Endurance Tech Tumbles After Announcing Foray Into Tyre Segment

Endurance Technologies Ltd. hit the lower circuit after the auto components maker announced its plans to manufacture tyres for two- and three-wheelers.

Shares of the company fell 20 percent to close at Rs 742.15 after it informed the stock exchanges about its foray into tyre business along with its quarterly earnings.

The company’s board, according to its filing, approved acquisition of 40 acres of land in Aurangabad Industrial City. The land and the tyre unit is expected to cost Rs 175 crore in capital expenditure, the statement said.

“We are just exploring into manufacturing of two- and three-wheeler tyres and no investments have started with this regards,” Anurag Jain, managing director of the auto parts supplier, said in a conference call. “We would like to assure our shareholders that we will only go ahead with the tyre project only after being 100 percent sure on returns and profit margins.”

The company, primarily into the manufacturing of aluminium die casting, suspension, transmission and braking systems, has no past experience in tyre business. “One of our OEM (original equipment manufacturer) customer also asked us to look into manufacturing of tyres and supplying it to them,” Jain said, adding that the company will undertake any project only if return ratios and profit margins are attractive.

According to Ashutosh Tiwari, head of research at Equirus securities, the tyre business is highly competitive and there are already several established players in the segment. “In the initial phase, there is a likelihood that returns and margins on tyres could be lower for Endurance if it decides to goes ahead with project.”

Endurance Tech’s top five clients in the two-wheeler segment include Bajaj Auto Ltd., Honda Motorcycle and Scooter India Pvt. Ltd., Royal Enfield, Yamaha and Hero MotoCorp Ltd. The company received 37.5 percent of its revenue from Bajaj Auto in the first quarter of the ongoing fiscal, according to its filings.