Ceat puts on hold plans to invest in new manufacturing facility for commercial vehicle tyres

Indian tyre maker Ceat has put on hold its plan to invest in a new manufacturing facility for commercial vehicle tyres.

The company will instead invest Rs 396 crore in making more profitable off-highway tyres for the European and US markets, managing director Anant Goenka told ET. “We have put on hold our investments in the commercial vehicle unit; margins in this segment are lower. The off-highway tyre segment is more profitable, and we will be investing to enhance capacity in the category.”

The company’s board has approved the investment proposal to enhance capacity for farm radial tyres at Ambarnath, Maharashtra, by 55 tonnes per day over the next two years from about 50 tonnes now. Funds for the investment would be raised through a mix of debt and internal accruals.

Goenka said the company had some upside utilising 80-85% of the available capacity for commercial vehicle tyres.

Ceat had planned to invest Rs 1,200 crore for a new facility near Chennai to manufacture tyres for commercial vehicles. In January this year, Goenka said it decided to cut the planned investment to Rs 500 crore and that the opening of the plant would be delayed by six months to the start of the next calendar year.

In May 2022, the company announced a capital expenditure of Rs 900 crore for this fiscal year.

Separately, Goenka said while the demand looked well in the Indian market, there were headwinds in international markets because of the recession in Europe.

“With strong demand coming in from OEMs (vehicle manufacturers), end of the chip shortage to a certain extent and steady growth in the commercial vehicle segment, albeit on a low base, demand parameters in India look well,” he said.

The company expects the second half of this fiscal year to be better in terms of revenue and margins because of improving demand and stabilising commodity prices, he said.

Ceat reported a 17% decline in standalone net profit to Rs 29.9 crore in the fiscal second quarter ended on September 30, 2022. Revenue from operations grew 18.7% to Rs 2,886.37 crore.

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