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Birla tyre unit likely to be sold to Pirelli

Badal Sanyal

CALCUTTA, Nov. 26

MR B.K. Birla, Chairman of Kesoram Industries Ltd (KIL), is said to be close to finalising a deal with Pirelli of Italy for outright sale of the tyre plant being run by KIL under the name and style of `Birla Tyres'. The deal was recently negotiated in Lo ndon by Mr Birla with an empowered executive of Pirelli.

Sources aware of this development indicated that Mr Birla was satisfied that he could clinch the deal at a price which was reasonably good, considering the rather depressed tyre market.

It will, however, take a few months to implement the deal because formalities under the Companies Act have to be completed to delink the tyre plant from KIL. This apart, a separate company has to be created to run and manage the tyre plant.

The details of the deal are yet to be known. But it is almost certain that Pirelli will have absolute control over the management of the new tyre company. The plant is located at Balasore in Orissa.

Birla Tyres is, in fact, known to Pirelli because the Italian tyre major has been associated with the plant as a technical collaborator right from the beginning. The plant, with an annual capacity of 1.1 million pieces of tyres, began production in 1989- 90.

Though promoted by KIL, the management control of the tyre plant was subsequently handed over, through a lease agreement, to a consortium of four companies of the B.K. Birla group. The lease arrangement was valid up to March 2000 and the plant is now bei ng run by KIL.

When contacted, Mr S.K. Parik, Secretary of KIL, who was also recently in London along with Mr K.K. Khemka, President of Kesoram Rayon, said that he was not aware of the deal. Mr Parik said: ``I understand negotiations are on with Pirelli, but nothing ha s been finalised. We know each other for a long time. In the event of any decision to sell Birla Tyres, Pirelli will get the first priority.''

Automobile tyre industry sources feel that the direct entry of Pirelli will encourage competition in the radial tyre market. The American tyre major, Bridgestone, which has set up a steel cord radial tyre company at Indore, is believed to be watching the development as it involves change of guard at Birla Tyres.