To invest Rs 1100 cr for expansion: JK Tyres

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Arun Bajoria , President of JK Tyre & Indu stries informs that India is witnessing a robust economic growth and taking a cue from it, JK Tyres has announced major expansion plans and are looking to invest Rs 1,100 crore.

Excerpts from the exclusive interview with Arun Bajoria:

Q: Would you take us through your expansion plans?

A: This is a robust economic growth, which is being witnessed by all in India and with the unparalleled boom in the Indian automobile industry, the whole thing is also showing a rub-off effect on the Indian tyre industry. We have taken a cue from it and therefore JK Tyres, which is one of the leading tyre manufacturers, has announced major expansion plans and we are looking at investing Rs 1,100 crore, which will be raised through internal accruals and debts.

Q: Can you give us an idea of how much money would you intend to raise via debt and have you tied up any funding so far?

A: Yes, we are in the process of doing that. I would not say that we have achieved the financial closure, but certainly, we are doing that and we will do it within the norms of the debt equity.

Q: Of the Rs 1,100 crore, have you decided how much could be debt?

A: As I said, we will not exceed the acceptable norms in the industry of debt equity, which is 1:1.5 or 1:2.

Q: Is that what your debt equity ratio will be like at the end of 2010 as well, 1 is to about 1.5?

A: Yes, we are aiming to make it less than 2.

Q: Since you are going on this massive expansion drive, could you also quantify for us how you see rubber prices moving because our understanding is that prices have cooled off by about 15% from June of last year? How do they stand right now and how do you see them going ahead for the next couple of years?

A: Rubber prices essentially at this point of time are about Rs 74-75; I am taking one particular type of rubber, which is RSS4, and for the next three months, I think they should be in the band of Rs 74-75 to Rs 80.

Q: Once all this expansion comes on stream and assuming you are operating at 100% capacity utilization, how much do you think your turnover might go into FY08-FY09 and then eventually FY10?

A: Well, we have plans to achieve a turnover of over Rs 5000 crore in the year 2010, I mean in three years from now (year ending September 30th, 2007). We will be around Rs 3,500 crore anyway this year. So, another Rs 500 crore every year is a very reasonable expectation from JK Tyres.

Q: You said rubber prices prevailing at about Rs 75 a kg. But we also have seen an uptick in crude prices, which are used for processing. Overall on the margin picture, which has prevailed in the 7.6-7.9% band, how would you expect them to pan out further?

A: When you say margins are 7.6 to 7.9, are you referring to EBITDA?

Q: Yes. Would you hope to be able to maintain these? Is there any pressure coming in or can you better them?

A: Well I am sure we are aiming to better them.

Q: Can you give us a range?

A: The range of April to June, which has just ended, we should be close to 10%.