Midas To Double Capacity In Three Years

Midas claims to have emerged as the leading tread maker in Asia. Its facilities dotted in and around Kottayam in Kerala are producing treads that are being used in more than 40 countries as well as in the large domestic Indian market.

According to Midas, it was by sheer chance that company came to realise its position in the market while attending one of the international exhibitions. Midas asked several other major Asian tread manufacturers about their capacities and found by sheer surprise that its capacity is much greater than the competing Asian brands. Even though holding this position it has no plans to sit and wait for the global recovery as Midas continues to do well in the international and Indian markets. The company is in the process of setting up another plant at Nedumavu. "The upcoming plant would add extra capacity of between 750-1000 tonnes per month," informed Paulose Varughese, Director, General Rubbers (owner of Midas brand of tread rubber). The new plant will begin production around March - April 2010. The new facility will have five presses installed and will cater for the domestic and international markets. The expansion is not confined to the new plant. "We have installed three more presses at the Eranjal plant and there are another three presses at the Ettumanoor unit to be installed in the next quarter," added Paulose.

While talking to Retreading Business in the new corporate offices on the banks of picturesque Meenachil river in Kottayam, Paulose appeared disappointed with the Indian government's handling of import restrictions on carbon black. With the increasing production targets Midas requires more carbon black, a key ingredient in making tread. "We import about 8,000 tonnes of carbon black from Russia and Korea annually. We were having to find ways to cope with this problem. We made a representation to the government to remove the restriction in the interest of the industry," said a concerned Paulose. Midas production had been affected by the carbon black shortage.

Currently, Midas is manufacturing about 2,500 tonnes of tread rubber every month. With increasing demand in the domestic and global market, Midas plans to double the manufacturing capacity to about 5,000 tonnes per month in the next two or three years. The company's order book is full and its plants are running at full capacity to deliver those orders. "We are working on a plan to scale up the monthly production to about 4,000 tonnes in one year and eventually to 5,000 tonnes," admitted Paulose. Eighty per cent of Midas production is consumed in the domestic market and the balance is shipped abroad. Midas operates with a dealer network of about 55 dealers in India and ten in the international market. Midas exports about 350 tonnes every month and may increase the export volumes further as it has made some major breakthroughs in some new territories. "We have made interesting advances in South and Central America in countries like El Salvador, Guatemala, Honduras, Chile, Bolivia and Uruguay, while we have also developed New Zealand, S Korea and the Philippines only recently," revealed Paulose. Previously Midas mainly exported to Europe and the Middle East.

Meanwhile, it is also working on improving its export volumes by another ten per cent. He further added, "We are working on raising the export content to at least 30 per cent of the total production by next year." It has not been easy for Midas to enter the high-end international market as it must have a product that can compete with the high quality European products.

The company invested hugely in its R&D wing which makes compounds to suit specific markets. The company follows a stringent regime at its well equipped lab, where it makes compounds specific to design and application. It also does road tests to confirm lab results. "Adding new machines at our lab is a continuous process and we have just installed a moisture analyser. It counts moisture content in synthetic or rubber in just three minutes," Paulose explained.

"Moreover, all our export materials meet European ECE 109 & 108 compliance standards. Midas has recently started manufacturing envelopes. The company had been working on the envelope project for some considerable time. "We have been working on envelopes from 2002 and it is only recently that we actually started manufacturing them," informed B F Varughese (Varkey), Director, General Rubber. He conceded, "We know we took long time but we could now manufacture quality envelopes for the domestic and the international market." We have the ability to manufacture 2,000 envelopes per month. "Capacity is not a constraint, we could raise the production at any time." Midas is also adding a new press to double the current capacity. Currently, it manufactures only the outer envelope but the inner envelope is under development. "We will start manufacturing inner envelopes in the next quarter," claimed B F Varughese.

Currently, India consumes around 6,000 envelopes per month and Elgi holds 70 per cent of that market. However, successes in the domestic and the international market have not prompted the company to make forays into tyre manufacturing, as others have. Midas remains focussed on the core tread manufacturing business. "We have no plans to foray into the tyre manufacturing business. We do not intend to deviate from our core business," he emphasized.

When asked about plans regarding the opening of a facility abroad or BF Varughese (Left) Paulose Varughese (Right), Father, George Varughese, (Front) Founder of the company 16 Retreading Business A range of Midas tread ready for packing INDIA even setting up a warehouse on abroad. He candidly refused, "Unless, we have a market of more than 300 tonnes, it is not a viable idea to set up a warehouse." He further said, "Our idea is to keep growing internationally with our base remaining firmly in India. That plan is working well at this point in time."

The INR 300 crore (about US$ 60 million) Midas Group owns about a dozen companies having interests in retreading materials, mixing and compound supply, and rubber estates and the firm has no further plans for expansion for next five years. "We are setting up a new factory and installing 11 presses.

That ongoing expansion is good enough for the next five years," believes Paulose. The company also moved to a new corporate office on the banks of Meenachil river in Kottayam in January 2009.

Commenting on the robust domestic market despite slowdown in the commercial vehicle segment, Paulose said, "The retreading industry in India is largely unaffected by the slowdown. It is not only Midas which is growing but virtually all tread makers are registering good sales despite the slowdown." According to Paulose, the domestic retreading market has grown around 15-20 per cent which indicates that there is no real impact from the crisis on the retreading sector. Retreading would have experienced more growth with the growing radialisation in India. But the growth of radialisation was slowed by the import restriction imposed on Chinese tyres by the Indian government in January 2009. "Currently, radialisation is growing at an average of 10 per cent annually but if Chinese radials had continued to enter the market the annual growth would have been around 25 per cent," added Paulose.

Issue 2009/4