Mumbai: German tyre maker Continental AG has signed an agreement to buy the tyre unit of Modi Rubber Ltd , Continental said on Monday.
It did not disclose financial details, and said the completion of the deal to acquire Modi Tyres Co Ltd “depends on the fulfillment of several conditions”.
Shares in Modi Rubber shot up 10%, its daily limit, to Rs 75.35 on the Bombay Stock Exchange.
Continental, the world’s fourth largest tyre maker with reported sales of €26 billion ($37.5 billion) in 2010, said Modi Tyres would become a fully owned subsidiary and would focus on local production and distribution of radial truck and bus tyres as well as radial car tyres.
“This development underlines Continental’s commitment to the Indian market and is part of the company’s strategy to invest in growing markets in Asia for its core businesses,” it said in a statement.
Auto sales in India grew a record 30% in 2010/11 to 1.98 million units, driven by a burgeoning middle class in Asia’s third-largest economy, easier access to loans and a wider choice of models.
But higher input costs and interest rates are seen crimping demand for cars and sales growth is expected to more than halve in 2011/12 to 12-15%.