JK Tyre gets approval from CCI for acquisition of Cavendish Industries

JK Tyres and industries (JK Tyre), part of JK Organisation informed stock exchanges that it has received approval from the Competition Commission of India (CCI) for the proposed acquisition of Cavendish Industries. JK Tyre is a leading tyre manufacturer in India.

Cavendish Industries is a subsidiary of Kesoram Industries, housing a tyre business undertaking located at Haridwar (Laksar) which manufactures a range of tyres, tubes and flaps.

On 12th September 2015 JK Tyre with its subsidiaries agreed to acquire Cavendish Industries at an enterprise value not exceeding Rs 2200 crores. The acquisition will provide further impetus to JK Tyre towards ready expansion in the truck and bus radials segment where it is a market leader as well as its entry into the fast growing two and three wheeler tyre market. Accordingly, JK Tyre estimates the transaction to be strategic, revenue accretive and synergistic with its existing tyre business. 

On financial front, the net revenue from operations of JK Tyre reached to Rs 1617 crores in Q3FY16 compared to Rs 1838 crores in Q3FY15 a decrease of 12 per cent YoY. The EBITDA stood at Rs 461 crores this quarter compared to Rs 427 crores in Q3FY15 an increase of 8 per cent YoY. The EBITDA margin of company stood at 28.5 per cent this quarter compared to 23.23 per cent in Q3FY15. The increase in EBITDA is on back of decrease in consumption of raw material by 16.86 per cent to Rs 883 crores compared to Rs 1062 crores same period last year. The net profit stood at Rs 111 crores in Q3FY16 compared to Rs 92 crores in Q3FY15 an increase of 20.20 per cent YoY.

On valuation front the trailing twelve month (TTM) P/E is at 4.72 compared to an industry P/E of 9.62. The stock of company is trading at Rs 81.80 on Monday an increase of 1.36 per cent from previous close.