CEAT Ltd Q4 FY2024-25 Earnings Conference Call

Ladies and gentlemen, good day and welcome to the CIA Q4 FI25 earnings conference call hosted by Aquarius Securities. As a reminder, all participant lines will be in the listenonly mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchstone phone. I now hand the conference over to Mr. Mihir Vara from Equidia Securities. Thank you and over to you sir. Yeah, thank you. Good afternoon everyone. On behalf of equities, I welcome you

all to the Q4 FY25 conference call. From the management side, we have Mr. Anabi, managing director and CEO and Mr. Kumar Suya, Chief Financial Officer. I would now like to hand over the call to Anabsa for his opening remarks. Over to you, sir. Good afternoon and welcome to CD's quarter 4 FI25 earnings call. I'll be taking you through the business updates for the quarter and then I shall hand it over to Kumar for his remarks on the financial performance. Post that we'll open the floor for Q&A. We continue to be bullish on the prospects of

Indian domestic market medium and long-term with government investment in infrastructure development and changing habits of the customers. We expect the tire market to grow at a CAGR of 6 to 7% volume turns for a long period of time till 2047. We expect exports to grow faster at about 10 to 11% long-term. We also expect uh the percentage of Indian exports to occupy more than 10% of global trade uh as a whole. Along with the industry growth, um the focus on sustainability and eco-friendly practices is also shaping the future of tire market. Supporting the ship, the

government's uh incentive schemes aims to boost electric vehicle adoption and expand the charging infrastructure which will accelerate the electric vehicle specific tires and propelling similar market demand. At seat we are fully geared to tapping to this trend technology wise and CRM wise. Coming to our performance for the quarter and financial year in quarter 4 we grew robustly at 14.6% uh 6% standalone basis on a fullear basis in FI25 our revenue stood uh at about 13,218 cr which is about 11% increase over uh the previous year standalone on standalone profit was about 100 crores for quarter

4 FI25 which is about 5% higher Q on Q basis growth momentum uh continued in quarter 4 I have been maintaining that we're looking for overall uh double-digit growth for the year. In quarter 4, volume growth was 11%. Replacement grew with uh high at high singledigit level whereas OEM grew a very strong double digit in fact mid20s and um and we had a slight reversal in uh international business. We degr slightly because of ongoing global uncertainties, tariffs and non-tariff barriers uh in quarter 4. We remain attentive to these developments and we'll continue to take appropriate

actions as international business is a focus area for us as it is margin equitative. Overall growth for the year in international business was in uh uh uh was in mid double digits. Replacement grew uh mostly uh very well in robust manner in commercial vehicles doubledigit growth. uh in two-heer segment was high singledigit growth and in passenger segment was mids singledigit growth. So all across there was a decent growth in replacement market in OEM. Uh we grew both Q and Q on YI basis primarily due to growth across segments whether it is passenger uh where we

have uh got approvals in new models with higher rim size tires which I've been talking about again in the past we had vacated high volume uh 12 13in tire models and now we're coming back on 14in and up upper models across vehicle owners. in truck bus radials. Our enhanced supplies from uh from Chennai plant have enabled us to uh take a better position in terms of share of business in OEMs. We still are small players in truck bus radial and barely doubledigit kind of share of business in OEMs. In two-heer we have a good share

of business in OEMs and we continue to build on that. Quarter four volumes were up 3.5% quarteron quarter. As far as demand demand outlook uh uh is concerned uh the same trends which were continuing and we have been talking about continue into the first quarter of FI26 which means the urban demand uh continues to be soft whereas the rural demand is definitely much more py and there is a delta of about 4 to 5% in terms of demand level between rural and urban in most segments. Um uh so this trend will continue and which means

that with our uh extended distribution network into rural territories we should be able to tap into rural demand better uh especially for two wheelers and for farm tires. Uh demand for passenger car tires uh will be a little bit soft because that comes primarily from the uh urban markets. OEM wise we expect passenger demand to be low singledigit. Um two-wheeler growth also may slow down but there will be significant growth in two wheelers and uh commercial vehicle growth may come back into positive territory as we go forward. We have been able to partially mitigate the

impact of raw metal prices through u uh minor price adjustments in quarter 4. uh we primarily uh adjusted price in two-heer tires in quarter 4 and we achieved a better product mix. Looking at commodity prices uh as we know that uh crude prices were more or less stable across Q3 and Q4. Now it is going down and hence crude based derivatives crude based raw material prices may come off their current levels gradually more so into quarter 2 than in quarter 1. Natural rubber prices are still holding firm. Uh international prices have come down. So as

a mix we have seen very minor adjustments in Q4 over Q3. We'll continue to see flattish trend with minor drop in Q1 over Q4. And if there are significant changes, it'll come at the end of Q1 more into Q2. And um going by past experience we expect to hold the price line and our gross margins which are currently uh at about 37.5% uh may see some improvement there on in Q2. As we have been saying that we are comfortable with a gross margin of 40% plus more the better and we are now uh at quarter

4 end at 37.5%. So there is some ground to cover as far as future trends are concerned. electrification, international business, premiumization and digital. We continue our uh journey to take tapping into these opportunities. We uh are continue to see hold our position in in terms of market share in OEM in four-wheeler as well as two-heer electric vehicle. And the visibility that we have on new vehicles getting launched with Cat uh gives us confidence that we'll be able to maintain 20 to 25% share in both these segments going forward. International business uh has been a key

driver and we have uh um u a new uh brand in the in the fold which is CAMSO. Um we have not uh yet consolidated the result. we won't consolidate the results of CAMSO for another quarter and uh starting quarter two beginning of quarter 2 we would uh be in a position to consolidate CAMSO results into C uh C results um all the antitrust uh regulatory activities are now behind us so integration work has uh started in uh in full full acceleration uh as you know it's a carved out business we've not bought an entity

so our focus purpose will be through in business continuity with 100% retention of customers. Initial few quarters shall go in stabilizing the operation, understanding the operation and we retain our view of medium-term to long-term margin accretive business as well as robust growth from the camo acquisition. Otherwise also C O continues to make steady progress. We got a few OEM additions argo ACO Mexico Yanmar etc. Our forestry and agriculture product ranges which have been launched recently have given us encouraging uh response. Our NPD activity continues in full force. We have launched about 49 plus offhighway tires

SKUs in quarter. for the for the uh for the immediate term there is some headwinds in international business as I mentioned um from Latin American markets where uh the currency has depreciated to a great extent imports into that country has become uh more expensive and we have been rendered somewhat uncompetitive the US tariff situation has thrown some uncertainty into the into the market and uh the rest of the markets like Europe Europe, Middle East and Southeast Asia continue to hold firm and are very stable at this point of time. Going back to uh cameo and

Sri Lanka, the economy there is doing uh good uh and um it has been slapped with a 44% reciprocal tariff as we know uh as we have been engaging with uh the uh with the uh political dispensation there including all senior ministers including the prime minister uh we are very hopeful of having uh if not favorable a much better situation ation emerging over a period of time than the 44% reciprocal tariff that we see today. In fact uh as things stand now we are looking at uh a mere 4% tariff on the tracks business and

in the worst case 44% tariff in the tires in the tires business and uh we have a mitigation strategy thought through assuming the worst comes true but we are pretty much sure and hopeful that the situation will emerge to a much better place than the 44% reciprocal tariff that we see today on prem premiumization. Uh you would have heard about launches of three absolutely top class high-tech tires which is the Zrated 21in radials for high performance mobility. Here this tire can exceed and perform at 300 km per hour. These are ultra high performance tires which

cater to high-end vehicles offering superior grip control and stability at extreme speeds. We have uh the calm technology which gives a very very low noise tire and it goes well with the electric vehicle uh trend that we are tapping into. And we have launched the run flat tires which is a first by any Indian manufacturer in India which gives you the leverage to to travel uh to a distance of 80 kilometer before you tend to the tire after it has been impacted. So these uh premium tire technologies will give us a filip towards our premiumization

journey as we go along. In terms of innovation, we have had uh two wheeler tire which is uh extremely high life. Uh it may outlive even the vehicle. uh and um we also have got uh an innovation award uh by the name of Golden Peacock Award at the IOD Golden Global Convention 2025 for an innovative truck bus radial product. We are proud to share that Chennai plant is the new lighthouse designated plant by the World Economics Forum. This is the second plant after Hal which has entered the lighthouse group. This implies high productivity, higher efficiencies

and lower costs as Chennai scales further. On premiumization, we see the website traffic from high-end uh car users uh leap frog by 26%. Leads from premium SUV users increased by 33%. Brand positive sentiments moved up by 71% with a 132% increase in average interactions uh per post. Y our capex has been around 950 crores for FI25 and we expect the capex to be 900 to,000 crores in the in the coming financial year FI26. Uh as well happy to share that uh the S&P global CSA ESG scores in that C stands out amongst the Indian tire

manufacturers with an ESG score of 56. We have a long way to go but 56 is a good place to start off with. Last year score was 49. S is committed to set companywide emission reductions in line with the science-based net zero standards which is SBTI. Hal and Amber plant have received international sustainability and carbon certificate ISCC plus. SET has also earned ISO 2400 certification highlighting our commitment to sustainable procurement and ethical sourcing. Recently we got uh ranked by Ecoadis which is widely respected by our OEM customers. We secured a rank of uh which secured

a score of 71 which places us in the top 15 percentile of global companies. This will definitely give us a competitive edge in opening the doors in several OEMs uh globally. In closing, as we look ahead, we are uh mindful of the evolving global economic environment and we are actively adopting to the evolving needs of our customers, especially the premium ones. Our commitment to innovation, quality and customer solution, customercentric solution continues to drive us forward as we enter FI26. We are also excited to bring Camso into the Seat family and start a new chapter together.

With this I would hand over the call to Kumar for his remarks. Thank you Arab. Good afternoon ladies and gentlemen and thank you for joining our quarter 4 FI25 earnings call. I'll share some further financial data points with you all post which we can enter the Q&A session. Coming to overall financial performance, uh we ended the year and quarter with some key milestones relating to revenue, our consolidated revenue for the quarter stood at 3,421 crores, delivering a year-on-year growth of 14.3%. Our fullear revenue stood at 13,218 crores, a growth of about 10.6%. The revenue for

the year and also in quarter 4 uh was the highest that we have achieved till date. This was driven by a combination of both volume and price growth. The replacement in international businesses delivered strong double-digit growth while international business delivered high singledigit growth during the year. In quarter 4, OEM and replacement businesses continued with strong double-digit growth and IM segment was flat. Uh coming to uh operating margins, a gross margin witnessed uh improvement of about 60 basis points quarteron quarter largely driven by marginally lower raw material prices and selective price increases in some key categories

like two wheelers and passenger within the parimeter of price elasticity of demand in the replacement segment. While the operating margin saw contraction of about 189 basis points year on year primarily due to increase in raw material prices. Her consolidated operating margin that is a bit for quarter 4 stood at rupees 33 394 crores translating to 11.5% margin which is about 101 basis points expansion quarteron quarter. Now coming to uh overall commodity markets and raw material prices. Unlike other commodities like steel, aluminium and other metals, the commodities that go into tires in the global market saw

a very high level uh and but stable during the quarter 4. Contrary to our expectations, the international prices remained at $1,900 to $2,000 per ton level in whole of water phone at which is at a premium to local rubber prices uh around rupes 15 rupees per kg. Local natural rubber prices remained rangebound in the range of about 190 to 200 rupees per kg during the quarter 4. In the last 3 weeks, as Arna mentioned, the international prices have come off the peak and corrected by about $200 per ton and currently international prices are trading at

a discount to local natural rubber prices in the range of about 7 to 8 rupees per kg. Uh as local natural rubber prices have largely remained firm. Coming to crude, the crude oil prices were largely in the range of about $70 to $80 per barrel. uh except in January where for a short period it crossed $80. However, the crude oil prices have corrected a bit in April. It is currently hovering around $65. The key crude derivatives like butadine, caproluman, CBFS prices largely remained constant in quarter 4. However, there has been some downward trend price movement

in in the month of April to the tune of about 2 to 5%. It appears that the crude oil prices would move in the range of $65 to $70 in the short term as OPEC is also announced some increase in production and is also supported by the US government in pushing higher level of crude oil production. The third uh liver that influences raw material prices is rupee. While rupee touched all-time low of 88 to a dollar in the month of March, it has appreciated since beginning of April and currently hovering around 85 to US dollar.

We feel that the current depreciation of rupee uh or appreciation of rupee is largely due to depreciation of US dollars against euro and its collateral effect on rupee. Taking all of the above and all inventory levels, we expect quarter one raw material consumption cost to be at the same level as that of quarter 4 or maybe a percentage lower than that. We are keeping our inventory at the lower range of lower range of our normal covers to take advantage of any correction in the commodity prices. Considering these factors, we'll keep continue to keep a close

watch on RM situation and see how it evolves over the next few quarters, but we expect them to remain within range. Uh coming to debt, capital expenditure and working capital, we spent about 235 crores on capex during the quarter which is largely in line with the estimates that we had shared with you in the previous quarterly call. Our overall capex for the year was about 946 crores in terms of cash outflow and we capitalized assets to the tune of about 1,40 crores during the year. We are working towards incurring a capex as arnab outlined in

the range of about 900 to,000 crores in the year FI2526. While our overall working capital remained negative, it went advers to the tune of about 98 crores in quarter 4 largely due to higher level of inventory and receivables. By end of March uh FI25 we generated healthy operating cash flow which was used to manage uh largely our capex requirement and part of our additional working capital. Our consolidated gross debt stood at 1,928 crores an increase of about 95 crores over quarter 3. We're taking steps to bring efficiencies in cash flows further so that we are

able to manage the additional requirement also out of investment uh where we need to fund for our acquisition of camso business uh effective quarter 2 our debt to AIDA on a consolidated B business basis stood healthy at 1.3 and debt to equity at 1.44x 44x as of 31st March. Coming to operational expenses in employee cost, employee costs marginally increase in quarter 4 over quarter 3 largely on account of higher headcount and manufacturing locations where capacities have been added. With respect to operating expenses, we exercise strong controls on all our expenses in uh quarter 4. That

helped us to bring down operating expenses as a percentage of turnover by about 40 basis points over the previous quarter despite incurring additional cost towards IPL in quarter 4 versus quarter 3. Our end to-end cost reduction programs covering all uh elements of cost helped in delivering sustainable and significant cost benefits to the tune of about 180 crores during the year. In the coming year, we will leverage scale and continue to focus on eliminating wastages and improving efficiencies to positively contribute to our margins. During the quarter, we also announced a voluntary separation package for one of

our older plants that led to more than 100 people employees accepting a uh voluntary retirement schemes that we had announced involving about 37 crores of cost that has been shown as an exceptional item in our financial statements. Depreciation marginally went up in quarter 4 versus quarter 3 on account of higher capitalization of assets. increased cost uh interest cost marginally went up in quarter four versus quarter three largely on account of uh increase in our debt which I just now explained and during the quarter and the previous quarter Reserve Bank of India announced reduction in report

rate to the tune of 50 basis points aggregating reduction uh of 25 basis points each. Uh the same has not been reflected in the MCLRs of banks. uh the interest rate have seen some corrections uh in the short-term uh government bonds as well as treasury bills. We expect the interest rates to soften progressively as we see improvement in the overall liquidity. Overall or consolidated profit after tax for the quarter stood at 93.23 crores which compares favorably against rupees 91.61 crores in quarter 3 of the current uh financial year FI 2425 and rupees 92.87 87 crores

in quarter 4 of the previous financial year and during the year uh the company delivered a profit of rups 449.56 crores which uh compared to 614.48 crores in the on a full year basis in the year 2324 profit for the current year translates to an EPS of rupes 116.84 84 or uh share uh value about 10 rupees. We pleased to also announce that the board of directors in the meeting yesterday uh recommended a dividend of 300% for the financial year 202425 which translates to rupees 30 per share. The dividend would be paid post obtaining the

formal approval of shareholders. Thank you once again. We can now open for Q&A. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question assemble. The first question is from the line of mummandia from Anand Rati Institutional Equities. Please go ahead. Yeah.

Uh thanks sir for the opportunity and congratulations on the healthy growth performance. Uh s firstly on the growth side uh we have seen a very good market share gains uh last year. Uh for next year also how do you see the OEM growth where particular how do you see the CV segment growth sir? CV um was in negative territory as you know this uh in FY to 25. So we expect CV to be uh in OEM's uh the vehicle growth to be in uh single digit. It should be in a positive territory basis the information

that we are receiving and our play will be we are a small player in TBR. So our play will be in just about double digit kind of share of business of that group. Got it. Uh and sir on the uh exports market uh you mentioned some of the challenges there. Uh so how do you see uh next year uh growth for that exports market and also sir uh can you give an update how is the OT segment uh in Europe doing sir OT segment has been uh facing headwinds uh since last two years if you

see last seven eight quarters definitely primarily from the OEM segments we have an OEM play there and OEM margins are not significantly different from the aftermarket so we have been making this up with an aggressive play in the aftermarket it and in Europe also that holds true. The OEM demand is showing signs of revival but it's not yet in. So the headwinds are still there and we have to rely on growth on through aftermarket for some more time. And sir uh on the camso part of the business is compact segments uh how that market doing

sir generally sir it is the same situation overall OEM uh is sluggish um which is the construction tracks and uh tires but uh after market is relatively better and the uh performance in aftermarket is steadier uh and then the OEM OEM demand uh should come back uh uh in some time as as I said green shoots are visible but not yet in and sir on overall export side uh will be there be a growth for next year sir yes we are definitely planning a growth uh in Europe in uh Latin America things have to turn

around turn around the currency situation has stabilized Southeast Asia Middle East those are our traditional areas we will see growth there so we are definitely planning growth in international business as well as uh in uh OT part of the international business. So overall we are looking uh forward to growth apart from CASO that is thank you sir. The next question is from the line of Sadharta from Nura. Please go ahead. Yeah thanks for the opportunity sir and congrats on a great set of numbers. Uh sir first question is on the replacement side. Now uh can

you sort of uh highlight if the industry growth has been similar or there has been marketer gains for us as well and what will be it for two wheelers and passenger car in FI25 and going ahead how do you see the scenario will it be more steady or do you still see some scope of market share gains for us? Yeah I would uh first uh share the market share status. So year on year we have uh seen uh good gains in truck bus radials but uh as I mentioned in the context of OEM in aftermarket

also we are small players we are still in singledigit market share so on a small base good market share gains uh good gains in two-heer where we are market leaders and both in motorcycle scooter scooter market has is market itself is growing very well but both in motorcycle scooter we have seen significant uh gains uh over one year period. Um in passenger car tires we have had a flattish kind of situation where we have neither lost nor gain the market share in aftermarket. As far as demand is concerned um a two-heer which is uh which

which is penetrated across the popsa will see a stronger demand in rural market is what we think. um uh passenger which is uh relying more on the um uh 50,000 plus population town will see softer demand and uh truck bus radial is steady if the GDP is growing at around six or thereabout uh the demand is also going to be around that or slightly lower maybe mid single digit. Got it sir. Uh so second question is on the export strategy. Now I think you had indicated that we will enter probably the US market from quarter

2 onwards with the TBR range and all. So any change to that uh plans whatever you had how much do you think uh we can contribute or get from US market in FI26 uh given the current scenario now and uh in the longer term also you had a target of touching 25% from esports uh by the next 1 two years. So where does some of those targets stand given the current context? Correct. So I'll answer one by one. With the integration of CAMSO right away in FI26 will hit the target of FI 25% salency of

international business. Number two in the current tariff situation there is the key thing is uncertainty right none of us really know where the dust will settle. But as far as I'll clarify on the tariff I take this opportunity to clarify on the tariff situation. What is our reading? Uh, India is not marginally uncompetitive if situation remain as it is. So, visav are key competitors from Thailand, Vietnam and China. We remain slightly competitive or if the auto component tariff of 20 25% applies uniformly. We are neither competitive nor uncompetitive. As far as Sri Lanka is concerned,

44% is a big uh big burden. But as we think as we see that in tracks probably the tariff is already down to 4%. In tires if it is 44% then 28% or 30% of our business is from Sri Lanka to US that has to be that risk has to be mitigated and we have a mitigation plan which I may share maybe later on. So that is a that is a tariff situation overall. Um at this moment if everything is as bad as it is today our exposure to US is in low single digit. So

therefore whatever we do the material impact to our numbers will be very very minimal in FI26. Having said that US is a key investment market a key growth market for future we believe that these things will sort themselves out. So our investment plan in terms of product development, product launches in US market in OT, PLT as well as purpose radials will continue as usual. No, sir. So lastly on this cam, so just a clarification either the tariff is 25% and auto parts or it is a reciprocal tariff of 10%. So does this 44% tariff apply?

Because as of now I think that has got delayed. You're right. reciprocal tariff has been postponed for 90 days after 90 days if it is not postponed again then a 44% reciprocal tariff is applicable on Sri Lanka this is the current situation on tracks as I mentioned it has already been reindexed to 4% not 44 4% which is 50% of the business and the other 50% 44 may apply but as things stand now but we with the indications that we have got by interacting with uh the local government officials as well as Michelin which is

got other business interest in Sri Lanka. So they are also working hard at Washington. We understand that things may resolve out to be better in future. Got it sir. Thanks a lot. I'll come back in. Thank you. The next question is from the line of Mul Sha from Dam Capital. Please go ahead. Yes sir. Thanks for my question and congratulations on a very strong performance particularly in this tough environment having doubledigit volume growth. So my first question is on clarification on this scam. So business to USA you indicated 30%. So that includes both tracks and

tires or only tire related or if at all then how much would be the only tire from this 30% out of this 30%. It's total tracks and tires are roughly half and half. So 15 and 15 roughly. So effective this 40% 44% impact would be only on the 15% of the overall business of them. So right as we speak now things are very dynamic things are changing by the day. Yes you as we speak now that is the impact. So now my question is on the average realization in export geographies considering the slightly favorable currency

moment as well as uh few price hikes we have taken on last one year. So on a YI basis or Q basis how what was the average realization per turn basis in this geographies blended average. So on uh Q YI is not very relevant on QQ basis uh we have seen a realization growth in excess of 2%. In quarter four over quarter 3 and if you can manage the mix then uh we would like this uh grow realization growth to continue. Yeah. So despite this volume related challenges we are able to increase the prices by

2% in export right? Not necessarily prices, it's a mix of price plus volume mix. Okay. So lastly again on this same similar strategy for considering next few quarters of challenges what would be your pricing strategy? whatever benefit from this lower RM basket we need to pass on or we'll try to maintain pricing or margin benefit and if the RM basket comes down definitely the price lines will hold and when the prices were going up we were unable to pass on the entire uh effect to the market so I am pretty sure that we will hold

the price line as the raw material uh prices uh taper off And if they take time to tear off, we'll also be open to looking at some opportunistic price increase in the meanwhile. Sir, geography wise, can you give any color that over near-term first half maybe which geographies you think will decline in absolute terms and which geography can still continue to grow? The overall market seems to be challenging but any geography you see decent growth coming in. Uh if you're talking about international markets, yes. Yes sir. Yeah. So we have stable uh business and growth

in European Union uh Middle East, Southeast Asia. We we have headwinds in Latin America and North America. Barring that it is business as usual in most geographies. Sir, thanks and all the best. Thank you. Thank you. The next question is from the line of Amar Kant Gore from Access Capital. Please go ahead. Yeah. Uh good afternoon everyone. Uh thanks for taking my question sir. Uh I had two part questions. One is related to camso. Uh correct me if if I heard it right. Your exposure via camso to us is about 30%. Is that correct? Yeah

correct. Yes. So sir I just wanted to understand a little bit uh uh in terms of the compensation that we are paying to cameo would there be any component uh that is withheld or that is dependent on the performance in the next uh maybe 1 2 3 years. No nothing is uh related to uh performance or anything. Uh there is some deferred compensation but that's for the brand and the stocks that we will take over at various points of time. Not everything is paid on day one but there's no correlation to the volume in every

quarter or something like that. Understood. Understood. And so second question was on on the other expenses. Uh we have seen other expenses remaining uh flattish versus typically we have uh an increase because of the marketing expense that we have uh IPL related and otherwise. So what is what is uh preventing these? I mean uh not a not a significant increase we've seen in other expenses 4% kind of QQ increase in revenue while other expenses have only gone up by only 1%. Yeah. See uh other expenses there is one program that we have been running in

terms of uh bringing efficiencies across all cost lines. Okay. Generally uh it is reflected there are two dynamics where you would be able to uh see that impact. One obviously on the raw material cost on all programs that we have undertaken to bring efficiencies in raw material cost either in the buying or in reducing uh wastages in our factories. Okay. Or any other uh programs that have led to uh reduction in raw material costs. What you see largely in other expenses is you know programs on uh utility cost, programs on factory related cost, programs on

supply chain related costs. So uh so broadly uh despite the fact that uh revenue has grown quarteron quarter by about 3.6%. Uh even after adjusting for IPL expenses, we kept all our other costs uh either constant or lower than the quarter 3. So which is what is you are seeing it there's no nothing exceptional about it in terms of there's no one-time cost benefit or one time cost impact in the previous quarter uh for the purpose of comparison it's largely the programs that we are trying our endeavor is to uh keep it at this level

if you look at it same period of last year also we were around 660 crores level okay and even the quarter 3 we are about 655 crores so we would like to be at this level even if you have to incur some IPL related expenses which would spike up in a particular quarter. In those quarters, we try to keep other expenses little lower so that overall costs remain within this range. So, so would it be fair to uh I mean uh assume that with some of the marketing expenses built into this quarter uh these numbers

would likely on a on a steady state basis uh those IPL expenses notwithstanding would be slightly lower than these uh on a steady state going forward. No see no quarter 4 IPL duration was small. So yes obviously such uh small period related IPL costs can be mitigated through you know uh strong controls and other elements of cost. But in the in quarter one where we have longer period IPL uh where we uh reasonable portion of our marketing expenses is tilted towards uh IPL. It will not be able to bring it at par with uh the

quarter 4 or quarter 3. so that you will see some spike in other expenses particularly marketing expenses in quarter one. Okay. Okay. Thanks. Thanks for that. Uh and all the best. Thank you ladies and gentlemen. In order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant. The next question is from the line of Navidid Bed from Nama in Asset Management. Please go ahead. Thank you. Thank you for the opportunity sir. Uh and congratulations on a very good set of numbers. Uh

I'm not sure if you have spoken about this but what was the overall volume growth for this quarter and for the full year? Well exact guidance we normally not share but uh we are definitely looking at no no the quarter gone by. Oh sorry sorry sir my mistake. Uh uh so for quarter four you mean right? Yes. For quarter 4 and for full year. Yeah. So uh so uh quarter four uh growth has been uh 11%. Okay. Total growth. Total total uh quarter four has been 11%. And volume Yeah. Yeah. Volume. Okay. Yeah. Okay. And

for full year and full year it is um uh about 7%. Thank you. Thank you sir. Thank you sir. The next question is from the line of Vijay Kumar Pandi from Nwama. Please go ahead. Hi sir. Thank you for taking my question sir. Just wanted to understand about the uh employee expenses. So it has gone slightly up uh on bioise like as compared to last year on full year level. So just wanted to understand uh what is driving this and despite like we have our like despite the VR scheme this has gone up. Is it

like something related to or anything? Can you just give some light on that? Okay. Uh I'm sorry. Could you you want to understand about VRS and other expenses? Can you repeat your question? Uh the employee benefit expense and the VRS expense. Yeah. Okay. So uh VRS cost is what we are showing as uh uh exceptional item. Okay. We incurred about 37 crores uh during the quarter 4. We announced a VR separation package in one of our factories where the little over 100 people took accepted VRS. So therefore that we are showing uh separately with respect

to employee cost you know moved up on quarter on quarter by about 10 crores 215 crores was quarter 3 quarter 4 was 225 crores uh all all of that cost increase in employee cost is can be attributed to additional manpower uh cost incurred in our factories where we have had uh capacity uh increase for example in Chennai factory we commissioned our truck and bus radial planted in September which we are scaling up. So therefore in quarter 4 we had to engage more people. Similarly the volume growth number that we were talking about in quarter 4

uh 11% kind of auh volume growth happened all all that had to be produced. So these are directly relating to production activity that cost was incurred in uh incurred in quarter 4 which is the reason as to why quarter 4 was about 10 crores more than quarter 3. With respect to other expenses, I think I've already explained. So unless you have any specific questions, uh I think other expenses have been explained too. Yeah, that's uh that's okay. And can you give a brief about uh the equity daily income the because that has come down on

year on year level uh for full year. So just wanted to understand what is driving that. No. Uh debt. No debt equity. See look uh no the JV income. Huh? JV income. JV income. Profit from JB. Okay. Uh you consolidate that uh share of it. Um share of profit of associates and JV. See it's more or less in line. Okay. This year in fact is higher. Uh share of profit this year is about 21.8. 8 crores versus 20.8 crores the previous year. Okay. And the share of profit is largely uh the JV venture that we

have in Sri Lanka. Uh we don't consolidate it with our results. So this is our share of profits. It has seen an improvement about a cr. Okay. Even in the quarter also there's a marginal improvement in by only about five lakhs quarter on quarter but year on year about a cr higher. Okay. Okay. Yeah, you you look at full year basis. I I unless you are comparing quarter four of last financial year versus quarter four of current financial year. Okay. But uh I think right comparison is full year full year or quarter 3 to quarter

four where you would see some kind of stability. Thank you very much. We will now begin the next question from Ankur Podar from Swan Investment. Please go ahead. Hello uh thanks for taking my question sir and congratulations on great set of numbers. Uh sir uh my question is regarding uh the realization for FI25 on uh the overall basis have increased by around 2%. While the uh RM basket has uh increased by around 8 to 10%. So there is roughly an under recovery of around six seven odd percent. So do you plan to uh have a

price increase in near term or how do you plan to mitigate this uh kind of pandemic? Your thoughts on that? See uh increase in raw material as a percentage of turnover uh when we be began the year was close to about 60% of our revenue. So when when we say uh raw material has moved up by 8%. Okay. the impact of that on sales is about 60% of that uh uh 8%. Okay. So, so that's a way we need to look at and our realization has moved up by maybe a little over 2%. Um both

through price increase as well as through mix and the difference is what is the difference between the uh impact of raw material cost okay and the realization part of it and which is evident in the gross margin also. Okay. But we we should also keep in mind you know in the previous year we had a very high level of gross margin improvement also significant improvement in gross margin which is why our overall operating margins went up uh by more than 4% in 2023 24 versus 22 23 uh and so on a high base of about

43% kind of a gross margin okay and maybe the gross margin has shrunk by about 4 and a half%. uh and I think Arnab also earlier mentioned in response to one of the questions uh currently our gross margin is or in his opening remarks hovering around 37.5%. Uh our endeavor is to take it up to in the range of 40 to 41%. Okay. And we will do that uh using both the livers one of them being like any correction in raw material cost from here on uh would be retained. Okay. uh and second was obviously

judicious uh price increases uh across uh depending on the categories, geographies and segments both of them will happen so that we get back to the normal level of gross margin and normal level of operating margins. Fair point sir thank you sir. Uh my second question is regarding our export strategy. As ENAB already said that uh you know we'll be clocking around uh uh 25 26% after uh cam camso uh integration. what is your strategy uh you know to scale up uh the export business from here on for the CE as well as CAMSO in terms

of uh you know which geographies you want to venture what kind of products specifically with CASO if you can throw some light you know your broad business plan in terms of scaling up the you know operations from here on right so uh when I said 25 26% It is at current level of camso business which utilizes the facility that we are purchasing at the level of 50%. So our endeavor uh our endeavor is to take the capacity utilization to 80 85%. So that much headroom we are looking at in what time period obviously in medium-term

which is about 2 through 3 years but the first year will go in understanding and consolidating business continuity retention of customers. So not much may happen in the first few quarters. So um uh so that could uh lead to that much kind of growth you know with some inflation maybe almost 2x of the current volume or 1.7x 1.8x of the current volume. So that's cameo. On the non-camso part we also have Amberath plant which is now utilized up to about 65%. So about 35% headroom is there in Ambernath. Plus we are expanding Ambernath as this

is our topmost priority of growth to about 150 tons per day. So we can uh in a reasonable time period if the OEM uh volumes come back we can double lumbernut volume in some time period of maybe 3 to four years to 5 years maybe uh as well. So that's the export growth on OT of CET um and CAMO and of course we have headroom for growth for OTRs as well as bias from the Bandup plant as well. Uh now coming to passenger and truck bus radial here we have aggressive plants in Europe and US

there is there will be some headwind unless this uncertainty is sorted out. uh current impact is very low as I explained earlier because our exposure is very low. Uh but it is an investment market and we'll continue to invest in this market and in Latin America as well and for uh passenger for two-wheeler categories and passenger categories in some select markets in Asia as well. So there is a well laid out plano to answer your question will go primarily to North America and uh Europe most of the business will come from there about 90%. Okay,

great sir. Uh my next question is to Kumar sir. Uh what are our plans regarding post the cancel acquisitions? There will be a fair amount of increase in the debt levels. So uh any uh you know medium-term plans? Uh how will you kind of scale down these debt levels? Uh if you can you know share your thoughts on Okay. See uh currently our as of 31st March our debt was about 1922 crores that was the uh level of debt and uh uh if you if you were to look at from leverage ratios point of view

uh it is about point debt equity is about44 and uh data bit is about 1.3. So uh low level of leverage that's the way uh one can come to conclusion uh with respect to the current level of leverage while the debt might go up because the scale of operations is also increasing overall as a company is also growing overall absolute eida also uh we are almost 1500 delivered a 1500 crida uh in the current year and last year was maybe 1650 crores of eida so uh in absolute time everything has moved moved up. So therefore

uh debt should be seen in the context of leverage ratios. So our our understanding is that you know uh it's not that entire consideration of 225 million will have to be uh invested up front. Okay. So uh at least about 20% of that uh we will be paying after uh 3 years uh 3 to 3 and a half years. Some amount of consideration is relating to uh finished goods inventory that will also not happen up front. will happen over a period of time uh as we take possession of those goods in different markets. So uh

uh if uh since uh debt is funible let the since the cash is fungeible okay and we are generating uh cash profit of 1,000 cr plus even in the year fi 2425 our cash profit was about 1,80 crores so uh we have to decide uh whether we want to keep the debt uh low even on a ratio basis or whether we want to keep debt at normal levels and help the business to grow through investment not only in this acquisition but also also in capacities so that we are able to deliver growth. I think the

growth of 14.5% in quarter 4 was delivered because we had capacities available to meet the sales growth. Uh and uh scale does play a role very important role for a tire industry in terms of distributing the fixed cost. So coming to your uh larger question it's possible the debt can move up uh in terms of debt equity debt debit ratio from current 1.3 level to maybe a 2.2 2 or 2.3 maybe the peak uh in a very bad bad quarter could be 2.4 2.5 which is far lower than where we were even 2 years back

we were uh EITA was closer to about 2.8 8 2.9 that kind of a level that's the way we see as we integrate the business as we generate more cash the absolute debt and uh there'll be some improvement in overall data bit which which would translate to maybe uh maybe a 3,000 up to 3,000 cr kind of a debt level over a period of time. Uh internally we would try to keep it below but that's the way we see the debt movement uh over over the next 12 months. Thank you sir. Participants are requested to

limit their questions to one per participant. The next question is from the line of Mul Sha from Dam Capital. Please go ahead. Hello. Yes. Hello. Am I audible sir? Yes sir. Your audible. Yeah. Yeah. Yeah. Yes, sir. My question is again on the camso side in terms of the apart we have enough capacity but apart from that any strategical investment required in terms of the increasing the network or what what could be the ballpark investment or capex requirement even considering the maintenance capex from annual point of view. Okay. Okay. Know look um uh from our

point of view beyond what we the 225 million which encompasses uh lot of other elements uh in the in the acquisition of that particular business uh we may have to add some uh key upstream equipment uh at least two of them uh uh in the next 12 months after 12 to 18 months after we acquire the business. Okay. be our uh to fund that to take care of that in add and plus normal maintenance capex for uh camso business business in Sri Lanka maybe we need about uh Indian Indian rupee terms possibly about 100 to

125 crores peranom for the first two years that's what that is the way we see in terms of requirement Hello. Thank you sir. The next question is from the line of Sadhar from Numura. Please go ahead. Yes sir. Thanks for the followup. Uh sir uh one question on uh your margins in uh various segments because like we have pushed a lot in OE till we have not seen any meaningful uh margin impact. So how should we think about the difference in margins between your replacement OE and export markets some sense there sir will be helpful.

See look uh among all three segments um OEM uh margins are little lower okay and uh which is uh where our overall revenue share is about 28% uh 28 29%. Okay. But having said that uh OEM business also gives us some cost protection during the period when we see high volatility in prices or high upward trend in prices because we have a mechanism to uh adjust the any movement in raw material prices with a one quarter lakh. So uh for us to grow in the replacement market it is important that we have a reasonable presence

with OEMs. So in general in terms of um margin distribution uh in the normal circumstances international business and replacement business uh operating margins are at similar levels. Gross margins replacement could be little higher but we also need to invest in marketing and therefore at operating margins level similar uh in case of OEM manufacturer OEM business while uh operating margin vary depending on the categories. For example, our two-heer margins would be little better. But in passenger car where we are penetrating into high-end tires etc. it could be lower. So uh operating margins of OEM business could

be lower in mid-s single digits versus replacement and experts at a high level. Thank you ladies and gentlemen. This was the last question for today. I now hand the conference over to the management for closing comments. Please, thank you very much for attending the uh the earnings call uh and uh being with us through FI25. Looking forward to you being with us in FI26. Wish you all a very good financial year in FI25. Thank you. Thank you on behalf of Aquarius Securities. That concludes this conference. Thank you for joining us.