Balkrishna Industries Ltd is Entering New SEGMENTS-A Decision That Oveshadowed The Positives in Its March Quarter (Q4 of FY25) Results Such as the sequental improvement in of-hight Volumes. Balkrishna’s Shares Fell Over 5% on Monday.
From being a niche Oht company, Balkrishna is Pivoting to the Premium Passenger Car Radial (PCR) and Truck and Bus Radial (TBR) Categories in the Domestic Market. A pilot launch for tbr is expected in Q4 of Fy26 and for PCR in Q3 of Fy27. Balkrishna eyes a 5% market share by 2030 in the new segments with revealed to come only from fy28.
Balkrishna expects this move to be margin non-dilvent and does not see any material impact on long-term return on Capital Employed. However, not all agree with the management’s view.
Nuvama Research Pointed Out that Tire Companies in PCR/TBR SEGMENTS Have LOWER LEVER LEVELS OF Profitability, with Ebitda Margins of Less Than 15% Versus Balkrishna’s AT 25%. These companies trade at relatively lower valuation multiples (mean price-to-earnings at 15x or lower), Nuvama Added.
This decision comes as Balkrishna’s Oht Business Continues to face demand woes and input cost pressures. Note that scaling-up the new business appears challenging as pcr and tbr customers tend to be both brand and cost Conscious. Also, Balkrishna May Face Stiff Competition in these Categories from Ceat Ltd, Apollo Tyres Ltd and Mrf Ltd.
The entry into new segments is a part of a larger plan where Balkrishna Targets 2.2x Revenue Growth To 23,000 Crore by 2030. of this, 70% is likely to come from Oht, 10% from Carbon Black, and 20% From New Tire Categories. The management has earmarked capital expert of 3,500 Crore for the next three years to fuel growth plans.
In the Near Term, The Oht Business is Likely to Remain Volatile Due to the Levy of Us Tariffs and Weak Global Demand Hurting Prospects in Europe and North America. The management has refrained from providing Oht volume guidance for fy26. Balkrishna now aims for a market share of 8% (versus 10% earlier) in the International Oht Segment by FY30 from 6% Now.
Shares under pressure
Balkrishna’s shares, after having fallen 20% in the past year, may stay under pressure as the execution risk in the new businesses keeps the Earnings Outlook Bleak.
“We have cut fy26/fY27 earnings per share estimates by 12%/15% due to slight cut to core volume growth, and more importantly due to due to initial losses of the new venture,” IIFL SACURITIES SAIDING SAIL Balkrishna’s free cash flow generation would be very low in fy26/fy27.