Hunting for acquisitions in India and abroad

K. Giriprakash
V.K. Varadarajan

The tyre prices of two-three wheelers and LCVs and trucks are expected to go up between seven per cent and 10 per cent in a couple of months.

Bangalore, May 31

The Ruia Group, which recently took over Falcon Tyres and Dunlop from the Jumbo Group, has started putting together expansion plans for both the companies.

While Dunlop will see an infusion of Rs 350 crore before the end of the calendar year, Falcon will get around Rs 70 crore for capacity expansion and a 6 MW cogeneration power plant.

"We expect to start the Chennai plant of Dunlop by August and the Kolkata plant towards the end of the year," the Group Chairman, Mr Pawan Kumar Ruia, told

Business Line

.

He added that the group was actively hunting for acquisitions in India and abroad.

The group has already invested around Rs 40 crore in the Chennai plant. The workforce at the plant will be reduced to 1,000 from the current level of 1,200. This will entail an expenditure of Rs 15-20 crore.

For the Kolkata plant, the workforce will be slimmed to 1,200. This will entail an investment of Rs 42 crore.

Each of these plants has a capacity of 130 tonnes per day. The Chennai plant produces truck tyres and tyres for LCVs, while the Kolkata plant produces tyres for trucks, LCVs and OTRs - off-the-road tyres for tractors and heavy duty vehicles used in infrastructure and mining projects.

Mr Ruia said that by 2007-08, Dunlop will start making profits. The total loss incurred by Dunlop is around Rs 650 crore; it has assets of around Rs 1,000 crore.

Falcon Tyres, which is based in Mysore, produces tyres and tubes for two- and three-wheelers. The tube and the tyre capacity will be expanded to 7.5 lakh per month. Mr Ruia said that the company will reduce dependence on outsourcing over a period of time to reduce costs. Falcon Tyres recorded 34 per cent increase in net profit to Rs 3.62 crore for 2005-06 on a turnover of Rs 256 crore, which grew 14 per cent over the previous year.

The company has also declared a dividend of 25 per cent, the highest so far.

"Once we took over the company in December, we de-bottlenecked the capacity."

The Group paid over Rs 200 crore to acquire Dunlop, Falcon Tyres, and India Tyre, last December. In Dunlop and Falcon, the group has 74 per cent stake each.

Tyre prices to rise

The tyre prices of two-three wheelers and LCVs and trucks are expected to go up between seven per cent and 10 per cent in a couple of months.

"The increase in the price of natural rubber, which has nearly doubled to Rs 110 a kg, has forced tyre makers to increase the price," said Mr Ruia.

"There is a possibility that very soon, the tyre prices will be linked to the price of raw material," he added.

(This article was published in the Business Line print edition dated June 1, 2006)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.