MRF created history, as the first stock to cross the Rs 1 lakh mark on Dalal Street
MRF Ltd, the leading tyre manufacturer in India, has achieved a remarkable feat by becoming the first Indian company to cross the Rs 1 lakh share price mark on Dalal Street. The stock rose more than 1 per cent to hit a record high of Rs 1,00,300 apiece on June 13, 2023. The stock has been on a stellar run, gaining over 50 per cent in the past one year and outperforming the benchmark indices.
MRF Ltd is known for its high-quality products and strong brand loyalty among customers. The company has a dominant market share of over 30 per cent in the domestic tyre industry and exports its products to over 65 countries. The company has also diversified into other segments such as paints, toys, sports goods and conveyor belts.
The company has been investing heavily in expanding its production capacity, research and development, and marketing activities. The company has also benefited from the recovery in the automobile sector, lower raw material costs, and favourable government policies. The company reported a net profit of Rs 3.41 billion for the quarter ended March 31, 2023, up by 106 per cent year-on-year. The company also declared a dividend of Rs 94 per share for the financial year 2022-23.
MRF Ltd is one of the most expensive stocks in the world in terms of absolute price. However, its valuation is reasonable in terms of earnings and book value. The stock trades at a price-to-earnings ratio of 55.15 and a price-to-book ratio of 2.84 as of June 12, 2023. The stock also offers a dividend yield of 0.15 per cent.
MRF Ltd is a blue-chip stock that has rewarded its shareholders with consistent growth and returns over the years. The company has a strong competitive edge and growth potential in the tyre industry. The stock is likely to continue its upward momentum as the company leverages its brand strength, innovation and operational efficiency.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult your financial advisor before making any investment decisions.
Trends that are shaping the tyre industry in India
The tyre industry in India is undergoing a transformation due to various factors such as technological advancements, changing consumer preferences, environmental regulations, and competitive dynamics. Some of the key trends that are expected to influence the future of the tyre industry in India are:
- Radialization: Radial tyres are more durable, fuel-efficient, and safer than conventional bias tyres. They also offer better ride comfort, handling, and braking performance. Radialization of tyres is increasing in India, especially in the commercial vehicle segment, due to the growing awareness among fleet operators and OEMs about the benefits of radial tyres. The government's policy to ban overloading of trucks and buses has also boosted the demand for radial tyres. According to ICRA, the radialization level in the truck and bus segment is expected to increase from 55% in FY21 to 65% by FY23.
- Product-as-a-service: Tyre manufacturers are exploring new business models such as product-as-a-service, where they offer tyres as a service rather than a product. This involves providing end-to-end solutions such as tyre leasing, maintenance, retreading, and replacement to customers for a fixed fee or on a pay-per-use basis. This helps customers reduce their upfront capital expenditure, operational costs, and downtime risks. It also helps tyre manufacturers enhance their customer loyalty, revenue streams, and profitability. Some of the leading players offering product-as-a-service in India are JK Tyre, CEAT, and Bridgestone.
- Smart tyres: Smart tyres are equipped with sensors and chips that monitor various parameters such as tyre pressure, temperature, tread depth, load, and wear. They can communicate with the vehicle's onboard computer or a smartphone app to provide real-time feedback and alerts to the driver or fleet manager. Smart tyres can improve vehicle safety, performance, and efficiency by optimizing tyre pressure, preventing blowouts, reducing fuel consumption, and extending tyre life. They can also enable predictive maintenance and remote diagnostics for tyres. Some of the global players developing smart tyres are Michelin, Continental, Goodyear, and Pirelli¹. In India, CEAT has launched smart tyres for two-wheelers under its Tyresniffer brand.
These trends indicate that the tyre industry in India is poised for further growth and innovation in the coming years. The industry players will have to adapt to the changing market dynamics and customer expectations by investing in research and development, product differentiation, digitalization, and customer-centricity.
Challenges that are facing the tyre industry in India
Despite the positive outlook, the tyre industry in India also faces some challenges that may hamper its growth and competitiveness. Some of the key challenges are:
- Raw material volatility: The tyre industry is highly dependent on raw materials such as natural rubber, synthetic rubber, carbon black, steel cord, and chemicals, which account for about 70% of the total production cost. The prices and availability of these raw materials are subject to fluctuations due to various factors such as weather conditions, global demand and supply, exchange rate movements, and trade policies. For instance, natural rubber prices increased by 40% in FY22 due to lower production in major producing countries like Thailand, Indonesia, and Malaysia amid the Covid-19 pandemic. The tyre industry has to cope with these uncertainties by passing on the cost increases to customers, hedging the risks, or improving operational efficiency.
- Competition from Chinese imports: The tyre industry in India faces stiff competition from Chinese imports, especially in the truck and bus radial (TBR) segment. Chinese tyres are cheaper than Indian tyres due to lower production costs, economies of scale, and government subsidies. Chinese tyres also have a higher load carrying capacity and longer life span than Indian tyres. According to ICRA, Chinese imports accounted for 40% of the replacement demand for TBR tyres in India in FY20. The Indian government has taken some measures to curb the influx of Chinese tyres such as imposing anti-dumping duties and placing tyre imports under the restricted category. However, these measures have not been very effective as Chinese tyres continue to enter India through various routes such as Sri Lanka, Nepal, Bangladesh, and Vietnam.
- Supply chain disruptions: The tyre industry in India has also faced supply chain disruptions due to the Covid-19 pandemic and its aftermath. The lockdowns imposed by various states and countries affected the movement of raw materials, finished goods, and workers. The shortage of containers and freight capacity also increased the logistics costs and delivery time for both domestic and export markets. The tyre industry had to deal with these challenges by optimizing inventory levels, diversifying sourcing options, leveraging digital platforms, and collaborating with stakeholders.
These challenges require the tyre industry in India to adopt proactive strategies to overcome them and sustain its growth momentum. The industry players will have to focus on innovation, quality improvement, customer satisfaction, and market expansion to gain a competitive edge in the domestic and global markets.
Opportunities that are awaiting the tyre industry in India
The tyre industry in India has a lot of potential to grow and expand its presence in the domestic and global markets. Some of the opportunities that are available for the industry are:
- Export potential: The tyre industry in India has a strong export potential due to its cost competitiveness, quality standards, and product diversity. The industry exports tyres to over 100 countries across regions such as North America, Europe, Africa, Asia, and Latin America¹. The industry has also gained an edge over its Chinese counterparts due to the anti-dumping duties imposed by various countries on Chinese tyres. The industry can leverage this opportunity by exploring new markets, developing customized products, and enhancing its brand visibility.
- Radialization of two-wheeler tyres: The two-wheeler segment is the largest consumer of tyres in India, accounting for about 60% of the total tyre demand. However, the radialization level of two-wheeler tyres is very low in India, at less than 5%, compared to over 90% in developed countries. Radial tyres offer better performance, safety, and fuel efficiency than bias tyres. The industry can tap this opportunity by increasing its production and promotion of radial tyres for two-wheelers, especially for premium bikes and scooters.
- Green tyres: Green tyres are eco-friendly tyres that reduce carbon emissions and fuel consumption by minimizing rolling resistance. They are made of natural or recycled materials such as silica, vegetable oil, rice husk, etc. They also have a longer life span and lower noise levels than conventional tyres. The demand for green tyres is increasing globally due to the growing environmental awareness and regulations. The industry can seize this opportunity by investing in research and development, innovation, and collaboration to produce green tyres for various segments.
- Atmanirbhar Bharat Abhiyan: The Atmanirbhar Bharat Abhiyan is a flagship initiative of the Government of India to promote self-reliance and domestic manufacturing in various sectors. The initiative offers various incentives and benefits to the tyre industry such as production-linked incentives (PLIs), capital subsidies, tax concessions, infrastructure support, etc. The initiative also aims to reduce the dependence on imports and increase the localization of components and raw materials. The industry can benefit from this opportunity by enhancing its production capacity, technology upgradation, product diversification, and value addition.
These opportunities indicate that the tyre industry in India has a bright future ahead. The industry players will have to capitalize on these opportunities by adopting strategic planning, market intelligence, customer orientation, and operational excellence.
Conclusion
The tyre industry in India is one of the most dynamic and promising sectors in the country. It has shown remarkable resilience and growth in the face of various challenges and opportunities. The industry has a strong domestic demand base, a competitive export potential, a diversified product portfolio, and a supportive policy environment. The industry is also undergoing a transformation due to technological innovations, changing customer preferences, environmental regulations, and competitive dynamics. The industry players will have to adopt proactive strategies to overcome the challenges and capitalize on the opportunities to sustain their growth momentum and emerge as global leaders in the tyre industry.
Source:
(1) 3 Trends that are All Set to Transform the Tyre Industry - Metro Tyre Blog. https://www.metrotyres.com/blog/3-trends-that-are-all-set-to-transform-the-tyre-industry/.
(2) Indian tyre industry to grow 13%-15% in FY22: ICRA - ET Auto. https://auto.economictimes.indiatimes.com/news/tyres/indian-tyre-industry-to-grow-13-15-in-fy22-icra/84167086.
(3) India Tyre Market Outlook - Expert Market Research. https://www.expertmarketresearch.com/reports/india-tyre-market.
(4) India Tyre Market Size, Share, Trends and Forecast 2023-2028 - IMARC Group. https://www.imarcgroup.com/india-tyre-market.
(5) India Tyre Market: Industry Trends, Share, Size, Growth, Opportunity .... https://www.marketresearch.com/IMARC-v3797/India-Tyre-Trends-Share-Size-33618820/.
FAQ's
What was the initial share price of MRF?
However, a chart from Business Today quotes the price as ₹ 11 per share in April 1993.
What was the price of MRF stock in 2005?
MRF Share Price From 1990 to 2023 Year Share Price on BSE 2004 2459 2005 2700 2006 2895 2007 4425
When did MRF stock launch?
5,00,000 shares issued to public in April 1961.
Can I buy 1 share of MRF?
Yes, You can buy MRF Ltd (MRF) shares by opening a Demat account with Angel One.
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