CEAT Ltd expects demand in FY27 to remain broadly supportive across aftermarket and OEM segments, though growth may moderate in the near term due to the West Asia conflict, fuel price uncertainty and steep input cost inflation, Managing Director and CEO Arnab Banerjee said during the company’s post-earnings analyst call.

“Near-term demand would be shaped by multiple variables,” Banerjee said. “The broader demand environment remains clouded by the West Asia conflict and related fuel price expectations.”

He added that the recently concluded rabi harvest should improve rural cash flows and support demand in the near term. “As of now, as we enter FY27, demand looks good in the aftermarket and OEM segments, but there is also an attendant steep price hike. Overall demand outlook is expected to moderate out therefore, but broadly may remain supportive,” he said.

The company expects replacement demand for medium and heavy commercial vehicle tyres to grow in high single digits in the near term, supported by increased economic activity, positive seasonality and an ageing vehicle fleet. Two-wheeler tyre demand also remains encouraging, with consumption levels now above pre-COVID levels. “For two wheelers, demand has been encouraging with consumption levels surpassing pre-COVID levels,” Banerjee said.

Passenger tyre demand in the replacement market has been relatively muted, but CEAT expects it to improve over the coming years, supported by higher original equipment sales in the previous year. In the OEM channel, MHCV demand continues to remain strong after GST rationalisation, with robust high double-digit growth in Q4. Light commercial vehicle demand is also strong.

Passenger car tyre demand is expected to grow in healthy single digits in the near term, with SUVs and MPVs performing better than sedans. In international markets, CEAT is seeing signs of recovery across multiple segments, especially in the US and Europe. Passenger car tyre demand is also strong in Europe.

However, Banerjee cautioned that geopolitical uncertainty remains a key monitorable. “Sales to Middle East obviously have been severely impacted in Q4,” he said.

Raw Material Inflation in Q1

CEAT expects the full impact of raw material inflation to materialise in the first quarter of FY27. Banerjee said gross margins in Q4 were broadly similar to Q3, with a marginal sequential contraction of about 19 basis points. Raw material prices were only slightly higher in Q4, but are expected to rise sharply in Q1.

“Our raw material prices in Q4 were slightly higher than Q3, but in Q1, they will shoot up to 15% plus. By the end of Q1, we may reach closer to 20%,” Banerjee said.

He said the increase has been steep and cannot be fully offset through internal cost measures. “This is a steep increase over a span of three months and the outlook is that we can manage only a small portion of it through cost optimisation. So price increase is an imperative,” he said.

The company has already started passing on cost increases across channels. In the replacement market, CEAT has taken price hikes between March and April, taking the increase to around 5% by the end of April. It plans to take another 5% increase through May and June. In OEMs, price increases will come with a lag due to index-linked arrangements. “In OEM, the price increase comes with a lag. So on 1st July, we will get a big increase. We have got a small single-digit increase in quarter 1,” he said.

In international markets, CEAT has been raising prices in stages, adding up to nearly 10%. However, Banerjee said the pass-through will take time due to existing order books. “There is an order base which we have which is at least about 30 days. So the pass-through in terms of execution and realisation will take some time,” he said.

Crude, Rubber, Currency Add to Cost Pressure

Chief Financial Officer Kumar Subbiah said CEAT is now dealing with actual physical disruption in raw material markets, unlike previous quarters where volatility was largely sentiment-driven. He said crude prices were around $65 per barrel at the beginning of Q4, but crossed the $100 mark by early March and were hovering around $107 at the time of the call.

“Unlike previous quarters where volatility was driven by sentiment, we are now navigating a scenario of actual and physical disruption,” Subbiah said.

Natural rubber prices have also hardened sharply. International prices, which were around $1,700 per tonne in the previous quarter, have moved up to around $2,050-2,100 per tonne. Domestic natural rubber prices have risen from around ₹190 per kg at the beginning of Q4 to nearly ₹245 per kg, aided by import parity and rupee depreciation.

The currency has added another layer of pressure. Subbiah said the rupee weakened from around ₹90-91 to the dollar to nearly ₹94, which will add to costs in Q1. “The full impact of the recent increase in raw material costs will materialise in quarter 1 of the current financial year, which we will try to manage through a combination of price increase and cost management in the first half of the year,” Subbiah said, adding that geopolitical risks, higher premiums and projected supply constraints would require close monitoring. 

FY26 Performance 

For FY26, CEAT reported strong financial performance. Consolidated revenue from operations rose 18.6% year-on-year to ₹15,678 crore, while consolidated EBITDA increased 37.9% to ₹2,063 crore. Consolidated PAT rose 47.9% to ₹697.2 crore. 

In Q4FY26, the tyremaker’s consolidated revenue stood at ₹4,218.9 crore, up 23.3% year-on-year. EBITDA margin expanded to 14.2%, up 267 basis points from the year-ago period. Consolidated PAT stood at ₹243.8 crore, compared with ₹98.7 crore in Q4FY25.

“As far as our financial performance goes, we had a good Q4 where our revenue grew 18.2% yoy on a standalone basis,” Banerjee said. “For the full year, we have been maintaining that we are looking at an overall double digit growth. Happy to share that on a full year standalone basis, we grew by 15.5%.”

He said CEAT’s standalone EBITDA crossed the ₹2,000 crore milestone for the first time in a year. “Overall, FY26 proved to be a robust growth year and a good year for profitability as well,” Banerjee said. 

“As we enter FY27, while input cost inflation presents a near-term headwind, structural demand drivers remain in place, providing the resilience and momentum needed to navigate this phase and sustain future growth,” he said.