The Alliance Tire Story

Forbes India has an interesting profile of how Yogesh Mahansaria and his father  – who had to leave off-road tyre maker Balkrishna Tyres  post a family split – rebuilt a global business in the same space through a buyout of Israel-based Alliance Tire in partnership with Private Equity investor Warburg Pincus. (In April-2013, Warburg sold its stake in Alliance to fellow PE giant KKR at an enterprise value of $650 million.)

Off-highway tyres are a $9 billion industry globally, about 10 percent
of the global tyre market. These tyres are big—from two to 10 feet
high—and heavy, ranging from 15 kg to 1,000 kg per tyre. Manufacturing
is labour-intensive. Companies need to have a huge number of stock
keeping units (SKUs, or the number of size variations in the same basic
product). Alliance, for instance, has more than 2,000 SKUs. Compare that
to a passenger tyre where, with just one SKU, companies can churn out a
million units. This industry comprises several verticals: Tyres for
agricultural, construction, forestry, mining, ports and aviation
equipment. ATG operates in three of these, agriculture, construction and
forestry.

…Further, very few people in the world are interested in making
off-highway tyres. The Bridgestones and Michelins of the world prefer to
focus on passenger, commercial and mining tyres. “In the last five
years, the market share of the big players has dropped from close to 50
to 35 percent. And because this is a low-volume, high-SKU business, no
Chinese players are interested. So this is a great opportunity for
companies like Alliance and BKT,” says a mutual fund manager who has
invested in BKT but does not want to be quoted.