JK Tyre and Industries will spend about INR 540 crore this fiscal mainly to expand its truck and bus radial (TBR) tyre production facility and debottleneck the plants, a top company official said. Though the company had put on hold fresh capital expenditure in 2020 because of Covid-19, it spent INR 200 crore in the current financial year.
“We are planning to incur capex of about INR 540 crore in FY23 of which INR 240 crore is for the expansion of the TBR capacity, to be completed in phases by March 2023, and INR 200 crore for debottlenecking capacity in the PCR segment. Another INR 100 crore will be spent on maintenance. This holds incremental revenue potential of INR 900 crore-1,000 crore, ” JK Tyre Chairman and Managing Director, Raghupati Singhania said.
The company said, in the quarter to December 31, 2021, it had the highest-ever quarterly sales at over INR 3,000 crore with exports amounting to INR 484 crore, up 46% sequentially. Its consolidated net profit declined 76.6% to INR 53.92 crore during the quarter under review. However, the company’s revenue from operations in October-December 2021 rose to INR 3,076.03 crore as compared with INR 2,769.28 crore in the year-ago period. JK Tyre’s net debt as at Q3 FY22 end was at INR 4,800 crore, including working capital borrowings.
The company remains committed to reducing its long-term borrowing by 45% which amounts to INR 1,400 crore in the next three years. According to the JK Tyre management, margins were muted due to the increase in raw material prices and demand resistance across segments, though the impact was partially set off by a 2% price hike. The company expects cost pressure to continue with 2 percent – 3 percent rise in raw material prices in the short term. Running at a capacity utilization of about 89% , the company remains bullish on demand from TBR and passenger car radial tyre (PCR) segment in coming quarters.
The farm sector demand was subdued because of high base. A latest note from ICICI Securities said that “JK Tyre leverage ratios and return ratios are set to improve, going forward, due to reduced interest outgo from lower debt, higher asset turnover and prudent capex spends.” The brokerage firm further said that the tyre maker will be benefited with the expected domestic CV cyclical upswing courtesy high market share in TBR, as it derives 63% sales from this space domestically.
