Mumbai: India’s fourth largest tyre maker Ceat Ltd, an RPG Group company, plans to set up a tyre manufacturing plant in Bangladesh. The company, according to deputy managing director Anant Goenka, will invest about Rs 250 crore to set up the new facility.
This is one of the largest manufacturing investments in Bangladesh by an Indian firm, and the first by an Indian tyre maker. Ceat plans to employ 550 people in the first phase of manufacturing, and aims to start production by end-2013.
Bangladesh, with a population of around 160 million, imports more than 95% of its tyre requirements.
Anant Goenka. Deputy MD , CEAT
“The Bangladesh market is not large enough for a regular tyre plant. However, we have the knowledge to successfully operate plants of smaller capacity, based on our Sri Lanka experience and we plan to leverage this in the Bangladesh venture,” said Goenka, who plans to fund the investment through a mix of debt and equity.
The announcement was made after market hours. Ceat stock closed unchanged at Rs 85.85 on Wednesday on BSE even as the benchmark Sensex rose 0.48%.
Net profit of the firm declined 52.30% to Rs 2.39 crore in the quarter ended December from Rs 5.01 crore a year earlier. Sales rose 18.18% to Rs 1,048.02 crore.
Ceat plans to replicate its Sri Lanka model by setting up a small plant of 65 tonnes per day. Goenka said his firm had plans to import 80% of raw materials.
The Bangladesh plant will make cross-ply tyres for trucks, light and small commercial vehicles and two-wheelers for the local market, which is currently around Rs 1,000 crore, according to Goenka, who expects this market to grow to around Rs 1,200 crore by 2015.
“Exports to countries like Nepal and Myanmar are a possibility in the future,” he added.
The firm aims to capture 40% of the projected demand of cross-ply tyres in the region by 2015. Cross-ply tyres are different from radial or radial-ply tyres, a newer technology.
All passenger cars in India use radials and commercial vehicles too are moving in that direction.
Bangladesh imports at least 1.5 million tyres annually. Of this, around 60% come from India and the rest from China, Indonesia, Japan and Thailand.
Bangladesh does not have adequate raw materials such as carbon, rubber, chemical and yarn. Besides, it does not have continuous power supply. So tyre makers are wary of investing in the industry, say analysts.
An analyst at a domestic brokerage who declined to be identified said while it’s a good strategy to have a manufacturing unit in Bangladesh as it’s a growing market for cross-ply tyres, it would have made better sense for Ceat to use its existing facility in India that manufactures such tyres to address that market. According to him, Ceat’s facility in Bhandup, Mumbai, can make 500 tonnes of tyres per day. “With the market for cross-ply tyres dwindling in India, it was a good opportunity for them to utilize the capacity here,” he said.