MRF: Rolling Ahead

Not many of us know what the abbreviation MRF stands for. However, one thing we surely know is that it manufactures tyres and that it is the largest player in the Indian tyre market. MRF, which stands for Madras Rubber Factory was setup in the mid-1940s with an initial capital of Rs 14,000 by legendary industrialist K. M. Mammen Mappillai. In 1961, MRF became a public company, established a technical collaboration with the US-based Mansfield Tire & Rubber Company and rolled out its first tyre from its plant at Tiruvottiyur. Since then, MRF’s trustworthy and smooth tyres have kept the company ahead of everyone.

During the 18 month period ended 31 March, 2016, MRF’s total income increased to Rs 22,706 crore from Rs 14,714 crore in the previous 12 month period ended 30 September, 2014. The company’s PAT in the same period increased to Rs 2327.72 crore from Rs 897.89 crore. MRF recorded a 9 per cent increase in total tyre production during the period. In the same period, the price of natural rubber and fuel fell, resulting in lower raw material cost. Reduction in material cost was passed on to customers by way of reduction in selling price. This has finally resulted in lower top line growth.

“This period was indeed challenging with the automobile sector recording a lackluster performance. This was compounded by increased tyre production capacity being added by major players. This scenario was further aggravated by significant import of Chinese truck radial tyres at prices far below those of domestic manufacturers thereby impacting the industry,” K. M. Mammen, Chairman & Managing Director, MRF said in the annual report.

The stock exchange loves MRF. If you had invested Rs 500 in August 2001 in an MRF share, you would today have more than Rs 59,000 in your account. Shares of MRF have soared more than 120 times in the last 16 years and are currently the most expensive stock in India in terms of share price followed by Eicher Motors, Bosch and Shree Cement.

From organising world class motor sports to indulging with big sports names, MRF has a strong brand presence in the country and abroad. Whether it is legendary cricketers like Brian Lara, Sachin Tendulkar and Steve Waugh who sport the MRF logo on their bats, or numerous hoardings placed by the company in prime locations across Indian cities, MRF is known to everyone. For 12 times in the last 16 years, MRF has been ranked highest in customer satisfaction in the J. D. Power Asia Pacific 2016 India Original Tyre Satisfaction Study for Passenger Cars and SUVs.

MRF is the only tyre company in India which makes the complete range of tyres — TBR, TBB, Motorcycle, PCR, LTR etc. It even makes tyres for the Indian Air Force Sukhoi-30 range of aircraft. MRF’s presence in the two-wheeler market is enormous and its growth has tempted biggies like JK Tyre and Apollo Tyres to enter the segment. MRF also has a very wide sales channel. It does not rely on multi-brand tyre outlets to retail its tyres and has its own stores at prime locations in almost every city and town. It has a presence in 65 countries.

MRF’s R&D team operates in a different fashion. The company says that the design process at the company starts from the customer — inputs from individual customers are compiled by marketing and given to the company’s R&D and Product Development Division. MRF’s team of 300 engineers and scientists give it enormous strength in product design.

Even though, the company’s net profit declined by 30.68 per cent at Rs 288.08 crore for the quarter ended 31 December, 2016, MRF is expected to gain from the changing macro-economics in the sector as global rubber prices are down about 25 per cent since February and Chinese tyre imports are down from 455 containers in October to 155 in February, giving the much needed relief to Indian players.