Margin management turns tricky for Balkrishna amid soft demand, new bets
Volumes declined 3% year-on-year to 80,664 tonnes in Q1, and the management refrained from providing a volume guidance for FY26. Revenue was largely flat at ₹2,759 crore, while Ebitda fell 8% to ₹656 crore. The 228 basis point (bps) drop in Ebitda margin to 23.8% was seen as a key disappointment. The company has guided for an operating margin of 24-25% for FY26.
A base tariff of 10% applies to Balkrishna's exports to the US, and the company has been unable to pass on the entire increase to consumers. It has absorbed 40% of the impact, which is expected to persist through Q2FY26.
'With multiple US trade tariffs getting finalized at around 15% (EU/Japan), we believe India tariffs are likely to inch up from around 10%. This remains a near-term demand/margin headwind for Balkrishna," said a Nomura Global Markets Research report. It has cut its FY26 Ebitda and earnings per share forecast by 8% and 16% respectively.
While raw material costs are expected to remain stable sequentially in Q2FY26, margin pressures are likely to continue. Balkrishna, which has a niche in the off-highway tyre (OHT) segment, recently announced plans to diversify into domestic tyre categories including truck and bus radials and passenger car radials (PCR). The concern, however, is that this expansion could be margin-dilutive over the medium term, given intense competition from established players.
Balkrishna would launch commercial vehicle radial tyres by Q4FY26 and PCR tyres by Q3FY27.A capital expenditure of ₹3,500 crore has been outlined for the next three years.
'Considering the higher upfront investments in the new tyre segments which have higher competitive intensity and lower margins than the company's core business, and the lack of visibility for business normalcy of its core business, we remain cautious," said HDFC Securities.
After hitting a 52-week low of ₹2,152.05 apiece on 7 April, following the Liberation Day tariff announcement, the stock has recovered to ₹2,746. It now trades at an undemanding 25x FY27 earnings estimates, according to Bloomberg.
However, Balkrishna has yet to prove itself in the new segments, and striking a balance between gaining market share and protecting core returns could be a significant challenge.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
NDTV
3 hours ago
- NDTV
"Have To Act Accordingly": Shashi Tharoor Slams US For Additional 25% Tariffs
New Delhi: Slamming the United States for "double standard" for imposing an additional 25% tariff on India for buying Russian oil, Congress leader Shashi Tharoor on Wednesday said US President Donald Trump's move will make "our goods unaffordable to a lot of people in America." He pointed out that while China imports various materials, including more Russian oil than India, the country has received a "90-day break" from the US tariffs. "Uranium, Palladium, there are various things they (US) are importing from Russia. There is, unfortunately, a certain double standard involved. They have given the Chinese a 90-day break, but the Chinese are importing far more Russian oil than we are. So clearly this has not been a particularly friendly gesture from a country we thought was well disposed towards us, an administration that we thought was well disposed," Mr Tharoor told reporters. Suggesting that tariffs also might signal how the friendly relations between India and the US have been affected, the Congress leader mentioned the possibility of "pressures within India" for imposing reciprocal tariffs on American exports to India. "Very clearly, we have to act accordingly, and we will have to learn our lessons from this experience. I think there is certainly a likelihood that there will be some pressure within India now to impose comparable reciprocal tariffs on American exports to India. So I think we're going to have to really start looking at other trading partners much more in these circumstances," Mr Tharoor mentioned. "I don't think that's particularly good news for us and that takes our total tariffs to 50 per cent then that's going to make our goods unaffordable to a lot of people in America and in particularly when you're looking at these percentages you have to compare them with the tariffs being levied on some of our competitors," Mr Tharoor told ANI. Comparing the tariffs on other countries like Pakistan (19 pc), Bangladesh (20 pc), Philippines (19 pc), Indonesia (19), or even Vietnam (20 pc), the Congress leader said that this will effect Indian goods being bought in US, as people will look for the cheapest option. "This means we need to very seriously diversify to other countries and other markets that may be interested in what we have to offer. We now have an FTA with the UK. We are talking to the EU. There are many countries in which hopefully we would be able to, but in the short term, it is definitely a blow," Mr Tharoor told ANI. US President Donald Trump signed an Executive Order on August 6 imposing an additional 25 per cent tariff on imports from India. Trump cited matters of national security and foreign policy concerns, as well as other relevant trade laws, for the increase, claiming that India's imports of Russian oil, directly or indirectly, pose an "unusual and extraordinary threat" to the United States. Terming the United States' move to impose additional tariffs on India over its oil imports from Russia as "unfair, unjustified and unreasonable," the Ministry of External Affairs (MEA) declared that New Delhi will take "all actions necessary to protect its national interests. "In an official statement, the MEA said, "The United States has in recent days targeted India's oil imports from Russia. We have already made clear our position on these issues, including the fact that our imports are based on market factors and done with the overall objective of ensuring the energy security of 1.4 billion people of India." "It is therefore extremely unfortunate that the US should choose to impose additional tariffs on India for actions that several other countries are also taking in their own national interest," the statement added.
Hindustan Times
3 hours ago
- Hindustan Times
Donald Trump pulls the trigger, doubles India levy to 50%
President Donald Trump signed an executive order on Wednesday imposing an additional 25% tariff on all Indian goods entering the US, carrying out his threat made a day ago to penalise New Delhi's continued purchases of Russian oil. Trump's additional 25% tariff followed after over a week of criticism focused on New Delhi's continued purchases of Russian energy. (REUTERS) The additional 25%, due to take effect on August 27, puts India at par with Brazil as the two countries whose exports will face the highest levy of 50% on their goods. The duties would put Indian exporters at a significant disadvantage compared to their rivals in Bangladesh, Indonesia and Vietnam – which face tariffs of between 19% and 20% tariffs. 'I have received additional information from various senior officials on the actions of the government of the Russian Federation with respect to the situation in Ukraine,' Trump wrote in the executive order. 'I determine that it is necessary and appropriate to impose an additional ad valorem duty on imports of articles of India, which is directly or indirectly importing Russian Federation oil.' India hit back, reiterating that the American actions are 'unfair, unjustified and unreasonable'. 'India will take all actions necessary to protect its national interests,' ministry of external affairs spokesperson Randhir Jaiswal said in a statement, adding that it was 'extremely unfortunate' that the US had chosen to act against India 'for actions that several other countries are also taking in their own national interest'. He was alluding to continuing imports of Russian energy, especially LNG, by European Union (EU) member states that have paid Russia $105.6 billion for gas imports since the start of the invasion of Ukraine. Almost 87% of all EU imports of Russian LNG went to Spain, France or Belgium, people familiar with the matter said, asking not to be named. To be sure, the executive order continues exemptions provided earlier for sectors like pharmaceuticals and smartphones — though how long these exemptions remain is unclear. The order also exempts goods that are already in transit to America and which will clear US customs before September 17. 'The move places India among the most heavily taxed US trading partners, far above rivals such as China, Vietnam, and Bangladesh, and threatens most of India's $86.5 billion in annual exports to the US, from textiles to machinery,' according to analysis by the Global Trade Research Institute. 'The tariffs are expected to make Indian goods far costlier in the US, with potential to cut US-bound exports by 40–50%,' the GTRI analysis added. The executive order issued on Wednesday specifies that certain exemptions will continue. Among these are Section 232 national security exemptions that protect Indian pharmaceuticals — which account for about 40% of America's generic medicines — along with electronics, semiconductors and technology products that form the backbone of bilateral trade. Additional exemptions under Executive Order 14257's Annex II cover raw materials, certain metals and chemical formulations. Select product categories like apparels, vehicles and parts, furniture, organic chemicals and some food products like shrimp – which account for billions of dollars of exports -- will now face high tariffs entering the US market. Trump's additional 25% tariff followed after over a week of criticism focused on New Delhi's continued purchases of Russian energy. Washington has sought to increase economic pressure on Russia to negotiate an end to the Ukraine war by restricting Moscow's oil export revenues. India is Russia's second largest market for oil exports after China. In 2024, China purchased Russian oil worth $62.6 billion, followed by India's purchases to the tune of $52.7 billion. In the order, the US president also specified that he may – in the 21 days before the order takes effect – change the levy if 'if another country retaliates against the United States in response to this action, or if the government of the Russian Federation or a foreign country impacted by this order takes significant steps to address the national emergency and align sufficiently with the United States on national security, foreign policy, and economic matters.' In other words, Trump held out both a threat that he could ratchet up the levy or pare it back, depending on any retaliation or changes to Russia's stance in the war against Ukraine. Trump has set an August 8 deadline for Russia to agree to a Ukraine truce deal. 'There's a higher chance that India will find loopholes to concede the agri/soybean access the US has been asking for, than there is for India to halt oil purchases from Russia due to external pressure. Either way, it is unlikely that a decision will be taken on either front as long as Parliament is in session. Momentum on real solutions shouldn't be expected before August 20,' says Prerna Bountra, Deputy Director at the Ananta Aspen Centre, a New Delhi-based think tank. The rising tensions between India and the United States have also spiralled into a political controversy, with Opposition parties objecting to the government's handling of ties with America. Congress leader Rahul Gandhi called the move 'economic blackmail' by the US to bully India into an unfair trade deal, adding Prime Minister Narendra Modi should not let Indian interests be overridden. (With inputs from Rezaul H Laskar in New Delhi)
Time of India
4 hours ago
- Time of India
India Unites Against Trump's ‘ECONOMIC BLACKMAIL': PM Modi, Rahul Gandhi, Tharoor BLAST US Tariffs
India's SHOCK Reply To Trump's 50% Tariffs; Fires 'Will PROTECT National Interests' Warning In a strongly worded statement, India's Ministry of External Affairs (MEA) sharply rejected the United States' new 25% tariff on Indian imports tied to Russian oil purchases—calling it 'unfair, unjustified, and unreasonable.' The MEA clarified that India's energy imports are driven by market dynamics and national interest, aimed at securing reliable, affordable energy for its 1.4 billion citizens. India noted that many other countries—including China, Turkey, and the EU—are also continuing trade with Russia, yet are not being targeted in the same way. 7.1K views | 1 hour ago
