MRF has decided to focus on exports and is eyeing new markets in this regard. This decision has been taken in order to make up for the slump in tyre demand following the recession in the Indian economy over the past couple of years.
MRF is India's largest tyre manufacturer. It's market leadership (appx. 22%) results in economies of scale in the low margin tyre industry. The company derives 95% of its revenues from its tyre business.
Exports currently constitute 6% of total sales at MRF. The company's plans involve increasing exports to 30% of total truck tyre production from the current 20-25%. The company currently exports to 65 countries and plans to expand in the Brazil and later the Latin American market. This move would enable the company to hedge its business by operating in various markets across the globe. This would also help the company overcome the slump in tyre sales that it is facing in the domestic market.
However, the company may be spreading itself too thin by exporting to 65 countries. The costs that will have to be incurred to have a significant presence in 65 counties would be very large. Moreover, once the domestic demand picks up, the company would have to set priorities, as with its existing capacity it will not be able sufficiently serve 65 markets. Also, given the competition from South East Asia, the company will find it extremely difficult to earn above average margins.
More Views on News
Sorry! There are no related views on news for this company/sector.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407