Balkrishna Industries sees Off Highway Tyres’ sales mix reaching 50% in 4 years, aims to double global presence
The OHT market is bigger than the agri tyre market in terms of volume and value globally, and therefore the company expects its agriculture tyre and OHT split to be 50:50 going forward.
Driven by the growth in mining, construction, and industrial OEMs across the globe and market share gains in geographies like India and the USA, Balkrishna Industries (BIL) expects its off-highway tyres’ (OHT) sales mix to jump from one-third of total revenues currently to 50 percent in the next 3-4 years.
The multinational tyre company, which sells under the BKT brand, also aims to double its global off-highway tyre (OHT) market to 10 percent by FY 2027–28 from the current 5–6 percent through portfolio diversification, a larger presence of OEMs and entry into new markets.
For BIL, the agriculture tyre business is much larger than OHT, as it started with the agri-segment. While agriculture tyres contribute 62.7 percent to the company's overall revenue, the OHT segment comprises 34.2 percent at present.
On the back of fresh competition globally, the company aims to increase its OHT revenue share to 50 percent over the next four years. Notably, the OHT market is bigger than the agri tyre market in terms of volume and value globally, and therefore the company expects its agriculture tyre and OHT split to be 50:50 going forward. Consequently, more OHT offerings could also enable BIL to enhance its presence among OEMs and expand the company's markets in geographies like Australia, eastern Europe, etc. However, India, the USA, and Africa will continue to remain key growth areas for the company throughout the projected period.
Over the long term, the company’s management expects the OHT segment’s margin to be higher than the agri segment’s margin by 1-2 percentage points (PP), though it will have to invest in the ramp-up. Based on the projections, it sees long-term sustainable EBITDA margins at 26-28 percent in FY 2027-2028 as compared to 19.6 percent in FY 2022-23.
Besides, the Mumbai-based tyre company is also adding new products, such as farm tracks and solid tyres to diversify its portfolio over and above adding 57 inch, 61 inch and 63 inch diameter radial OHT and agriculture tyres for larger applications. In the domestic market, BIL is focusing on rural area campaigns in targeted developed regions to create a stronger brand image for the company and also differentiate it from emerging competitors.
Capacity ramp up and Investment
BIL, a leader in off-highway, agriculture, and industrial tyres has lined up a capex of Rs 550-Rs 600 crore for the ongoing financial year. “Of this, routine maintenance capex will be Rs 250 crore to Rs 300 crore. The balance will be spent on new product development, like rubber tracks and giant solid tyres. This will help us widen our product basket in the end market, along with higher investments in brand building and marketing efforts, which are required to reach our market share goal of 10 percent,” said Rajiv Poddar, Joint Managing Director, BIL said during a conference call last month.
It has five manufacturing plants in India located in Gujarat, Maharashtra, and Rajasthan. The company currently has 3,200 stock-keeping units (SKUs), which it manufactures across its various plants, spanning about 550 acres.
While exploring incremental opportunities in the ultra-large earthmovers and mining radial tyre categories, the company set up India’s first ultra-large size all-steel OHT radial tyre plant at Bhuj, Gujarat in 2015. Spread over 470 acres, the Bhuj plant accounts for nearly 50 percent of BIL’s total capacity. It has expanded meaningfully over the past few years, especially across agriculture radial tyre and giant OHT (up to 57 inches) used in the mining segment. At present, BIL is the only radial OHT tyre player in the country.
After ground breaking in May 2021, the company announced an outlay of Rs 1,900 crore for the brownfield ramp up of the Bhuj plant to increase tyre and carbon black capacity and automate existing facilities. According to BIL, having its own carbon black facility has led to improved quality of off-highway tyres, and its carbon black facility generates sufficient power to meet 80 percent of its own power requirement.
Out of the company's total capacity of 360,000 metric tons per annum (mtpa), the Bhuj plant currently has a capacity of 200,000 mtpa, along with 200,000 mtpa of carbon black capacity and captive power generation. This facility has scope to further expand the capacity by another 100,000–150,000 mtpa and to be the key driver in helping BIL gain 10 percent global OHT market share over the next 3-4 years.
At a recent investor meeting, BIL highlighted that for every 50,000 mtpa addition, the company foresees a capex need of Rs 850 crore. This indicates that the off-highway tyre major is looking to invest Rs 1,700-Rs 2,550 crore as brownfield capex in the Bhuj plant with a lead time of 12-15 months to reach the desired capacity expansion. The company management also hinted that any greenfield plant addition, if at all it happens at a later stage, would be in coastal India only.
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