JK Tyre & Industries Ltd. (JKTIL) has kicked off a major investment plan that will result in a significant expansion of capacity at the company’s Chennai plant, in a move that seemingly defies the current downtrend in the domestic automobile industry.
The first phase of the expansion plan, which was approved by the company’s board on Thursday, will entail a fresh investment of Rs.1,430 crore. The company had initially invested Rs.1,000 crore to build and commission the Chennai plant.
The new investment, according to company officials, will be met through mostly debt and internal accruals.
The New Delhi-based tyre company’s Chennai plant currently has a capacity of 4 lakh truck/bus radials and 30 lakh passenger car radials.
According to Chairman and Managing Director Raghupati Singhania, the capacity after the expansion will be 8 lakh truck/bus radials and 45 lakh passenger car radials.
The JK Tyre chief expects to finish the expansion in 15-18 months, and also estimates that there would be a 50 per cent increase in employment at the company’s Chennai plant, which now employs roughly 500 people.
“I’m an optimist. We believe this will be a viable capacity. While we recognise that the vehicle industry is suffering, we are positioning ourselves for when the economy turns. We believe it will take a couple of quarters, nearly 15 to 18 months or so, for the economy to turn,” Mr. Singhania said, while addressing reporters here on Thursday.
“We have a thirst for exports and nearly 30 per cent of our Chennai capacity we are planning to export,” he added. The company is also in the process of expanding the capacity of its Mexico plant, which will cater primarily to OEMs (original equipment manufacturers) such as Nissan.
Marginal drop in net
The company, which also released its quarterly results on Thursday, reported a marginal decline in net profit for the quarter ended September 30, 2013. The company reported a net profit of Rs.64 crore as against Rs.67.38 crore in the corresponding quarter last year.
