Chennai: MRF Ltd, a maker of automobile tyres, has halted all expansion that includes building a Rs900 crore factory in Tiruchirappalli, Tamil Nadu, and a Rs150-250 crore facility for supplying to defence sectors near its factory in Medak, Andhra Pradesh.
The decision has come at a time when most automobile companies are reporting declining sales, cutting production and slowing expansion on the back of an economic slowdown.
Cautious approach: An MRF franchise in New Delhi. The tyre maker hopes exports and replacement markets will counter the slowdown. S. Burmaula / HT
“We are holding all expansion plans. Capex plans need to be deliberated before we spend. So, one has to be careful. We are waiting and watching,” said executive vice-president, marketing, Koshy K. Varghese.
MRF had capital expenditure plans of around Rs500 crore for the current fiscal and would have included expansion of its six factories at Tiruvottriyur, Arakkonam (both in Tamil Nadu), Pondicherry, Medak, Kottayam in Kerala, and Goa. All of this has now been shelved. The company follows an October to September fiscal year.
Rating company Credit Ratings Information Services of India Ltd expects the slowdown in the automobile sector to continue till 2009-10, which was caused mainly due to “difficult financing conditions and rising cost of ownership”.
MRF sees export and replacement markets countering the effects of the slowdown and is looking at South East Asia, Africa and the West Asia.
Though the company posted an increase in net sales in the first quarter of its fiscal year (October-December) to Rs1,351.30 crore against Rs1,155.57 crore in the same quarter of the previous fiscal, it reported net loss of Rs38.30 crore for the quarter as against profit of Rs51.75 crore .
The company’s scrip ended on Wednesday at Rs1,631, down 1.13%, on a day the benchmark Sensex index of the Bombay Stock Exchange rose by 0.57% to 9,201 points.