Indian Tyre Makers Face FY27 Margin Pressure and Higher Capex Outlay: Report

Indian tyre manufacturers are entering the 2027 fiscal year facing renewed margin pressures and elevated capital expenditure commitments, following a profitability recovery in FY26 driven by softer raw material costs and demand acceleration.

FY26 Margin Recovery Across Top Players

In a report analyzing the annual reports of Apollo Tyres Limited, CEAT Limited, and MRF Limited, brokerage firm Equirus Securities noted that standalone operating margins expanded across all three major players in FY26. MRF recorded standalone EBITDA margins of 15.5% (up 120 basis points), Apollo Tyres reported 14.5% (up 245 basis points), and CEAT registered 13.4% (up 210 basis points). The margin expansion was largely aided by Brent crude averaging USD 69 per barrel over the first three quarters of FY26, which kept crude-linked input prices such as carbon black, synthetic rubber, and chemicals stable.

Cost Pressures Emerging for FY27

The report cautions that input cost pressures are set to re-emerge in FY27 due to rising commodity prices. Domestic natural rubber prices have surpassed Rs 220 per kg to reach Rs 280 per kg, while crude oil prices have moved above USD 100 per barrel. Additionally, the depreciation of the Indian Rupee from around Rs 86 to Rs 94 per US Dollar is expected to increase imported raw material expenses for domestic manufacturers.

Expansion Plans and Capital Spending

Capital outlays are projected to remain high across the sector as companies expand production capacity:

For Apollo Tyres, standalone capital expenditure increased to Rs 8.9 crore in FY26 from Rs 4.5 crore in FY25. Estimated capital commitments surged to Rs 15.4 crore, driven by passenger car radial capacity additions at its Andhra Pradesh and Hungary plants. Consolidated capex rose 85% to Rs 13.5 crore.

For Ceat, standalone capex grew 14% to Rs 10.8 crore. The company is expanding passenger car utility vehicle capacity at its Chennai facility from ~95 lakh units per annum to 130 lakh units per annum by FY28, alongside two-wheeler capacity expansion at its Nagpur plant. Consolidated capex stood at Rs 11.5 crore, reflecting the partial integration of the acquired Camso off-highway business.

With MRF, standalone capex rose to Rs 14.2 crore, while capital commitments more than doubled from Rs 7.1 crore in FY25 to Rs 15.1 crore in FY26.

Revenue Performance

For FY26, CEAT recorded standalone revenue growth of 15.5% year-on-year to Rs 15,214.9 crore, supported by domestic replacement demand and the consolidation of its Camso acquisition on a consolidated level. MRF reported standalone revenue growth of 10.8% to Rs 30,652.1 crore, while Apollo Tyres registered a 9.0% standalone revenue increase to Rs 19,816.2 crore. Industry volume growth was supported by stronger demand in both OEM and replacement segments during the second half of FY26 following GST rationalization.