MRF R&D spend up by 250%; to develop low rolling resistance tyres

MRF has initiated several projects, which include developing low rolling resistance (RR) tyres

With more competition from both domestic and international players, tyre major MRF raised its spending on research and development (R&D) by a little over 250 per cent to around Rs 200 crore in 2016-17.

It says it initiated several projects, including on developing low rolling resistance (RR) tyres.

By comparison, its R&D spending was Rs 54.9 crore in the 18 months between October 2014 and March 2016.

In the company's annual report, chairman and managing director K M Mammen said MRF's total income for 2016-17 was Rs 15,078 crore. "We have been market leaders for an unprecedented 30 years. However, competition has become stronger, with companies increasing their manufacturing capacities." MRF would try to constantly improve its products and widen its distribution network, he said.

The company says it has begun to experiment with raw materials derived from environmentally sustainable sources such as biomass and waste, beside nanomaterials. 

Mammen said the Indian tyre industry had gone through a turbulent year, the volatility being compounded by government decisions such as demonetisation and a change from BS-III to BS-IV vehicle emission standards.

A near-normal monsoon in 2016-17, especially in the north and west, had resulted in a healthy upswing in the agrarian economy, which should augur well in the coming year. More so as 2017 was expected to see taxation and commercial reforms. 

"MRF will be ready for whatever the future may hold," said Mammen.

With e-commerce booming, MRF has also decided to step into the digital world with its own e-commerce service, available now in some cities.

Mammen said the outlook for the domestic tyre industry looked stable in the short to medium term, with favourable demand in both the domestic and export markets. However, raw material cost escalation, especially of natural rubber, would stay for some time and affect operational margins. 

A good monsoon, investments in the core and infrastructure segments, and sectoral growth, coupled with an expected 7.2 per cent growth in the economy, would have many positive benefits for the tyre industry, in both the original equipment and replacement markets. However, the days of higher industry profit margins were most likely over, said Mammen. And, an expected hardening of raw material prices, plus excess capacity in the industry, would see competition intensifying.