New Dunlop India Owner Angles for Sumitomo Alliance

(India/Rubber Asia) At long last Dunlop India, a name that is as deeply steeped in history as it is in litigations, is getting the much-awaited kiss of life. After months of apparently tortuous negotiations, the Kolkata-based Pawan Ruia group has finally wrested management control of Dunlop India and also that of Falcon Tyres from the Dubai-based Jumbo Group for 2 billion rupees (about £25 million). The Jumbo group is owned by entrepreneur Manu R Chhabria.

The new owners have already unveiled a roadmap to redeem the company’s “iconic reputation” in the tyre-making world over the next year and a half. Equally significantly, Pawan Ruia, chairman of the 3 billion rupees group, has already hinted at the possibility of Dunlop India working with Japanese conglomerate Sumitomo. Even a joint venture with Sumitomo, which owns the Dunlop brand in almost every country except a few like India, is not ruled out, according to sources.

The Ruia group is set to pump between 1 and 1.5 billion rupees into the Dunlop plants besides taking care of 6 billion of liabilities (including wage/salary arrears of its staff) and a vast array of public litigations.

Speaking on his return from Singapore where some sources say the deal was inked, Pawan Ruia said the Dunlop plants at Sahagunj in the state of West Bengal and Ambattur in Tamil Nadu, would soon be reopened and upgraded to meet the “ever-increasing” needs of the tyre industry.

Both plants have been closed since February 1998. Industry circles hope that the company — which claimed in its logo “Dunlop is Dunlop, always ahead” — is now in safe hands given the Ruia track record of turning around sick companies. The latest confirmation of the group’s reputation for being “turnaround artists” is provided by the way it reversed the fortunes of Jessop & Co, the once-ailing government undertaking taken over by the Ruia group in 2003. Jessop is already on its way back into the black in the current financial year.

However, the new owners will have to sort out several critical areas such as settlement of labour dues — particularly at Sahagunj — and raising working capital before the factories open in another six to nine months. The Ambattur factory, which made truck tyres, should open in another six months because the former management had worked out a package after talks with the labour unions.

According to Pawan Ruia, the Sahagunj unit, with its 2700 workers, will restart with making industrial products like conveyor belts in another nine months.
Driving home the point that India is among the few countries where Sumitomo is not the owner of the ‘Dunlop’ brand, Ruia said the Japanese tyre giant has a presence in 69 countries. According to him, “Sumitomo has announced that they are keen to begin manufacturing of nylon tyres in India at a new plant, and we are open to the idea of teaming up with them.”

Mr Ruia added that the new plant could be set up in land adjacent to the Sahagunj factory, although “no formal discussions with Sumitomo Corp regarding this have taken place so far.” Sumitomo might also be roped in by the Ruias to upgrade existing Dunlop factories, which still use old technology.

Manufacturing of aeroplane tyres, Dunlop’s forte in its hey-days, may also be restarted once the Ruias get a partner to upgrade its technology. Dunlop is the only tyre maker in the country that holds a licence to make aviation tyres and was once a major supplier to the Indian military.

According to reports the group chairman, PK Ruia, said that Dunlop had a total capacity of producing close to 75,000 truck tyres a month at both the facilities. Of the company’s two sites (Ambattur and Sahagunj), Ambattur has the larger capacity of 40,000 tyres a month. This is against a total market size of over 900,000 tyres a month, 70 per cent of which is provided by three players, the Business Line added.

This means Ambattur has the potential to become an original equipment hub for the company due to its proximity to the commercial vehicle manufacturing sector in south India. “Together, Falcon and Ambattur are equipped to cater to almost the entire demand for tyres, except the demand for car tyres in south India,” Business Line quoted Ruia as saying.

Four Falcon board members quit

However high-profile the triple acquisition may have been, there have clearly been a number of corporate casualties. Only days after it was bought by the Ruia group, the company informed Bombay Stock Exchange that Vidya Manohar Chhabria, Komal C Wazir, Mohan M Thakur and Deepak Chaudhuri (the former executive director) had all resigned. The resignations took effect on 1 December, it emerged.

Meanwhile, for the 2.24 billion rupee Falcon Tyres, which makes tyres for two and three-wheelers, and currently has a 20 per cent market share in aviation tyres will continue to focus on the original equipment market (OEM) segment where, when last reported, it had 50 per cent of the market.

India remains the only country where no multinational is a market leader in any of the major tyre segments.