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Company Overview MRF Limited: SWOT Overview MRF is engaged in the development, manufacture, and distribution of a range of tyres

and other related products. It manufactures tyres for all kinds of vehicle including two-wheelers, light commercial vehicles, passenger cars, heavy duty trucks and buses and off-road industrial vehicles. MRF maintains strong brand recognition in the tyre industry in India. A strong market position helps the company to have an edge over its competitors. However, there is intense competition from regional parts manufacturers and industry consolidation.

Strong brand recognition Vertically integrated operations

Lock outs due to labor issues Involvement in price fixing (company's reputation)

Growing automotive manufacturing Foray into fighter aircraft tyres

Intense competition Threat from cheap Chinese imports

Strong brand recognition MRF maintains strong brand recognition in the tyre industry in India. For instance, it has received many awards in the recent past. According to a study by the industry experts, MRF ranked highest among the new-vehicle owners who are highly satisfied with their original equipment tyre brands. Therefore, strong brand recognition allows the company to enter new markets with ease and also enables it to launch new products. In addition, it also provides competitive advantage to the company over its peers and helps in attracting new customers. Vertically integrated operations The company is vertically integrated its operations in terms of its core business. MRF is primarily engaged in the manufacture and sale of rubber products. The company derives majority of its revenues from its core business i.e. tyres, the rest comes from its presence in toys. It manufactures tyres for all kinds of choice to helping them maintain their vehicle. For example, the company provides one stop shop for all types of tyres through MRF T&S franchises. The company currently operates more than 200 T&S shop across India. Through MRF Tyredrome, the company offers computerized wheel alignment, wheel balancing, tyre changing, nitrogen filling, robotic car wash, optical headlamp aligning, rim straightening and tubeless tyre repair. In addition, through MRF Institute of Driver Development (MIDD), the company provides training to drive light and heavy commercial vehicle (LCV & HCV). MRF has trained over 2,000 LCV and 700 HCV drivers. MRF also

provides tyre maintenance services. Thus, vertically integrated operations provide MRF with significant advantages over less integrated competitors and position the company to optimally serve its customers. Additionally, it enables the company to constantly increase capacities and maintain market leadership and profitability in most segments.

Lock outs due to labor issues impact the sales
MRF has been suffering from labor issues in its facilities from the past few years. For instance, in 2011, the company's manufacturing facility in Kottayam in Kerala was forced for a lockout for about two days due to labor unrest in the factory. Consequently, MRF's tyre production was severely hit. Due to this, it reported a decline of 6.2% in its net profit for the second quarter ended March 31, 2011. Hence, such instances in the future could impact the production of tyres which could have a direct influence on the company's revenues.

Involvement in price fixing allegations impacts the company's reputation

MRF is alleged to participate in price fixing and price hike allegations in 2011. During the year, the Competition Commission of India (CCI) investigated the possibility of cartelization in the Indian tyre industry based on a report submitted by its Director General earlier in the year. According to the investigation, it is concluded that five leading Indian tyre makers including Apollo Tyres, MRF, JK Tyre and Industries, Birla Tyres and CEAT along with Automotive Tyre Manufacturers' Association (Atma) had acted in concert, violating section 3 of the Competition Act that deals with cartelization. However, in October 2012, CCI acquitted all the five tyre companies, including MRF, of cartelization charges.Although the company was exonerated, such events could distress its reputation in the market place, which ultimately impacts its revenue growth.

Poised to benefit from growing automotive manufacturing industry in India
The Indian automotive manufacturing industry has experienced strong double digit growth for the 2010 -2011 period. The industry is expected to maintain positive levels of growth from 2012 through to the end of the forecast period in 2016. According to MarketLine (a unit of Informa plc), the Indian automotive manufacturing industry grew by 11.8% in 2012 to reach a value of $77.6 billion. Moreover, MarketLine estimates that in 2016, the Indian automotive manufacturing industry would have a value of $109.1 billion, an increase of 40.6% since 2012. Moreover, it is estimated that in another 40 years, the Indian automobile sector will top the world in car production and around 611 million automobiles will be running on the Indian roads. The economic liberalization in India that happened in 1991 brought in an increase in competitiveness and a relaxation in restrictions. Post 1991, the Indian car market has been displaying steady growth. Many Indian automotive majors like M&M, MSIL and Tata Motors expanded their base both in India and abroad. The Indian automobile sectors healthy and financially viable growth led to the internal development and also gave rise to noteworthy India-specific investments by multinational car makers. Major global players like General Motors, Ford, Mercedes-Benz, Volkswagen, Suzuki, Honda, Fiat, Hyundai, Porsche, Audi and more are active in the country, so does in all other segments of the automotive industry. MRF is one of the leading manufacturers of tyres in India. Therefore, a growing automotive manufacturing industry in India would increase the demand for new tires and replacement tires, which in turn could drive the demand for the company's products.

Foray into fighter aircraft tyres

After successfully manufacturing and supplying tyres for Indian defense helicopters from 2010, MRF is poised to manufacture tyres for Indian Air Force fighter aircraft. By the end of February 2011, MRF has supplied about 500 tyres ordered by Hindustan Aeronautics (HAL), the state-run military aircraft manufacturer, for helicopters under the brand name Aero Muscle, which was launched in 2010. In addition, the company is expected to receive another order for supplying 200 to 250 tyres for military helicopters in the near future. While the company has been getting orders for military helicopter tyres, it is now planning to foray into the manufacture of fighter aircraft tyres. In this context, in February 2011, MRF secured various approvals from Centre for Military Airworthiness and Certification (CEMILAC), one of the certifying authorities, and was getting ready to receive orders for aircraft tyres. The company has been manufacturing Aero Muscle tyres for helicopters at its Arakonam plant in Chennai. The company is likely to shift production to its Medak unit in Andhra Pradesh when the volumes increase. With this, the company is set to emerge as a major private sector supplier of tyres for various fighter aircraft and helicopters of the defense forces. Thus, such initiations help the company to diversify its offerings and customer base, which represents an opportunity expand its revenues and profits.

Intense competition
Competition in the tyre industry is very intense particularly in India. The primary factors under which the company competes with other tyre manufacturing companies include price, quality, availability of raw materials, and strategic location of production facilities, among others. Some of the MRF's competitors include Apollo Tyres, JK Tyre & Industries, CEAT, Dunlop, Falcon Tyres, Goodyear, Modi Rubber, Birla Tyres, among others. These companies have much larger market size, revenue and customer base compared to MRF. Further, the entry of multinational companies (MNC) such as Goodyear, Bridgestone and Michelin into the domestic market may also create an intense pressure to MRF margins. MNC tyre makers have cornered a higher market share in India in the past few years due to their international relationships apart from superior technology. Since Honda, Hyundai and Toyota have an international sourcing agreement with Bridgestone; it is also the preferred supplier in India. Similarly, Goodyear is preferred supplier for Ford India. Therefore, intense competition from regional parts manufacturers and industry consolidation may reduce the revenues, profitability and cash flow, and also lead to pricing pressures, which may adversely impact MRF's profitability.

Threat from cheap Chinese imports

The Indian tyre manufacturing industry is facing a threat due to cheap import of tyres from China. The replacement market in India for truck and bus tyre is very price-sensitive and there is a very low brand and quality awareness. Chinese tyres, though low on the quality scale, have been competing in the Indian market on the basis of low prices. This is because Chinese tyre manufacturers enjoy the benefits of lower manufacturing costs and higher employee productivity. Besides being a pricesensitive segment, these tyres find acceptance in the domestic markets on account of their price competitiveness. According to industry estimates, the Chinese products are 15-30% lower than the rates quoted by local players. Hence, the rising threat from cheap Chinese imports could negatively impact the demand for the company's products and the financial position.