JK Tyre Aims Big - Plans A Capital Expenditure of INR 1100 Crore For The Next Two Financial Years
Published On 31-May-2022
The tyremaker will invest this amount in the maintenance of infrastructure and capacity expansion.
The homegrown tyre brand JK Tyre has decided to put a capex of INR 1100 crore till the end of the next financial year. During an analyst call, Sanjeev Aggarwal, CFO said that the expenditure includes INR 530 crore to expand the production capacity of the passenger car radial, while the INR 300 crore will be spent on the maintenance. The capex also includes around INR 240 crore for increasing the production capacity of truck bus radial (TBR) at its subsidiary Cavendish Industries.
Debottlenecking and expansion
The move of the company is commissioned under the debottlenecking programme, which it has announced earlier in 2021. The process will improve efficiency and performance in the manufacturing facilities by identifying overall conditions related to operating parameters and system settings. The boost in the tyre capacity will lead to around a 35 per cent increase in the passenger car radial (PCR) production, which is presently about 90 lakh tyres annually.
The funding for expanding the production at the Banmore manufacturing facility in Madhya Pradesh will come through a combination of internal accrual and debt. The company is currently in talks with the lenders and said they are positive about providing a loan to finance this process. According to MD Anshuman Singhania, the Board has approved the Banmore capacity expansion, projected at INR 530 crore and will become operational by the end of 2023.
Positive growth outlook
On asking about the outlook of the tyre industry, Singhania, MD, JK tyre, said that the company is optimistic about the strong surge in demand across the categories and with better economic sentiments, high agricultural output with improved realisation in the country would lead to solid rural demand in FY2022-23.
Moreover, with the expected control of the inflation and improved geopolitical sentiments, the tyre industry and automotive, as a whole, have high chances of bouncing back. Singhania further stated that robust spending on the infrastructure by the government will further improve the demand in the commercial vehicle segment in upcoming years.
Recently at Excon 2021, the company launched four new tyres in a move to expand the OTR (Off-the-road) tyre segment. The tyres come with high mileage, traction and durability, and are best suited for heavy-duty tippers involved in harsh operating conditions.
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