Balkrishna Tyres to begin advanced carbon black production in H1 FY25

Balkrishna Industries, one of the leading manufacturers of off-highway tyres (OHT) under the brand name Balkrishna Tyres (BKT), is all set to start production of its 30,000 MTPA (metric tonne per annum) of advanced carbon black capacity at Bhuj, Gujarat, in the first half of the ongoing fiscal year, as per a senior company official. 

Currently, carbon black forms 7% of the total company revenue, estimated to scale up to 8-9% by the end of the current financial year with the commencement of a new production line. 

"Our current capacity for carbon black stands at 170,000 MTPA, which is expected to reach 200,000 MTPA by H1 FY25. The rationale for setting up this plant was that existing customers needed advanced carbon black," Rajiv Poddar, Joint Managing Director of the company, said during the earnings call.  Notably, advanced carbon black is suitable for use in specific applications such as paints, plastics, and inks. 

He also mentioned that margins would be 200-300 basis points higher than normal carbon black, and there would be an addition of Rs 300 crore to Rs 350 crore to the gross block due to this facility. 

Moreover, the company will nearly halve its capital outlay this year, in comparison with roughly Rs 1140 crore in capex spent in FY24. “We will spend Rs 500-600 crore as capex this year. The company has enough land to support small brownfield expansions, which would be set up in 12-15 months,” Poddar added. 

The Mumbai-based company reported an 88% jump year-on-year (y-o-y) in its profit after tax (PAT) at Rs 481 crore for the quarter ended March (Q4FY24) as compared to Rs 256 crore in the same quarter last year. 

The tyremaker's sales for Q4FY24 rose 13% year over year to Rs 82,085 crore from Rs 72,676 crore in Q4FY23. At the operating level, earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at Rs 699 crore in the fourth quarter of FY24 over Rs 494 crore in the corresponding period in the previous fiscal. EBITDA margin stood at 25.9% in the reporting quarter as compared to 21.3% in the corresponding period in the previous fiscal.

The management has refrained from giving any volume growth guidance for FY25 as the demand outlook remains uncertain in its key end-markets given the ongoing geopolitical conflicts.