Ceat buys global rights for brand from Pirelli

(Reuters) - Tyre maker Ceat Ltd has acquired global rights of its ‘Ceat’ brand from Italy-based Pirelli, for 9 million euros, thus getting rights to export tyres under the brand on its own across the globe.

Ceat now owns the ‘Ceat’ brand in nine south Asian countries, including India, Pakistan and Sri Lanka. Pirelli owns the ‘Ceat’ trademark in the rest of the world.

Pirelli will hold exclusive rights for radial tyres in Europe, Latin America, Turkey and Mexico up to 31 December, 2011. Ceat can enter these markets after that, Managing Director Paras Chowdhary told Reuters.

Pirelli will completely stop sales of tyres under ‘Ceat’ brand after 31 December, 2012, when Ceat will get all exclusive rights for the brand, he said.

“We have allowed them to sell exclusively in some markets as they need a reasonable time to exit,” Chowdhary said.

Ceat has made an upfront payment of 4.5 million euros to Pirelli and has provided a bank guarantee for the balance.

The acquisition will enable Ceat to export radial and cross-ply tyres worldwide under the Ceat brand. The firm currently exports its tyres to Europe and South America under the ‘Altura’ brand. The deal will enable Ceat to double export revenues to over 10 billion rupees in three years. Total sales are also expected to double to Rs. 56 billion in that period on higher exports and capacities, he said.

“We are now eager to give a big push to exports. That will start from this quarter itself,” he said.

Ceat’s 6-billion rupee plant at Halol in Gujarat with a capacity to produce up to 150 tonnes a day is expected to start commercial production from January.

It has also ramped up capacity at its Nashik plant in Maharashtra by 1,000 tonnes per month.

However, soaring prices of natural rubber, a key raw material for tyre makers, has put pressure on profit margins and Ceat was likely to face more pressure on profit margins in October-March compared with the first half, he added.

Ceat’s net profit in July-September took a 75 percent knock as galloping rubber prices defeated a rise in sales.

Natural rubber prices have risen more than half this year and are currently trading at Rs.198.5 a Kg.

Ceat shares ended up 7.4 percent at Rs.138.85 in a firm Mumbai market.