about Rs 1,110 crore in 2006-07 compared to Rs 857 crore in the previous year, marking a growth of roughly 30 per cent. Export sales stood at Rs 192 crore as against Rs 162 crore in 2005-06.

The tyre unit has been able to record its performance notwithstanding the rise in prices of natural rubber. Various cost-cutting measures and higher capacities have, among other things, enabled it to stay in shape, it is mentioned.

On another front, Kesoram is trying to address critical issues involving its spun pipes arm, which has in recent times done a major overhaul of plant and machinery. Pig iron and scrap prices have increased, a trend that has not allowed the unit to realise the expected margins, leading to an impact on profitability.

The Kesoram stock moved higher by 3.99 per cent on NSE to Rs 453.50 on Friday. Over 6 lakh shares made up the volumes. It reached the day’s high at Rs 460.80.

Capacity expansion in cement

Kesoram Industries has embarked on a programme to increase its cement capacity, a project that involves an investment of about Rs 500 crore, Mr Birla indicated. The expanded capacity will go on stream in the next two years.

The company will end up as a bigger player in the cement space, with over five million tonnes in the next year. Its cement units (Vasavadatta Cement and Kesoram Cement) are running efficiently, he added.

The two expansion programmes – tyres and cement, which together account for 85 per cent of the company’s turnover – will require a borrowing of about Rs 1,000 crore. Talks on securing loans have been going on with ICICI Bank and SBI. UTI Bank and Citibank are also in the queue, Mr S K Parik, Director, told newspersons.

More Stories on : New Projects | Tyres | Cement

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