A decline in raw material costs and planned expansion in capacities across product lines will help in improving margins going forward, said JK Tyre & Industries, one of India’s top tyre makers.
The Delhi-based firm is expecting a robust growth in demand in the current year powered by favorable movement in the aftermarket segment even as growth in the original equipment maker (OEM) segment is expected to remain benign.
Anshuman Singhania, managing director, JK Tyre & Industries said, “We are seeing a 2.5% decline in raw material (RM) basket from the previous quarter. There would be stabilisation in the full RM basket as we move forward in the quarter.”
JK Tyre reported a 43% year-on-year (y-o-y) drop in net profit at Rs 98.66 crore for the quarter ended March 31. The drop was majorly due to the adverse movement in raw material prices. Its revenue from operations grew 2% y-o-y to Rs 3,759 crore. Ebitda margin for the same quarter stood at 10.2%, down from 13.4% recorded in the same quarter last year.
“We can expect margin expansion because of the drop in RM costs, but it will also depend on our ability to pass on the price to the consumer through hikes. We have not taken any hikes this quarter,” said Sanjeev Aggarwal, CFO, JK Tyre
The company has optimistic growth projections for the current year. In the OEM segment, the truck and passenger car segment is expected to see single digit growth while in the 2 & 3 segment we will see high single digit growth.
In the replacement segment, the company is expecting mid-single digit growth in commercial vehicles (CV) and a high single digit growth in passenger car (PC) and 2 & 3 segment.
Besides expansion of capacities in the CV and PC categories this year, JK Tyre will enhance capacity at its facility in Mexico as well, which caters to the North American, Mexican and Latin American markets.
“We see robust demand across all segments. The government’s focus on infra and a strong pipeline of new vehicle introductions and potential easing on int rate and normal monsoon augurs well for a sustainable growth,” Singhania added.
From Rs 4,300 crore in December 2024, the net debt of JK Tyre was brought down to Rs 4,081 crore as of March 31. The company is targeting a debt to equity ratio of 1.5-1.8 from more than 2 presently.
“Our balance sheet is quite healthy and we have been maintaining our debt to equity ratio well within the comfortable level,” Aggarwal added.