Progression of Investment / Export Opportunity What Lies Beneath? Raman R Managing Director & CEO 1 CEAT Kelani Holdings (Pvt) Ltd
Why invest in Sri Lanka ? 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 divid end’ 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 D ec’ 12 3 Ashoka Capital
Country Fundamentals – Socio - Economic India Sri Lanka Bangladesh GDP (US$ Billion) 1,847 59 110 Population (Millions) 1,241 21 161 Per Capita Income (US$) 1,513 2,879 791 Median Age (years) 26.5 31.1 23.6 Adult Literacy (%) 74.0 91.2 56.8 Poverty (%) 29.8 8.9 31.5 Agriculture(17%), Agriculture(12%), Agriculture(18%), Industry(26%), Industry(30%), Industry(29%), GDP breakdown Services(57%) Services(58%) Services(53%) IT services(47%), T extile (41%), T extile (78%), Major exports Jute goods(5%) Petroleum (19%) T ea (14%) FX reserves (US$ Billion) 261.3 6.6 10.4 Doing Business 2012 132 nd 89 th 122 nd (out of 183) Debt to GDP (%) 68.0 78.5 22.8 4 Ashoka Capital
Country Fundamentals - Economic Historical GDP Growth Projected GDP Growth 10.1% 8.3% 7.8% 6.8% 6.7% 6.7% 6.7% 6.5% 6.4% 6.5% 6.4% 6.1% 6.1% 5.9% 5.9% 6.0% 4.9% 3.5% 2009 2010 2011 2012 2013 2014 Sri Lanka India Bangladesh Fiscal Deficit Sri Lanka is expected to grow faster than India over the next few years. 8.3% 8.3% 8.3% 6.9% 3.9% 3.5% Sri Lanka has significantly improved its fiscal over the last few years 3 Year Average Current (2011) India Sri Lanka Bangladesh 5 Ashoka Capital
About CEAT in Sri Lanka CEAT Sri Lanka Turnaround History 2009-10 Start of the Growth Journey 2008-09 : Sailing thru Recession • Recession till Sep’09 • War Over in May’09 2007: Radial • War Factory Set up • A9 Not Continuing. Opened fully • Small in 2009-10 Market. 1999 : Merged with • Domestic Kelani Tyres Limited • Attractive Radial Market (Three way JV) trade schemes Showing signs Radial Manuf. of recovery. • Focused Started – 5 Sizes marketing • Interest each of CAR 1992: effort Rate Down In house Mixing &VAN. Formation of JV & Calendaring, • Two way JV. Capacity Expanded. Amalgamation of Light . Cultures Truck An ISO 9001 : 2008 Company
Other Details – CEAT Srilanka Employment Opportunity 2010 2011 2012 2005 2004-5 2009-10 2010-11 1050 Employees 1200 Employees 775 Employees 875 Employees Year Capacity Expansion 2009 / 10 2012 /14 2010 /11 2011 /12 1100 MT 1300 MT 1400 MT 1600 MT Glance @ Investment 2010-11 2009-10 2011-14 Existing Total 300 Mn 250 Mn 1500 Mn 4550 Mn 2500 Mn
Our current/ future Investment/diversification of products Radial New TBR MC Banbury Capacity Enhancement Replacing 50 year old Setting up 50MT a day Revamping MC from 18,500 tyre per Russian Banburry by capacity TBR Plant by Capacity by 2014/15 month to 37,000 tyre 2014/15 2015/16 per month by 2014/15 Investment Investment Investment Investment Rs. 12 billion Rs. 450 million Rs. 60 million Rs. 600 million
CEAT Sri Lanka – The Steady Growth Journey CEAT Srilanka Growth Path Exports Export :3200 Mn Export : 2600 Mn 2012-13 Export : 2000Mn 2011-12 2010-11 Sale : 9964 Mn Export :1500 Mn Sale : 9627 Mn 2009-10 Sale : 8423 Mn Export :1000 Mn Sale : 5962 Mn Total Sales 2008-9 Total Sale : 4779 Mn TOP 25 in Exports Exports contribute to 40% of our total turn over
Dominant Leadership In Prime Categories – CEAT Sri Lanka SL Tyre Market Size (MT) Market Standing Aprx Tonnage : Agri 2% Market Leadership 23,717 MT 3W 7% Segment Share Position Truck 24% (Aprx Value : 20 bn SLR) MC 10% Light Truck, Radial 33% Truck/ LT 57% No.1 24% Radial (Capacity 32% No.1 SL Tyre Market CEAT Volume Share Sold) Motor Cycle 19% No.2 CEAT 41% Three Wheel 46% No.1 Others 59% Agri. Tyres 74% No.1 Largest Dominant Player in Domestic Market 9
CEAT Sri Lanka - EXPORTS 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 Israel Egypt Nepal Nigeria Bhutan Laos Sudan Cambodia Zimbabwe South Africa
Benefits of local manufacturing Foreign exchange earnings 25 Mn USD Foreign exchange Imp. substitution earnings 60 Mn USD Import Taxes & Levies Tax & Levies substitution Rs. 1.1 Bn Employment opportunity – 1200 people
Positives - Encouraging Sector Growth
Sri Lanka – The Hub for rubber industry 1. Availability of Rubber & government encouragement for value addition • Currently produces around 140,000 MT of NR per year. • 10 th largest producer of rubber in the world and 7 th 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 Kegalle solid tyres. Moraragala Kalutara • Other manufacturers for gloves, mats, Ratnapura footwear etc are also present in Sri Lanka. • Differential Cess on NR for domestic and export consumption
Sri Lanka – The Hub for rubber industry 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 8 Ashoka Capital
Sri Lanka – The Hub for rubber industry 3. Investment Benefits – for new and existing company • Tax Incentives : I ncentives 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
Sri Lanka – The Hub for rubber industry 4. Duty and other benefits 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 Dependency Shortage on India for of skilled testing & man power certification All RM Shortage imported of allied (except NR) industries
Sri Lanka – The Hub for rubber industry 2. Non availability of bilateral agreement with emerging markets FTA with SAARC Countries ASEAN Countries Bangladesh Malaysia, Thailand, Singapore, Pakistan Laos, Indonesia, Cambodia, Nepal Brunei, Vietnam, Myanmar & Bhutan Philippines Common Market for Eastern and South African Development Southern Africa (COMESA) Countries (SADC) Angola, Ethiopia, Kenya, Mauritius, South Africa, Botswana, Sudan, Uganda, etc Mozambique, Zambia, Zimbabwe, etc
Sri Lanka – The Hub for rubber industry 3. Fluctuating interest cost/currency • Interest rate fluctuation • Currency fluctuation – USD /LKR
Sri Lanka – The Hub for rubber industry 4. Global competitiveness - Rising cost Increase in Power Increase in Fuel cost Rising input cost Increase in Freight Cost Impact on consumables
Thank You Kelani Holdings (Pvt) Ltd
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