JK Tyre merges Cavendish for operational synergies

The board  of JK Tyre and Industries Ltd gave the green light to the merger of Cavendish Industries to improve operational efficiencies, according to the company’s statement in a BSE release on September 16. The merger will lead to a share transfer as part of the process. The company informed that the amalgamation would deliver operational synergies, lower costs, strengthen the sales and distribution network, and increase shareholder value.

Amid this development, shares of JK Tyre dropped 1.44% to ₹435.00 apiece on the BSE during early trading hours today. The stock opened higher today at ₹450.25, in contrast with the weak broader market, against the previous close price of ₹441.35. The tyre manufacturer’s market cap stands at ₹11,383.19 crore. Over the past month, the stock has climbed 7.74%, rose 1.41% in the last six months, and gained 10.79% year-to-date (YTD).

“The Board of Directors of the Company at its meeting today, i.e. September 16, 2024, has considered and approved the draft Scheme of Amalgamation of Cavendish Industries Limited (“Transferor Company") with the Company and their respective shareholders under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 (“Act") (“Scheme"),” the tyre manufacturer company states in a release.

As part of the merger, JK Tyre will issue 92 shares for every 100 shares held by Cavendish Industries’ shareholders, ensuring a proportionate allotment. The shareholding pattern will shift slightly, with the promoter's stake reducing to 49.31% following the merger, JK Tyre adds.

The company informed the exchanges that both firms operate in a similar business domain, and the merger will centralise all related activities under one listed entity, as the company explained that the amalgamation would consolidate all its operations into a single listed entity. The move is also expected to streamline various business operations, cutting down on administrative and managerial overheads.

The tyre manufacturer also highlighted additional advantages, including reduced interest costs, a unified resource pool for accelerated growth, ease of doing business, an expanded product portfolio, and a shared sales and distribution network. These changes are expected to improve customer satisfaction, reduce legal and regulatory compliances, and enhance investor perception and shareholder value.

“The consideration for the amalgamation will be discharged on an "arm's length" basis,” the company adds.

Earlier, JK Tyre had acquired Cavendish Industries, a unit of Kesoram Industries, for ₹2,195 crore to strengthen its position in the truck and bus radial tire market.

JK Tyre reported a net profit of ₹211.74 crore in Q1 FY25, up from ₹159.34 crore in the same quarter last year. However, its revenue declined by 2.1% year-on-year (YoY), standing at ₹3,639 crore in Q1 FY25, compared to ₹3,718 crore in Q1 FY24.