JK Tyre revives Rs 11 bn investment plan
ECONOMY & POLICY

JK Tyre revives Rs 11 bn investment plan

JK Tyre and Industries, the flagship entity of the JK Group, has rekindled its Rs 11 billion investment strategy, which had been deferred in 2018 due to a downturn in macroeconomic indicators. The company is now aggressively positioning itself to capitalise on the burgeoning demand for tires within India.

Dr Raghupati Singhania, Chairman and Managing Director of JK Tyres, highlighted in a post-result conference call that the capital expenditure will be bolstered through a combination of debt and equity. Recently, the company secured Rs 2.4 billion from IFC, a division of the World Bank Group, with a specific focus on investments in the private sector across emerging markets like India. Dr Singhania expressed the aim of attracting more such investments in the upcoming months, reiterating his optimistic outlook on the company's performance. He further underscored that a favourable monsoon, positive economic growth projections, and an impetus on infrastructure development will serve as growth catalysts moving forward.

JK Tyres' investment initiative signals a growing confidence in India's automotive sector. The industry is projected to experience a Compound Annual Growth Rate (CAGR) of 8-10 per cent over the next several years, propelled by factors including escalating demand for passenger vehicles, commercial vehicles, and two-wheelers.

As of a June update from ICICI Securities, a research analyst firm, JK Tyres' Chennai plant currently boasts a production capacity of 330 tonnes per day, enabling the manufacturing of 4.85 million passenger car radial tires and 1.2 million truck, bus, and radial tires annually. The cumulative capital expenditure invested in the plant amounts to Rs 25 billion. In the fiscal year 2022-23, the plant achieved revenue of Rs 28 billion, with TBR (Truck, Bus, and Radial) contributing around 40 per cent of the total. JK Tyres holds the position of the second-largest domestic TBR manufacturer, commanding a market share of 28 per cent.

The company's forthcoming plans encompass an investment of Rs 8 billion in capital expenditure to augment the capacities of its Banmore and Haridwar facilities during FY24-FY25, thereby contributing to an annual capital expenditure of Rs 5 billion during the stated period, inclusive of maintenance-related expenditure.

Renowned as a leading tire manufacturer in the nation, JK Tyres currently operates twelve manufacturing units with an aggregate capacity of 33 million tires. The utilisation rate for Q1 FY24 stood at 85 per cent. Segment-wise, the company's tire capacity includes 3.7 million radial tires and 2.3 million bias tires for trucks and buses. Passenger car radial tire capacity is set at 14.5 million, while two-wheeler and three-wheeler tire capacity reaches 7.9 million.

The strategic choice of JK Tyres to fund its capital expansion through a combination of debt and equity underscores its confidence in the promising trajectory of the Indian tire industry. The overall investment strategy of JK Tyres is ambitious yet opportune. According to a report by the Automotive Tyre Manufacturers' Association (ATMA), based on an extensive study by CRISIL Market Intelligence and Analytics (MI&A) Consulting, the Indian tire industry is poised to more than double its revenue to $22 billion by fiscal 2032, up from $9 billion in FY 2022.

JK Tyre and Industries, the flagship entity of the JK Group, has rekindled its Rs 11 billion investment strategy, which had been deferred in 2018 due to a downturn in macroeconomic indicators. The company is now aggressively positioning itself to capitalise on the burgeoning demand for tires within India.Dr Raghupati Singhania, Chairman and Managing Director of JK Tyres, highlighted in a post-result conference call that the capital expenditure will be bolstered through a combination of debt and equity. Recently, the company secured Rs 2.4 billion from IFC, a division of the World Bank Group, with a specific focus on investments in the private sector across emerging markets like India. Dr Singhania expressed the aim of attracting more such investments in the upcoming months, reiterating his optimistic outlook on the company's performance. He further underscored that a favourable monsoon, positive economic growth projections, and an impetus on infrastructure development will serve as growth catalysts moving forward.JK Tyres' investment initiative signals a growing confidence in India's automotive sector. The industry is projected to experience a Compound Annual Growth Rate (CAGR) of 8-10 per cent over the next several years, propelled by factors including escalating demand for passenger vehicles, commercial vehicles, and two-wheelers.As of a June update from ICICI Securities, a research analyst firm, JK Tyres' Chennai plant currently boasts a production capacity of 330 tonnes per day, enabling the manufacturing of 4.85 million passenger car radial tires and 1.2 million truck, bus, and radial tires annually. The cumulative capital expenditure invested in the plant amounts to Rs 25 billion. In the fiscal year 2022-23, the plant achieved revenue of Rs 28 billion, with TBR (Truck, Bus, and Radial) contributing around 40 per cent of the total. JK Tyres holds the position of the second-largest domestic TBR manufacturer, commanding a market share of 28 per cent.The company's forthcoming plans encompass an investment of Rs 8 billion in capital expenditure to augment the capacities of its Banmore and Haridwar facilities during FY24-FY25, thereby contributing to an annual capital expenditure of Rs 5 billion during the stated period, inclusive of maintenance-related expenditure.Renowned as a leading tire manufacturer in the nation, JK Tyres currently operates twelve manufacturing units with an aggregate capacity of 33 million tires. The utilisation rate for Q1 FY24 stood at 85 per cent. Segment-wise, the company's tire capacity includes 3.7 million radial tires and 2.3 million bias tires for trucks and buses. Passenger car radial tire capacity is set at 14.5 million, while two-wheeler and three-wheeler tire capacity reaches 7.9 million.The strategic choice of JK Tyres to fund its capital expansion through a combination of debt and equity underscores its confidence in the promising trajectory of the Indian tire industry. The overall investment strategy of JK Tyres is ambitious yet opportune. According to a report by the Automotive Tyre Manufacturers' Association (ATMA), based on an extensive study by CRISIL Market Intelligence and Analytics (MI&A) Consulting, the Indian tire industry is poised to more than double its revenue to $22 billion by fiscal 2032, up from $9 billion in FY 2022.

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