Ceat to invest Rs 3,500-4,000 cr in capex to increase production capacity by 50%

Ceat, an RPG-controlled company, is lining up investments of Rs 3,500-4,000 crore towards new capacity addition over the next three to five years.

The Mumbai-based tyre maker is enhancing capacity of passenger car radials, two-wheeler and off-highway tyres. There would be an overall jump of 50 percent in capacity post full ramp up due in FY21.

At an investor-cum-analyst meet in Mumbai, senior management led by Anant Goenka, managing director, Ceat, guided for capital expenditure of Rs 1,500 crore in FY19 and Rs 1,200-1,300 crore in FY20.

Passenger car radials is one of the key focus areas for the company. Ceat is investing about Rs 2,000 crore towards new capacity addition in this segment, which would lead to its capacity increasing from 500,000 tyres per month to 700,000 tyres per month. New capacity is expected to be on board by 3QFY20 with full ramp-up by 3QFY21, said a report from Motilal Oswal.

Ceat aims to double its car radial market share to 16-22 percent over the next 3-5 years from the current level of 8-10 percent. “As a testament to Ceat’s strong brand equity, Goenka shared that the company managed to achieve 2x its internally targeted RFQs from OEMs in FY18”, added the report.

In the two-wheeler category Ceat commands a share of 30 percent. It is targeting an investment of Rs 400 crore in two-wheeler tyre production spread over the next couple of years. This is hopes would push market share to 34 percent. Ceat’s overall capacity utilization in the two-wheeler tyres in 80-85 percent.

The categories of Truck and Bus Radials (TBR) and Off The Road (OTR) tyres will witness a combined investment of Rs 1,500 crore (Rs 1000 crore for TBR and Rs 500 crore OTR) towards new capacity addition.

“Chinese tyre imports have reduced significantly from the peak of 150,000/month to 50,000/month currently post the imposition of anti-dumping duty. CEAT was unable to benefit from the resultant increase in demand for TBR tyres due to capacity constraints”, added the Motilal report.

Ceat has a plant in Ambernath (in Thane district) with capacity of 40 tyres per day. Management plans to ramp it up to 100 tyres per day. The expansion is likely to start in the next 3-4 months and will be completed in 12–18 months thereafter. A new entrant in this segment, CEAT is pricing its products lower than other players. However, over the long term, the company plans to bring it on a par with other players, said a report from Edelweiss.