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Cover Feature

Published on: July 25, 2021, 8:41 p.m.
Our subsidiaries are doing well, says Singhania
  • Raghupati Singhania: committed to innovation

By Ritwik Sinha. Consulting Editor, Business India

How do you assess the performance of JK Tyre in the past one decade in a generic sense, vis-à-vis market trends and challenges? 

JK Tyre & Industries is the flagship company of JK Organisation and is amongst the top 25 tyre manufacturers in the world. We provide end-to-end solutions across segments of passenger vehicles, commercial vehicles, farming, off-road and two & three-wheelers. From initiating its journey by producing the first radial tyre in 1977 to becoming the market leader in the truck-bus-radial segment, the company has globally benchmarked 12 ‘sustainable’ manufacturing facilities – nine in India and three in Mexico.

We commenced manufacturing two- and three-wheeler tyres in India, after the acquisition of Cavendish Industries in 2016. This made us a full range tyre company, catering to the growing two- and three-wheeler tyre industry of India. We have been committed to offering world-class products and services to our customers and consistently expanding our product portfolio not only to catering to the various segments of markets but also to achieve higher customer satisfaction.

Taking its commitment towards innovation to the next level, JK Tyre launched India’s first ever ‘Smart Tyre’ technology, which incorporate AI based Tyre Pressure Monitoring Systems (TPMS) through TREEL sensors. With a distribution network of 6,000-plus dealers and 650- plus brand shops in India, we have an extensive foothold in the domestic as well as export markets. Taking ahead our customer-first approach, we are also associated with various e-commerce platforms with the sole purpose of serving our customers through seamless connectivity.

Since 2010, you made two significant acquisitions – one in South America and the other one within the country. Have they started performing as per your expectations? How challenging has it been to integrate and align them with your long-term plans?

We acquired Cavendish Industries in 2016, at a value of Rs2,170 crore, which has proved to be a strategically important turnaround story. Since then, we have witnessed an upward graph and contribution in the overall growth of the company. The acquisition also enabled the company to enter into the fast growing two- and three-wheeler segment, a segment in which the company was not present earlier. It also saved three years of setting up a similar greenfield facility and enabled quicker penetration into the two- and three-wheeler segment.

CIL has been on an operational turnaround since its acquisition in 2016, and it has reported a revenue growth of 16 per cent to Rs2,571 crore for 2020-21. The cash profit for the year was Rs225 crore, posting a significant jump of 150 per cent. We expect Cavendish to continue a sustained improvement in sales and profitability in the coming period as well.

Similarly, JK Tyre acquired Tornel in 2008 which currently operates as a subsidiary, with distinct distribution channels across the regions of North and Latin America. The acquisition boosted our Mexico’s distribution centres, retail stores, warehouses and local sales offices.

JK Tornel, Mexico, has an excellent stronghold in the domestic market. Leveraging its brand equity, the company became the number one supplier to mass merchandisers, such as Walmart. In addition, it has significantly improved its position in LATAM markets. During the year, the company also enhanced its presence in the advanced markets of the US.

Both the subsidiaries have been performing exceptionally well and we look forward to consolidating our leadership position in the tyre market.

Despite being a leading player in a large segment like tyres, your market cap is low. Your comment...

The acquisition of Cavendish was financed by a combination of equity and loans. Immediately thereafter, economic activities, particularly in the automotive sector, started slowing down and this led to a delayed turnaround of Cavendish. Incidentally, CIL plants were shut when handed over to us. This borrowing led to a skew in our leverage, which impacts company’s market cap.

However, Cavendish is now doing well and on the path of growth, which will help us reduce our debts. Furthermore, we already plan to reduce our debt by 45 per cent in the next three years. The promising demand outlook for the industry will definitely give a much better valuation. Considering all these factors, we expect it could be the trigger point for the company re-rating ahead.

Finally, what is your outlook for JK Tyre for the next 5-10 years? Any plan to have a larger international presence – inorganic or organic?

Our focus largely remains on increasing volumes across all product segments in the replacement and export segments. Expanding the distribution channel through exclusive brand shops across India will further help us gain a significant market share. The company has plans to incur Rs200 crore to de-bottleneck our plants over the next 2-2.5 years to increase operational capacities, to be funded through internal accruals. These would enable us with sufficient operational capacities to further cater to the high demand for our products. 

By and large, we are optimistic about the upcoming years. Pent up demand post the pandemic, along with the government’s push for infrastructural and development plans and voluntary scrappage policy will help create a strong rebound in demand. 

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