The budget should focus on containing inflation; Taxes should be reduced: Arun Kumar Bajoria, JK Tyre
Arun Kumar Bajoria, President & Director, JK Tyre & Industries Limited, talks about Q3FY21 numbers, EBITDA and budget expectations during a candid chat with Swati Khandelwal, Zee Business.
Arun Kumar Bajoria, President & Director, JK Tyre & Industries Limited, talks about Q3FY21 numbers, EBITDA and budget expectations during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:
Q: Congratulations! on the stellar performance in Q3FY21. You have recorded the best sales for any quarter this time. What factors took you to this milestone and do you see this getting beaten in the coming 3-4 quarters itself?
A: JK Tyre's results of the previous quarters have been announced and the growth was led by the sharp recovery in the economic activity and festive seasons, like Dusshera, Diwali and Christmas, happens in the October to December period, preference for personal mobility, which includes the use of different kind of personal vehicles to lessen the fear of COVID along with good monsoon. Plus, vehicle utilization of the commercial vehicles has been very good in this quarter, Original equipment manufacturers (OEMs) have also given good indications of turnaround and rural demand, especially, the governments infra spend in the region have helped in performing us in the quarter. We have received good traction due to these factors and as you have also said the revenue stood at Rs 2,776 crore, which is 26% higher and it has been the best quarter in the last forty years for JK Tyre. EBITDA stood at Rs 507 crore, which has doubled from the previous quarter and the corresponding quarter.
Profit Before Tax (PBT) stood at Rs 343 crore is a multi-fold growth and has no competition from corresponding or something else. Besides, JK Tyre has done very intensive work in terms of Market Network Expansion and have added a large number of dealers due to which our reach has increased a lot. There has been a lot of focus on improving operational efficiencies. There has been almost 95-96% capacity utilization in 12 of our plants - nine plants in India and three plants on Mexico - and we are expecting the same in the future as well. At the same time, I would like to inform that we have worked a lot in working capital management and the nine months, we have reduced our borrowings by more than Rs 1,000 crores and due to this, our interest cost has come down by 21% in this quarter.
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Q: Your EBITDA has doubled compared to the last year. Going forward, what kind of trends are visible, and do you think the levels are sustainable or it can be better than this?
A: I would like to say that we will try to maintain these levels in the fourth quarter and there are two reasons for this
(i) Exports - we are receiving good demand, but we are facing certain problems and have faced the same even in the third quarter and that is related to container availability. I think, at the moment, the arrangement of the containers has become very bad in the world including India and we are engaged completely in it. I expect that our exports will increase in this quarter.
(ii) Demand from the OEMs - I think the OEMs will take more tyres from us in the fourth quarter as compared to the third quarter, which will be helpful for us.
Plus, when it comes to our product mix then our R&D is very strong and they have given good products, like our Smart Tyre is in a good demand at present, which provides details related to tyre pressure, its consumption among others on the dashboard of the commercial vehicle to the driver at a glance. And, tyre pressure is a must for safety purposes in all the tyres of the trucks, buses and other vehicles and if you get it on the dashboard then immediately you will take a corrective step towards it.
Q: There are reports that in Q4FY21, there is an expected price hike of 5-6% in tyre prices. As per you what would be the hike percentage, given that in Kerala state budget last week, the MSP for rubber has already been raised by about 13% and rubber base price is expected to go up to 200/kg from the new 170/kg effective April. Also, tell us about your expectations from the budget?
A: Regarding rubber, I want to inform you that the rubber was priced at Rs 118 per kilogram in March and it was sold in the range of Rs 158-161 per kilogram in December. Once again, it has gone down marginally to Rs 155-156 per kilogram. So, you can think that when the price of something suits up by 32-33% then it creates an unavoidable situation, although, we have not raised any specific price yet and are also trying to increase our internal efficiencies, as I have told you to cost-cutting all-round so that least price increase happens, and we all are making intensive efforts in that direction. However, if there is an unavoidable price increase then we will have to do something and I feel that it must not be too much and we will try to contain the price hike in a range of 1-2.50%, unless, the input prices don't suits-up a lot. As far as the budget is concerned, we expect that it must not be an inflammatory budget and it should contain the inflation, which is an important aspect, as inflation doesn't do good to anyone. Any product, any end consumer, even the government themselves nobody gets any benefit. Secondly, taxes should come down and it is the demand of almost everyone because I don't know to which level a tax of 18% is justifiable today but I leave it on those who have a better understanding about the matter.
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