Apollo Tyres Ltd plans to come out with a rights issue of convertible debentures for raising funds up to Rs 78.75 crore. The proposal for the issue was were approved by the company's board of directors at its meeting in New Delhi on Monday.
A spokesperson for the company said that it was an in-principle decision and the details of the issue will be worked out later in consultation with merchant bankers.
The receipts from the issue will be utilised to part-fund the company's expansion plans and the commencement of production of radial tyres for light commercial vehicles planned for its plant in Limda, near Baroda, in view of the increasing demand.
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The expansion plan envisages a sharp in crease in production capacity for radial as well as non-radial tyres at the Baroda manufacturing facility.
Apollo plans to increase the radial tyre production capacity at the Baroda plant to 2,000 tyres a day (equivalent to 15 tonne a day) of passenger car as well as light commercial vehicle radials. The capacity at present is 700 radial tyres a day (equivalent to 5 tonne a day) for passenger cars only. Apollo hopes to complete this production capacity expansion by June 1999.
Besides, Apollo has also embarked upon a plan to expand its Bias (non-radial or cross ply) production capacity at the Baroda plant to 3,200 tyres a day from the current 2,000 tyres a day. This is planned for completion by March 1999.
Apollo is also setting up a greenfield tyre manufacturing facility, for which it is in the process of identifying a suitable site. The capacity and investment for the proposed plant are yet to be decided by the company's board.
At present, apart from the plant near Baroda, Apollo two other manufacturing facilities in Kerala.
The company has decided to set up the greenfield plant as it considers the current recession in the tyre industry to be a temporary phenomenon and sees a huge demand potential for tyres.
The plans for capacity expansion and addition of fresh capacity have been chalked out by Apollo with the aim of becoming the lowest cost producer in the country.
On account of these projects, the capital expenditure requirement for the company is put at over Rs 200 crore in the next two years.
Apollo posted a rise in net profit to Rs 40.68 crore in 1997-98 from Rs 36.32 crore in the previous year, although its total turnover and other receipts fell to Rs 1369.24 crore from Rs 1426.91 crore.