In an interview with CNBC-TV18, KJ Rao, Chief Financial Officer of Ceat , spoke about the company's working and its future plans. Here is a verbatim transcript of an exclusive interview with KJ Rao on CNBC-TV18. Also watch the accompanying video. Q: The rubber prices are at fresh 14 month highs. They constitute about nearly half the cost of your raw material. Half the amount is accounted for by rubber. Would you be able to pass it on this price or do you see severe margin crunching? A: Natural rubber has scaled its peak levels now. It is about Rs 120 per kg. Domestic and international prices are at the same level. Therefore, in the Indian and international market, the prices are aligned. This represents 40-45% of the input cost for the tyre industry. The surge in rubber prices has impacted the cost structure of the tyre industry. As far as passing on these to the end consumer is concerned, it is a tough task. Partly, we have no choice but to pass on. Whether we will be able to pass on fully is the question where we are evaluating and trying to optimize on the cost and look at some internal measures to contain the cost structure and pass on the benefit partly to the consumer as well. Q: If you could take any tyre that you sell, how much would be the total cost of that tyre last quarter and now? How much rubber would have you spent on that tyre last quarter and this quarter? Is there any tyre that you can take and then perhaps have a better perspective? A: The rubber prices may be at an average of Rs 90. This quarter rubber prices are up by on an average of around Rs 115 and up by Rs 25 per kg. If you take about 45% input cost which is content of rubber, it is 45% of Rs 25. Q: What margin are you selling your tyre at? Is it at a zero margin or you are just trying to cover variable cost? Where are we right now in terms of margins? A: The margins are now lower than the second quarter one's. Part of the variable cost is certainly covered. There is a small increase in tyre prices in end October. Whether it is sufficient or not, is the question which we are addressing. If needed, we may have to take a second increase in the price. Q: What would you see your margins at for the second half? What may be the price hike? Will it be 5-10% come December? A: It will not be to the tune of 5-10% perhaps the market can not take it. It will have to be a little lower than. We are working out the number. The impact is as high as Rs 25 per kg. We are working out on the dilemma that we have to partly pass on if not fully. I am sure we will be able to come out of that.
