Cost for phase 1, which will involve setting up 40,000 MT capacity, is $107 million. This will be funded by debt of up to $54 million, including IFC's loan, which will have a tenor of 10 years.
will also mobilise another loan of up to $24 million on similar terms. This gives the company access to a different fundraising channel --from institutional financiers -- and help it develop a more diversified investor base.
"IFC's investment will provide validation of a greenfield business plan and the growth prospect of the sector. This will send a positive signaling effect to other investors on the soundness of the project and help attract investors for the current and future financing stages," said IFC.
MTPL estimates exports to account for 70-80 per cent of sales and contribute to India's forex earnings. The project will support value-addition in the domestic rubber production industry and is expected to create 1,500 jobs in the first phase.
OHT has a small presence India, compared to developed markets such as EU and North America. The size of OHT segment globally is still relatively small as it accounts for only about 10 per cent of the braoder tyre industry. At present, value brands have around 30 per cent share in the global market. Indian players hold half of this market share.
The Indian OHT market is price sensitive due to low farm income. As a result, the product range in India is not as specialized as in the EU and North America, where more application specific solutions are available.
Indian players such as MTPL stand to gain by producing more products in the value brand segment of OHT tyres, given that conversion costs in India are lower than in any other manufacturing bases. This project will demonstrate the competitiveness of Indian players in the global market and increase the overall share of Indian value brands, said IFC.