Company Overview

Balkrishna Industries Limited (BKT) (NSE BALKRISIND) started its Off-Highway tire business in 1987. For over 30 years, BKT has successfully focused on specialist segments such as agricultural, construction and industrial as well as earthmoving, port and mining, ATV, and gardening applications. In the course of the years Balkrishna Industries has come up with many tire novelties that cater for the most demanding user needs in any Off-Highway application, and today the company offer an extensive product range of over 2,700 high-performance specialist tires.1

Products

  • Agriculture Tires        
  • Industrial Tires        
  • OTR Tires        

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Plant Locations       

Tyre ManufacturingAurangabad  (Maharashtra)
Tyre ManufacturingBhiwadi,  Dist: Alwar (Rajasthan) Unit I
Tyre ManufacturingBhiwadi , Dist: Alwar (Rajasthan) Unit II
Tyre ManufacturingTaluka Bhuj , Dist: Kutch (Gujarat)
Carbon Black ManufacturingTaluka Bhuj , Dist: Kutch (Gujarat)
CalendaringBhiwadi , Dist: Alwar (Rajasthan)
Wind farmFatehgarh , Dist: Jaisalmer (Rajasthan)
Mould UnitDombivali (E), Dist: Thane (Maharashtra)

Business Overview

The company is primarily engaged into Specialty “Off Highway Tire segment” which is consisting of Agriculture, Industrial, Construction, Earthmoving, Mining, Port, Lawn and Garden and All-Terrain Vehicle (ATVs) Tires, etc 2

This segment is highly technical & capital intensive and known as “large varieties low volume segment” where any credible player needs to maintain large number of Stock Keeping Units (SKUs) to meet the diverse requirement of its customers worldwide. While the sub segment (agriculture) is largely known as non-cyclical in nature, the other sub segment (industrial, construction and mining) is generally considered as cyclical and the performance of it is largely linked to overall economic outlook of the world. The market for Company’s products is mainly Europe, America, Australasia and India.        

The first 8 months of the year under review have been challenging due to various macro factors such as; Trade War, unfavourable climate condition in Europe which impacted the demand of its products adversely in various parts of the globe        

From December 2019, after resolution of trade war between USA and China and favourable winter agricultural season in Europe, the demand scenario turned positive and business continued to improve until middle of March 2020 when the company all were caught by the deadly Corona Virus more commonly known as “COVID-19” which led to lockdown of the entire country and as a result, its manufacturing activities as well as dispatches remained suspended from 25th March 2020 to the later part of April 2020 when lockdown was partly lifted by the Government as the company were falling into essential services. Balkrishna Industries has undertaken sufficient safety measures across all its plants and followed increased protocol to ensure safety and well-being of its staff members as well as outsiders interacting with its staff members.        

After resumption of manufacturing activities and dispatches, the company were gradually able to ramp up its activities and are happy to inform you that Balkrishna Industries has gained normalcy in its manufacturing activities as well as dispatches to a good extent. However, the year ahead also looks challenging as Balkrishna Industries is still struggling with COVID-19 issues, the solution of which does not seem to be in sight as of today.        

Opportunities and Threat:

Opportunities

The company operates into a segment predominantly known as “large varieties - low volume segment”, which is not only capital intensive but also labour intensive. The company is fully geared to take advantage of the peculiarities of the said segment and has developed a large base of SKUs to meet the diverse needs and applications.        

Moreover, this segment is neither exposed to any technological obsolescence nor wild fluctuations in demand for its products.        

The Company is continuously marching ahead to explore incremental opportunity in the form of developing “Earthmovers & mining tires” markets and taking advantage of the shift from bias to radial tires, which is growing continuously. In order to take advantage of this opportunity, the Company had set up an all-steel OTR Radial tire plant and have further added such capacities by setting up a green field tire plant at Bhuj to produce large size all steel OTR radial tires besides other categories of tires. The company is proud to be the first Company in India to set up such a plant. The company is continuously expanding its base into various sub-segments like agricultural, industrial, construction, mining, winter and solid tires under both technologies – bias as well as radials.        

The COVID-19 issue has led to a situation where most of the countries are thinking to reshuffle their sourcing plan / strategy. It may open up lot of opportunities for India including its Company.        

Threats

Like any other Company, the company is also exposed to various threats like competition from small players, retention of employees, labour issues, increase in raw material prices and other input costs, etc.        

A new threat has emerged out of COVID-19 which may change the manner and pattern of the business and also may intensify the various threats to which Balkrishna Industries is already exposed to. It may increase the operating cost of running the business.        

Project And Expansion

The company had undertaken various projects/expansion during financial year 2018-19. The current status of these are as under:        

Carbon Black: The Second phase of the Carbon Black project was completed on 12th March, 2020 with a capacity of 80,000 tons per annum. The first Phase of 60,000 tons per annum capacity was already completed in the month of June, 2018.        

Greenfield Tire Plant in US: The Board had approved to explore to set up a Green Field Tire Project of 20,000 Mts per annum capacity with an estimated capital outlay up to USD 100 million through its wholly owned subsidiary company in USA. After reviewing various aspects of the project in the backdrop of various challenging economic and business environment, the Board decided to keep it in abeyance.        

Waluj Plant: The Green Field Tire project was progressing as per schedule, however due to COVID-19, the work was temporarily shut from 25th March, 2020. The project work resumed after the lockdown was lifted. The Company is trying to complete this project as per schedule i.e. before 31st March 2021 subject to delay of one quarter provided there is no further lockdown or any unforeseen circumstances.        

Bhuj Plant: The various activities; setting up of ultra large sized all steel OTR Radial Tire Plant, expansion of mixing facility and setting up of a warehouse at Bhuj plant were progressing as per schedule. However, due to COVID-19, the work was temporarily shut from 25th March, 2020. The project work resumed after the lockdown was lifted. The Company is trying to complete these activities as per schedule i.e. before 31st March 2021 subject to delay of one quarter provided there is no further lockdown or any unforeseen circumstances.        

Operations

Standalone: During the year under consideration on Standalone basis, the company achieved a Revenue from Operations of Rs 4,78,249 Lakhs as against Rs 5,24,450 Lakhs during the previous financial year. Earnings before Interest, Depreciation and Tax (EBIDTA) has decreased to Rs 1,49,812 Lakhs from Rs 1,52,535 Lakhs during previous financial year and Net profit has increased to Rs 94,498 Lakhs from Rs 78,200 Lakhs during previous financial year. More than 80% of its revenue is generated through exports.        

Consolidated: During the year under consideration on Consolidated basis, the company achieved Revenue from operations Rs 4,81,124 Lakhs as against Rs 5,20,999 Lakhs during the previous financial year. Earnings before Interest, Depreciation and Tax (EBIDTA) has increased to Rs 1,52,203 Lakhs from Rs 1,52,030 Lakhs during previous financial year and Net profit has increased to Rs 95,965 Lakhs from Rs 77,365 Lakhs during previous financial year.        

The decrease in revenue and EBIDTA in standalone and decrease in revenue in consolidated results have happened due to adverse factors explained hereinabove whereas the net profit has increased despite lower revenue due to reduction in rate of tax by the Government of India during the year and consequent adjustments in deferred tax liability.        

The company enjoys the status of “Four Star Export House”.        

Outlook for the Financial Year 2020-21:

The outlook for the current year i.e. 2020-21 is full of challenges, mainly due to COVID-19 pandemic. The entire world including India is struggling with it which has severely impacted the economic activities across the globe including India. Since there is no treatment / solution in sight, it is very difficult to say when and how normalcy will be restored.        

This pandemic has also triggered a fresh tussle between USA and China which may impact the global business environment adversely. In view of all such factors, the outlook for the current financial year is uncertain. However, the long-term prospects of the company are good and promising as the company continues to explore all the avenues to ensure growth of its business which includes deeper penetration into its existing market within India as well as outside India including OEMs and continuous expansion of its product range. The company is proud to say that it has more than 2700 SKUs.        

Recent developments

Tyre-maker BKT eyes doubling domestic market share in the next few years 3

Leading off-highway tyre manufacturer Balkrishna Industries that sells under the BKT brand expects its domestic market share to double in the next couple of years to over 12 per cent, a top company official said.        

The company, which competes with Goodyear, Yokohoma-owned ATG, MRF and Apollo, among others, currently commands 6-7 per cent share of the domestic market.        

It expects its market share to touch 12-15 per cent as it has been witnessing increasing demand for its farm sector offerings.        

Currently, only 20 per cent of the city-based company's sales comes from the domestic market, of which 40 per cent is from the farm segment. It expects this to grow to over 50 per cent in two years.        

"The farm sector has been getting lots of government attention in the past few years and one of the results is the rising mechanisation. Accordingly, Balkrishna Industries is also getting lot of demand. This should help it drive sales.        

"The company see its domestic market share more than doubling to 12-15 per cent from 6-7 per cent now. Currently, farming contributes 40 percent of domestic sales which should also be going up to well over 50 per cent," BKT Joint Managing Director Rajiv A Poddar told PTI.        

Overall, he said BKT nets almost 80 per cent of revenue from exports, with domestic sales accounting for the rest.        

Of the total revenue, 60 per cent is contributed by the agriculture sector, followed by mining and construction equipment chipping in with 35 per cent and the rest 5 per cent from golf carts segment.        

Europe is its largest market, accounting for half of the firm's exports, followed by Americas at 20 per cent.        

The Rs 4,800-crore company is confident of closing the current fiscal at at least the past year's level or even marginally higher.        

The lockdown has shaved off 50 per cent sales in Q1 but Q2 has made up for it, with sales almost normalising to pre-pandemic levels, he said.        

Poddar ruled out getting into passenger or commercial vehicles space, saying there is huge market available for the off-highway tyres.        

The BKT Group manufactures an extensive range of off-highway tyres specifically designed for vehicles operating in agricultural, industrial, earthmoving, mining, port, ATV (golf) and gardening sectors. It manufactures more than 2,700 different tyres which are sold in over 160 countries.        

It is expecting its Rs 1,000-crore capacity expansion plan to be completed as scheduled in March, under which it is setting up a Rs 500-crore facility to replace its existing plant and enhance productivity.        

The company is also setting up an ultra large-sized all-steel OTR (off-the-road) radial tyre unit with an annual capacity of 5,000 tonnes at its Bhuj facility which it had set up in 2015 at an investment of Rs 3,000 crore. It will be the first of its kind plant in the country.        

BKT has annual capacity of 3-lakh tonnes currently.        

It is also building a warehouse and mixing plant there at an estimated cost of about Rs 500 crore.        

Balkrishna Industries: Volume jumps 61 per cent QoQ in Q2FY21  4     

09-Nov-2020; Balkrishna Industries declared the results for the quarter ended September 30, 2020, on Friday after the market hours.        

The company’s consolidated revenue for the quarter Q2FY21 stood at Rs 1,577.9 crore as against Rs 1,084.28 crore in the corresponding quarter last year, registering a 45.5 per cent YoY increase.        

On the volumes’ front, the company reported the highest-ever quarterly sales volume in Q2FY21. Besides, it registered a significant jump of 60.71 per cent QoQ to 61,224 MT in Q2FY21 vs 38,096 in Q1FY21. On a YoY basis, volumes jumped by 36 per cent. With 99,320 MT of volume achieved in H1FY21, the company expects to cross the FY20 sales volumes in FY21, being marginally subjective to no further deterioration caused by COVID-19.        

EBITDA for the quarter spiked by 97.8 per cent YoY to Rs 539.97 crore as against Rs 273.04 crore in the corresponding quarter last year, with a corresponding margin expansion of 904 bps. EBITDA margin for the quarter stood at 34.2 per cent.        

PAT for the quarter came in at Rs 340.94 crore as against Rs 294.31 crore in the corresponding quarter last year, with a YoY increase of 15.8 per cent.        

As far as demand is concerned, it continued to be strong in the agricultural segment across different geographies. In other segments, the demand continued to remain stable.        

The board of directors has declared a second interim dividend of Rs 4 per equity share.   

References

  1. ^ https://www.bkt-tires.com/ww/en/about-us        
  2. ^ https://www.bkt-tires.com/downloads/5760/2198/Annual%20Report_2019-20.pdf
  3. ^ https://www.business-standard.com/article/companies/tyre-maker-bkt-eyes-doubling-domestic-market-share-in-the-next-few-years-120102601271_1.html
  4. ^ https://www.dsij.in/DSIJArticleDetail/ArtMID/10163/ArticleID/15685/Balkrishna-Industries-Volume-jumps-61-per-cent-QoQ-in-Q2FY21
Created by Asif Farooqui on 2020/12/21 17:45
     
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