| Change in the air
Calcutta, Dec. 2: Putting months of speculation at rest, Pawan Ruia has finally bagged the ailing tyre maker, Dunlop.
In a deal signed today, Ruia clinched Dunlop, profit-making Falcon Tyres and India Tyre Co, a trading company, beating other contenders like Hero Group, Metro Tyres and Apollo Tyres.
The transaction that marked the exit of Chhabria-owned Jumbo Group from the tyre business in India is valued at Rs 200 crore.
When contacted, a Jumbo Group spokesperson confirmed the development.
“The tyre business of Jumbo Group has been sold to Pawan Ruia in an offshore deal,” the spokesperson said. The companies, which held stakes in Dunlop and Falcon, have now been sold to Ruia, he added.
The exit from the tyre business is in line with Jumbo Group’s policy to concentrate on its core business ' electronics.
“We have tried to revive the company for long but without any result. The group was looking at some company which has a long-term interest in the tyre business,” he added.
The key factors that went in favour of Ruia are that he stumped up more cash than others and showed eagerness to buy Dunlop that others were not ready to touch. Moreover, he has the experience of turning around Jessop, which was an ailing public sector unit.
Pawan Ruia could not be reached for comment. Ruia group spokesperson said an announcement would be made only tomorrow.
While the share transfer agreement between the two parties has been sealed, the deal has to be vetted by the Board For Industrial and Financial Reconstruction (BIFR).
For a BIFR company, which Dunlop is, takeover is not completed without the board’s approval. The share transfer may take place, but it needs BIFR blessing. Without it, the deal is not consummated. For instance, the government sold its stake in Jessop to Ruia Cotex, but it came into effect only after the BIFR okayed it.
However, there will be no hurdles to acquiring Falcon Tyres, which is a profit-making company.
If Ruia manages to win the BIFR approval and convince the banks and financial institutions to get along with him, he would face the uphill task of reviving Dunlop. When Dunlop was closed in 1998, it had 5,000 people on the rolls. Now the workforce at Sahagunj in Bengal stands at 2,700.
In an exclusive interview with The Telegraph a week ago, Ruia had said he might not need more than 1,000 workers to run this plant.
“I may need to put in Rs 50 crore to start operations at Sahagunj,” he had said.
His total investment could be much more because Dunlop comes with a huge liability in its books.
The situation at the Ambattur facility in Tamil Nadu is said to be better and operations can start soon.
It is to be seen whether Ruia can persuade the state and the trade unions to agree to his plan to right size the workforce.
He had expressed hope that operations at Sahagunj factory could start within three to four months after the completion of all the formalities. However, this would depend on approvals from all quarters: the unions, the government, banks, financial institutions, the BIFR and the AAIFR.