MRF forges ahead with its expansion in West India

As part of its initial plans, the company is busy finalising the nuts and bolts of the project especially given the introduction of the Goods and Services Tax (GST).

While the impact of GST has not hit the tyre major given that the same tax rate of 28 per cent prevails on tyres, MRF Chairman and Managing Director KM Mammen said “We have just got the land and are now building the fence around it. Once we start the factory construction, it will take one year to commission the plant.” 

The city-based tyre major, with bulk of its customers in the north, is now in the process of tying up funds for the greenfield plant that envisages an investment of Rs 4,500 crore. “As it (GST) is a new reform, we expect it to take about six months to stabilise,” he said. 

Noting that MRF would continue to invest at the same pace as planned prior to GST, Mammen said, “We have no plans to review our capex in view of the GST. You cannot do that as setting up a factory takes a long time. And it cannot be delayed. Business is always a risk. It is imperative to get the initial planning right.” 

Asked about the business climate in the state and the movement of investors to neighbouring states, Mammen said he “missed his dear friend (the late CM J Jayalalithaa) very much. “Be it any investor, you must make them comfortable. Given the present environment, there are a lot of capable bureaucrats, who are involved in the governance, which is good.” 

After the double-whammy of GST and the November 8 note ban, the Chinese imports have not hit  MRF as a lot of questionable processes including under-invoicing had stopped. “GST is good, especially for our country and it needs time. Though we do not expect imports to decline by 100 per cent, what is happening is that the use of cash and not showing bills will come to a stand-still,” Mammen observed. 

On challenges, his response was “my current challenge is to see that we go through the next six months without any hiccups.  Indian economy is unique. Everybody in (the tyre industry) are used to cash dealings.”  

However, as far as MRF is concerned, its retailers were fully on track as far as the GST is concerned. “We have planned in advance and have been working for  the last six months. We have encouraged and taught our retailers to register and fill up the forms. It is not possible to do it overnight.” 

MRF’s request to the Centre to take a re-look at the inverted duty structure had not made any headway. 

While it continues to spend extensively on R&D, its focus on emerging technologies that includes trying out nano technologies and e-commerce adaptation have also been on track. Rolling-resistance tyres using sand as a compound material to bring in fuel-efficiency and meeting emission norms are areas that drive the tyre brand which pioneered the radial technology. “We are working on nano and already using it in so many areas but it is expensive,” he said, adding that such technology fitments were happening for the premium segments.  

“Radial tyres are still a huge market for us in India, especially in Pune,” Mammen said, noting advanced technology use would mean a decline in the requirement of people.