NEW DELHI: India’s third largest tire maker JK Tire Industries has signed a binding agreement with Kesoram Industries Limited, a flagship company of the BK Birla Group, for Rs 219.5 signing crore for acquiring a manufacturing plant in Laksar village in Hariwar district. We manufacture a wide range of tires, inner tubes and outer tubes. According to the deal overview, JK Tires acquisition of Kesoram will acquire Cavendish Industries, a wholly owned subsidiary of Industries, which has a tire plant in Laksar. JK Group has agreed to acquire an enterprise value of Rs 200 crore at around 220.

The transaction will be funded by internal accruals and debt raised by JK Tyres and other JK Group subsidiaries. The financial exposure to the JK Tire acquisition is expected to be around Rs 4.5 billion as per the Bombay Stock Exchange disclosures. ET first reported the proposed transaction this year in July.

In a statement, JK Raghupati Singhania said, “The transaction reflects the company’s potential to turn around through acquisitions that are uniquely positioned to deliver successful outcomes for all business stakeholders.”

Apart from Laksar, Birla Tires (a subsidiary of Kesoram Industries) also has a plant in Balasore, Orissa. The company has an annual production capacity of 12.1 million tires. Laksar’s existing Balasor plant is twice the size of the existing Balasor plant, which was set up in 1991 in association with Pirelli of Italy.

Kumar Das, Chief Financial Officer, Birla Tires Tridib He said that the deal will help strengthen the company’s balance sheet. He said, “A significant portion of this popular revenue will be used to reduce the company’s debt.”

Das added that Kesoram Industries currently has a total debt of Rs 480 crore After this deal, the crore will be reduced to Rs 3,000 crore. “We plan to fully utilize the production capacity of the Balasore plant and hence the sale of the Hariwa plant will not affect the company’s revenues. Meanwhile, the company plans to outsource radial, commercial and three-wheeler tires to third parties. Before implementing its own expansion plans, please refer to the source.

For JK Tire, the acquisition will further accelerate its expansion into mid-day line tires for trucks and buses and enter the fast-growing 2/3 tire market as a market leader.