JK Tyre and Industries has planned a capital expenditure of Rs 1,100 crore till next financial year, the company’s CFO Sanjeev Aggarwal said.
The tyre maker plans to invest in capacity expansion as well as regular maintenance of the existing infrastructure.
”Total spend over the next two years, ie, FY23 and FY24 would be Rs 1,100 crore, including maintenance CAPEX of around Rs 300 crore,” Aggarwal said in an analyst call.
The majority of the CAPEX — Rs 530 crore– will go into the passenger car radial (PCR) capacity expansion.
The company has also lined up the capacity expansion of truck bus radial (TBR) at its unit Cavendish Industries.
”The debottlenecking program which we had announced earlier has already been commissioned and completed. Now the projects in hand are TBR capacity expansion for Rs 236 crore and the PCR capacity expansion for Rs 530 crore.
”So, these are the two main expansion projects at this moment. Apart from this, there is the maintenance CAPEX of about Rs 150 crore on annual basis, which is Rs 300 crore for the 2-year period,” Aggarwal noted.
There is a very good demand for PCR tyres in the domestic and export markets, he added.
Aggarwal said the PCR capacity expansion at its Banmore plant in Madhya Pradesh would be funded through a mix of debt and internal accrual.
”We have been in touch with our lenders and they are quite positive that they will be able to provide sufficient amounts of loans to finance this,” he noted.
The expansion will lead to a 35 percent increase in PCR production which currently stands at around 90 lakh tyres per annum, Aggarwal said.
”The Board has approved PCR capacity expansion project for an estimated cost of Rs 530 crore at Banmore tyre plant. The proposed expansion plan along with the debottlenecking program, which has recently been commissioned, will lead to an increase in PCR capacity by 35 percent,” JK Tyre and Industries MD Anshuman Singhania noted.
The proposed expansion is expected to become operational by December 2023, he added.
On the outlook for the tyre industry, Singhania said: ”We believe there is a strong demand growth across all market segments given the improved economic sentiments, record agri output coupled with improved realization in the country, which is expected to lead to robust rural demand this year.” Further, with the expected moderation in inflationary pressures and improved geopolitical sentiments, automotive as well as tyre demand should improve further, he said.
Strong infrastructure spending by the government will continue to improve the CV segment demand in the coming years, Singhania said.
JK Tyre has a presence in over 105 countries with over 180 global distributors.