Dunlop hopes to be in black this fiscal

The ailing tyre major Dunlop India will come back into the black with a net profit of Rs 30 crore in the current fiscal following a good cycle in the tyre industry, according to Dunlop India Dunlop would be registering a profit after eight years.

Ruia took over the company from the M R Chhabria family in December 2005 and said making a profit from operations by the fiscal ending March 2007 would not be a problem. Dunlop under the Chhabrias had been making losses since 1998-99.

Dunlop was trying for a technical tie-up with Sumitomo Corporation for Dunlop. Ruia said he was planning to raise Rs 400 crore for Dunlop as a combination of debt and equity for capex, working capital and creditors payments.

The management has projected a net profit of Rs 30 crore in 2006-07 over a projected turnover of Rs 660 crore. The profit projection is Rs 90 crore in 2007-08 over a turnover of Rs 1,265 crore. It is targeting Rs 100 crore profit by 2008-09.

"Falcon Tyres is doing well now. In June it has registered a turnover of Rs 30 crore, which is 50 per cent higher than the average turnover. So we are confident that with its brand, Dunlop would do even better," he said.

According to him, the Dunlop is planning to open its Ambattur plant in Tamil Nadu in July itself. The Sahagaunj factory in West Bengal is likely to be operational from September this year.

"By September-end both of our plants will be operational," he said. Commenting on the turnaround, Ruia said tyre demand had picked up sharply and the rising cost of rubber had been passed on to consumers, as a result of which operations had become profitable.

Rubber prices had risen from around Rs 65 a kg to Rs 105/kg at present. Dunlop had also downsized nearly a third of its workforce and brought down costs sharply besides settling loans and dues with institutions and utilities.

On the fund arrangements, Ruia said that in 20 days it was hoping to tie up Rs 400 crore for Dunlop India.

"I have spoken to private equity funds as well as foreign institutions. They are keen to invest in Dunlop because of the brand value and image. Fund will not be a problem for Dunlop," he said.

Ruia indicated that he was looking at some hybrid instruments such as optionally fully convertible debentures and foreign currency convertible bonds.

"We have paid-up equity of only Rs 45 crore and authorised capital of Rs 100 crore. So we could raise equity base through private placements," he said.

Ruia had 74 per cent stake in Dunlop, after the placement it may come down to 64-65 per cent in the expanded capital base.