Balkrishna Industries to Supplement Working Capital with Unused Investments in FY23, Auto News, ET Auto
New Delhi: Tire maker Balkrishna Industries is channeling around INR 900 crore from previous fiscal capital expenditures (capex) into growth capex and working capital for the current financial year (FY) 2022-23.
In the just ended FY22, the company had announced an expenditure of INR 1,900 crore for the ramp-up of brownfield site at Bhuj plant to increase tire capacity and capacity of carbon black, including advanced carbon black, for Bhuj power station, and modernization, automation of existing facilities.
“During the last financial year, we committed a capex of INR 1,023 crore on a new allocated project investment program of INR 1,900 crore. This year, the capex is expected to be INR 1,100 crore which will include the balance of INR 900 crore as growth capex and rest as maintenance. capex,” Rajiv Poddar, the company’s co-chief executive, said in a recent call.
In FY22, the company’s working capital was weighed down due to high inventory accumulation which stood at INR 1639.4 crore from INR 909 crore in the previous fiscal year. He expects soaring commodity prices and supply chain disruptions from container shortages will further inflate the cost of working capital.
“The increase in working capital on the FY23 closing books is due to high raw material costs and disruptions in freight availability. Inventory days are expected to return to approximately 55 days versus high 75 days as soon as container availability issues are resolved with reversal of raw material costs,” Poddar added.
Further, the company has decided to put an investment of INR 350 crore on hold to continue its operations at the old factory in Walunj given the robust demand scenario and strong outlook. At present, Balkrishna Tire has 285,000 metric tons capacity and 25,000 metric tons capacity at the old factory in Waluj and it reported that another 50,000 metric tons capacity will arrive towards the end of the first half of the year. fiscal year 23, bringing total capacity to 360,000 tonnes.
Due to the inflated cost, the Mumbai-based tire maker recorded a price hike of around 15-16% in FY22. Company management said raw material costs are expected to rise further 3% in the first quarter of FY23 and that high logistics costs will persist through the end of the first half of FY23.
With regard to the outlook, he expects demand momentum to continue across all geographies and segments, driven by the recovery in economic activities, government spending on infrastructure globally and prices. robust raw materials and agricultural raw materials.
Seeing good demand from the mining and agricultural sectors in the OHT segment, the company expects to cross a volume of 320,000 to 330,000 tonnes in FY23, implying volume growth of approximately 13% to 14% compared to the EX22. Currently, the tire maker has a 4-5% market share in the replacement segment in India
In the financial year 2021-2022, Balkrishna Industries recorded a 22.1% increase in net profit to INR 1,410.69 crore on a 43.6% increase in net sales to INR 1,410.69 crore in in fiscal year 22 compared to fiscal year 21. The company manufactures and distributes off-highway (OHT) tires for agricultural and construction vehicles and has also moved into earthmoving and mining tires.
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Better cash accruals should help fund higher capital expenditures and keep debt metrics healthy, according to CRISIL Ratings analysis of India’s top six tire makers, which account for about 80% of tire revenue. Rs 75,000 crore from the sector. However, with capacity utilization still below 75%, capital expenditure this financial year will be below the annual average of INR 6,200 crore between 2018 and 2020, he noted.
