Tire raw material prices may increase due to the Israel-Hamas war: Dr. Anshuman Singhania of JK Tyre

 Tire raw material prices may increase due to the Israel-Hamas war: Dr. Anshuman Singhania of JK Tyre

However, he also notes that the firm is concentrating on premiumization across all of its product lines and that the industry outlook is quite positive.

Leading domestic tire manufacturer JK Tyre & Industries is investing Rs 1,100 crore to increase production capacity to 35 million units annually across all manufacturing locations. The company's managing director, Anshuman Singhania, told Moneycontrol that the current conflict between Israel and Hamas would raise crude oil costs, which will have an effect on the tire business. Below are edited excerpts:

How do you feel about the most recent financial results?

It's been excellent. Thanks to volumes and the biggest-ever gain in profitability, we've had excellent success with a steady rise in the top line.  The operating margin improved by 15% year over year in Q2, mostly due to increased operational savings, and premiumization was prioritized.

We have a consolidated net sales of Rs 3,905 crore for the second quarter of FY23–24, and our topline is steadily increasing. Our profits before interest, taxes, depreciation, and amortisation (EBITDA) increased by 280 basis points on a quarterly (QoQ) basis to Rs 597 crore. At Rs 249 crore, the net profit for the quarter represented a 5X year-over-year (YoY) gain.

This fiscal year, what type of investments are you making to increase your production capacity?

We had already said that we would be investing Rs 1,100 crore in our current initiatives. For Rs 301 crore, we have been debottlenecking the passenger car radiator (PCR) factory, which was just finished and is starting production.  Our PCR factory at Banmore, Madhya Pradesh, was expanded with funding of Rs 530 crore, and it was finished in Q2. With an investment of Rs 260 crore, we aim to finish expanding our TBR (truck and bus radials) plant.  Our current annual capacity is 34 million tires; with the increase, that number will rise to 35 million. The first half of the next fiscal year and current fiscal year are the designated times for these initiatives.

How are you prepared to meet the evolving needs of the automotive sector as it shifts to electric mobility?

For commercial vehicles (CVs), light commercial vehicles (LCVs), as well as electric two- and three-wheelers, we have previously developed a full line of electric vehicle (EV) tires. We are also consistently investing in this technology. We were one of the first tire manufacturers to create tires specifically for electric buses.   Along with closely collaborating with OEMs like Ashok Leyland, VECV, and others, we have been providing the industry leaders in the e-bus sector, including JBM Auto, Tata Motors, and others.

Are you going to start a new EV tire manufacturing facility?

That's not the case.   We have the capacity to manufacture goods for any new market niche in our current facilities.

Do you have any plans for inorganic expansion, particularly in foreign markets?

We continue to get opportunities and assess them as they arise. However, nothing is planned for the foreseeable future.

Will commodity prices, particularly those of rubber, rise or fall in the next quarters?

Quarter over quarter (QoQ) declines in raw material costs have been around 5-5.5 percent. But continuing ahead, we anticipate that the Israel-Hamas conflict will cause raw material costs to rise by 3–4 percent in Q3FY23–24. The price of crude oil, which accounts for over 55% of the cost of a tire, will also be impacted by the circumstances.

So, will you continue to concentrate on your current markets or will you go on with your growth strategies?

The current markets, as well as those in the United Arab Emirates, South America, Africa, and certain portions of Southeast Asia, will continue to get attention.

Could you please share your growth estimates for this fiscal year?

We don't provide sales or profitability estimates, but I can tell you that the demand for both commercial and passenger car tires is expected to be strong and the industry outlook is quite positive. We anticipate fairly robust growth, bolstered by government infrastructure spending.

Whether it is for CVs or PVs, premiumization is the main emphasis of our product lines.  The fact that our selling prices have increased across a range of product categories is another sign of our growing momentum. Additionally, growth is being fueled by our increasing volumes and capacity utilization, as well as our enhanced efficiency. In the second quarter, our volumes increased by 7% in the replacement market and 18% in the OEM sector.

How do the next two quarters look?

We anticipate a strong second half since quarter three is the holiday season and quarter four is the fiscal year's last quarter, when the aftermarket is strong.

What type of growth in percentage terms do you anticipate for your top and bottom lines this fiscal year?

As we end out this fiscal year, we expect to have grown by double digits from our Rs 14,600 crore earnings the previous year.