Leading tyre maker Ceat has realigned its medium-term growth plan, under which it is revising some of its capital expenditure programmes and aims to grow the businesses in three segments.
It has decided to postpone ₹700 crore phase-1 truck bus radial (TBR) capacity expansion by 12 months and the balance ₹500 crore of phase-2 expansion has been postponed indefinitely due to market conditions and revised growth plans.
“The TBR capacity addition’s planned based on estimated demand in the replacement market and exports in addition to OEM. The capacity deferment has been done based on the above,” Kumar Subbiah, Chief Financial Officer told BusinessLine.
Strategic focus segments
The company has identified two wheeler, passenger car, and OHT (off highway) tyre segments as strategic focus areas, given their abilities to bring better margins.
“With about 30 per cent of our revenue, the two wheeler business is quite profitable. OHT today is only about 5 per cent. But we would like to take this up to about 10 per cent plus over time, international business where there is an overlap with OHT is about 18- 20 per cent today, but we can take that up to about 25 per cent. So, in that sense, the more profitable categories will be a much larger share of our business. We have curbed our TBR ambitions,” Anant Goenka, Managing Director of the company indicated during the recent Q3 earnings call.
Dominance in EV 2Ws
In the two wheeler (2W) segment, where it claims a market share of about 30 per cent, the company has also achieved leadership position in the electric two wheeler category with a market share of about 60 per cent. It is working with all major electric 2W makers.
Ceat will increase the OHT capacity to 81 tonnes/day (up from 50 tonnes/day now) by the middle of this calendar year with current capital expenditure and will ramp up further to 105 tonnes per day over the next 15 months.
“OHT (radial) plant at Ambernath is for exports and is currently fully utilised. The downstream capacity addition is based on expected demand in exports in the next two years,” said Subbiah.
Export growth including OHT has been strong in the last 12 months and Ceat expects the trend to continue.
China-plus-one strategy of global OEMs is helping it grow in exports. It is expecting high growth in the EU passenger cars segment and will be entering countries like France and Germany.
Also, it is planning to launch truck radial tyres in the EU market in the next 4-6 months and passenger vehicle radial in the US market. These plans are expected to help the company increase the revenue share of exports to 25 per cent from 18-20 per cent currently.
“2W, PV & OHT currently account for 50 per cent of our revenue. We expect share of these in revenue to increase by 5-6 per cent over the medium-term due to new capacities,” he added.