progression of investment / export opportunity · progression of investment / export opportunity...
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Progression of Investment / Export Opportunity
What Lies Beneath?
Raman R
Managing Director & CEO
CEAT Kelani Holdings (Pvt) Ltd
Strong Growth Ahead: Sri Lanka have good track record of economic growth despite specific challenges and are projected to grow faster than India over the next 3 years.
Peace Dividend: Sri Lanka is benefiting from a ‘peace dividend’ after the end of the civil war, is the focus of large investments by MNCs and has a fast growing tourism industry.
High Quality Assets at Attractive Valuations: Fast-growing businesses with a strong competitive positioning are available at attractive valuations.
Uncorrelated Investment Opportunity : SL investment opportunities uncorrelated to global economy or regional markets and generate diversification benefits in any portfolio.
Source: Bloomberg, Monthly correlation for 5 years, Updated in Dec’12 Ashoka Capital 3
Why invest in Sri Lanka ?
Jute goods(5%)
Ashoka Capital 4
India Sri Lanka Bangladesh
GDP (US$ Billion) 1,847 59 110
Population (Millions) 1,241 21 161
Per Capita Income (US$) 1,513 2,879 791
Median Age (years) 26.5 31.1 23.6
Adult Literacy (%) 74.0 91.2 56.8
Poverty (%) 29.8 8.9 31.5
GDP breakdown
Agriculture(17%), Industry(26%), Services(57%)
Agriculture(12%), Industry(30%), Services(58%)
Agriculture(18%), Industry(29%), Services(53%)
Major exports IT services(47%), Petroleum (19%)
Textile (41%), Tea (14%)
Textile (78%),
FX reserves (US$ Billion) 261.3 6.6 10.4
Doing Business 2012 (out of 183)
132nd
89th
122nd
Debt to GDP (%) 68.0 78.5 22.8
Country Fundamentals – Socio - Economic
10.1% 8.3% 7.8%
6.8% 6.7% 6.7% 6.7% 6.4% 6.5% 6.4% 6.5% 6.1% 6.1% 6.0%
2009 2010 2011 India
2012 Bangladesh
2013 2014 Sri Lanka
Sri Lanka is expected to grow faster than India over the next few years. 8.3% 8.3% 8.3%
3 Year Average Current (2011)
India Sri Lanka Bangladesh
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3.5%
6.9%
3.9%
Fiscal Deficit
5.9% 5.9%
3.5% 4.9%
Historical GDP Growth Projected GDP Growth
Country Fundamentals - Economic
Sri Lanka has significantly improved its fiscal over the last few years
CEAT Sri Lanka Turnaround History
1992: Formation of JV
1999 : Merged with Kelani Tyres Limited (Three way JV)
2007: Radial Factory Set up
Light Truck
In house Mixing & Calendaring, Capacity Expanded.
Amalgamation of Cultures
• War Continuing.
• Small Market.
• Attractive trade schemes
• Focused marketing effort
.
• Recession till Sep’09
• War Over in May’09
• A9 Not Opened fully in 2009-10
• Domestic Radial Market Showing signs of recovery.
• Interest Rate Down
• Two way JV.
2009-10 Start of the
Growth Journey
2008-09 : Sailing thru Recession
Radial Manuf. Started – 5 Sizes each of CAR &VAN.
About CEAT in Sri Lanka
An ISO 9001 : 2008 Company
Other Details – CEAT Srilanka
2009 / 10 2012 /14
1100 MT 1300 MT 1400 MT 1600 MT
2011 /12 2010 /11
Glance @ Investment 2009-10
300 Mn
2010-11
250 Mn
2011-14
1500 Mn
Total
4550 Mn Existing 2500 Mn
Capacity Expansion
2004-5 2009-10 2010-11 Year
2005 2010 2011
775 Employees 875 Employees 1050 Employees
Employment Opportunity
2012
1200 Employees
Radial
Capacity Enhancement from 18,500 tyre per month to 37,000 tyre
per month by 2014/15
Investment
Rs. 450 million
New Banbury
Replacing 50 year old Russian Banburry by
2014/15
Investment
Rs. 600 million
TBR
Setting up 50MT a day capacity TBR Plant by
2015/16
Investment
Rs. 12 billion
MC
Revamping MC Capacity by 2014/15
Investment
Rs. 60 million
Our current/ future Investment/diversification of products
2008-9
2009-10
2012-13
2010-11
2011-12
CEAT Srilanka Growth Path
Export :1000 Mn
Export :1500 Mn
Export : 2000Mn
Export : 2600 Mn
Export :3200 Mn
Total Sale : 4779 Mn
Sale : 5962 Mn
Sale : 8423 Mn
Sale : 9627 Mn
Sale : 9964 Mn
Exports contribute to 40% of our total turn over
CEAT Sri Lanka – The Steady Growth Journey
TOP 25 in Exports
Exports
Total Sales
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Dominant Leadership In Prime Categories– CEAT Sri Lanka
Segment
Market Share
Leadership Position
Truck/ LT 57% No.1
Radial (Capacity Sold)
32% No.1
Motor Cycle 19% No.2
Three Wheel 46% No.1
Agri. Tyres 74% No.1
Market Standing
SL Tyre Market CEAT Volume Share
CEAT 41%
Others 59%
Aprx Tonnage : 23,717 MT
(Aprx Value : 20 bn SLR)
Largest Dominant Player in Domestic Market
Truck 24%
Light Truck, 24%
Radial 33%
MC 10% 3W 7%
Agri 2%
SL Tyre Market Size (MT)
CEAT Sri Lanka - EXPORTS
Laos
Nepal
South Africa
Sudan Cambodia
Israel
Bhutan
Zimbabwe
Existing Markets Emerging Markets Future Markets
Philippines Vietnam Angola
Singapore Nepal Ghana
Bangladesh Saudi Arabia Brazil
India Kenya Israel
Pakistan Ethiopia Laos
Mauritius Sudan Bhutan
Dubai Cambodia Zimbabwe
Oman Uganda South Africa
Jordan
Syria
Yemen
Egypt
Nigeria
Import substitution
Foreign exchange earnings
Foreign exchange earnings 25 Mn USD
Imp. substitution 60 Mn USD
Employment opportunity – 1200 people
Benefits of local manufacturing
Tax & Levies Taxes & Levies Rs. 1.1 Bn
Positives -
Encouraging Sector Growth
Sri Lanka – The Hub for rubber industry
Moraragala
Kegalle
Ratnapura
Kalutara
• Currently produces around 140,000 MT of NR per year.
• 10th largest producer of rubber in the world and 7th largest in NR
• Export earnings USD 1200+ Mn annually and growing steadily
• Rubber and rubber products contributes to 9+% of the total exports of the country.
• Key tyre majors are present in Sri Lanka manufacturing pneumatic and solid tyres.
• Other manufacturers for gloves, mats, footwear etc are also present in Sri Lanka.
• Differential Cess on NR for domestic and export consumption
1. Availability of Rubber & government encouragement for value addition
2. Sri Lanka – Strategic Location Sri Lanka is strategically located at the cross roads of both east and west sea routes and serves
as the point of entry to South Asia.
Sri Lanka is likely to emerge as a regional trade hub and has invested significant resources
in ports and logistics infrastructure to benefit from the location advantage.
Sri Lanka’s geo-political significance has also resulted in significant investments from larger
countries. For example : Investment of over US $1 billion to build a port in Hambantota.
Sri Lanka is on the key global trade routes
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Sri Lanka – The Hub for rubber industry
3. Investment Benefits – for new and existing company Sri Lanka – The Hub for rubber industry
• Tax Incentives: Incentives include Exemption on
• Corporate Income Tax,
• Customs Duty,
• Value Added Tax,
• Research & Development expenditure
• Ports & Airports Development Levy
• Board of Investment Law: The safety of foreign investment is guaranteed by the constitution and there are:
• 27 Bilateral Investment Promotion and Protection Agreements and
• 38 Avoidance of Double taxation Agreements existing at present
4. Duty and other benefits Sri Lanka – The Hub for rubber industry
ITEM Duty PAL
NATURAL RUBBER Available Locally
CARBON BLACK Free 5%
NYLON TYRE CORD Free 5%
TYRE BEAD WIRE Free 5%
SYNTHATIC RUBBER Free 5%
RUBBER CHEMICAL Free 5%
STEEL CORD Free 5%
Constraints -
Impeding development
Sri Lanka – The Hub for rubber industry
1. Non availability of skilled manpower and dependency on imports
Shortage of skilled
man power
Dependency on India for
testing & certification
All RM imported
(except NR)
Shortage of allied
industries
Sri Lanka – The Hub for rubber industry
2. Non availability of bilateral agreement with emerging markets
FTA with SAARC Countries Bangladesh
Pakistan Nepal
Bhutan
ASEAN Countries
Malaysia, Thailand, Singapore, Laos, Indonesia, Cambodia,
Brunei, Vietnam, Myanmar & Philippines
Common Market for Eastern and Southern Africa (COMESA)
Angola, Ethiopia, Kenya, Mauritius, Sudan, Uganda, etc
South African Development Countries (SADC)
South Africa, Botswana, Mozambique, Zambia, Zimbabwe, etc
Sri Lanka – The Hub for rubber industry 3. Fluctuating interest cost/currency
• Currency fluctuation – USD /LKR
• Interest rate fluctuation
Sri Lanka – The Hub for rubber industry
4. Global competitiveness - Rising cost
Increase in Fuel cost
Impact on consumables
Increase in Power
Increase in Freight Cost
Rising input cost
Kelani Holdings (Pvt) Ltd
Thank You