Indian Economy News

MTPL to set up off-highway tyre facility in Gujarat, invest $107 million

  • IBEF
  • December 9, 2019

Backed by International Finance Corporation (IFC) through equity and loan, Mahansaria Tyres Private Limited (MTPL) to set up a US$ 107 million facility to manufacture off-highway tyres in Gujarat.

IFC will provide a loan of up to US$ 30 million and it will buy a stake in MTPL for up to US$ 7.74 million.

MTPL is owned by Ashok Mahansaria, Yogesh Mahansaria and Yogesh Investments Private Ltd. (YAIPL), erstwhile sponsors of Balkrishna Industries and Alliance Tyre Group, and it has over 25 years of experience in off-highway tyres used in agriculture and construction industry.

Cost for phase 1 is US$ 107 million, which will involve setting up 40,000 MT capacity. This will be funded by debt of up to US$ 54 million, including IFC's loan, which will have a tenure of 10 years.

Another loan of up to US$ 24 million will be mobilised by IFC on similar terms. This gives the company access to a different fundraising channel including institutional financiers and help it develop a more diversified investor base.

"IFC's investment will provide validation of a greenfield business plan and the growth prospect of the sector. This will send a positive signalling effect to other investors on the soundness of the project and help attract investors for the current and future financing stages," said IFC.

It is estimated by MTPL that exports will account for 70-80 per cent of sales and contribute to India's forex earnings. The project will support value-addition in the domestic rubber production industry and is expected to create 1,500 jobs in the first phase.

As compared to developed markets such as EU and North America, OHT has a small presence India. The size of OHT segment globally is still relatively small as it accounts for only about 10 per cent of the overall tyre industry. At present, value brands have around 30 per cent share in the global market. Half of this market share is held by Indian players.

The Indian OHT market is price sensitive due to low farm income. As a result, the product range in India is not as specialized as in the EU and North America, where more application specific solutions are available.

Indian players such as MTPL stand to gain by producing more products in the value brand segment of OHT tyres, given that conversion costs in India are lower than in any other manufacturing bases. This project will demonstrate the competitiveness of Indian players in the global market and increase the overall share of Indian value brands, said IFC.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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