Ceat Tyres Ltd is the flagship company of RPG Group. This company announced Rs 1200 crore fresh investment into the expansion of bus and truck radial tyres on Wednesday, even as the pandemic's second wave has created a minor disruption.
The new investment of above Rs. 3500 crore is approved by the board, which was announced a few years ago by the company. A part of this money will go into expanding the old plant in Halol, Gujarat, and the rest investment will be used in Chennai to set up a brownfield facility (company's base for radial tyres of cars).
Anant Goenka is the MD of Ceat Tyres, who told ET that the truck radial facility in Halol, Gujrat, on the outside of Baroda is expected to begin in a year's period. The company has taken approval from the board for a new capacity because it would need this facility in 18 months.
"We have got a lot ambitious, and of course the growth of the market has also supported us. We are registering a rate of health growth because the utilisation level is growing continuously. We have approval from the board, that's why we are preparing ourselves for the future", added Goenka.
This amount of Rs 1200 crore will be used in two phases. Approximately half will be invested right now in the first phase, and the second half will be funded when the market picks up, added Ceat Ltd.
The company gave a capex of Rs 1000 crore for FY-22. This capex will go into car radials, speciality tyre segments, specific projects and truck radials.
Goenka claims that the company was able to outpace the market over some last years because of the past capacities. And this new investment would be helpful to the company to sustain this growth once the market improves in the second half of FY-22.
Despite the expansion by this company, the MD of this company said the Ceat Tyres had not lost sight of financial efficiency. The debt of this company has been reduced by Rs 150 crore in the last year and has improved the equity ratio of debt of the company.
The company delivered a strong performance of earnings for FY-21. The revenue posting growth at Rs 2290 crore was 45%, with a net profit at Rs 153 crore. The EBIDTA margin of this company slipped to 11.7 % due to the current spurt in commodity prices.
"Towards the following part of the year, there was some erosion in gross margins due to an increase in commodity prices which had prompted us to take a little increase in value. High commodity prices and this pandemic situation remain a wide concern on OEM and demand. The vaccination drives us to remain bullish on the market from a medium to long-term perspective," added MD of Ceat Ltd.
In the following, Goenka said that demand was robust till about 15th April - companies were performing at 90% but up the last 20-25 days has created a lot of uncertainties with companies as well as retailers and retail shops were shutting down. After the first wave, the second wave affected the rural area's market too.
He said that the company would be reproduced on the lower side in line with demand.
Ceat Q4 net profit jumps 196% to INR 153 crore.
Before one year ago, in the same quarter, the consolidated revenue of the company stood at Rs 2290 crore in Q4 FY-21, up 45% as against Rs 1573.41 crore.
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