Jk-Continental Venture Cost Escalates By Rs 100 Crore

The project cost of the proposed joint venture between J K tyres and Germany's Continental Tyres for the manufacture of tyre radials for passenger cars and light commercial vehicles has increased by over Rs 100 crore to cross Rs 500 crore.

The two companies are likely to hold an equal stake in the venture. Earlier the projected cost was approximately Rs 400 crore. A JK official said last week that the project would now require investments to the tune of more than Rs 500 crore.

The official said the two companies are "in advanced stages of talks" and pointed out that the plant will be located in a coastal region.

 

He said the company would make a press statement about the alliance before the end of the current financial year.

A Tamil Nadu government official had earlier told Business Standard that the plant is proposed to come up in Manali in the state, but the JK official denied this and said a final decision on the plant's location has not been made yet.

"The plant will come up near a port since this project will primarily cater to exports," he said. "We are considering four states -- Tamil Nadu, Andhra Pradesh, Karnataka and Maharashtra."

A company source said the venture would have an installed capacity of 15,000 tyres per day, adding that Continental is keen to buyback nearly 80 per cent of the production, which it will sell in Europe.

This will be Continental's third tie-up in India. It has already entered into joint ventures with Modi Rubber Ltd (MRL) for radial truck tyres and with Apollo Tyres Ltd for passenger car radials. The alliances are in areas that would prevent overlapping of various product categories.

JK's tie-up with Continental will be similar to that of the German company's alliance with Apollo Tyres, the company source said. Continental also has an 80 per cent buy-back arrangement with Apollo.

But the JK-Continental venture can use the "Continental" brand name only on those goods being bought back by the German company. This is because Modi Rubber Ltd has already signed a technical agreement with Continental way back in 1970 for exclusive use of its brand name.

Apollo Tyres and JK Industries, however, had entered into technical pacts with General Tire of the US in 1972 and 1977, respectively.

It was only after Continental Tyre took over General Tire in 1992, that these two companies gained access to the Continental technology.