We want to be market leader in 2wheeler space: Anant Goenka, MD, Ceat Tyres
At a time when companies such as Apollo Tyres and JK Tyre are scouting for acquisitions abroad, Ceat is focusing on domestic business fundamentals with a perceptible shift in focus to the passenger vehicle segment.
Ceat, the flagship company of RPG Group, is eying leadership position in the passenger vehicle space In the coming years, especially in two-wheelers.
At a time when companies such as Apollo Tyres and JK Tyre are scouting for acquisitions abroad, Ceat is focusing on domestic business fundamentals with a perceptible shift in focus to the passenger vehicle segment.
In an interview with ET's Ketan Thakkar and Satish John, Ceat MD Anant Goenka speaks about organic growth and how the company has been making big strides in the two-wheeler business. Edited excerpts:
Are you focussing more on the two-wheeler segment?
We have consciously differentiated ourselves in the passenger vehicle space, especially two-wheelers.We feel this is the segment where we can grow faster. It is an inherent area of strength for us, and the margins too are better here.
How differently have you approached the two-wheeler business?
We have strengthened our distribution network by adopting an FMCG model of dealing directly with distributors instead of dealers as the ticket size is small. As far as marketing is concerned, we focus a lot on safety and grip.
As a critical input from marketing research, we have introduced “puncture safe“ technology, where a user can continue to ride for hundreds of kilometres despite a puncture.
How critical is this segment?
It is a large segment, and over 25 per cent of our revenues come from the two-wheeler business.
Four years ago, it was about 10-12 per cent, and has now more than doubled. We were selling about 2.5 lakh two-wheeler tyres a month then, now we sell almost 1.2-1.3 million tyres.
What are your aspirations in the two-wheeler space and would it require any investment?
We want to be the market leader. The number one player, according to our estimates, has a 35 per cent market share. We would be number two with 28 per cent, and the next would be about 25-26 per cent market share. We have set up a huge capacity, and have added a new plant n Nagpur for about Rs 400 crore, which came on stream early this year.
We will be ramping that up to full capacity in about a year from now. The plant will almost double our capacity from 13 lakh tyres to about 25 lakh tyres.
You have, as a company, focused on organic growth, whereas your peers have gone for overseas acquisitions. Is it a conscious decision?
Strategically, we have been wanting to grow in our core area -India. We are in a position where our debt-equity is comfortable; earlier the debt-equity was 2:1, now it is at 0.3:1. Even at a peak of investments, it can go up to 0.5:1. So, we are currently in a very comfortable debt-equity situation.
We have the resources to look at international acquisitions, but we are not actively looking at them. We will not go in for a $100-200-million acquisition --we will go for technology acquisitions and the cost of acquiring a technology is that much.
With macro factors looking favourable, how do you see the next few years?
I am positive about the future -private investment will pick up in 6-12 months. We are at a very comfortable economic and fiscal situation.
From a value level, the compounded annual growth rate over the past few years would have been 3-4 per cent and volume would have grown by 6-7 per cent. For Ceat, the speed of growth has been little better than the industry.
Can you elaborate on your capex plans for the coming years?
We have a routine capex plan of Rs 100 crore every year, which goes into products and enhancement or upgradation of existing plants. Besides, we have a Rs 1,500 crore, which is going into fresh capex of capacity expansion.
We are investing a part of this Rs 600 crore will go into in the Halol plant. Another Rs 900 crore is for Nagpur, Baroda and Ambernath plants. In less than a year's time, we would have spent this money.
At a time when companies such as Apollo Tyres and JK Tyre are scouting for acquisitions abroad, Ceat is focusing on domestic business fundamentals with a perceptible shift in focus to the passenger vehicle segment.
In an interview with ET's Ketan Thakkar and Satish John, Ceat MD Anant Goenka speaks about organic growth and how the company has been making big strides in the two-wheeler business. Edited excerpts:
Are you focussing more on the two-wheeler segment?
We have consciously differentiated ourselves in the passenger vehicle space, especially two-wheelers.We feel this is the segment where we can grow faster. It is an inherent area of strength for us, and the margins too are better here.
How differently have you approached the two-wheeler business?
We have strengthened our distribution network by adopting an FMCG model of dealing directly with distributors instead of dealers as the ticket size is small. As far as marketing is concerned, we focus a lot on safety and grip.
As a critical input from marketing research, we have introduced “puncture safe“ technology, where a user can continue to ride for hundreds of kilometres despite a puncture.
How critical is this segment?
It is a large segment, and over 25 per cent of our revenues come from the two-wheeler business.
We have a routine capex plan of Rs 100 crore every year, which goes into products and enhancement or upgradation of existing plants. Besides, we have a Rs 1,500 crore, which is going into fresh capex of capacity expansion.
Four years ago, it was about 10-12 per cent, and has now more than doubled. We were selling about 2.5 lakh two-wheeler tyres a month then, now we sell almost 1.2-1.3 million tyres.
What are your aspirations in the two-wheeler space and would it require any investment?
We want to be the market leader. The number one player, according to our estimates, has a 35 per cent market share. We would be number two with 28 per cent, and the next would be about 25-26 per cent market share. We have set up a huge capacity, and have added a new plant n Nagpur for about Rs 400 crore, which came on stream early this year.
We will be ramping that up to full capacity in about a year from now. The plant will almost double our capacity from 13 lakh tyres to about 25 lakh tyres.
You have, as a company, focused on organic growth, whereas your peers have gone for overseas acquisitions. Is it a conscious decision?
Strategically, we have been wanting to grow in our core area -India. We are in a position where our debt-equity is comfortable; earlier the debt-equity was 2:1, now it is at 0.3:1. Even at a peak of investments, it can go up to 0.5:1. So, we are currently in a very comfortable debt-equity situation.
We have the resources to look at international acquisitions, but we are not actively looking at them. We will not go in for a $100-200-million acquisition --we will go for technology acquisitions and the cost of acquiring a technology is that much.
With macro factors looking favourable, how do you see the next few years?
I am positive about the future -private investment will pick up in 6-12 months. We are at a very comfortable economic and fiscal situation.
From a value level, the compounded annual growth rate over the past few years would have been 3-4 per cent and volume would have grown by 6-7 per cent. For Ceat, the speed of growth has been little better than the industry.
Can you elaborate on your capex plans for the coming years?
We have a routine capex plan of Rs 100 crore every year, which goes into products and enhancement or upgradation of existing plants. Besides, we have a Rs 1,500 crore, which is going into fresh capex of capacity expansion.
We are investing a part of this Rs 600 crore will go into in the Halol plant. Another Rs 900 crore is for Nagpur, Baroda and Ambernath plants. In less than a year's time, we would have spent this money.
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