Ceat Tyres plans price hike to beat rising input cost

KJ Rao , CFO, Ceat Tyres , said the High court has cleared the restructuring proposal. The company is seriously discussing the matter of increase prices of tyres, he said.

Excerpts from CNBC-TV18’s exclusive interview with KJ Rao:

Q: The big news really is about you hiking prices. Also, rubber prices have reached a high as well. Compared to their price of about Rs 90 per kg in Q2, they are currently at Rs 95 per kg. How much of that would translate into a hike in prices per tyre?

A: The cost-pushes in raw material prices especially in rubber, even international prices are also going up, coupled with increase in crude  prices is really a matter of concern. Currently, we have not yet increased the market price of tyres. We are working out on various options like change in the market mix etc. We are doing pretty well in the export market. Some of these initiatives are quite favourable for us. Nevertheless, we are seriously discussing the matter of increase prices of tyres.

Q: How much would be the range?

A: It will not be an increase for all the tyres or tubes. It is going to be more specific, product-wise. We have not yet decided that. Perhaps in the next few weeks, we will come out with that.

Q: What kind of capacity expansion are you looking at for your passenger radials and the alliance that you were seeking for an international truck radial maker?

A: The capacity increase has just been completed in our Nasik plant. We were having a capacity of around 45,000 tyres per month and that is going to 65,000-70,000 tyres per month. We have started production on the passenger car. We are looking for a tie-up for the truck and bus radial tyres, which is an international technology tyre. We are also examining the option of going with some of the technical expertise group available in the international arena. We are evaluating some of these options very actively. Perhaps in the next few weeks, we would conclude that and go forward with working out the project details.

Q: How much headroom do you have for price escalation across whatever segment you might want to look at, given the fact that otherwise it could tip in favour of Chinese imports that we see?

A: Yes, we do not have much headway in that. While material prices are up, we will not be able to go beyond 2-3%. It will not be much. In the tyre industry, the product mix plays a very vital role in topline as well as bottomline. That is the key. We are looking at some of these initiatives, so that we keep it at the bare minimum if at all we come out an increase.

Q: Can you update us on the restructuring of the business that you are looking to complete by January with the investment portfolio being on one wing and the core business on the other?

A: I am happy to announce that the Mumbai High Court has cleared the scheme of restructuring. There are no amendments or changes there. The judgment has been delivered last Friday. Now, we will have to complete the formalities of some of these actions, which are to be implement primarily. To go for a delisting first and then come out with a listing of both Ceat as well as CHI Investments.

The exchange ratio is 75:25. For every 100 shares held by Ceat, investors will get 75 shares in Ceat and 25 in the investment company. All this should be in place in the next 6-7 weeks.