MUMBAI: India’s two leading tire makers Madras Rubber Manufacturers (MRF) and Onkar Kanwar-led Apollo Tyres are in a bidding war to acquire the main tire unit of BK Birla flagship Kesoram Industries, raising interest in a possible bidding war for the North Arkhand plant. At the same time, it could further add to the value of the plant, which already far exceeds the market capitalization of the entire diversified Birla group.

While MRF he is the leader for the plant, many sources with knowledge of the ongoing negotiations say Apollo has also recently entered the fray.

For Apollo and MRF In addition, the acquisition will improve their manufacturing position and strengthen their market share in North India. In the commercial vehicle tire segment, they are ranked first and second, respectively.

Next week is expected to be decisive. Apollo and Kesoram promoters are expected to meet in New Delhi on Monday to discuss the issue, according to sources quoted earlier. Later in the day, the Kesoram management is also scheduled to meet the loan consortium to seek approval for splitting the tire plant into subsidiaries. This is expected to boost monetary activity and increase the net worth of listed Kesoram. Interestingly, MRF and Kesoram 12 hold daily board meetings and publish quarterly financials, prompting speculation that a deal is imminent unless Apolloo, at the last minute, makes a convincing counteroffer.

If successful, it would be the first acquisition in the history of 69 Chennai MRF. Meanwhile, Apollo Kanwar The family has expanded its international presence through acquisitions, including the purchase of South Africa’s Dunlop Tire International Ltd. and Holland Tire in 2006.-Since 2009 manufacturing Vredestein tires.

But this is the boldest acquisition to date. Cooper Tire & Rubber Company, one of the largest tire companies in the United States, several times the size of Apollo, all-cash 25 acquisition of $ 100 million. The deal, this deal, was a complete failure. It is located in Laksar, Kesoram North Arkansas The sale of its main unit (Birla) Tires brand sells tires) would have significantly deleveraged its debt balance sheet, which stood at Rs 44.25 billion at the end of September. Burden. Achievement of FY14 quarterly targets and release of working capital for other businesses. Tire business accounts for nearly half of FY14 EBITDA.

Birlas expects an enterprise value of at least Rs 2, 200-2, 300 crore for the plant alone. In the long run, this is at least 45% higher than the company’s overall market capitalization of Rs 15.21 billion (as of Friday, February 6). The Economic Times reported on January 20 MRF that the stock had risen 26% in the past month following interest in the unit. This high premium expectation is seen as a potential hurdle to the sale as MRF is believed to be bidding Rs 1, 600-1, 800 crore.

A source said, “MRF has been with Kesoram After months of in-depth discussions, the management remained a formidable competitor, but now with the development of Apolloo, which is being aggressively pushed at a later stage, it has suddenly become a two-horse race,” said the said source. ” . Because the negotiations are private, anonymity can be guaranteed.

“While we are still in the negotiation stage, Apollo does not want MRF to go down without a fight as it would significantly narrow the gap between the two in the commercial vehicle tire segment.Apolo is looking for the right candidate after the failed Cooper acquisition.” He added that Apolo is dependent on India for about two-thirds of its revenue.

Ganguli, company secretary, Kesoram Gautam, told The Economic Times, “We are not aware of any interest or proposal from MRF or Apollo. Nor are we aware of the meeting with Apolloll on Monday. The company is expected to make a disclosure to the stock exchanges on Monday, but did not elaborate, saying it would be in line with the “restructuring” and “reorganization” measures taken by the group and acceptance of the transfer of the tire assets of Uttarakhand to its subsidiaries. Items discussed.

A spokesperson for Apollo Tyres said the company did not comment on market speculation.

In June last year, Kolkata-based Kesoram appointed a three-member board to restructure the group’s businesses, including cement, tires, rayon, transparencies and filaments. Kesoram then initiated a formal sale process and appointed a banker to manage the exercise. The committee recommended to the board that the North Akhand division be divided into separate subsidiaries.

In the highly competitive and concentrated tire market, where the top 6-7 players account for nearly 90% of the industry’s revenues, Birla Tires ranked in the top five with 5% revenue market share. MRF leads with 29% market share while Apolloo is second with 21% market share.

Currently, Kesoram (Birla Tyres) Laksar has two production facilities in Balasore Orissa and Uttarakhand with a total annual capacity of 12.1 million units, of which only half was utilized in FY2014. The Uttarakhand plant was set up in 2008 and further expanded in 2013 to produce 4.4 lakh truck tires per annum. This is twice the size of the existing Balasore plant that opened in 1991. It was created in partnership with Pirelli of Italy. The Uttarakhand plant, which has a capital expenditure of Rs 230 crore, mainly produces truck tires and enjoys excise duty exemption till 2019. However, severe cost overruns and debt have led to operational losses at the plant, sources said. Birla’s tire portfolio comprises mainly truck and bus bias and radial tires, which account for 67% of sales, with agricultural off-the-road (OTR) tires having a smaller share in this segment. Kesoram primarily targets replacement and OEMs and exports to 50 markets and countries.

According to May 2014 According to the company, Apollo claims to have been the leader in the truck tire market for more than a decade. After more than 10 years, it now contributes 46% of our revenue. The company has manufacturing facilities in Asia, Africa and Europe with a total capacity of about 1,685 tons per day. In India, the plants are mainly located in the south and west. The company on Friday announced that consolidated net profit from its South African business rescue plan declined 45.49 percent to Rs 184.24 crore in the third quarter ended December 31st.