Opportunity What Lies Beneath? Raman R Managing Director & CEO - - PowerPoint PPT Presentation

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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

• pportunities 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$) 1,513 2,879 791 Median Age (years) 26.5 31.1 23.6 Adult Literacy (%) 74.0 91.2 56.8 Poverty (%) 29.8 8.9 31.5 GDP breakdown Agriculture(17%), Industry(26%), Services(57%) Agriculture(12%), Industry(30%), Services(58%) Agriculture(18%), Industry(29%), Services(53%) Major exports IT services(47%), Petroleum (19%) T extile (41%), T ea (14%) T extile (78%), FX reserves (US$ 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 Ashoka Capital 5 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

• f 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

• f 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

Ashoka Capital 8

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

• f skilled

man power

Dependency

• n India for

testing & certification All RM imported (except NR)

Shortage

• f 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

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