Ceat to invest Rs 1,200 cr to expand into truck, bus radial capacity

Indian tyre manufacturing company Ceat has announced a fresh investment of Rs 1,200 crore to expand into truck and bus radial capacity, even after the second wave of Covid-19 has created a short-term disruption.

The fresh investment approved by the company is over and above the Rs 3,500 crore investment announced by the company a few years ago. A part of this investment will expand the existing plant in Halol, Gujarat, and the reading fund will be used for setting up a brownfield facility in Chennai, Ceat’s base for car radial tyres.

Ceat told a prominent media source that the company's truck radial facility in Halol--on the outskirts of Baroda--is expected to be utilised in a year's time, and then by then, it would need a fresh capacity in 18 months, hence the company has taken the board approval.

The Rs 1,200 crore will be used in two phases, approximately half will be invested now, and the second half will be invested once the market picks up, said Ceat.

For FY22, Ceat has lined up a capital expenditure of Rs 1,000 crore, which will go into specific projects on car radials, truck radial and speciality tyre sector.

Despite the aggressive expansion that the company has rolled out, Ceat said it has not lost sight of financial efficiency. The company's debt has been reduced by Rs 150 crore in the last one year and has further improved the company's debt-equity ratio.

Ceat delivered a strong earnings performance for FY21, with revenues posting a growth of 45% at Rs 2,290 crore, with net profit at Rs 153 crore. However, the earnings before interest, taxes, depreciation, and amortisation (EBIDTA) margin of Ceat plunged to 11.7% owing to a recent spurt in commodity prices that hit the bottom line.

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