India operations

  • India demand: Strong demand momentum is seen across key segments/channels, and demand from T&B OEMs also seems promising. TBB is growing faster than TBR due to lower costs; however, TBR should also pick up with growth in OEMs.
  • RM cost inflation: It stood at 5% QoQ in 2QFY22; smaller inflation is expected in 3QFY22.
  • Pricing action: It took a price increase of 3–7% in 2QFY22 (3–4% in 1QFY22) and another 3–5% over Oct–Nov’21. It would need another 3–5% price hike to offset the cost inflation to date.
  • The Vredestein brand was launched in India and would help the company make inroads in high-margin premium segments.
  • Capacity utilization stood at ~80% for 1HFY22, with TBR at 74% (PCR at 97%).

  • Exports: It achieved the highest quarterly exports ever in 2QFY22 (up by 70% YoY; includes exports to the EU).

Europe

  • Demand: The healthy demand momentum would continue with an increase in premiumization. Volumes grew 4% during the quarter at capacity utilization of 86%. PCR grew in the low double digits, and growth in TBR came with market share gains.
  • Volumes grew 4% and revenue growth was in line with that of the market, as it had to let go of some opportunities due to the associated freight charges.

  • It took a price increase of ~2% during the quarter, of which 4–6% was in TBR, Agri, and Industrial. It would take price hikes in 3Q and 4Q as well to offset the RM cost inflation.

  • It witnessed further improvement in the sales mix – Ultra High Performance (UHP) / Ultra Ultra High Performance (UUHP) accounted for ~39% of Passenger Car and Light Truck (PCLT) sales/volumes v/s 38% in 1QFY22. It expects this to further rise to over 40% by FY26.

  • It had taken write-offs on fixed assets in 2QFY21. The Netherlands plant would continue to be a strategic plant for EU operations as premium PCR Tyres and some other Tyres are manufactured at this plant.

Others

  • Capex for FY22 is estimated at INR20b at the consol. level (INR11b complete up to 1HFY22), while the guidance remains the same.
  • The increase in inter-segment is attributable to a) RM sourcing from SG and b) India supplying to the EU.


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