CEAT Kelani to pump Rs 3B into tyre industry

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By 2018-01-12

By Zohara Ghaffoor

CEAT Kelani Holdings, an India – Sri Lanka joint venture, will pump Rs 3 billion for the enhancement of its manufacturing capacity, innovation and exports, thereby bolstering Sri Lanka's tyre industry.
CEAT Kelani Holdings Chairman Chanaka de Silva speaking at a press briefing yesterday said the money will be allocated to construct a state-of-the-art plant in Kelaniya for the manufacture of Truck Bus Radials (TBRs), which he said would be the first ever domestic production of TBRs.

Speaking to Ceylon FT, De Silva said the company is also on the verge of exporting Sri Lanka's 1st ever Pneumatic Tire order. He said containers will be shipped next month.

The Chairman further noted however that the Rs 3 billion will come in gradually over the next 2 years while required machinery has already been purchased from Europe. He said the return on investment will come in at 6 to 8 years.
With this infusio, the company will see a substantial increase in sales in the next 3 years over the Rs 10.5 billion it achieved in 2016-2017, he added.

The funding will come in from 70% of the company's equity borrowing and 30% internal funds, the panel said.

Speaking of the FTA between Sri Lanka and India, he said the company is benefitting tremendously, as it is enjoying duty free tyre exports to India.

Further he said the new project will save the country foreign exchange as the country imported apprx US$ 50 million worth of tyres each year from different brands. He said tyre imports will start reducing, and the country will have a noteworthy import substitution.
According to the Chairman, 65% of its total production is locally consumed and the balance 35% is exported.
"We export to 14 countries and intend to expand further. Our key markets are India, Egypt, the Philippines, South Asia, the Middle East, Africa and the Far East," he said. "The rubber production in the country is going down unfortunately. However, we are managing at the moment. We are still buying our rubber from Sri Lanka."

He said it was a great advantage as many other countries had to import their primary raw material, rubber. However he said 50% of the raw material was still imported from other countries.
Through this infusion CEAT Kelani's Passenger Car Radial (PCR), Van and SUV radial tyre and Motorcycle tyre manufacturing is expected to double in the next two years. Further, the money will be allocated for the expansion of the existing cutting edge passenger car tyre plant.

The brand accounts for a market share of 32 per cent in the radial segment, 51 per cent in the Truck/Light Truck category, 54 per cent in the 3-Wheeler segment, 23 per cent in the motorcycle segment and 72 per cent in the agricultural tyre segment in Sri Lanka.

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