In order to increase its ASEAN region presence, Taiwan’s Cheng Shin Rubber will invest NT$2.36 billion (£49.7 million) to build a plant in Indonesia. A filing to the Taiwan Stock Exchange states that the company’s board approved plans for the factory on 15 October.
JK Tyre & Industries is reportedly planning to start its 1,000-crore rupees expansion plan at its Chennai plant within the next two to three months doubling the tyremaker’s capacity at the plant, according to the Business Standard.
Within the next two to three months, JK Tyre & Industries intends to get is RS 10 billion Chennai plant (£100 million) expansion project underway. When work is complete plant capacity will be double the current level, making it one of the company’s main export facilities.
Both Apollo Tyres and JK Tyre & Industries intend to establish new plants in Asia, and the chairman of the Indonesian Tire Producers Association says both firms are looking at his country as a potential site. Aziz Pane told Indonesia’s Investor Daily “the two investors from India are interested in coming here.” He added that each tyre maker would have to invest between US$300 million and $350 million in order to achieve a suitable economy of scale. He also opined that in order not to operate at a loss, the factories will have to be operated on a three-shift day system.
Could JK Tyre & Industries be the next Indian tyre maker to broaden its geographic footprint? Speaking with The Economic Times, company chairman and managing director Dr. Raghupati Singhania said that following the integration of Mexican tyre maker Tornel into the company, JK Tyres has “encountered some interesting propositions for possible opportunities of acquisition to catapult into a global entity.”
JK Tyre & Industries is one of three companies named as joining the International Rubber Study Group’s Panel of Associates. The Indian tyre maker’s membership, along with that of Evonik Industries and International Rubber Consortium, was announced on 15 August. The IRSG Panel of Associates now has 123 members.
On 28 May, JK Tyre & Industries poured water on news published by Indian financial daily The Financial Express, stating it had “no firm proposal” to acquire a tyre manufacturer in Southeast Asia for Rs 1.5 billion (£15.7 million) and that it had “not made any commitment whatsoever” to this effect. Yet at the time the company was still committed to investing in the region, specifically in rubber plantations. Now it appears this project has been shelved, or even dropped entirely.
In its financial results for the March to June quarter – the first quarter of its current financial year – JK Tyre posted a net profit of Rs 540.4 million (£5.7 million), a year-on-year increase of 265.9 per cent. Quarter net sales came to Rs 18,669.4 (£196.0 million), 3.3 per cent higher than in the first quarter of 2012.
At its meeting on 27 May, JK Tyre & Industries Ltd’s Board of Directors confirmed the promotion of Raghupati Singhania from vice-chairman to chairman. Singhania is now chairman and managing director of the company.
The All India Tyre Dealers' Federation (AITDF) has approached the country’s Competition Appellate Tribunal (COMPAT), a body that handles appeals against any decision made or order passed by the Competition Commission of India (CCI), regarding the clean bill of health the CCI gave tyre makers when it investigated cartelisation claims. Last October the CCI found no evidence of cartelisation in the tyre industry, and thus dismissed a complaint filed by the AITDF. The manufacturers in question, Apollo Tyres, MRF, JK Tyre, Ceat and Birla Tyres, along with the Automotive Tyre Manufacturers' Association, faced no penalty. These five manufacturers are said to control 95 per cent of India’s domestic tyre market.
India’s JK Tyre and Industries Ltd attributes much of its improved profitability in the three months to 31 December 2012 to its strong performance in the truck and bus radial sector. Despite an overall slowdown in the Indian market and a slump in orders from OEM customers, the tyre maker recorded a net profit of Rs 211.4 million (£2.5 million) in its 2012-13 third quarter. This compares with a net loss of Rs 213.1 million (£2.6 million) a year earlier. Net sales between 1 October and 31 December 2012 amounted to Rs 12.7 billion (£152.4 million), down 7.6 per cent year-on-year.
The Hindu Business Line reports that faling rubber prices in India led to shares in India’s major tyre makers rising up to five per cent earlier this week. The newspaper stated on 5 December that Apollo Tyres, MRF, JK Tyre and Ceat were amongst those to gain, and MRF stock hit an all-time high of Rs 11,892 (£135.32) on the Bombay Stock Exchange.
An analyst in India opines that JK Tyre & Industries is currently a very good investment, and he states that shares in the company may be capable of achieving gains as high as 40 per cent over the coming half year or so. Aashish Tater, head of research at Kolkata-based Fort Share Broking, told Indian business news broadcaster CNBC-TV18 that there is a “bullish call” on the tyre sector, and he named Goodyear India and JK Tyre & Industries as the broker’s “prime picks.” Tater particularly feels that the second of these offers opportunities for investors.
In addition to reporting its financial results for the quarter ending June 30, at JK Tyre & Industries’ annual general meeting the company shared its plans to acquire natural rubber plantations in Southeast Asia. Vice-chairman and managing director Raghupati Singhania told the broadsheet DNA at the 30 July meeting that the tyre maker has identified plantations of interest in Malaysia, Indonesia and Vietnam and is “now zeroing in on them.” The company intends to source 10 to 15 per cent of its natural rubber from these plantations.
In its July 2012 report into India’s tyre industry, ICRA Research Services states that “changing revenue mix and softer rubber price” will “pay dividends.” The investment and credit rating agency observes that rubber prices have declined from their peak of around Rs 240 (£2.79) per kilogram at the start of the 2011-12 financial year (April 2011), easing to approximately Rs 195 per kilogram in November and then stabilising at between Rs 185 and Rs 200 per kilogram.
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