Business Daily from THE HINDU group of publications
Friday, Jul 13, 2007
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Business Daily from THE HINDU group of publications Friday, Jul 13, 2007 ePaper |
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Corporate
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Mergers & Acquisitions Metro Tyres willing to offer stake to Continental
Stake may be offered when Metro goes for an IPO, expected in 18 months, or earlier. Majority stake will continue to be held by Metro. Metro expects Euro market to contribute up to €15 m in the first year. Continental wants to source more tyres from Metro.
K. Giriprakash Bangalore, July 12Metro Tyres is willing to offer stake to its partner, German-based Continental Tyres, which is helping the company to break into the highly competitive European market. The Metro Tyres group Managing Director, Mr Rummy Chhabra, told Business Line that the company is willing to offer a stake to Continental Tyres, the world’s fourth largest tyre maker, though the majority stake will continue to be held by the Indian-based company. He said the stake could be offered earlier or when Metro goes for an IPO, which is expected in another 18 months. Metro plans to raise about Rs 100 crore from its IPO proceeds. Metro has also opened an office and a warehouse in Barcelona and will market its tyres and tubes under the Ortem brand in Europe, Mr Chabbra said. Metro expects the European market to contribute up to €15 million during the first year of operations to its topline. Budget segment
Mr Chabbra said Continental was willing to help the company to enter its own turf in Europe as both their products complement each other. “While we address the budget segment, Continental plays in the premium end of the market. Hence our products do not overlap each other,” he said. He pointed out that its expansion into Europe will increase the volumes, which could lead to substantial cost savings for both Metro as well as Continental. Mr Chabbra said Continental, which sources 2-lakh tyres every month and 3-lakh tubes per month from Metro wants to increase the sourcing from the company. Hence to meet Continental’s demand, it is setting up another plant with a capacity of 4-lakh tyres per month either in Uttarakhand or Himachal Pradesh in another 18 months at an investment of about Rs 50 crore. Metro currently has four plants in India. Metro has also shifted production line from Continental’s Malaysian plant to India to increase the capacity here. The Malaysian production line contributed about 1-lakh tyres per month. Metro had carried out a similar exercise when it bought a plant in Sweden. A new plant, as well as increase in capacities in existing plants, should see the company increase its total share in the domestic market to 20 per cent in another two years from the existing 3 per cent, Mr Chabbra said. Business from Continental both from the domestic market as well as from exports contributed a total of Rs 60 crore to Metro’s turnover of Rs 400 crore last fiscal. Mr Chabbra said there are no plans to increase the tyre prices currently. The last price increase was effected five months ago when prices went up 4 per cent. “I don’t think the market can take another price hike so soon,”Mr Chabbra said.
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