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%)



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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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


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


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


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

progression of investment / export opportunity · progression of investment / export opportunity...

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