Ceat Expects To Double Off-Highway Tyre Segment Revenue After Camso Acquisition

Ceat Ltd. expects its new acquisition of Camso Inc's off-highway construction equipment tyres and tracks business will offer a major boost to its revenue and margins, Chief Financial Officer Kumar Subbiah has said.

On Friday, Ceat had announced it had entered into a definitive agreement to acquire the business from the Michelin Group for about $225 million.

The agreements pertains to only acquiring the business assets of Camso and no shares are being purchased in any entity and no entity is being acquired, Ceat said in an exchange filing.

Talking to NDTV Profit, Subbiah noted that Camso's off-highway construction equipment tyre and tracks business clocked revenue of around $200 million in 2023. With the recent acquisition, Ceat’s revenue from the off-highway tyre business will double, according to him.

“Our revenue from OHT would double through this acquisition. It is a profitable product in the segments that they operate in the compact construction. Camso brand is considered to be premium. It's a tier-one brand and we expect this to be margin-accretive as far as Ceat is concerned,” he said.

The CFO added that the company would be able to give actual margin guidance after it takes possession of the business.

“We expect it to be higher than our current company range. We will be able to comment once we take possession of the business. What we would like to say now is it's going to be margin accretive and exact level of margin we will be able to provide more visibility as we start operating it,” he said.

As part of the transaction, Ceat will also get two manufacturing facilities in Sri Lanka and the rights to use the Camso brand, following an initial three-year licencing period, as per the exchange filing.

Commenting on the Sri Lanka plants, Subbiah said that they currently operate at a 50-60% capacity, which means Ceat will have an opportunity to increase it.

“There is an opportunity for us to operate at a higher level. There is enough headroom for us to grow this category of business for the next few years considering the adequate capacities available in Sri Lanka,” he explained.

The top executive noted that the transaction “fits in very well and complements very well,” Ceat’s speciality business.

“For the first three years, we would have a licence to use this brand for this specific category. After three years, the Camso brand would be available to us. We would be owning that brand and we would have all the rights to use that brand wherever we want them,” he said.

Ceat Ltd. shares were trading 3.82% lower during at Rs 3,285.35 apiece, while the NSE Nifty 50 was 0.12% higher at 24,649.