IFC proposes to extend $30m debt financing to Indian tyre maker

Photo: Bloomberg

International Finance Corporation (IFC) has proposed to extend $30 million in debt financing to an Indian off-highway tyre (OHT) making company.

The proposed investment will support the company in setting up a greenfield OHT manufacturing facility in India, IFC said in a disclosure dated 14 May without naming the company.

In the first phase, the company will pump in about $107 million in setting up a 40,000 million tonne capacity plant. This will be funded by debt of up to $54 million, of which $30 million will be contributed by IFC in the form of an A loan.

IFC will further help mobilise up to $24 million in the form of a parallel loan and invest up to Rs 542 million (Rs 54.2 crore) as equity in the company. The project is expected to create significant direct local employment by creating 1,500 additional jobs in phase 1 alone, the disclosure said.

After project completion, the company estimates exports to account for 70-80 per cent of sales and contribute to India’s forex earning, IFC said.

The Indian OHT market is less mechanised and more price sensitive due to low farm incomes and as a result, the product range in Indian markets is not as specialised as in the EU and North America, where more application-specific solutions are available. IFC anticipates more investments in this sector will happen, increasing the degree of customisation and product range available, thus resulting in increased penetration of OHT in India.

The size of OHT segment globally is still relatively small at nearly 10 per cent of the total tire industry. At present, value brands hold around approximately 30 per cent of the global market share, with Indian players holding half of this market share, IFC said.