Kicking off work on its maiden two-wheeler tyre facility here, Ceat today said it will be investing Rs 1,200 crore over the next four years to create a capacity to roll out 30 lakh tyres per month from the unit.
The RPG Group firm has been outsourcing two-wheeler tyres to a Hyderabad-based company till now and has decided to start manufacturing itself at a greenfield plant at Butibori on the city's outskirts.
Construction of the plant will be carried out in three phases and the first one with a capacity of 12 lakh tyres a month will be operational by April 2016, Ceat Managing Director Anant Goenka said.
The company will be investing Rs 400 crore in Phase 1.
Maharashtra Chief Minister Devendra Fadnavis laid the foundation stone for the first phase of the plant.
Speaking to reporters, Goenka said apart from the investments at Butibori, the company is ramping up capacities through investments at its Halol plant (Rs 650 crore) and a factory in Bangladesh (Rs 300 crore).
Goenka said on completion of all the three phases, the Nagpur plant will generate employment for 1,100 people.
With an objective of fuelling expansion plans, the company raised Rs 420 crore through QIP route on November 27.
"Out of Rs 420 crore raised by us through QIP, we will be using Rs 120 crore for the Butibori project alone. We will approach banks to meet the balance fund requirement."
Following the QIP, the promoter's holding in Ceat has come down to 50.9 per cent from 57 per cent and the debt to equity ratio has risen to 0.8 from 0.7. Also FII holding will go up to 26 per cent from 19 per cent, Goenka added.
On the impact of fall in global crude prices, he said, "around 40 per cent of our raw material comes from the crude oil in forms like carbon black and nylon and hence it will reduce our production cost during the third quarter onward. However. It was not likely to have any impact on our margins."
Goenka conceded the prevailing slowdown in the automobile sector has affected the sales of tyres to original equipment manufacturers (OEMs).
"The sluggish automobile market has really hit our supply to OEMs. However, let me add that merely 30 per cent of our supply goes to OEMs and the remaining goes to the replacement market which has remained completely unaffected due to this sluggish automobile market.
