Tyre stks in focus; JK Tyre, TVS Srichakra gain up to 10% in a weak market

DGFT, vide its June 12 notification, has placed import of major tyre categories in the 'restricted' category from the 'free' category earlier.

Shares of tyre makers were trading higher in an otherwise weak market with JK Tyres, TVS Srichakra, Ceat and Apollo Tyres gaining up to 10 per cent on the BSE in the intra-day trade on Monday.

At 01:46 pm, these stocks were up in the range of 2 per cent to 6 per cent, as compared to 2 per cent decline in the S&P BSE Sensex. However, MRF and Balkrishna Industries were trading flat, after gaining 3 per cent and 2 per cent, respectively, in the intra-day deals on the BSE.

Among the individual stocks, JK Tyre surged 10 per cent to Rs 65.70 on the BSE in the intra-day trade. TVS Srichaka, on the other hand, gained 9 per cent to Rs 1,516, followed by Apollo Tyres (up 6 per cent at Rs 112.60) and Ceat (up 5 per cent at Rs 968.30).

The Directorate General of Foreign Trade (DGFT) vide its June 12 notification has placed import of major tyre categories in the 'restricted' category from the earlier 'free' category. It has not, however, imposed any additional duties on these tyre imports. The development implies that tyre imports would now require DGFT permission vs. no restrictions earlier.

“As per industry sources, imports serve around 4 per cent to 5 per cent of domestic consumption. Owing to small scale of tyre imports, we feel the notification would have a limited positive impact on domestic manufacturers. However, it does signal the government's intent to safeguard domestic industry while ensuring that imports are from registered/licenced owners only,” ICICI Securities said in a note.

Analysts at JM Financials believe that near-term imports may reduce significantly as importers may take time to complete approval formalities.

“We await further clarity on the notification to assess long term impact as the conditions for license approval will determine future availability of imported tyres and MNC (Michelin, Bridgestone, etc) which currently import few SKUs may start producing at their domestic facilities. Past experience suggests that products which are included in restricted list witnessed significant import reduction in the following years”, the brokerage firm said in sector update.