About Tolins Tyres Limited

Tolins Tyres Limited is primarily engaged in manufacturing of bias tyres for comprehensive array of vehicles (including light commercial, agricultural and two/three-wheeler vehicles) and precured tread rubber and are also involved in manufacturing of ancillary products like bonding gum, vulcanizing solution, tyre flaps and tubes. They commenced operations in 1982 as a proprietorship concern for manufacture of tread rubber. They incorporated this Company in the year 2003 and commenced production and sales in the year 2005 and since then have been one of the players for retreading products manufacturing owing to their excellence and innovation in the industry. They are a profitable growing Company in the retreading and tyre manufacturing space and their Profit after Tax has grown at a CAGR of 541.98% between Fiscal 2022 (on a standalone basis) and Fiscal 2024 (on a consolidated basis). Over the years, they have expanded their manufacturing capabilities through infusion of capital from the Promoters, in addition to growing their dealers and distribution network. With over four decades of experience, they rely on their product development capabilities to design and deliver proprietary products such as precured tread rubber and bias tyres that are market fit.

Under the “Tolins Tyres” brand, they market and sell tyres for use in light commercial vehicles, agricultural vehicles and two/three-wheeler vehicles, primarily in India and export to the Middle East, the ASEAN region, and Africa. The Company has established itself as a major tyre retreading solutions provider across India and exported to 40 foreign countries, including the Middle East, East Africa, Jordan, Kenya and Egypt.

Currently, the Company caters to all three segments of market viz. exports, domestic sales and Original Equipment Manufacturers (“OEMs”) like, Marangoni GRP, Kerala Agro Machinery Corporation Ltd (KAMCO), Redlands Motors, Tyre Grip etc. Further, they sell their products through dealership network and their depots. They have a widespread customer base with their domestic customer base situated in most of the regions of the country and their international customers situated across varied countries covering Middle East, the ASEAN region and Africa. They have been recognized by their customers for the high-quality of the products supplied by them, which is one of the factors that has helped them establish long term relationships with them.

They operate from three Manufacturing Facilities out of which two are located at Mattoor in Kalady, Kerala and the third one is located in Al Hamra Industrial Zone in Ras Al Khaimah in UAE.

Overview of the tyre industry in India
The growing turnover of the Indian tyre industry in recent years can be attributed to increasing demand for vehicles, rising disposable incomes, increasing premiumisation of vehicles and tyres, the industry venturing into the luxury segment, growth in exports and reduction in import of tyres. The turnover has doubled in a decade from Rs 46,000 crore in fiscal 2013 to Rs 90,000 crore in fiscal 2023. 

The domestic tyre industry is dominated by major players such as Apollo Tyres, Balakrishna Industries, Bridgestone, Ceat, JK Tyres, MRF and TVS Srichakra. These companies account for more than 80% of the tyre market in terms of revenue. 

Global companies such as Michelin, Bridgestone, Goodyear and Maxxis have set up their manufacturing units in India. However, their share in the overall Indian tyre market continues to be low with customers being price sensitive.

Tyre exports from India have seen flat growth this year. The global economy's challenges from recessionary conditions, rising interest rates, political upheaval, and a weakening of external demand impacted the growth momentum of Indian tyre exports.

CRISIL MI&A forecasts overall tyre exports to increase by 7-9% in fiscal 2029, with the two-wheeler tyre segment leading the growth. Indian two-wheeler OEMs' strong market presence in African and Latin American countries, along with the enhanced reputation of Indian tyre brands, will support this expansion. However, exports in other segments are likely to decline due to decreased demand from advanced economies in Europe and America.

India's tyre exports declined to Rs 23,075 crore in fiscal 2024 from Rs 23,125 crore in fiscal 2023. 

In fiscal 2024, the top export markets for Indian tyres were the US, Germany, Brazil, Italy, UAE, France, Philippines, Netherland, UK, Bangladesh, and Canada. The US continues to be the largest market for Indian tyres, accounting for 18% of the total tyres exported from the country during the year. 

The competitive performance and affordability of Indian tyres, combined with the global shift towards diversifying supply chains away from China, have positively impacted export growth. The establishment of manufacturing units by Indian OEMs abroad is also boosting the acceptance of Indian tyres in international markets. Moreover, increased investments in technology and innovation are expected to further solidify the position of Indian tyre manufacturers globally.

Radial Truck & Bus (TBR) Tyre
The moderation in CV tyre exports owing low demand from European market in fiscal 2024 expected to ease in fiscal 2025. The subdued demand in major economies owing to global slowdown has resulted in moderated growth in MHCV tyre exports. In fiscal 2025, in the overall exports growth is expected to be higher than fiscal 2024 owing to anticipated loosening monetary policies across the globe and subsequent increase in demand.

Tyre imports

Tyre imports are declining on the back of government regulations that favour domestic players. 

The tyre Imports in India went up by 19% in FY24. The rise in imports comes on the back of 15% growth in the previous year. Tyres over Rs 2500 crore landed in India during the period benefiting from low rates of duty under FTAs signed by the country. 

In fiscal 2023, tyres worth Rs 2,131 crore were imported into the country. In volume as well as value terms, PCR tyres accounted for the largest share.

OTR/ Industrial tyres account for the largest share in overall tyre imports in India in value terms. The share of both PCR and TBR came down in fiscal 2024 while that of Motorcycle tyres went up in comparison to the previous year.

In September 2017, anti-dumping duty (ADD) to the tune of $245.35-$452.33 per tonne was imposed on pneumatic radial tyres above 16-inch in size, mainly affecting the truck and bus radial (TBR) and PCR segments for five years. In June 2019, countervailing duty (CVD) to the tune of 9.12-17.5% was imposed on Chinese pneumatic radial tyres above 16-inch in size for five years. Further, in June 2020, the government put tyre imports under the restricted category, which severely impacted imports, potentially benefitting domestic players in the replacement segment. Additionally, in September 2020, tyres were removed from the Duty-Free Import Authorisation list. Accordingly, share of tyre imports from China, Vietnam and Thailand declined considerably across segments, resulting in a significant dip in total imports. 

PCR tyre imports continued to remain positive in the past due to demand for high-end tyres as well as imports by multinational corporations such as Michelin, Pirelli, Hankook and Falken. However, with import restrictions in place, the import of PCR tyres will remain a key monitorable soon.

Two-wheeler tyres: Review and outlook
Improving urban sentiments owing to a pick-up in overall public mobility, with resumption of work-from-office and physical classes in educational institutions, and positive rural sentiment backed by an anticipated normal monsoon, are expected to support two-wheeler sales this fiscal.

Three-wheeler tyres: Review and outlook
The need for cost-effective and efficient modes of transportation remains strong, thereby driving the demand for tyres. A larger number of operational three-wheelers would result in a higher demand for replacement tyres. The government regulations related to vehicle maintenance and safety can influence the demand for replacement tyres as they are required to adhere to certain standards.

Passenger vehicle tyres: Review and outlook
Passenger vehicle sales are expected to be driven by the expansion in the addressable market, urbanisation, low penetration, modest increase in the cost of acquisition and fast-paced infrastructure development. We also expect automobile manufacturers to focus on rural markets and expand their distribution network in semi-urban and rural areas. 

The passenger vehicle sales are projected to grow by 5-7% in fiscal 2025 over a strong base created by 3 consecutive years of healthy growth. Rise in income levels along with increase in finance penetration coupled good traction in newly launched UV models is expected to bode well for the industry.

Better financial conditions, the launch of higher-end utility vehicle models by OEMs and improving demand sentiments are expected to drive 5-7% growth in fiscal 2025. Additionally, the high sales in the PV segment in fiscal 2022 are expected to result in higher tire sales in fiscals 2025 and 2026.

Commercial vehicle tyres: Review and outlook
The tyre demand from OEMs catering to the MHCV segment is projected to decline by 4-6% in fiscal 2025 due to a projected decline in the Medium and Heavy Commercial Vehicle (MHCV) sales segment by 2-4% in fiscal 2025. The projected higher decline in sales in higher tonnage vehicles is expected to lead to a larger decline in tyre sales in fiscal 2025. The decline in the volume up for replacement and the oversupply of tonnage in the system will hinder the volume growth. The higher tonnage available in the system is restricting volume growth in the current fiscal as the trend towards higher tonnage vehicles is expected to continue implying tonnage growth will be in line with GDP but volumes will be limited. 

Tyre demand from OEMs catering to the LCV segment is projected to decline by 8-10% in fiscal 2025. Though overall LCV sales are estimated to grow by 0-2% due to increase in sales of LCVs and pickups by 2-4%, the ULCV segments which have higher tyre sizes is estimated to decline by 35-40% due to subdued volumes up for ULCV replacements which peaked in fiscal 2023.

Tractor tyres: Review and outlook
OEM tractor tyre demand is projected to record an 3-5% growth in fiscal 2025 on account of higher tractor purchases which are estimated to grow by 4-6. Subdued rural sentiments due to erratic rainfall and high input costs have led to a decline in farmer sentiments.

Tyre demand from the tractor segment is expected to be stable in the long run as the government has set a target to augment farm incomes, provides direct income support to farmers and owing to improvement in land productivity through issuance of soil health cards. The government's renewed thrust on enhancing irrigation intensity is expected to support tractor growth and increase mechanisation. Tractor manufacturers have started offering rental services via mobile applications, which will also prop up demand for tractors in the long term.

Outlook on the Indian two-wheeler industry
India is the largest motorised two-wheeler market in the world, with domestic sales of 18.4 million units in fiscal 2024. Two-wheeler sales constituted 73% of the total automobile market, which includes two-wheelers, threewheelers, passenger vehicles (PVs), commercial vehicles (CVs) and tractors by volume in fiscal 2024. 

The two-wheeler segment sees a healthy demand in India and is preferred over four-wheelers by the majority of the Indian population, especially for their regular commute. This is primarily due to the lower acquisition cost, higher mileage, lower maintenance cost, ease of navigation especially during rush hours, hassle-free parking and suitability of two-wheelers on rough roads.

In fiscal 2024, the two-wheeler industry’s sales grew by a further 13%, supported by further improvement in the macroeconomic scenario, rural support, continued traction for premium motorcycles as well as scooters. In addition, continued demand for electric two-wheelers despite the subsidy cut1 supported the growth in fiscal 2024. The new launches, especially in the premium segments provided an added support to the demand. The commuter motorcycle segment also witnessed some improvement during the year after consecutive contractions aided by limited rise in operating costs as well as increased customer incentives.

Motorcycles dominate the domestic two-wheeler industry sales with more than 60% contribution to the annual domestic sales. However, their contribution has gradually contracted over the years, from 78% in fiscal 2009 to 63% in fiscal 2024. 

On the other hand, the scooter segment expanded its presence over the long-term horizon, from 15% in fiscal 2009 to 34% in fiscal 2024. The moped segment also lost some ground to scooters over the years, from around 6% share in fiscal 2009 to ~3% in fiscal 2024.

Indian two-wheeler industry (fiscal 2024 to 2029)
The industry is expected to continue its growth momentum over the long-term horizon led by the positive microeconomic and macroeconomic environment, favourable rural demand, premiumization, intermittent launches, shrinking replacement cycle and continued support from financers. Moreover, continued R&D investments by the OEMs and the technological advancements in the industry to provide an added support to the growth of the industry over the long-term horizon. 

Additionally, the fast-rising EV segment, with EV portfolio expansion by legacy players, capacity expansion by new age players will accelerate the industry growth. 

Introduction of CNG powertrain, which will offer lower operating costs compared to petrol variants, will push the two-wheeler industry growth further.

Led by these positive industry drivers, two-wheeler industry sales are projected to log 6-8% CAGR and reach volume of 25-27 million by fiscal 2029.

Indian three-wheeler industry
India is the largest three-wheeler (3W) market in the world, with domestic sales of 0.75 million units in fiscal 2024.

With the emphasis on reducing the carbon footprint, electric vehicles (EVs) are gaining importance globally. India is also a signatory to the Paris Agreement under the United Nations Framework Convention on Climate Change. The country is also part of the EV30@30 campaign, targeting a 30% sales share for EVs by 2030.

The domestic three-wheeler market grew phenomenally last fiscal, recording the highest growth of 88% on-year. Electric vehicle penetration has reached to 13.2% in fiscal 2024 The availability of finance, alternative fuels and state subsidies contributed majorly to the growth.

The overall 3W industry expected to grow by 5-7% CAGR between fiscal 2024 and fiscal 2029.

Indian passenger vehicle Industry (fiscal 2024 to 2029)
The domestic passenger vehicle industry grew at a 5% CAGR during fiscal 2019-24 period. Despite the pandemic hiatus, the industry achieved this growth from a record high base of fiscal 2019; led by the sharp rise in traction for the SUV segment, increased vehicle launches coupled with the entry of newer players. Relatively lower impact on disposable income of the upper middle class led to a significant growth in the SUV segment driving overall PV sales. In turn, the industry reached a historic high of about 4.2 million vehicle sales in fiscal 2024.

Despite this healthy growth, India’s car penetration (26 cars per 1000 people- fiscal 2024) is still much lower than the car penetration of global peers like China (183), Mexico (280), Brazil (276) as well as of developed countries like United States (594), UK (489), Japan (495) and Korea (389). Thus, there is a lot of headroom for growth for the Indian domestic market.

PV Exports Outlook for India
Passenger vehicle exports from India is expected to grow at 3.1% in fiscal 2024 and at a CAGR of 7-9% between fiscals 2024 and 2029. Anticipated economic growth in key export regions along with push from OEMs will make India the base of exports for certain models, which in turn will boost exports. While the outlook for Middle East and Asia remains positive, the ongoing Iran-Israel conflict would remain a key monitorable. Any escalation of the conflict could push the oil and gas price alongside impacting the shipping through the Strait of Hormuz. Rise in crude oil prices could impact the fuel prices in export destinations thereby increasing the inflation pressure and impacting exports demand from India.

Domestic sales, which formed 85.4% of overall industry in fiscal 2023, is expected to grow at 4.5-6.5% CAGR between fiscals 2024 and 2029P. Over the period, exports are forecast to grow at 7-9% CAGR reaching a share of 15.6% by fiscal 2029.

Indian tractor industry
In fiscal 2022, domestic tractor demand dropped 6.4% on-year after growing 26.6% in fiscal 2021. Price hikes by OEMs, higher inventory at dealerships, lower commercial demand, negative farmer sentiment owing to rising cost of cultivation, low fertiliser availability and increase in other expenditure (such as marriages and other social occasions) hampered the demand.

CRISIL Consulting projects domestic tractor sales to expand at 4-6% compound annual growth rate (CAGR) during fiscals 2024 to 2029, after factoring in one to two years of erratic monsoon during the period along with healthy sales expected in the remaining years. From fiscal 2018 to 2023, the industry registered a CAGR of 5% due to healthy sales in fiscals 2017, 2018, 2021 and 2023.

TOLINS TYRES LIMITED COMPETITIVE STRENGTHS
1. Diversified Product Range and Customised Product Offering
2. Quality of Products
3. Long standing relationship with large OEMs and dealer network in India and their Depots
4. Integrated manufacturing operations coupled with in-house products and process design capabilities which offer scale, flexibility and comprehensive solutions
5. Locational Advantage
6. Research and development and product development capabilities
7. Their R&D Centre
8. Experienced and Dedicated Management Team
9. Track record of growth and financial performance

TOLINS TYRES LIMITED COMPETITIVE STRATEGIES
1. Optimisation of their Capacity Utilisation
2. Expanding Reach of Domestic Markets
3. Expand their Product Range by introducing new products and product range
4. Penetrate into New Geographies through an Increase in Exports
5. Strengthen Relationships with their Existing Customers and Expand Customer Base
6. Continue to Improve Operational Efficiencies through Economies of Scale, Supply Chain Rationalization, technology enhancements and effective Resource Planning
7. Improve Efficiencies with Technology Enablement
8. Pursue Inorganic Growth through Selective Acquisitions
9. Broad Description of their Products Offerings

TOLINS TYRES LIMITED COMPETITIVE RISK FACTORS & CONCERNS
1. The tyre manufacturing industry is encountering difficulties because of limited suppliers for key raw materials such as natural rubber and carbon black.
2. They are dependent on their automotive original equipment manufacturer (“OEM”) customers for the sale of a significant portion of their agricultural tyres.
3. Their business is significantly dependent on their Manufacturing Facilities in India and abroad.
4. They derive a portion of their revenue from the sale of bias tyres, which may result in pricing pressure that could adversely affect our profitability.
5. The Company and their Subsidiaries namely Tolin Rubbers Private Limited and Tolins Tyres LLC (One Person), have reported negative cash flow in the past.
6. The sale of their products is concentrated majorly in Kerala.
7. The revenue their Company generates from their sale of tread rubber is higher as compared to the revenue generated from sale of bias tyres.
8. They may face an adverse impact on their international sales and earnings as a result of risks associated with our international sales.
9. A significant portion of their tyre products are sold to dealers & distributors.