Sri Lanka’s CEAT-Kelani joint venture to invest on capacity expansion
The Morning: Kelani Tyres (TYRE) by a Colombo Stock Exchange (CSE) corporate disclosure dated 31 January 2022 announced that the directors of the CEAT-Kelani joint venture companies, at their meeting held last Thursday (27 January), had approved a special capital expenditure of Rs. 3.2 billion.
The investments so approved will increase the production capacity of its passenger car/sport utility vehicles (SUV)/light van, steel-belted radial tyres from its current level of 51,000 tyres per month to 61,000 tyres per month and to increase its production capacity of motorcycle/scooter tyres from its current level of 41,000 tyres per month to 57,000 tyres per month.
Therefore, the Rs. 3.2 billion capital expenditure will be used to replace existing tyre manufacturing equipment with the latest state-of-the-art machines which will enhance the capacity and product offerings of the full factory production to be in line with internationally benchmarked tyres and quality.
In addition, its range of tyres will be expanded to include tyres of 17” rim sizes and above in the car and SUV segments and tyres of high-speed rating (H and higher), lower rolling resistance, and higher overall performance.
According to the CSE disclosure, the above investment shall also enable the future expansion of production capacity of its passenger car/SUV/ light van, steel-belted radial tyres to 100,000 tyres per month.
Such further capacity expansion shall require only investments in balancing downstream tyre manufacturing equipment and required infrastructure and shall not require any additional or minimal upstream equipment.
The financial benefits of these investments will start manifesting by FY2023/24, the disclosure noted.
OSL take:
Many Sri Lankan businesses are currently engaged in expansion programmes after recording growth rates even amidst the pandemic challenges. The expansion of Sri Lanka’s private sector is in line with the ongoing development programme carried out island wide. The expansion programmes are also indicative of the overall strength and growth of the country’s economy. Sri Lanka’s geographical positioning in the Indian Ocean, the many trade agreements as well as concessions enjoyed by the country and the business conducive environment have all helped boost the country’s businesses while also positioning the country as an emerging business destination in the South Asian region. The expansion of Sri Lanka’s businesses have also opened up many new business/investment opportunities while foreign businesses/investors could also explore forming partnerships or joint ventures with local businesses.
| Article Code : | VBS/AT/09022022/Z_7 |