ET NowIn a chat with ET Now, Raghupati Singhania, CMD, JK Tyres, talks about the acquisition of Cavendish Industries. Excerpts:
ET Now: Give us the details of the Cavendish acquisition.
Raghupati Singhania: The details of the deal are simple. Birla Tyres wanted to sell off this asset. The has 10 lakh capacity in tyres, tubes and flaps. That is where we got in and made a bid. Then we negotiated and did due diligence.
The process took a long time because parallely we had to go through the CCI approval as well. Finally on last Friday we were able to take over the plant.
As far as the money is concerned, it is a Rs 2,195-crore deal. Rs 700 crore of it is equity, and Rs 1,495 crore is debt. That is being structured in different companies. The whole equity has been bought by JK Industries and its associates.
ET Now: What synergies have you found between you and Cavendish? As for combined revenue, what is the target for the next financial year? Where does this deal stand you in terms of tyre manufacture in India?
Raghupati Singhania: There are huge synergies, particularly in terms of truck radials. We were always the leaders there. Our board was already considering another expansion of the Chennai or Vikrant plant to enhance our truck radial capacities. In the mean time, this deal came about. So, from that angle, it is a fantastic opportunity.
There is 12-lakh readymade capacity currently. So we now have very good access there. Secondly, we will get the opportunity for entering the growth sector — two and three wheelers. As a company we have long been thinking about that and playing with various ideas.
Thirdly, we get an access to North India, as this plant is located in Uttrakhand. Fourthly, with volume increase, the denominator always goes up and along with that, raw material procurement. With this help, you can strike economies of scale.
Last but not least, we have a well-established sales and distribution infrastructure across India. There again, we will have the advantage of a volume cut. You can use that infrastructure to your advantage.
ET Now: What are the major challenges do you see for the tyre industry in the current financial year? What is your overall target?
Raghupati Singhania: The tyre industry is but a part of pan-Indian economic activity. It is a derived-demand product. If the economy grows, there will be more transportation — more manufacturing and goods transported in the country. Along with that, the tyre industry will also flourish.
ET Now: Give us the details of the Cavendish acquisition.
Raghupati Singhania: The details of the deal are simple. Birla Tyres wanted to sell off this asset. The has 10 lakh capacity in tyres, tubes and flaps. That is where we got in and made a bid. Then we negotiated and did due diligence.
The process took a long time because parallely we had to go through the CCI approval as well. Finally on last Friday we were able to take over the plant.
As far as the money is concerned, it is a Rs 2,195-crore deal. Rs 700 crore of it is equity, and Rs 1,495 crore is debt. That is being structured in different companies. The whole equity has been bought by JK Industries and its associates.
ET Now: What synergies have you found between you and Cavendish? As for combined revenue, what is the target for the next financial year? Where does this deal stand you in terms of tyre manufacture in India?
Raghupati Singhania: There are huge synergies, particularly in terms of truck radials. We were always the leaders there. Our board was already considering another expansion of the Chennai or Vikrant plant to enhance our truck radial capacities. In the mean time, this deal came about. So, from that angle, it is a fantastic opportunity.
There is 12-lakh readymade capacity currently. So we now have very good access there. Secondly, we will get the opportunity for entering the growth sector — two and three wheelers. As a company we have long been thinking about that and playing with various ideas.
Thirdly, we get an access to North India, as this plant is located in Uttrakhand. Fourthly, with volume increase, the denominator always goes up and along with that, raw material procurement. With this help, you can strike economies of scale.
Last but not least, we have a well-established sales and distribution infrastructure across India. There again, we will have the advantage of a volume cut. You can use that infrastructure to your advantage.
ET Now: What are the major challenges do you see for the tyre industry in the current financial year? What is your overall target?
Raghupati Singhania: The tyre industry is but a part of pan-Indian economic activity. It is a derived-demand product. If the economy grows, there will be more transportation — more manufacturing and goods transported in the country. Along with that, the tyre industry will also flourish.
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