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BW Businessworld

Ceat Tyres: No Brakes On Growth

Amidst heavy competition from the likes of MRF, JK Tyre and Apollo Tyres, CEAT has maintained its status of a technically savvy tyre-maker and a highly profitable company. Instead of specialising in manufacturing tyres for particular segments, Ceat is an all-round player, making tyres across segments

Photo Credit : Subhabrata Das

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Founded in 1958, Ceat Tyres, the flagship company of Mumbai-based RPG Enterprises, is one of the most respected and fastest growing brands in the Indian tyre market. Amidst heavy competition from the likes of MRF, JK Tyre and Apollo Tyres, Ceat has maintained its status of a technically savvy tyre-maker and a highly profitable company. Instead of specialising in manufacturing tyres for particular segments, Ceat is an all-round player, making tyres across segments.

In the last few years, the company has remained profitable despite a challenging environment. For the year ended 31 March, 2016, it reported a consolidated net profit of Rs 446.49 crore, growing by 40.76 per cent year on year. Between FY12-13 and FY15-16, Ceat’s PAT grew over four times, while its debt equity ratio came down to 0.3 in FY16 against 1.1 in FY13. There was a 10x growth in market capitalisation from Rs 500 crore in September ’13 to Rs 5,000 crore in Sep ’15. The tyre-maker launched close to 350 new products between FY13 and FY16.

Anant Goenka, managing director of Ceat, says, “Our revenues from new products in the focus categories have doubled. The products are technologically superior and offer higher safety to users. One of the breakthrough developments in two-wheelers has been the introduction of puncture proof motorcycle radial tyres recently, which solves one of the key pain points of the company.”

Unique Approach
CEAT’s distribution network, marketing strategy and technical innovation in product manufacturing, differentiate it from other players. On the distribution front, inspired by fast moving consumer goods (FMCG) players, the company adopted an FMCG-type model in the tyre industry; a first of its kind.

“We moved from directly selling tyres to dealers to adding another layer, the distributor, who in turn tapped on to their vast network of sub dealers. This helped improve our reach and serviceability substantially,” says Goenka, adding that implementation of the total quality management-based business excellence system has improved the health of the company remarkably.

According to Goenka, to remain a fast growing company, development of breakthrough and best-in-class products is key. “Various product ideas are being developed, key amongst which is a smart tyre with sensors inside it that would constantly evaluate the condition of the tyre and identify any problems, and provide possible solutions to the driver,” he says.

Ceat is one of the most recognised brands in country. “We embarked on increasing brand visibility in a systematic way by communicating our value proposition. We came up with successful campaigns for our utility vehicle tyres and motorcycle tyres,” says Goenka. Its “Idiot-safe” campaign for motorcycle tyre and “Nimbu-Mirchi” series that starred Irrfan Khan for UV segment have been quite popular. “These campaigns garnered many “Best Campaign” awards in addition to boosting the sales volumes,” he adds.

Smooth Sail
The company plans to spend over Rs 2,800 crore over the next five years to expand its manufacturing capacity by 1 million tyres per annum for truck bus radials, 17 million tyres per annum for 2-wheelers and 6 million tyres per annum for passenger car radials.

“The investments are being done to boost the growth in our focused segments of 2-wheelers and passenger car radials. In addition to that with the growth in radialisation of truck segment, it becomes imperative for us to increase our truck bus radial capacity, to maintain our market share,” says Goenka.