In interaction with Sunil Chordia, Chairman and Managing Director, Rajratan Global Wire Ltd
Bead wire forms nearly 3 per cent of the cost of making a tyre and is one of the most critical components in a tyre since it is used to hold the tyre to the rim of the wheel.
"Higher volumes (and revenues) and a strong control on our conversion cost as well as fixed costs have led to strong operating leverage for us, which is visible in our margins as well as profits!" says Sunil Chordia, Chairman and Managing Director, Rajratan Global Wire Ltd.
What is your growth outlook for the bead wire business?
Bead wire forms nearly 3 per cent of the cost of making a tyre. However, it is one of the most critical components in a tyre since it is used to hold the tyre to the rim of the wheel. It is used across all types of tyres such as cycle, PVs, 2Ws, 3W, LCVs, M&HCVs, truck bus radials, OTRs and aircraft. In India, the growth in tyre making capacities is being driven by (1) domestic consumption (2) replacement markets (3) exports (as a result of China +1 strategy globally). These three factors augur well for the consumption of bead wire along with our planned expansion in Thailand from 34,800 tonnes per annum (TPA) to 60,000 TPA and the proposed plan for a new manufacturing facility in South India for 60,000 TPA over and above the existing 72,000 TPA in our plant at Pithampur (Madhya Pradesh).
According to you, what is the key contributor for the strong results reported by the company in Q4FY21?
Our timely expansion in India in FY20 from 36,000 TPA to 72,000 TPA allowed us to address the growth opportunity from pent-up demand in the system coupled with restrictions on imports due to the pandemic and related transportation & logistics issues. We have been able to support the requirements of our customers in the toughest times. Further, we have also entered into vendor management programmes with a key client for six of their plants to ensure timely and adequately available inventory management for continued production. Higher volumes (and revenues) and a strong control on our conversion cost as well as fixed costs have led to strong operating leverage for us, which is visible in our margins as well as profits!
How have the policies scripted in Budget 2021 for the automobile sector given a boost to the company’s business?
Two major overhangs on the automobile sector have now gone away (1) the transition from BS-IV to BS-VI and (2) the scrappage policy. Both factors have been the key to the revival in automobile demand, which has further seen increased demand for personal mobility driven by the need for safe travel, led by COVID-19. This ultimately augurs well for tyre OEM demand as well as replacement demand (70 per cent of tyre sales in India) along with bead wire demand.
How has this pandemic affected the bead wire business?
Like everybody else, our plant was shut down for 40 days in Q1FY21. However, the situation was the same with our suppliers as well as customers. Post-pandemic, we have delivered three consecutive quarters of highest-ever revenues, EBITDA and net profit, which clearly shows the potential for bead wire in India & Thailand. We are also tapping into the export opportunity available to us. Our planned expansion in Thailand is targetted towards local demand+exports. Meanwhile, our planned facility in South India is aimed towards servicing tyre manufacturers in the southern part of the country and also, for exports (proximity to port).