Ceat Plans Buyouts, Rado In Cross-Hair

Ceat Ltd is planning a spate of acquisitions for expanding tyre capacity. The RPG group flagship has targeted Rado Tyres, Stallion Tyres and Ramkesh Tyres apart from showing interest in Tyre Corporation of India Ltd.

Company sources said the management is working on modalities to acquire Rado Tyres. Ceat currently has a conversion agreement with Rado, whereby Ceat supplies raw materials and technology for Rado to make tyres for Ceat.

Rado has a tyre plant in Kochi though details of the capacity are not available.

"We are aiming for management control in Rado," said a Ceat source. Apart from the 30 per cent stake of the promoters, Ceat is also working on acquiring the 20 per cent stake of financial institutions in the company. Ceat is also exploring the possibility of using the spare capacity available with Stallion Tyres, which has a plant in Hyderabad. Stallion Tyres was revived by Apollo Tyres, which has a token stake in the company.

 

Industry sources said that Stallion has a capacity of 9 lakh two- wheeler tyres at its Hyderabad facility. However, whether the promoters agree to let Ceat use their capacities would be influenced by Apollo Tyres' view in this regard.

Ceat has already made a bid to acquire Tyre Corporation of India, which had been referred to the BIFR. Ceat is expected to submit its revised proposal soon as the government is not satisfied with the price offered and has now invited revised bids. Tyre Corporation has three manufacturing units at Kakinara, Tangra and Kalyani.

Further, Ceat is also examining the possibility of taking over Ramkesh Tyres, another South based privately held company. A Ceat official said " We are looking out for opportunities and are carrying out due diligence to identify take-over targets. Ceat sources said that funds for these acquisitions will come from the $ five million ECB and the unsecured bonds currently being privately placed by the company. The RPG group major is one of the leading players in the tyre industry along with Apollo Tyres, MRF and Dunlop.

Though the tyre industry has been facing overcapacity for the last four years, the last six months have been fairly good.

Tyre analysts say that companies go in for acquisitions not only to add to their capacities but also to prevent a situation of over-supply in the market.

They express an opinion that the reason behind Ceat's acquisition plans could be that after taking over these companies, the plans might be shut down.

Ceat has already affected a lock-out at its Aurangabad plant, where it makes radial tyres. Ceat had set up a 50: 50 joint venture company with Goodyear called South Asia Tyres, which makes the tyres for Ceat and Goodyear.