TVS Srichakra to expand capacity

To invest Rs 30 crore

TVS Srichakra is going through a capacity expansion exercise this year at an investment of Rs 30 crore. The expansion is to take the annual capacity to about 10 million tyres from the present level of a little over 7 million tyres.

Economies of scale are critical to the success of a tyre company, said K Gopalan, president-finance, TVS Srichakra. The company has a marketshare of 23-24 per cent in the two wheeler tyre market, a few percentage points behind market leader MRF.

TVS Srichakra has managed to effect an average price increase of about 4-5 per cent this financial year on the tyres sold to its direct clients- two wheeler companies- to partially offset the significant increase in the price of inputs.

The company's operating environment, however, continues to be tough because price of key inputs such as rubber chemicals is determined by the trend in crude oil price.

In this business environment, the company has looked for ways to reduce raw material costs, said Gopalan. TVS Srichakra's operations are raw material intensive "" they come to about 65 per cent of net sales.

One step the company took to bring down raw material cost was to put in place an e-sourcing exercise with the help of Ariba Inc, a company that provides spend management solutions in India.

Gopalan said that the e-sourcing exercise was used to broadbase the dealer network that could be tapped to source natural rubber. Ariba roped in more dealers to participate in a screen based auction for rubber.

The auction was carried out with TVS Srichakra being unaware of the identity of the dealers who took part. Gopalan said the outcome of the auction was that the company saved Rs 2 crore on a spend of Rs 90 crore.