JK Tyre & Industries shares recouped losses after
falling by over 5 per cent on Monday following the announcement of a Rs
2,200-crore deal to buy Kesoram Industries' tyre manufacturing unit in
Haridwar. The deal was announced on Saturday.
Shares of Kesoram Industries, part of the BK Birla Group, which jumped as much as 15 per cent in early trade, were up 7 per cent as of 09.29 a.m.
JK Tyre said the acquisition of Haridwar-based Cavendish Industries would allow the company to expand its truck and bus radial tyre production, as well as start producing tyres of motorcycles and tricycles.
The deal will be funded by a mix of debt and internal resources and is expected to close over the next few months, JK Tyre said in the filing.
"In radial tyres, India is losing to China, where the cost of production is 25 per cent lower... Kesoram is better off in this deal," said TS Harihar, chief executive and founder of HRBV Client Solutions.
Here are the important things to know about the deal:
1) The Haridwar unit has a capacity of 555 tyres per day; it employs 5,947 full time employees
2) JK Tyres will be able to enter into the 2-wheeler market post the deal
3) JK Tyres' capacity will go up by 27 per cent to 25.4 million tyres post the acquisition of the Haridwar plant
4) Kesoram will use funds to pay back debt; the company has an estimated debt of Rs 3,800 crore. Kesoram Industries has been reporting losses due to high interest cost.
5) Kesoram is not exiting the tyre business yet
Shares of Kesoram Industries, part of the BK Birla Group, which jumped as much as 15 per cent in early trade, were up 7 per cent as of 09.29 a.m.
JK Tyre said the acquisition of Haridwar-based Cavendish Industries would allow the company to expand its truck and bus radial tyre production, as well as start producing tyres of motorcycles and tricycles.
The deal will be funded by a mix of debt and internal resources and is expected to close over the next few months, JK Tyre said in the filing.
"In radial tyres, India is losing to China, where the cost of production is 25 per cent lower... Kesoram is better off in this deal," said TS Harihar, chief executive and founder of HRBV Client Solutions.
Here are the important things to know about the deal:
1) The Haridwar unit has a capacity of 555 tyres per day; it employs 5,947 full time employees
2) JK Tyres will be able to enter into the 2-wheeler market post the deal
3) JK Tyres' capacity will go up by 27 per cent to 25.4 million tyres post the acquisition of the Haridwar plant
4) Kesoram will use funds to pay back debt; the company has an estimated debt of Rs 3,800 crore. Kesoram Industries has been reporting losses due to high interest cost.
5) Kesoram is not exiting the tyre business yet
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