Volatility in commodity prices could threaten a strong rise this year in shares of India’s Rajratan Global Wire Ltd, an Indian supplier to tire makers including Bridgestone Corp and Yokohama Rubber Co. With no clear signs that the global macroeconomic situation will improve anytime soon, demand for the company’s products fell in the July-September quarter as the company’s key customers hoarded inventories and dampened new orders.

Shares of the company, which makes the metal wires that hold tires together, have risen about 190% this year, making it the second-best performer among Indian consumer discretionary companies. However, the company is concerned that stubborn inflationary pressures are eroding demand at home and abroad.

In recent months, companies, including Unilever’s Indian unit and domestic consumer goods companies Britannia Industries Ltd and Dabur India Ltd, have turned to the cheapest packaging to ease demand amid rising input costs to sustain demand.

“Until last quarter, demand exceeded our capacity, but we saw demand pressure in the second quarter,” Chairman and Managing Director Sunil Chordia said in a phone interview late last week. “Exports are down, so tire businesses are not fully operational.”

The fiscal year in India runs from April to March, and the second quarter refers to the period from July to September.
The Indore-based company plans to enter the European market within the next six months and is in talks with Bridgestone, Trelleborg Automotive and Nokian Tyres. “Europe is a big market for tire manufacturing, and we have a marketer there,” Chordia said.

Chordia added that the company’s manufacturing plant in the southern Indian city of Chennai would start trial production early next year, mainly for the European market. Chordia said the Chennai plant has a total capacity of 60,000 tonnes per year, and the company plans to ship 50% of its production to the European market.