Yogeshkumar Mahansaria, one of the promoters of Balkrishna Industries Ltd (BIL), and his brother Ashokkumar are said to have quit the Rs 1,000 crore tyre company.
MUMBAI: Yogeshkumar Mahansaria, one of the promoters of Balkrishna Industries Ltd (BIL), and his brother Ashokkumar are said to have quit the Rs 1,000 crore tyre company due to “family differences”. They are now striking out on their own.
Yogeshkumar has tied up with US buyout firm Warburg Pincus LLC to acquire Israel-based Alliance Tyre for $45 million.
The transaction is expected to be completed before June this year.
Alliance reported a net loss of $12.3 million in the first half of 2006 on sales of $78.8 million.
It had posted a net profit of $13.8 million on sales of $78.5 million in the same period of 2005.
The Hadera, Israel-based Alliance started negotiations with the two buyers, which will include an open offer for the public’s shares.
The transaction, subject to the approval of the relevant parties, is expected to be completed through the second quarter of 2007.
Mahansaria could not be reached for comment. Yogeshkumar told DNA Money he will float a new tyre venture early next fiscal and the Alliance acquisition is part of this move.
Balkrishna Industries is currently being run by Arvind Poddar, managing director.
BK Bansal, head-finance, Balkrishna Industries, told DNA Money the company was not involved in the Alliance deal.
Instead, Bansal said, Balkrishna is increasing tyre capacity to 1,00,000 TPA from the current 70,000 TPA. “80% of the expansion work is already completed,” he said. Balkrishna primarily operates in three business segments - pneumatic tyres, paperboards and processing of textile fabrics. The tyre business contributes 80% of the company’s revenues.
It is among the top 10 manufacturers of off-highway (OHT) automobile tyres globally.
The global OHT business is valued at $7.5 billion, comprising earthmover tyres, industrial tyres and agricultural & construction equipment tyres.
Agricultural tyres constitute 70% of Balkrishna’s revenues, while the construction tyres constitute the bulk of the rest.
Balkrishna has two tyre manufacturing plants at Waluj near Aurangabad in Maharashtra and Bhiwadi in Rajasthan.
The company has chalked out aggressive capex plans to cater to the growing OHT market. It has plans to scale up its total tyre capacity to 1,00,000 TPA by FY07E from the current levels of 70,000 TPA. The capex shall entail an investment to the tune of Rs 270 crore.
Global tyre players like Bridgestone and Michelin have exited the OHT business since it is too fragmented, generates low volumes and is labour-intensive.
But Balkrishna has capitalised on its strength in engineering and lower labour costs to carve out a niche in this speciality tyre segment.
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