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INDIA
Vamshi to Invest in Modernisation and Capacity Hike
Hyderabad based tread rubber producer Vamshi Rubber Limited has been contemplating plant modernisation as well as an investment in additional capacity for some time, according to Managing Director R Surendra
Reddy commented, “There are policy issues like rising non- performing assets (NPAs) leading to stringent regulator y controls from the government, besides the majority of infrastructure and power projects are getting
Left to right: K Gopinath of International Sales, R Surendra Reddy, Managing Director, P Varun Kumar, Director, T S Rajan, General Manager
Reddy, and subject to the market showing signs of improvement in the coming months, the company is now looking to put its plans into action.
“Overall, business has been sluggish in India and in overseas markets,” commented Reddy. “The expansion plan is ready for implementation, but the ongoing market scenario has not been conducive to embark on any major drive,” he added.
Vamshi plans to invest in between INR 3 – 4 million in site expansion and modernisation should retread volumes in the market show signs of improvement.
On the ongoing market scenario,
Vamshi test facility ensures high quality
delayed, creating sluggish conditions.”
The gradual radialisation of the Indian tyre market is also a factor affecting the growth of the retreading sector, according to Reddy.
“Radialisation is growing by 15- 20% annually in India,” he explained. “Radials give more mileage and take much longer to come for retreading compared to bias-ply tyres, impacting retreading volumes. The growth in the market for radial tyres will, of course, give impetus to retreading in the longer term, but at the moment, it has created a slowdown in the market.”
Reddy also points to a slight lull
in the retread market due to a saturation of the market caused by smaller players leaving the market as a result of the introduction of GST in India. Moreover, the liquidity scenario has yet to improve in the market and remains tight owing to the demonetisation of big currency notes by the government a couple of years ago. Demonetisation has further expanded the credit cycle in the market from 30 to 90 days and in some cases to 180 days. Despite the negative factors affecting the market in India, Vamshi has performed well, producing 5,200 tons of tread liner in 2018 up from 4,700 tons in 2017. With the prevailing market conditions, the company expects to hike annual production to 5,500 tons, an increase of merely 300 tons against 500 tons in the previous calendar. Currently, Vamshi has installed capacity of 6,000 tons annually. Considering the difficult market conditions, Vamshi production has achieved 90% capacity utilisation. The company hopes to repeat last year’s performance in 2019 also. “If capacity utilization is maintained this year, we may hike capacity by 20% by next year,” stated Reddy.
Vamshi supplies around 20% of its production to fleets owned by state transport companies, and the company says it will continue to focus on supplies to various State Transport Undertakings (STUs), to further expand its client base. Vamshi has been supplying tread liner to STUs of Rajasthan, Telangana, Andhra Pradesh for the past 15 years. With the increasing focus on STU business, Vamshi added Karnataka last year and hopes to gain business with the state- owned transport companies of Gujarat and Maharashtra in 2019. “We have emerged as one of the biggest suppliers of tread liner to STUs last year,” Reddy claimed.
Over the years, the growth in franchisee networks has stemmed as customers now generally prefer to remain independent from committing to a single brand. “We have about 75 franchisees and added 8 more during 2018 in the states of Telangana, Assam, Maharashtra, Tamil Nadu, Punjab,” he added.
In addition to its franchisee network Vamshi also has non- franchisee clientele of about 125 plants. across the countr y.
As far as export markets are concerned, overseas shipments were also up marginally to 400 tons in 2018 compared to the previous year. “However, business in one of the Non-EU market was impacted due to economic crisis leading to currency volatility,” said K Gopinath, Head Sales (International), Vamshi Rubber Limited.
The tread major continues to face headwinds in the other international market also. “The Middle East used to be one of our major export markets, but retreading continues to struggle there as some of the markets reduced by half in the last 3-4 years. We have to evolve a product-specific strategy for the Middle East market,” he said. Vamshi is also working on European certification for winter conditions and once received, the company plans to hit more European markets particularly in the South and Central parts of Europe. “We are in touch with customers there, but these are currently holding on due to certification. Once we are through these hurdles, we will be clear for export to those markets,” said Gopinath.
He further added, “Our focus remains on the markets of Middle East, Europe and Africa. We are scouting for more clients in the African market and hope to add 5- 6 more clients soon.”
24 Retreading Business