JK Tyre, Zafco secure IFC funding for tire projects

WASHINGTON—The International Finance Corp., an arm of the World Bank, has approved funding for tire factory projects proposed by JK Tyre & Industries Ltd. in India and by an affiliate of Zafco Group Holdings Ltd., the Dubai, United Arab Emirates-based tire distributor, in Pakistan.

For JK Tyre, the IFC has approved financing valued at $100 million to cover an expansion of a passenger tire plant in Banmore, Madya Pradesh, and other projects.

In Pakistan, the IFC has OK'd financing valued at $50.2 million for Armstrong ZE Pvt. Ltd.—a company owned by Zafco's founding Hussain and Yusufzai families—for a greenfield tire plant rated at 1.4 million passenger and light truck tires a year.

The IFC said in a Jan. 6 statement that it is considering a "sustainability-linked" senior secured A loan to JK Tyre and its wholly own subsidiary Cavendish Industries Ltd (CIL). Of the loan proceeds, up to $30 million will be to JK Tyre, and $70 million to CIL to be used to expand existing brownfield plants and to refinance and extend the maturity of CIL's existing high-cost debt.

The brownfield expansion includes increasing production capacity for radial passenger tires at JK Tyres' plant in Banmore, Madhya Pradesh, by 26 percent, or 3.2 million units per year, the IFC said, to 15.5 million units annually.

JK Tyres has available land around the Banmore plant for the expansion, the IFC added.

The investment will also go towards increasing annual truck/bus tire capacity at CIL's plant Laksar, Uttarakhand, by 14 percent, 280,000 units, to 2.25 million tires. The expansion will occur within the Laksar plant's existing footprint.

Armstrong ZE is proposing building a factory in Gharo, Sind Province, Pakistan, on the delta of the Indus River, rated at 1.4 million car and light truck tires a year, with a total investment of $92 million.

The IFC disclosed in late December that it—supported by a consortium of Pakistani banks, including HBL, Meezzan Bank, Bank Alfalah and Habib Metropolitan bank—had agreed to provide financing valued at $50.2 million.

The financing comprises a $25 million loan from the IFC alongside an investment in Pakistani rupees from the local banks value at up to $25.2 million The project is expected to create over 1,800 direct and indirect jobs and help increase the competitiveness of the sector through technology and know-how transfers.

Zafco has yet to disclose a timetable for the project.

"Armstrong ZE is deeply honored to have earned the trust and support of IFC and our partner banks...," Armstrong ZE Chairman Azim Yusufzai said.

"Their investment in this transformative project is not just a financial endorsement but also a strong vote of confidence in our vision, capabilities, and potential to shape the future of tire manufacturing.

"Together, we aim to foster innovation, create employment opportunities and contribute to sustainable development in our communities and beyond. This collaboration marks a monumental step forward in advancing our mission to deliver world-class, sustainable, and innovative tire solutions to the Pakistani market."

The number of registered vehicles in Pakistan has grown steadily over the last decade, the IFC said, reaching approximately 30 million vehicles in 2023, including 23 million two-wheelers.

Local tire manufacturing assets, however, remain "constrained due to a lack of technical expertise and technology and a substantial informal market," making the country heavily dependent on imports.

Reducing these imports will also help improve Pakistan's foreign currency reserves, the IFC said.

The IFC also said it will support Armstrong through its Responsible Investing Support in Emerging Economies (RISE) advisory program, which is designed to strengthen Armstrong's climate-risk management, resource efficiency and environmental and social processes.

The Hussain and Yusufzai families also own Zafar Enterprises, a leading tire distribution company in Pakistan, and Zafco Group Holding, a global importer and exporter of tires, batteries and lubricants, with a presence in over 85 countries.