Gujarat Special: Ceat outlines thrust areas for 2013-14

Tyre major’s OE business recorded a 30 percent hike in 2012-13 and going forward, the company hopes to boost business in two-wheelers and exports, says Brian de Souza.

Ceat, the tyre making company which is part of RPG Enterprises, says its OE segment business grew by 30 percent despite the sluggish conditions that prevailed in the passenger and commercial vehicle sectors in the just-concluded financial year.

In an interview with Autocar Professional, managing director AnantGoenka says the company’s utility vehicle business had grown in the year riding on UV growth of over 50 percent as per SIAM estimates, while the tyre replacement market had been generally sluggish recording a growth of five percent. During the year, the company signed on a slew of new players including Royal Enfield, Yamaha Motor India and Bajaj Auto and in the four-wheeler segment, Nissan Motor India.

Goenka says the company has been able to consolidate its position in two-wheelers and will continue to make investments to build a stronger brand. During the year, adds Goenka, the company was able to increase its share of business with the likes of automotive majors like Mahindra & Mahindra as well as Tata Motors. Ceat kicked off its supplies to Bajaj Auto in November last year. In the CV sector, the company supplies tyres to the Ashok Leyland Dost as well as products from Mahindra & Mahindra and Tata Motors.

On the export front, sales are up 10 percent, thanks to increased exports to South East Asia, Africa and Latin America. The Latin America market has been through a tough phase due to its dependence on Spanish banks but the area has seen improvement and that is what the company is keen to leverage, going forward, Goenka explains. Going forward, Goenka says the company is looking the tap the OE market for bikes as well as the replacement market for both bikes and UVs which are expected to grow faster than other sectors.

On the sales front, Ceat also plans to increase its channel presence as well as increase brand spending. While Goenka will not put a figure to the amount that is allocated for the purpose, he says the company typically spends on average in the region of about 30 percent of its sales turnover on advertising.

The company is also keen to enhance its export profile and the markets that have been identified in terms of their importance include Indonesia, East Africa, the Middle East and Latin America in that order. While the company has been able to leverage the low rubber costs, the prices are expected to be low as demand has fallen and the Chinese market is going through a weak phase, Goenka remarks.

Ramp up at Halol plant
Meanwhile, Ceat is ramping up capacity at its Halol, Gujarat plant to cater to new and existing clients. While the Rs 650-crore unit has a 150-tonne capacity, Goenka reveals that the plant has been functioning at 115 tonnes. The aim is to take this up to 135 tonnes in two to three months. The Halol plant is the Group’s only radial tyre plant (Ceat has three plants in India and one in Sri Lanka) and had started its innings at about 30-40 percent utilisation.

Goenka says that the experience of setting up base in Gujarat has been very positive, right from getting special permissions for water and power, and also the quality of labour force which is productive. During the last quarter of 2012-13, Ceat also made an additional investment of Rs 26.99 crore in Ceat Bangladesh. It has entered into a joint venture agreement with the AK Khan & Company, Bangladesh to establish Ceat Bangladesh. While Ceat has 70 percent equity capital of the JV company, the balance 30 percent is held by the JV partner.

The company hopes to achieve a 40 percent market share by 2016 after the plant becomes operational by the second half of 2014-15. The JV will produce bias tyres for the truck, light commercial vehicle, and two- and three-wheeler segments. The plant will have a capacity of 110 metric tonnes per day in phases.

In a recent presentation to investors, Ceat said that one of its growth drivers will be its entry into semi-urban and rural areas. On the HR front, it has introduced a voluntary retirement scheme for employees of its Bhandup unit, near Mumbai, with 188 employees opting for it. The compensation in this respect aggregates Rs 1.37 crore.