Government should introduce measures to boost economy & demand: Dr Raghupati Singhania, CMD, JK Tyre

Dr Raghupati Singhania, Chairman & Managing Director, JK Tyre & Industries Ltd., talks about growth opportunities in 2020, the slowdown in the auto sector, smart tyre technology, TREEL, and budget expectations among others, during an interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: The company has posted strong numbers in terms of two and three-wheeler vehicle segment although you are a new entrant in the segment. So, what growth opportunities are available in this particular segment in 2020?

A: Three years have crossed since when we re-entered the two-wheeler segment and can proudly say, JK Tyre's two-wheeler tyre, Blaze, has established a 10% market share in the replacement market space. We have, now, started supplying to big OEMs (original equipment manufacturers) as well. 

We didn't had adequate capacity and that's why production plants were revamped with an aim to increase the production by 15-20%. I believe the two-wheeler market will continue to grow, maybe at a low scale, in the future but will continue to grow. So, we will contribute to it and maintain the market share.

Q: Do you think that the issues connected to the auto sector have bottomed out as production growth has been noticed in Maruti Suzuki, India's largest car company, after a gap of 9 years? So, can we say that the worst is behind us and things will improve further, if yes, then what impact it will have on your business? 

A: A: I would like to believe, but jokes apart, I feel the car sector has bottomed-out to a great extent and there will be a gradual growth in the market. The government has taken many initiatives and their impact will be seen gradually. The biggest thing in this is consumer finance and the government has taken several steps on this front as well, so the things will get better slowly.

The other segment in the commercial sector that includes trucks, LCVs and so on and it is facing a different problem. The segment is dependent on GDP and if there is an increase in the economic activity then there will be more goods for being carried. More goods will give a boost to the commercial sector. So, I think it, the commercial sector, will take some more time.  

Q: Let us know something about the smart tyre technology that was launched by JK Tyre in the recent past. What is expected an incremental sale in the tyre due to the technology?

A: We have introduced a smart technology, TREEL, that is installed with Tyre Pressure Gaze Monitoring System. It is an attachment that can be attached with any tyre from an existing vehicle to trucks. We don't expect that it will increase our tyre sales. We are offering an additional feature to the customers so that he can enhance the life of the tyre by monitoring the pressure, mileage and location of the tyre. Thus, it is a technology that has been introduced in the form of smart tyres. We are the first company in India to offer smart tyres to the public. 

Q: What is your outlook on rubber prices in 2020 and what impact it will have on your margins and how it will be factored in?

A: Rubber prices are good at the moment but prices have gone down just because it is off-season and we can't do anything in that context. Rubber prices are well positioned and I believe that it will not turn up to be volatile. But, we will be benefitted if there is an increase in the overall demand of the tyres as earlier I have said that demand will gradually increase in the replacement market.

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Q: What are your expectations from the upcoming union budget? 

A: There are many things to be desired but I can share the expectation and it is related to the ongoing slowdown in the economic activity about which everyone including the government is quite aware. I hope the government will introduce measures to boost the economy as well as demand. I hope such measures will be announced soon.

Q: What is your CapEx plan for 2020? Do you have plans related to acquisition?

A: A major CapEx plan was made and had also ordered the project. JK Tyre enjoys the number one position in truck radial and an important position in the market as well. Thus the demand was quite high and that's why an expansion plan of Rs1,000 crore. We had also placed the orders for it. But, the plan was postponed for two years because of the slowdown happened. Thus, we don't have any CapEx plan for 2020 but we will have an expansion plan of Rs1,000 crore in 2021.