JK Tyre turns volatile after deal to buy Kesoram's tyre unit for Rs 2200 crore

JK Tyre & Industries was up 0.88% to Rs 109.40 at 9:37 IST on BSE after the company said its board approved acquisition of Cavendish Industries from Kesoram Industries.

The company made the announcement on Saturday, 12 September 2015.

Meanwhile, the BSE Sensex was down 55.65 points, or 0.22%, to 25,554.56.

On BSE, so far 6.96 lakh shares were traded in the counter, compared with an average volume of 7.50 lakh shares in the past one quarter.

Trading in the counter was volatile. The stock rose 2.35% at the day's high of Rs 111 so far during the day. The stock fell 5.21% at the day's low of Rs 102.80 so far during the day.

The stock hit a record high of Rs 162.95 on 19 December 2014. The stock hit a 52-week low of Rs 73.48 on 15 September 2014.

The stock had outperformed the market over the past one month till 11 September 2015, sliding 0.41% compared with 8.10% fall in the Sensex. The scrip had also outperformed the market in past one quarter, rising 19.97% as against Sensex's 2.88% decline.

The small-cap company has an equity capital of Rs 45.36 crore. Face value per share is Rs 2.

JK Tyre & Industries and JK Asia Pacific Singapore, a wholly-owned subsidiary of JK Tyre have signed a binding term sheet with Kesoram Industries to acquire 100% equity in Cavendish Industries (CIL). CIL houses a tyre business undertaking at Haridwar (Laksar), which manufactures a range of tyres, tubes and flaps.

JK Group has agreed for this acquisition at an enterprise value not exceeding Rs 2200 crore, subject to conditions, wherein JK Tyre will hold the largest shareholding block and shall have substantial management control of CIL with an option to place upto 55% with its associates/group companies, JK Tyre & Industries said in a statement.

The acquisition is proposed to be funded, by combination of debt and internal accruals raised by JK Tyre and other JK Group entities. The financial exposure of JK Tyre in the acquisition is expected to be of the order of Rs 450 crore. The final transaction is expected to consummate over next few months (subject to various approvals) with definitive documentation expected to be executed between the Parties in due course of time, the company said.

The acquisition will provide JK Tyre with further impetus towards ready expansion in the truck and bus radials segment where it is a market leader as well as entry into the fast growing 2 / 3 wheeler tyre market. Accordingly, JK Tyre estimates the transaction to be strategic, revenue accretive and synergistic with its existing tyre business.

On consolidated basis, JK Tyres & Industries' net profit rose 113.1% to Rs 118.12 crore on 5.1% decline in net sales to Rs 1759.91 crore in Q1 June 2015 over Q1 June 2014.

JK Tyre & Industries is a leading tyre manufacturer in India.

Powered by Capital Market - Live News