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    Balkrishna Inds

    BALKRISIND
    Automobile and Auto Components·28 Jul 2025
    Management Summary

    Balkrishna Industries reported a resilient Q1 FY26 with sales volume of 80,664 metric tons despite global headwinds and tariff disruptions. The India business showed strong growth of 14.4% YoY, contributing 35% to volumes. However, profitability was impacted by lower gross margins due to product mix and India contribution, and a 40% decline in PAT to INR287 crores, largely due to an INR154 crore M2M loss. The company declared an interim dividend of INR4 per share and reiterated its full-year EBITDA margin guidance of 24-25%.

    Highlights

    4
    • Managed to achieve a sales volume of 80,664 metric tons during the current quarter, demonstrating resilience given prevailing global headwinds.

    • India business continues to be strong, contributing approximately 35% to sales volumes and growing approximately 14.4% on a year-on-year basis.

    • The Board of Directors has declared a first interim dividend of INR4 per equity share.

    • Capex for OTR, Carbon Black, PCR, and CVR are expected to operationalize as per schedule.

    Concerns

    5
    • Q1 FY26 was a volatile quarter on account of tariff-related disruptions, with a marginal decline in sales volume compared to Q1 FY25.

    • Gross profit margin was lower due to product mix impact and higher India contribution.

    • EBITDA margin of 23.8% was impacted by partial absorption of U.S. tariffs and lower absorption of fixed costs due to lower sales volume.

    • Profit after tax stood at INR287 crores, approximately down 40%, primarily due to an M2M loss of INR154 crores.

    • Europe witnessed a 20% decline Y-o-Y due to weak farmer sentiments and higher input costs.

    What Changed2

    vs Q2 FY26

    Guidance items4 → 7 (+3)Risks discussed3 → 5 (+2)

    Key financials

    Single quarter

    15 metrics
    1. 01Revenue₹2,759 Cr
    2. 02Sales Volume80,664 metric tons
    3. 03EBITDA₹655 Cr
    4. 04EBITDA Margin23.8%
    5. 05PAT₹287 Cr-40%YoY

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Capex

    ₹3,500 crores

    Dividend

    ₹4/share (interim)

    Guidance & targets

    7
    CategoryTargetPriority
    Profitability
    EBITDA Margin
    24%, 25%
    Medium
    Profitability
    Blended Margins
    23% to 25%
    Medium
    Capacity
    Advanced Carbon Black Capacity Ramp-up
    ramp up this business
    High
    Capacity
    TBR Capacity Expansion
    as per schedule
    High
    Market Share
    Market Share in PCR and CV segments
    accelerate our efforts
    Low
    Market Share
    Rubber Track Product Market Share
    3% to 5%
    Medium
    Market Share
    Market Share for new products (TBR, PCR) in India
    5% market share
    High

    Resolution of tariff uncertainties

    Once permanent tariff structure is in place (likely next quarter or two)
    Current90-day pause announcement on tariffs, gradual return to normalcy.
    TargetPermanent tariff structure in place.

    Why it matters

    Tariffs significantly impacted Q1, and their resolution is key for stable ordering cycles and business conditions.

    However, we do believe that the complete normalcy in the ordering cycle will take shape once there is permanent tariff structure in place.

    How to verify

    risks_and_concerns[risk='Tariff-related disruptions and uncertainty']

    Risks & concerns

    5
    RiskSeverity

    Tariff-related disruptions and uncertainty

    Q1 FY26 was a volatile quarter on account of tariff-related disruptions, impacting ordering cycle and profitability.Management acknowledged

    high

    Geopolitical and macroeconomic challenges in export markets

    Ongoing conflicts, trade tensions, and economic uncertainties influence cautious sentiments among customers.Management acknowledged

    medium

    Weak customer sentiments and decline in Europe market

    Europe saw a 20% Y-o-Y decline due to weak sentiments and overall economic environment.Management acknowledged

    high

    M2M loss impacting PAT

    A mark-to-market loss of INR154 crores was the primary reason for the approximately 40% decline in PAT.Management acknowledged

    high

    Margin dilution due to product mix and higher India contribution

    Lower gross profit margin due to product mix impact and 35% contribution from India, which has lower realization and margins.Management acknowledged

    medium

    Q&A highlights

    8

    “So the current sentiments in Europe is weak, and this is reflected in the numbers. Overall economic environment was also weak in Europe. So that is the reason for this continued numbers.”

    Highlights a significant regional weakness (20% YoY decline) and its underlying causes, impacting overall performance.

    asked by Raghunandhan

    2 min read6 chapters

    Detailed Narrative

    01

    Q1 FY26 Performance Overview and Headwinds

    Balkrishna Industries reported a sales volume of 80,664 metric tons in Q1 FY26, a marginal decline compared to Q1 FY25, but demonstrating resilience amidst global headwinds🌐. The quarter was marked by volatility due to tariff-related disruptions, geopolitical challenges, and a weak macroeconomic environment, particularly in key export markets like Europe, which saw a 20% year-on-year decline. The company noted that the 90-day pause on tariffs led to a gradual return to normalcy in ordering cycles.

    02

    Financials Impacted by Tariffs and M2M Loss

    Stand-alone revenue for the quarter was INR2,759 crores. EBITDA stood at INR655 crores with a margin of 23.8%, impacted by partial absorption of U.S. tariffs (40% of the 10% tariff) and lower fixed cost absorption due to reduced sales volume. Profit after tax (PAT) declined approximately 40% to INR287 crores, primarily due to a significant mark-to-market (M2M) loss of INR154 crores. Other expenses also increased by 24% year-on-year and quarter-on-quarter due to duty impacts and marketing.

    03

    Strong India Business Growth and Product Mix Shift

    The India business remained robust, contributing approximately 35% to total sales volumes and achieving a 14.4% year-on-year growth. This growth momentum is expected to accelerate with the launch of PCR and CV segments. However, the higher contribution from India, coupled with product mix changes, led to a lower gross profit margin and a realization differential of 8-10% lower compared to international markets, with margins being 0.5-1% lower.

    04

    Capital Expenditure and New Capacity Operationalization

    The company reiterated its capex plan of INR3,500 crores over the next three years, allocated for OTR, Carbon Black, PCR, and CVR segments, with operationalization expected as per schedule. The new Bhuj OTR facility and expanded rubber track line went live in Q1 FY26. The advanced Carbon Black capacity, currently in trial stage, is expected to ramp up by the end of the calendar year, and currently contributes approximately 9% to total sales.

    05

    Outlook and Strategic Initiatives

    Management maintained its full-year EBITDA margin guidance of 24-25% (or 23-25% blended post full commercialization), despite current challenges. The company is focusing on building a new dealer network for its upcoming PCR and CV segments in India, targeting a 5% market share by 2030, acknowledging a gestation period for this. For the rubber track product, the company aims for 3-5% market share with its current capacity.

    06

    Forex and Hedging Strategy

    The Euro-INR realization for the quarter was INR93.60. The company employs a conservative hedging policy, hedging 80% of net receivables, which translates to 30-35% of gross Euro revenue, but does not hedge against dollars. This strategy aims to mitigate currency volatility, although M2M losses can still impact reported profits. The company confirmed no direct impact from Russia sanctions on its European business due to no direct raw material or machinery sourcing from Russia.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.