JK Tyre's acquisition of Cavendish Industries, gives it ownership of three plants. Dr Raghupati Singhania, CMD of JK Tyre, spoke to Shobha Mathur on the buyout giving new heft to the company and the future growth game-plan.
19 Apr 2016 | 3976 Views | By Shobha Mathur
JK Tyre has completed its acquisition of Cavendish Industries, which has three tyre plants under Birla Tyres. Dr Raghupati Singhania, chairman and managing director of JK Tyre, spoke to Shobha Mathur on how the buyout gives new heft to the company and enables it to also enter the ...
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JK Tyre has completed its acquisition of Cavendish Industries, which has three tyre plants under Birla Tyres. Dr Raghupati Singhania, chairman and managing director of JK Tyre, spoke to Shobha Mathur on how the buyout gives new heft to the company and enables it to also enter the two- and three-wheeler tyre industry.
How do you view the benefits of the Cavendish acquisition?
The benefit is that it is basically a good asset, a readymade plant with good facilities and equipment. More importantly, it has truck and bus radial capacity which is significant for us as we are leaders in this segment in the Indian market. Secondly, we get access to the two- and three-wheeler market which is a fast-growing segment.
With the total volumes going up and our widespread sales and service country-wide network, it will add to the economic distribution.
How much of the overall plant capacities have been utilised thus far?
They are three plants. At the moment, all the plants are shut for some good reason over the last couple of months. We are now starting the plants in the next 15 days and will have the first tyre rolling out of the plant. We have taken possession of the plants just three days ago, so we will start working on it now.
What is the strategy to turn around the plants?
The goal is to bring in new manufacturing processes, induct our technology, create a new work culture and improve productivity. This is how we have done in other places and this is how we will turn it around. Within one year’s time, we should be able to turn it around.
You have a target of generating a turnover of Rs 10,000 crore from the domestic business in FY’17. How much will be contributed by the new acquisition?
It is difficult to say. Maybe Rs 1,500-1800 crore will come from it.
JK Tyre now has 12 plants in India. How do you plan to further step up capacity and the product portfolio?
We have just acquired Cavendish Industries and we now need to digest it, run it optimally, make full utilisation, upgrade it and then start making money. Then we will take the next step.
Going forward, you have said that JK Tyre will grow both organically and inorganically. Is another acquisition on the radar?
Not yet. This does not bring us to an end. Our aspirations are to continue to grow, whether it is by expansion or by position.
JK Tyre has three plants in Mexico. Are you looking to expand geographically as well?
We are doing very well and have expanded one of the plants just a few months ago. The plants produce passenger car radials, tyres for trucks, tractors, LCVs and industry tyres.
The Mexican economy is doing well. Latin America and countries like Brazil were affected because of their very poor financial position but, hopefully, it will improve. We are also supplying to a number of OEMs from Mexico. Also, the Mexican peso was devalued substantially but is now stabilising.
Going forward we are looking at opportunities in select markets in Africa and South East Asia.
How is the tyre industry performing globally compared to India?
It is competitive everywhere. The question is that the ease of doing business in some of these countries is better whereas we get caught in a whole lot of infrastructure weaknesses in India.
How affected is JK Tyres with Chinese imports infiltrating Indian markets?
It is affecting us terribly. About 40 percent of the Indian truck bus radial market is Chinese and the government seems to be doing nothing much about it. We keep talking to the government about it and drawing their attention to Chinese tyre imports. But something is yet to be done.