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BE Corporation

“All we are asking for is a level playing field”
Issue Date - 24/11/2011
B&E: MRF has become the first Indian tyre company to cross the turnover of Rs.100 billion in one year. In fact, the company has registered growth in excess of 30% during the financial year ending September 30, 2011. So, how do you plan to keep pace with the rising demand in the near future, both in the aftermarket and from OEMs (original equipment manufacturers)?
Koshy K. Varghese (KKV): We have been growing at a CAGR of over 30% for the last two years, and Rs.100 billion turnover is something we are really proud of, because we are the first Indian tyre company to achieve this. However, this fiscal might not be as good as the last one, primarily because the raw material prices have gone up sharply over the last one year. As far as rising demand is concerned, the company has been investing Rs.9-10 billion annually in new plants for the last few years. In fact, we are in the process of setting up a new plant with an investment of Rs.8 billion in Trichy which will start operations by early 2012. Post the commercial operation, this new plant in Tamil Nadu will add 15% to the overall turnover of the company.

B&E: MRF is reportedly considering several overseas acquisition options. Is the decision triggered by the rising prices of raw materials in the country?
KKV: We may look at acquiring plants outside India. We have not come across anything as yet. If we do get we will definitely acquire. But it will not be just to offset the rising costs of raw materials. We are looking at it as a tool to increase our turnover. Further, as a company which has a global footprint – today exports are about 10% of our total sales – it is good to a look at options of having manufacturing bases outside the country. Therefore, we will definitely go for an acquisition if a good opportunity comes up. But it has to make business sense and fit into our overall strategy.

B&E: Industry players have been requesting the government, for long now, to make changes in the import duty structure in order to make the industry more competitive. Do you see it happening in the near future?
KKV: All we are asking for is a level playing field. In a scenario where you can import a tyre by paying a 7% duty, the import of natural rubber attracts a hefty 20% duty. Considering that the tyre industry is not the only consumer of natural rubber and it is consumed by many other industries as well, we have been requesting the government to bring down the duty on natural rubber at 7% to give a level-playing field to the Indian manufacturers. No doubt, there is a shortage of natural rubber in the country, but it is available in abundance in several international markets, and we can surely take advantage of it.

B&E: So how do you plan to take control of the situation amidst the rising raw material prices which have been hurting margins of tyre manufacturers for over a year now?
PB: We may look at rubber estates overseas to bring down cost. Today most of the rubber that we procure is either bought domestically or we import rubber but if we could manage rubber estates abroad, we can take advantage. In fact, the company could look for good options in countries like Thailand, Cambodia and Vietnam, the leading producers of natural rubber in the world.



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