Sunil Chordia, Chairman -; Managing Director, Rajratan Global Wire Ltd

18 Apr 2022 , 06:37 PM

In an interaction with Mamta Maity, indiainfoline.com, Sunil Chordia, CMD, Rajratan Global Wire Limited said “As for Rajratan, the higher share of domestic sales in Thailand helped adjust the increase in logistic prices.”

To start with, can you take us through your journey of Rajratan Global Wire as a Bead Wire manufacturer

Rajratan Global Wire Ltd was founded by Mr. Sunil Chordia and his family in 1989, under the name of Rajratan Wires Pvt Ltd to manufacture pre-stressed concrete wires. In 1995, the company entered into the business of bead wire and in 1997, they entered into a JV with Gustav Wolf, Germany to expand their offerings in India in Bead Wire. The company was renamed Rajratan Gustav Wolf Ltd. In 2002, the company bought out the stake of Gustav Wolf with an aim to expand capacities and make Rajratan a global company. Subsequently, the company was renamed Rajratan Global Wire Ltd. In 2008 the company ventured into Thailand with the first bead wire manufacturing plant in Thailand, with a vision to service tyre manufacturers in the region. From a humble beginning of 5000 TPA today Rajratan Global Wire has a capacity of 72,000 TPA in India and 40,000 TPA in Thailand.

In which states does Rajratan Global Wire have its manufacturing facilities and what is the capacity utilization?

The company’s manufacturing facility in India is situated at Pithampur, Madhya Pradesh, and is currently working at a capacity utilization of more than 70-75% in the current financial year. With the growth and expansion of the sector, Rajratan Global Wire is in the process of setting up a new Greenfield capacity near Chennai, Tamilnadu for 60,000 TPA which will help Rajratan increase its export to 50% capacity in the coming years from this port based facility.

What is the business model that your company follows? What is the revenue model?

The company manufactures and sells bead wire to all major tyre manufacturers in India. The bead wire is customized to tyre manufacturers with respect to their sizes and purposes. Also known as reinforcement wire, bead wires are critical for the safety of the tyre, which acts as an entry barrier for any new manufacturer. The approval process of tyre companies takes anywhere between 1.5 to 3 years for them to be approved as a quality and consistent bead wire supplier to the tyre manufacturers. Rajratan has expanded capacities to meet the increased demand from the increasing number of tyre manufacturers. The revenue model ensures that the rise in steel prices is passed on to tyre manufacturers by incorporating it into the selling price for bead wire.

What is the demand outlook for tyre industry?

Tyre companies have expanded capacities in the last 3-4 years and are continuing to further expand capacities aimed at meeting domestic and global demand for tyres. While OEM sales contributes to 30% of tyre sales, 70% is still dominated by the replacement market where the demand is very strong. Tyre companies are doubling capacities to cater to the growing demand, which has led to Rajratan also expanding capacities to meet the industry requirement. Overall tyre demand is expected to grow at a CAGR of 7-8% over a large base.

What are the new product launches in 2022 that investors should know?

The technology and innovation in the bead wire segment is steady and follows the industry standards. The key areas of innovation is largely in effectually optimising the manufacturing process and building a stronger distribution network. Bead wire being a critical product within the entire tyre manufacturing ecosystem, Rajratan continues to evolve its overall processing and quality efficiency to increase the distribution and exceed client expectations.

What are the key focus areas in 2022 for Rajratan Global Wire?

For FY22, Rajratan Global Wires will be expanding their Thailand capacity from 40,000 TPA to 60,000 TPA. For FY23, ground breaking and Civil and EPC contractual activity will commence for their upcoming greenfield capacity near Chennai, Tamil Nadu.

Additionally, the existing production facility at Pithampur will work on increasing their capacity utilisation to reach 95% and boost the overall volumes for the company.

Tell us about the upcoming plant in Chennai?

We are setting up a greenfield facility in Chennai for an estimated sum of Rs 300 crores. The plant shall have a production capacity of 60,000 TPA. The first commercial production is expected to roll out in 18 months, gradually leading to full capacity installation within 36 months. The facility is port based, being setup to cater to South India based customers as well as Exports.

How are you managing export when the logistic costs are still high?

As for Rajratan, the higher share of domestic sales in Thailand helped adjust the increase in logistic prices. The Indian facilities also contributed to proving a positive overall export volume. The shift from the Thailand facility helped reduce the overall logistic cost and was able to address the client requirements as their locations were under 300Kms away from the facility. Even though the fuel prices have increased, the government subsidy and capping of diesel prices have helped maintain and manage the logistics effectively. The sales & logistic teams utilized their expertise in building a framework to optimize the freight costs from each manufacturing plant. This eventually worked in reducing the overall costs that were incurred and the benefits were passed over to the customers as well.

How do you describe the Indian bead wire industry? 

The Indian bead wire industry is growing with an expected growth rate of 8% every year for the next 5 years. The estimated overall Bead Wire consumption in India is close to 100,000 MT Annually. Domestic manufacturers cater to 90% of the bead wire requirements & the balance is imported. The high steel and freight prices have impacted the import supply of bead wire in the last 18-24 months. With the Indian government enforcing several restrictions on the import of steel products (MIP, BIS Certification, pre declaration, etc), it has created a challenging situation for customers to be dependent on the import of steel supplies. 

India has not been a traditional supplier of bead wire to the global market. However, Rajratan has been building a strong presence and ensuring that business relationships with major MNC companies in South East Asia and Europe will help achieve a target of exporting 50% from the upcoming Chennai facility.