JK Tyre and Industries, one of India’s largest tyre producers, will not have any capital expenditure this year in light of the sluggish and uncertain market conditions.
Speaking to Moneycontrol on the sidelines of the company’s September quarter results presentation, senior officials said no capital expenditure (capex) has been planned for the time being.
Last year JK Tyre had incurred capex of Rs 374 crore, which was a decline from the Rs 595 crore spent in FY19.
Anshuman Singhania, Managing Director,
JK Tyre & Industries, said: “There is no capex right now which we are planning. We are watching the market very carefully and we will take a call when and whenever the market improves”.
Arun Bajoria, the company’s Director and President (international operations), added: “For the time being we have sufficient capacity to cater to demand. So, we are not planning any capex till the time the uncertainty over the pandemic gets over.”
The company said that at the consolidated level there is capacity utilisation of 80 percent at its manufacturing plants, including utilisation levels in India, which stand at 80-85 percent.
A worrying trend
The Delhi-based tyre maker joins forging giant Bharat Forge in bringing capex down to zero for FY21.
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Unlisted multinational companies have also followed suit to prepare a readjusted spend for this year.
JK Tyre’s peers
Ceat and
Apollo have also slashed capex for the year by 33 percent and 29 percent, respectively, to Rs 500 crore and Rs 1,000 crore, respectively.
September quarter profit down
JK Tyre’s net profit dipped 35 percent to Rs 110 crore for the September quarter from Rs 168 crore in the same quarter last year.
The company is the market leader in the truck and bus radials segment, with more than 70 percent of its revenue being generated by aftermarket sales. It noted that the truck, bus and farm sector contributed significantly to its revenue in the replacement segment.
The strict lockdown, which crippled economic activity, led to the truck and bus tyre replacement market benefiting from pent-up demand in the July-September quarter, when the ‘unlock’ phase saw goods transport resume in earnest. This is evident from the revenue increase of nearly 7 percent for JK Tyre during the quarter.
Though net profit was down during the quarter, JK Tyre’s profit before tax rose nearly eight times to Rs 167 crore on a consolidated basis. A deferred tax item of Rs 52 crore (as against a negative Rs 166 crore in same quarter of the previous fiscal year) brought down the net profit.
Anshuman Singhania has been appointed Managing Director of JK Tyre & Industries with effect from October 21. Singhania, who was earlier the company’s deputy managing director, is the nephew of Chairman Raghupati Singhania.
