Balkrishna Industries Approves Rs 1,900-Crore Capex Plan
Balkrishna Industries Ltd. has approved a Rs 1,900-crore capital expenditure plan as the tyremaker looks to expand capacity and upgrade technology to cater to the rising demand.
“We expect this demand trend to continue. It’s therefore important to plan our capex now so that we don’t face capacity constraint from FY23 onwards,” Rajiv Poddar, joint managing director at Balkrishna Industries, said in a post-earnings conference call on Tuesday.
The company which sells products under the BKT brand, according to a media statement, is looking at a brownfield expansion in Bhuj at the cost of Rs 800 crore, which will increase production capacity by 50,000 metric tonnes per annum.
As part of modernisation and technology upgradation, the firm will spend Rs 450 crore.
And another Rs 650 crore will be spent on increasing the capacity of carbon black, and setting up of a captive power plant.
The company aims to fund the projects by internal accruals and debts, if required. The payback period for this capex could be anywhere between five and six years, it said in the earnings call.
“The demand continues to be strong in the agriculture segment across geographies. In other segments, demand remained more or less stable post the recovery in the end markets of industrial, construction and mining segment,” Poddar said.
The company’s board, however, shelved the U.S. greenfield tyre project of 20,000 MTPA capacity, which was approved in August 2019.
Sales volumes of Balkrishna Industries rose 26% year-on-year to 59,810 million tonnes in the October-December period, according to an exchange filing. That helped the tyremaker post a 31% increase in its overall revenue at Rs 1,509 crore, compared with the Rs 1,385 -crore consensus estimates of analysts tracked by Bloomberg.
Other highlights (year-on-year)
Net profit rose 45% to Rs 325 crore, against the Rs 224-crore forecast.
Earnings before interest, tax, depreciation and amortisation rose 39% at Rs 480 crore. Analysts had pegged the operating profit at Rs 430 crore.
Ebitda margin stood at 31% compared with 29.9%.
Still, shares of Balkrishna Industries fell as much as 10.5%—the most since March 2020—to Rs 1,647 apiece around noon on Tuesday.