Two of India’s leading tyre makers, Madras Rubber Factory (MRF) the country’s largest tyre manufacturer and Onkar Kanwar led Apollo TyresBSE -0.40 % are battling it out to acquire the main tyre unit of BK Birla flagship Kesoram Industries raising the possibility of a bidding war for the factory which is located in Uttarkhand. At the same time, the competitive turn of events may further jack up the valuation of the plant that’s already far higher than the market capitalization of the entire diversified Birla conglomerate.
While MRF was the front-runner for the asset Apollo has recently entered the fray said multiple sources aware of the ongoing negotiations.
For both Apollo and MRF, the acquisition will consolidate its manufacturing presence in the north Indian market and help to get a stronger grip over the commercial vehicles tyre segment where they are the number 1 and 2 players respectively.
The next one week is expected to be crucial. According to the sources cited earlier, on Monday, the promoters of Apollo and Kesoram are expected to meet in New Delhi to discuss the matter. Later in the day, Kesoram’s management is also scheduled to meet with its consortium of lenders to get their approvals to hive off the tyre plant to a drop down subsidiary. This is expected to facilitate the monetization exercise and improve the net worth of Kesoram, which is a listed company. Interestingly, both MRF and Kesoram has called for a board meeting on the 12th to announce its quarterly financial numbers, triggering speculation that a deal between the two is imminent, barring a compelling last minute counter-offer from Apollo.