Heard on the Street

HNIs seen buying SRF to ride tyre sector boom

Buzz is that shares of SRF are being accumulated by some high net worth individuals, following an improvement in the outlook for the tyre industry. The company is mainly into nylon tyre cord fabric and industrial yarns. The sentiment for the tyre sector has been bolstered by the US government���s decision to impose additional duties on Chinese-made tyres.

According to dealers tracking SRF, another positive for the company is expectation that it will generate 3.8 million CERs (Certified Emission Reductions or Carbon Credits) per annum, which are said to be trading at around E12 .5 per CER (for December 2009 delivery). With these credits expected to accrue till 2014, the present value of these CERs is significant. The scrip ended at Rs 156.65, up 1.16%, on BSE on Friday. Interestingly, the improved outlook in the tyre industry has also benefited the producers of caprolactam, the principal raw material used by automobile and textile manufacturers for the production of nylon yarn and tyre cord.

According to analysts, Gujarat State Fertilizers Corporation (GSFC) and Fertilisers & Chemicals Travancore (FACT) are the only two Indian companies manufacturing caprolactam. Dealers said international prices of the compound have risen from a low of Rs 70,000 a tonne in February to Rs 116,000 a tonne as of this month. Share prices of both companies have been inching up of late. While FACT ended marginally lower at Rs 37.65 on Friday, GSFC gained 1.1% to close at Rs 164.90 on BSE on Friday.

(Contributed by Deeptha Rajkumar)