1. Introduction
Balkrishna Industries Limited (BKT) is a prominent player in the global off-highway tire (OHT) market. With a focus on specialized tire segments, BKT has built a robust business model targeting agricultural, construction, industrial, mining, port, and all-terrain vehicle (ATV) applications. Founded in 1951 with roots in textiles, the company diversified into bicycle tires in 1963 and entered the off-highway tire segment in 1987. Over the years, BKT has evolved into a global leader in niche tires, selling products across 130 countries and holding a 5% global market share in FY24.
2. Business Overview and Operations
BKT operates five manufacturing plants located in Aurangabad, Alwar, and Kutch in India, with additional facilities such as a carbon black plant in Kutch, a wind farm in Jaisalmer, and a mold manufacturing unit in Thane. The company’s tire production capacity stands at 3,60,000 metric tons per annum (MTPA), while its carbon black plant has a capacity of 1,70,000 MTPA. Around 50% of the carbon black production is used in-house, with the rest sold to third-party customers.
The company manufactures more than 3,200 stock-keeping units (SKUs), covering both radial and cross-ply tire constructions. Agriculture and farming industries make up the majority of BKT’s clientele, with prominent customers including John Deere, SAME, CLAAS, TAFE, New Holland Agriculture, and Escorts Kubota. Other key customer segments include mining, forestry, construction, industrial, and ATV industries.
Subsidiaries and Global Presence
BKT operates through four wholly-owned subsidiaries located in overseas markets and one domestic subsidiary. With a significant focus on exports, around 72% of the company’s revenue comes from international markets, with Europe being its largest geographical segment, followed by India, the Americas, and the rest of the world.
3. Market Segmentation and Sales Performance
Segment-wise Revenue Breakdown
- Agriculture: 61%
- Off-the-Road (OTR) Tires: 36%
- Others: 3%
Sales Channels
- Replacement Market: 71%
- Original Equipment Manufacturer (OEM): 27%
- Others: 2%
Geographical Distribution (Standalone, FY24)
- Europe: 47%
- India: 17%
- Americas: 27%
- Rest of the World: 9%
Performance Overview
In FY24, BKT reported net sales of ₹9,369 crores, a 4% decline from the previous year due to sluggish global demand in H1 FY24. However, domestic sales grew steadily, contributing ₹2,615 crores. Export revenue stood at ₹6,754 crores, with Europe facing demand headwinds due to economic disruptions and global sanctions. The company’s tire sales volume reached 2,92,628 MT, reflecting a 2.8% decline from FY23 levels.
The carbon black segment generated ₹650 crores in FY24. In Q1 FY25, BKT saw a 26% YoY sales increase, driven by a recovery from cyclone disruptions in Gujarat. The company achieved 83,570 MT in sales, with domestic volume growing 17% YoY.
4. Profitability Analysis
EBITDA Growth and Margins
BKT achieved an EBITDA of ₹2,255 crores in FY24, registering a 32% YoY increase. The rise was attributed to favorable raw material costs, reduced freight expenses, and operational efficiencies. EBITDA margins expanded to 24.1%. Freight costs declined significantly earlier in the year but showed an upward trend from Q4 FY24.
In Q1 FY25, EBITDA rose by 33% YoY to ₹664 crores, driven by higher sales volumes. Freight costs are projected to rise to 8-9% of sales in Q2 FY25. Despite rising logistics expenses, BKT aims to maintain EBITDA margins at 25% for FY25.
Net Profit and PAT Margins
In FY24, BKT’s net profit rose 39% to ₹1,472 crores, driven by higher other income, including foreign currency gains. The PAT margin expanded to 15.7%. In Q1 FY25, the PAT margin reached 18.1%, supported by ₹162 crores in other income.
Return on Equity (ROE) and Return on Capital Employed (ROCE)
- ROE: 17.9% in FY24
- ROCE: Driven by increased profitability, with capacity utilization of 75-80%.
5. Efficiency and Working Capital Management
Cash Flow Analysis
- Operating Cash Flow: ₹2,083 crores in FY24
- Investing Cash Outflows: ₹1,476 crores (PP&E and investments)
- Financing Cash Outflows: ₹602 crores (debt repayment and dividend payments)
- Free Cash Flow per Share: ₹60.9
The company approved a capex plan of ₹1,300 crores for expanding its Bhuj facility, adding 35,000 MTPA in capacity.
Working Capital Cycle
BKT’s working capital cycle stood at 51 days in FY24. Inventory levels remain high due to supply chain disruptions but have stabilized.
Asset Turnover Ratio
- FY24: 0.72x
BKT’s asset base includes ₹6,232 crores in property, plant & equipment and ₹1,445 crores in trade receivables.
6. Solvency and Financial Stability
Debt to Equity Ratio
- FY24: 0.35x
Long-term borrowings totaled ₹691 crores, while short-term borrowings stood at ₹2,404 crores.
Interest Coverage Ratio
- FY24: Sufficient resources to cover interest obligations, despite higher borrowing costs.
Current Ratio
- FY24: 1.27x
7. Valuation and Market Performance
PE Ratio and Valuation
BKT is currently trading at a TTM-based PE ratio of 35.56x, reflecting its premium valuation compared to peers.
Dividend Yield
- Dividend Payment: ₹20/share in FY24
- Dividend Pay-out Ratio: 26%
Stock Performance
The stock has shown significant resilience, consolidating between ₹1,500-₹1,850 in 2021 and reaching a high of ₹2,724 in September 2021. Current support levels are at ₹2,350-₹2,500, with potential upside targets of ₹3,500-₹3,700.
8. Quality and Management
Management and Leadership
BKT is led by Chairman Arvind Poddar and Joint Managing Director Rajiv Poddar. The Poddar family controls a 58.29% stake. The company’s legacy in the textile industry has evolved into a global tire powerhouse, known for quality and technical expertise.
Shareholding Pattern (Q1 FY25)
- Promoters: 58.29%
- FIIs: 12.61%
- DIIs: 22.46%
- Public: 6.66%
9. Sector and Competitive Landscape
BKT operates in a niche OHT market, characterized by technical complexity and high entry barriers. Unlike other tire segments, OHT remains less affected by Chinese competition. The company’s presence across agriculture, construction, and industrial segments, coupled with its global focus, provides a competitive edge.
10. Future Outlook
- Carbon Black Expansion: A new 30,000 MTPA capacity is scheduled to become operational in H1 FY25, with projected revenue of ₹400-₹600 crores.
- Compliance with EUDR: BKT is preparing for the European Union Deforestation Regulation (EUDR), which mandates sustainable sourcing of natural rubber.
- Capex and Expansion: Investments of ₹600-₹700 crores are planned for FY25.
- Growth in Mining and Infrastructure: The growing demand for mining tires is expected to support future growth.
Conclusion
BKT has established itself as a leader in the global off-highway tire market. Despite challenges in FY24, including sluggish European demand and rising logistics costs, the company demonstrated resilience through strong domestic performance and effective cost management. With expansion plans, sustainable practices, and a focus on niche segments, BKT is well-positioned for future growth. The company’s prudent financial management, market leadership, and commitment to innovation ensure its continued success in the competitive OHT market.
ALSO READ: Bandhan Bank: From Inclusion to Growth
