Shares of this prominent tyre manufacturing company rose nearly 3 percent to Rs.452.4 each after the merger with Cavendish Industries, one of its subsidiaries.
Share Price Variation
During Tuesday’s trading session, JK Tyre & Industries Limited‘s share price reached an intra-day high of Rs.452.4 per share, marking a 2.5 percent increase from its previous close of Rs.441.35 apiece. The share has since declined and is currently trading at Rs.437 per share.
What happened
On Monday, the board of directors of JK Tyre & Industries Ltd. approved the merger of its subsidiary, Cavendish Industries Ltd., into the parent company through a share swap agreement.
Under this amalgamation, shareholders of Cavendish Industries will receive 92 shares of JK Tyre, each with a face value of Rs.2 per share, for every 100 shares they hold with a face value of Rs.10 apiece.
This share exchange ratio is based on a report from PwC Business Consulting Services LLP and a fairness opinion provided by ICICI Securities, as stated by JK Tyre in an exchange filing.
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The merger, pending regulatory approval, will result in a minor adjustment to the shareholding pattern. Following the amalgamation, the promoters’ stake in JK Tyre will decrease from 50.55 percent to 49.31 percent, according to the filing.
Merger Benefits
As both entities operate in the same line of business, JK Tyre noted that the amalgamation will bring all operations under one listed company. This consolidation is anticipated to achieve economies of scale, enhance operational synergies, and improve efficiencies across various levels.
Additionally, the amalgamation will lead to reduced costs, a streamlined sales and distribution network, and increased shareholder value.
Financial Performance
As of June 30, 2024, Cavendish Industries Limited’s standalone financials included total assets of Rs.4,003.67 crore, a net worth of Rs.1,009.71 crore, and a turnover of Rs.974.57 crore for the quarter ending on the same date.
In comparison, JK Tyre & Industries Ltd. reported standalone total assets of Rs.9,642.01 crore, a net worth of Rs.3,811.96 crore, and a turnover of Rs.2,506.77 crore as of June 30, 2024.
In its recent financial updates, JK Tyre reported a net profit of Rs.218 crore for Q1 FY25, reflecting a 37 percent increase from Rs.159 crore in Q1 FY24. However, revenue from operations declined to Rs.3,639 crore, down from Rs.3,718 crore, representing a 2.2 percent decrease over the same period.
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Company Profile
JK Tyre & Industries Limited is a leading tyre manufacturer in India, producing tyres for passenger cars, commercial vehicles, and off-highway vehicles. Known for pioneering radial tyre technology, it operates 12 manufacturing facilities and serves over 105 countries globally.
Written by – Siddesh S Raskar
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