Analysis of Balkrishna Industries

Automobile companies have to work on design and product innovation to stay relevant. The Capex is quite high for automobile companies. Tyres are a common auto ancillary for Internal Combustion Engine (ICE) and Electric vehicles. The tyre companies still have to deal with the uncertainties around crude oil prices. If the crude oil price goes higher then it directly impacts the profitability of a tyre company. In this analysis of Balkrishna Industries, we shall take a look at various aspects such as the management, shareholding pattern, financials, key ratios, and return given by the stock to its shareholders.

Journey of Balkrishna Industries

Balkrishna Industries, also known as BKT, is the largest listed tyre company. The company started its journey as a maker of bicycle tyres in 1954 under Shri Mahabirprasad Poddar. It was formally incorporated as a tyre company in 1987. In 1995, it ventured into the international Off-Highway Tyre business. Since then, the company has become a global player in the Off-Highway Tyres business. The company prides itself on innovation.

The company was listed on the BSE on 25 February 1963. Europe remains BKT’s largest market, followed by India. Almost 18% of the revenue now comes from North America. Balkrishna Industries has been focusing on branding in the last few years. One can see BKT banners and hoardings around sports arenas. The company has also signed up celebrities to make their products more visible among the customers.

Management and Shareholding

The company is headed by Mr. Arvind Poddar, Chairman and Managing Director. The leadership team also includes Mr. Rajiv Poddar, Joint Managing Director and Mr. Madhu Sudan Bajaj, Sr. President (Commercial) and Chief Financial Officer.  Mr. Vipul Shah, who has over 35 years of experience in areas of company secretarial compliances, finance and accounts, is a Whole Time Director and Company Secretary of BKT. The company has its registered office in Waluj of Chatrapati Sambhaji Nagar district of Maharashtra.

Mr. Arvind Poddar and Mr. Rajiv Poddar took home remunerations of ₹42.29 crore and ₹41.17 crore, respectively, in FY23-24. Both the managing director and joint managing director receive commissions of ₹36.75 crore. Mr. Arvind Poddar has over 34 years of experience in textile and tyre industries. 

Shareholding Pattern of Balkrishna Industries

The promoter and promoter group, together hold 58.29% of the outstanding shares. While Mr. Rajiv Poddar holds 27.71% of the shares, 24.95% of shares are held by VKP ENTERPRISES LLP which has Mr. Arvind Poddar and Mr. Rajiv Poddar as designated partners and directors.

Among the public shareholders, mutual funds hold 16.09% of the shares. HDFC S&P BSE 500 ETF alone had a stake of 5.04% as of 31st December 2024. PARAG PARIKH FLEXI CAP FUND had a stake of 2.29%. Domestic Insurance companies held 7.11% shares of the company. Foreign Portfolio Investors held 11.28% of shares as of 31st December 2024. Small investors held about 5% stake in the company.

Business Analysis of Balkrishna Industries

Balkrishna Industries operates in three segments: Agricultural, Industrial, and Off-the-Road. The company’s product offerings are quite varied. The company does not make car and bike tyres.

The two main consumables in tyre companies are rubber and crude oil. The cost of these two products directly impact the profitability of a tyre company. The crude oil price has dropped significantly from its 10-year peak of $120, but the price of rubber is nearing its 10-year high again.

Financial and Ratios of BKT

BKT has been one of the fastest-growing listed tyre companies. Over the years, the company has maintained a gross margin of over 50%. In the last 10 years, the revenue of the company has increased from ₹3,817 crore in FY14-15 to ₹9,369 crore in FY23-24. During the same period, the PAT of the company has tripled from ₹473 crore to ₹1471 crore.

The Debt to EBIT ratio has gone up above 100% since FY21-22. As of Q2FY25, the company had a debt of ₹3.12K crore. The debt has reduced a little between FY22-23 and FY23-24. During the financial year ending 31st March 2024, the company incurred capital expenditure of ₹1,598 crore on property, plant, and equipment. The Net Debt to Equity ratio was 19% at the end of FY23-24 which was significantly less than that of FY22-23.

ROE of BKT was 18.87% at the end of Q3FY25. The Price to Book Value ratio stood at 5.14. The trailing-twelve-month PE was 27.27 as of 13th March 2025. The company has a reserve of ₹9.36K crore.

The stock of Balkrishna Industries has given meager returns of 26.77%, 26.46%, and 9.09% in the last 3 years, 2 years and 1 year period, respectively. After reaching a 52-week high of ₹3,350, the stock price has been sliding.

The company managed inventory days of 108, continuously decreasing from the high of 162 in FY21-22. Working Capital Days has also stabilized at 76. At the end of FY23-24, the company had a cash equivalent of ₹137 crore.

BKT pays out dividend consistently to its shareholders. The company had paid ₹16 as dividends in FY22-23 and FY23-24. Which made the dividend yield less than 1%.

The Peers

The peers of BKT are:

• MRF
  • Even though MRF mainly sells Car and Two Wheeler tyres, its business of Agri, Industrial and OTR tyres does intersect with that of BKT.
  • MRF is arguably most well-known trye company in India.
  • The stock is trading at a TTMPE multiple of 25.24 and PB ratio of 2.48. The ROE of the company is 9.92%.
  • MRF has given a return of 58% in the last five years.
• Apollo Tyres
  • Apollo tyres makes tyres only for passenger vehicles and two-wheelers.
  • The stock has given a return of 285% in the last 5 years, but the return in the last 1 year is negative 18.59%.
  • The stock trades at a TTMPE multiple of 19.71. ROE of the company is in single digit, 9.02%.
• CEAT
  • The company is only into passenger vehicles and two-wheeler tyre segments.
  • This is one of the most most visible name owing to its sponsorship of the Indian Premier League (IPL).
  • The stock trades at a TTMPE multiple of 22 and a PB ratio of 2.54.
• JK Tyres and Industries
  • JK Tyres has a big range of tyres that cater to segments like passenger vehicles, two-wheelers, commercial vehicles, OTR, farm equipment, etc.
  • The stock of the company is trading TTMPE of 12 which is the lowest among the listed tyre players.
  • The stock has given a return of 420% in the last 5 years, but the return in the last 1 year is -38%.
  • The company has historically been a high-debt company.
• Goodyear India
  • Goodyear is an American tyre company of International repute. It makes and sells tyres only for passenger and commercial vehicles.

When we compare BKT with its peers, we find that its ROE is the highest. Since it operates in a niche segment and earns most of its revenues by exporting to Europe and North America, the profit margin is higher than other listed tyre companies. While Balkrishna Industries has a Net Profit Margin (NPM) in double digits, other tyre companies manage very low NPM.

Conclusion

Balkrishna Industries operates in a niche segment of tyres. The company earns over 50% of its revenue from just two geographies, Europe and North America. The Net Margin of the company is much higher than its peers. The financial numbers of the company look better than its peers. It will be interesting to see how the company navigates through Trump Tariff and keeps its margins levels as high as now.

The ROE of the company is better than its peers, and the market too is willing to give a better valuation to BKT. As India modernizes and industrializes, the requirement for farm and industrial equipment is bound to go higher. The company is spreading its wings in India and bound to benefit.

References

• BKT page on screener.in
• BKT page on Moneycontrol
• Analysis of retail companies: DMart and Trent
• Source for rubber and crude oil prices: tradingeconomics.com
• Shareholding Pattern of Balkrishna Industries
• Corporate Information page on BSE
• Balkrishna Industries website
• Annual Report of Balkrishna Industries