Tyre Corp may be revived through JV

The Board for Reconstruction of Public Sector Enterprises (BRPSE) is considering a joint venture for the revival of Tyre Corporation of India Ltd (TCIL).

In the past, CEAT Tyres has shown interest in acquiring a stake in the company. In 2003, the private company was the only bidder for a joint venture with Tyre Corporation leading to a cancellation of the process.

When contacted, CEAT executives told Business Standard that it already had a business relationship with Tyre Corporation. "They make tyres according to our specifications and the products bear our brand. We are quite satisfied with Tyre Corp," an executive aid.

At present, CEAT buys 10,000-15,000 tyres per month from the PSU. "Tyre Corporation has a strategic benefit for us simply because it will helps us extend our presence in east India," he added.

They said Tyre Corporation's joint venture partner would have to invest in modernisation. The size of the tyre replacement industry stands at 550,000 per month.

Heavy industry ministry officials said a decision regarding the Tyre Corporation would be taken soon. The company's proposal was taken up by the board last week. Typically the Board should take a decision within two months of its presentation.

TCIL is engaged in the production of automotive tyres, tubes, flaps, hoses and belting conveyor.

In 2002-03, TCIL produced 12,914 MT of automotive tyres. While the company had a turnover of 32.52 crore, it had a loss of 16.91 crore. Its losses increased due its BIFR-sanctioned draft revival plan that was revised repeatedly the IDBI and the Government. Its production stood at Rs 144.88 crore in 2003-04 (provisional).

TCIL was formed in 1984 as a GoI enterprise to vest the two nationalised sick companies- National Rubber Manufacturers Limited and Inchek Tyres Ltd for revival of the units.

It has three units, a tyre division in Kankinara, an industrial rubber products division in Tangra and a reclaimed Rubber unit in Kalyani (West Bengal). The Tangra unit has been closed.

The main reasons for decline in profitability are higher interest burden due to provision of penal interest, non-availability of working capital and overall recession in the tyre industry. Financial restructuring has been sought to reduce heavy interest burden on GoI loans and deemed NPA balances of cash credit accounts, according to ministry officials.