Rajratan gains from tyre demand surge, import curbs

A surge in demand for tyres, restrictions on imported tyres in India and the closure of a domestic rival bode well for

Rajratan

Global Wire, helping it achieve high utilisation levels at both its manufacturing facilities despite the pandemic and firm up plans for investing in further capacity expansion.

The Indore-based company manufactures a tyre component called bead wire, which is needed for making all types of tyres, right from bicycle to aeroplanes.

It has laid out an investment plan of Rs 320 crore for increasing the capacity of its Thailand plant by 50% to 60,000 tonnes a year and then build a new facility at Chennai with an annual capacity of 60,000 tonnes. It had increased the capacity at its

Pithampur

plant in 2019-20 to 72,000 tonnes a year.

“In five years we want to be the number one supplier of bead wire to tyre companies with a total capacity of close to 200,000 tonnes (a year) and account for 20% of the global market,” Rajratan Global Wire chairman Sunil Chordia told ET.

The bead wire manufacturing company has a combined capacity of about 110,000 tonnes a year at its Pithampur and Thailand facilities, with utilisation levels of 85-90%.

The company has also benefited from global manufacturers looking to reduce their dependence on Chinese suppliers due to trade tensions and to protect their supply chains against disasters like a pandemic, said Chordia.

“Even Chinese tyre makers in Thailand are buying from Rajratan. Enquiries have also come from Europe,” he said.

Rajratan Global Wire shares surged over 900% in the 12 months leading to August, followed by a 30% correction. The stock closed at Rs 1,852.7 per share on the BSE on Monday, down 5% over the previous closing.

In India, demand for bead wires shot up in tandem with the rise in demand for tyres as the Covid-19 lockdowns were gradually lifted last year. Restrictions on import of tyres from overseas, mainly China, also helped the domestic industry.

Aradhya Steel, a local competitor of Rajratan Global Wire, went out of business last year and that also helped the company gain incremental business, said Chordia.

These factors helped the company post 14% growth in revenue and 60% growth in profit in 2020-21 despite the pandemic washing away business in the first quarter. For the April-June quarter, the company reported a profit of Rs 22 crore on revenue of Rs 182 crore.

Given the recent demand surge, the company was also able to pass on the increased input costs to its customers.

( Originally published on Aug 24, 2021 )