Goodyear looks to sell India farm tyres biz for Rs 2,500 crore

Goodyear Tire and Rubber is planning to hive off and sell its farm tire business in India, a year after it sold its off the road business to Japanese major Yokohama for $905 million, said people aware of the development.

On Monday, the Indian listed subsidiary of Goodyear informed the stock exchanges that its US parent intends to conduct a strategic review of the company's farm tire business operations in India. “The Board took note of the communication received from The Goodyear Tire & Rubber Co., USA, i.e. the ultimate parent company regarding their intention to conduct a review of the farm tire business of the Company to evaluate all strategic, operational and financial opportunities related to that business,” it said. However, it added, that the potential outcomes of this strategic review “is not currently known and there can be no assurance that the strategic review will result in the implementation of any transaction.”

Sources in the know added, the US parent has initiated working with strategic advisors to explore a full sale, valuing the India farm business upto Rs 2500-Rs 2700 crore. It is the market leader with 50% share. The farm tire division produces specialized tires for agricultural machinery and equipment, serving the agricultural sector across India.

In Nov 2023, the Akron, Ohio based Goodyear announced a strategic review and “portfolio optimisation” exercise that involved strategic alternatives for three of its verticals – chemical business, Dunlop brand of tyres and its off-the road business to overhaul its portfolio and cut costs with the goal of raising more than $2 billion in gross proceeds. The company had said the exercise which will include footprint adjustments and plant optimization, should drive an annual run-rate benefit of $1 billion by the end of 2025 and also drive benefits of $300 million in that time. This was done after activist shareholder Elliott came into the company and has been harping on radical changes. The sale to Yokohoma was also part of the strategy to streamline operations. Interestingly, India was not part of that transaction.

Goodyear India has a market capitalisation ofRs 2,114.97 crore. The parent owns 74% of the company, as on December 2024.

Industry analysts note that several global tire manufacturers have been reassessing their specialized divisions to optimize operations and focus on core growth areas. For example, in December, CEAT, an RPG Group company, announced that it had entered into an agreement with global tyre company Michelin to acquire the Camso brand’s Off-Highway construction equipment bias tyres and tracks business. The all-cash deal, valued at $225 million and including two manufacturing facilities in Sri Lanka and the global rights to the Camso brand.

The farm tire market in India has faced challenges in recent years, including fluctuating raw material costs, competition from both domestic and international players, and changing agricultural practices. Goodyear India’s farm tyres business too reported a decline in revenues in FY24 amid weak industry volumes. Its FY25 EBITDA is expected to be around Rs 175-200 crores.

The company said the farm industry saw sluggish demand due to unpredictable weather patterns, specifically erratic monsoons caused by El Niño, along with inadequate rainfall. These factors had an adverse effect on agricultural productivity and rural income. The Central Water Commission also reported low reservoir levels compared to FY23, and to the 10-year average. Rural stress, inflationary pressure affected discretionary spends and impacted consumer replacement of farm tyres.

Goodyear has two manufacturing facilities in Ballabgarh (Haryana) and Aurangabad (Maharashtra) rolling out different types of tyres. In the farm equipment segment, Goodyear supplies to all major tractor companies in India. The company is also a supplier of car tyres to many leading passenger vehicle makers in the country. Its net profit saw a sharp 56.63% decline to Rs 9.48 crore in the third quarter ended Dec 31, 2024. Revenues rose 6.82% y-o-y in the same period, but fell 7.41% q-o-q raising concerns about the company’s performance.

“Good year has been hobbled with problems globally, so they have not managed to focus or grow the local operations despite the brand equity they have,” said a CEO of a rival company on condition of anonymity. The company had a joint venture with CEAT called South Asia Tire Ltd in the late 80s but were ahead of time in the radial space. The JV was dissolved and Goodyear inherited their Aurangabad plant.

“The aim will be to tap specialist tire companies like Balkrishna Tires, PEs that have had great success in the OTR space in India. But this is a low margin business and more importantly have high cost, unionised operations, so their average cost per worker will be much higher which are a further drag on margins,” said a long time industry watcher. Funds like Warburg Pincus and KKR have had great outcomes in the space before.

Last year, Warburg had once again tied up with entrepreneur Yogesh Mahansaria for the Goodyear OTR business, but eventually got outbidded by Yokohoma. Mahansaria’s new venture Asensco is also expected be tapped for this transaction.