Apollo to set up Retreading Chain; Vamshi Rubber Ltd is a Major Player in this Space and the Scrip is likely to get Re-rated:
Vamshi came out with Excellent Results for Q3FY-06-07:
Its Net Sales shot up from Rs.6.96 Cr to Rs.12.91 Cr: Net Profits on the other hand jumped from Rs.9.3 laksh to Rs.25.8 lakhs:
C Sivadasan, proprietor of Ayyappa Tyres in Andheri, will soon find the going tough. His bread-and-butter business, tyre retreading, is getting big-time competition.
As part of its ‘Tyre Plus’ strategy, Apollo Tyres, India’s second-largest tyre manufacturer, is setting up a chain of tyre re-treading centres across the country.
The first of these centres, being set up with an investment of Rs 8 crore, will come up in Kundli in Haryana by May.
The plant would initially be capable of re-treading 5,000 tyres a month, which would be ramped up to about 20,000 units. Initially, only commercial vehicle tyres would be retreaded at the facility.
“Tyre retailing itself is a non-glamorous business. Retreading is further on the lower end of this business. We intend to change that with our state-of-the-art fully automated facility,” said an Apollo Tyres official. In order to reach its revenue target of $2 billion by the turn of the decade, Apollo Tyres is tapping revenues from sources it calls ‘Tyre Plus’.
Under this, it has already started selling alloy wheels for passenger cars, and is entering the 12,000-15,000 tonnes-a-month re-treading business. At present, the unorganised sector commands a three-fourth share of this business.
Some major players in the sector are Midas, LG, Indag, Vamshi Rubber Ltd and MRF. John now has another tyre biggie in the form of Apollo to compete.
Retreading is the process of tyre reconditioning that extends the useful life of a worn tyre by the addition of new material.
While a car tyre is retreaded only once, commercial vehicle tyres are often retreaded twice or thrice and aircraft tyres several times.
Under its ‘Tyre Plus’ strategy, Apollo already supplies retreading material (rubber strips, chemicals, glue) to dealers. The new plant would use the technologically advanced ‘cold re-treading’ process, which is superior to the ‘hot retread’ method followed by streetside retreaders.
According to company sources, 3-4 more such centres are being planned. Retreading is not a low-technology process and many global majors like Michelin, Goodyear, Bridgestone are at it. In India, out the annual demand of 10 million tyres, aftermarket sales accounts for 60%. Although most of it is the low-end two-wheeler tyres, retreading opportunity exists in the higher-end commercial vehicle (over 80% by volume), OTR (off-the-road) and passenger car tyres.
Retreading cost for commercial vehicle tyres range from Rs 2,000 - 3,000, which is about a fourth of the tyre cost. Hence, a progressive increase of retread business is expected to add to the company topline.
Company sources said while retreaded products don’t come with any service guarantees, Apollo would introduce differentiators by offering quality. “The plant is
completely state-of-the-art with imported cold retread technology machines.
This would enable us to offer products at quality people associate Apollo tyres with,” said a company official. [Eidted version from Internet]
My Addition: Since Vamshi Rubber Ltd as mentioned in the previous postings, is a major players in this field and hence due to this new development, it will gain. Retreading of tyres, hereto a neglected space, will now get a new meaning and the Scrips in this space will be re-rated soon.
Best wishes,
Suman Mukherjee
India.
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