Dunlop Grabs 20% Market Share In Heavies

Dunlop India Ltd has captured a 20 per cent market share in the heavy-duty category of the domestic tyre industry since the launch of its latest product. The company expects a further 10 per cent rise in its demand in the next few months.

The product, christened 18 PR "Mahaan" heavy duty lug tyre, had been introduced in the market about four months back. It is sold at a premium and is dearer by about Rs 800 per piece, compared to similar products of other companies.

The company is rolling out 5000 tyres per month from its Ambattur unit and production is expected to be stepped up in the near future once sales pick up. These tyres mainly cater to the replacement market.

 

They are especially useful in the heavy-duty segment such as the Delhi-Guwahati route, Rajasthan and the Salem region of Tamil Nadu.

The Rs 700-crore company's management, grappling with a serious cash crunch, is contemplating ways to raise resources for its operations.

Some of the measures include leveraging of non-performing assets through long-term leasing, mortgage and external commercial borrowings. Another attempt to shore up the company's bottomline is by negotiating with raw material suppliers for credit.

It is believed that the company which has a stagnant working capital of about Rs 40 crore for the past five to six years, needs around Rs 100 crore for its operations, considering the fact that it has a Rs 700 crore turnover.

The Dunlop India spokesperson said: "The company's financial performance has picked up in the last three months." Dunlop is the market leader in the OTR tyres and aero-tyres category as well as industrial products such as steel-cord belting and high pressure hoses.

In the 15 months ending March 31, 1996, the company made an operating profit of Rs 68.79 crore and Rs 39 crore was registered as net profit.

Though demat trading has arrived, problems persist on the primary market front. Anuradha Himatsingka examines the major issues

Formula-based issue pricing urged

M R Mayya, capital market expert and former executive director, Bombay Stock Exchange (BSE), has called for a return to a fixed, new issue pricing formula to save the primary market and prevent merchant bankers from misusing free pricing.

He feels that free pricing with few controls and regulations should be allowed to prop up the depressed capital market. "Companies should be directed to decide the price as per the erstwhile Controller of Capital Issues (CCI) formula. But if the price is higher than it deserves as per the CCI formula, the prospectus should be directed to the Securities & Exchange Board of India (Sebi) to vet the proposal," said Mayya.

Mayya was addressing a seminar on 'Capital Market ---Problems and Prospects' organised by the Bengal National Chamber of Commerce & Industry in Calcutta yesterday.

Moreover, the 'safety net', which was proposed by Sebi and later faced opposition by merchant bankers, is essential to boost the primary market, Mayya said.

The downward trend in the primary market, which was witnessed in 1995-96, persisted in the next year.

The amount of capital raised through new issues declined from Rs 14,151.1 crore in April-December 1995 to Rs 10,369.21 crore in April-December 1996.

Besides, investor education to create an awareness among investors of their rights and obligations, coupled with periodical training of brokers is a must, added Mayya.

Both Mayya and Nitish Sengupta, director-general, International Management Institute, feel that futures and options should be introduced with certain restrictions to suit the changing needs of the market. Sengupta said that the G S Patel Committee's recommendations on the revival of forward trading should be implemented without any modifications to revive the capital market.

Samarendra P Saha, president, Bengal National Chamber of Commerce & Industry, acknowledged the United States Agency for International Development's efforts to establish the depository system, strengthen the regulatory and enforcement capacity of Sebi, develop stock exchanges and associations of various securities market intermediaries into self-regulatory organisations.

He also lauded the agency's efforts to promote futures and options markets to help institutional investors with risk management, develop the mutual fund industry to mobilise savings of retail investors for investment in corporate and infrastructure sectors, and to bring Indian securities market closer to international standards of regulation.

Vivek Mahajan, committee member, Calcutta Stock Exchange(CSE), announced the bourse's intentions to capitalise on its areas of strength to woo investors to the local bourse which was one of the second largest exchanges in the country after the Bombay Stock Exchange.

"Speculation in the exchange provides liquidity to the market which is essential to gain an edge over other exchanges including the National Stock Exchange and the Bombay Stock Exchange", said Mahajan.

The exchange is also considering the proposal to form market-makers of high networth investors who can provide a two-way quote, and provide for a 'timeless trading zone' where information would not affect order flows.

Mayya feels that free pricing with few controls and regulations should be allowed to prop up the depressed capital market