Thank you, Sonali. Good evening.

On behalf of Nirmal Bang Institutional Equities, I welcome you all to 1Q FY27 Earnings Conference Call of CEAT Tyres. The management is represented by Mr.

Arnab Banerjee, Managing Director and CEO, and Mr. Kumar Subbiah, Chief Financial Officer.

I will now hand over to the management for their opening remarks, after which we will open the floor for Q&A. Over to you, sir.

Good evening, everybody, and thanks for coming to this call. I'll take you through the business updates for the quarter, and then I shall hand it over to Kumar for his remarks on financial performance.

Post that, we'll have the Q&A. The structural consumption tailwinds triggered by last year's GST reforms continued to boost domestic volumes.

However, Q1 also saw a sharp escalation in input costs driven by natural rubber prices, both international and local, and also prices of crude-linked derivatives. Raw material cost increase was about 15% to 16% vis-a-vis the average of last quarter.

Demand outlook, near-term expectation primarily hinges on monsoon bridging its rainfall deficit. El Niño poses a risk to rural demand and on account of reduced farm incomes, and also supply chain disruptions following the West Asia crisis.

Some moderation in demand may happen in Q2, but we don't expect demand to fall off a cliff. In the near term, we expect replacement demand for MHCV to be mid-single digit.

In two-wheeler, growth is expected to be in high single digits, where consumption levels have surpassed already pre-COVID levels. Passenger tyre demand is expected to be mid-single digit.

Overall rural demand has been very, very strong right through quarter one. In the OEM segment, demand has been very robust, in some categories even in the mid-20s.

We expect demand for MHCV to grow in mid or high single digit, while OEM two-wheeler and passenger car tyre demand is expected to grow in double digits. In international business, we have a strong order base despite disruption in Middle East sales.

CEAT quarter one results, the growth aspect, Q1 continued CEAT's growth journey with strong revenue growth of 18.3% YoY on standalone basis, whilst standalone EBITDA stood at ₹380 crore. This is on the back of strong growth in Q3 of last year and Q4 of last year as well.

Overall performance, as I mentioned, 18.3% value growth in quarter one. Replacement grew in mid-teens, and demand has been strong over the last three quarters post GST.

OEM grew in low teens, and international business has been growing very strongly, almost in the 30s. Volume performance, replacement overall volume growth was robust.

Two-wheeler continues to do well backed by strong rural growth. Truck bus radials also have done growth in double digit, and farm has grown in high teens as well.

Replacement passenger car tyre segments grew in healthy double digit during Q1. In OEM, we recorded the highest volume in passenger car tyres.

Of course, our base was smaller, and the most of the growth has come from 17-inch-plus fitments, which is the premium segment in OEM. In two-wheelers, we registered a mid-single-digit growth in this quarter.

Farm growth in OEM has been pretty robust, strong single digit, and truck bus growth in OEM was flattish. International business growth across segments was strong, particularly strong on passenger car tyre, two-three wheeler, as well as the agriculture segment.

In truck bus segment, we had a single-digit growth in international markets. Margin scenario, Q1 standalone gross margin witnessed a contraction of 575 basis points QoQ.

Our standalone EBITDA margin for Q1 stood at 9.1%. Raw material costs continue to be high entering into quarter two, and we have been taking price increase right through April, May, and June, about 7% to 8% in replacement, about 3% to 4% in OE, and about 4% to 5% in IB has already been taken.

We have had a strong price increase on 1st June, and right through June and on 1st July, and in July and August, we'll continue this journey. Standalone profit was ₹98 crores, and in consolidated accounts, it was ₹4 crore.

This disparity or gap between the two is high in Q1 primarily because of a nearly ₹48 crore impact from depreciation in Sri Lankan rupees, LKR, on the $80 million-denominated debt at the overseas entity, CEAT Sri Lanka OHT, and also higher costs in our Camso business arising from initial investments in new warehouses, new offices, startup costs, new hirings there without commensurate growth in revenue because it just happened in quarter one. Our top line in Camso is trending at $10 million USD at customer prices.

This is not what we are realizing because we are selling to Michelin, as explained in earlier calls. Part of the realization goes to cover the cost and a marginal profit in the hands of Michelin.

We are about to change the capital structure of CEAT OHT Lanka to reduce the interest burden as well as to reduce the risk of currency fluctuations. Overall transition is happening as per plan.

About 60% of the customers have transited to CEAT by end of Q1, and we expect to complete the customer transition by end of Q2. The transition from buying semi-finished goods from Michelin to buying our own raw material will take some more time.

It will be completed by end of quarter four of FY26. Hence, FY28 is the first full year when we'll have control of the entire value chain.

However, in second half of this financial year, we'll have control of all our customers, and therefore we'll start growing our volumes across replacement and OEM segments when we handle our customers directly. Overall, on the four trends which we keep talking about: electrification, international business, premiumization, and digital AI, I'd like to cover a few points.

On electrification, our trend in owning share in OEMs continued consistently. We have about 25% share each in OEM passenger EVs and in two-wheeler EVs.

We continue to get nominated to significant new OEM launches in both two-wheeler and four-wheeler. Our international turnover including Camso was around 23%, and standalone basis was about 20%.

Despite geopolitical issues and freight rates and delivery timeline disruptions, OHT business delivered a strong quarter, growing sequentially as well as on YoY basis. We added about 10-plus new SKUs, and we got several new nominations in marquee OEMs in the OHT segment.

In the online segment, growth was robust as well, as I mentioned earlier, in all segments, including four-wheeler as well as the truck bus radial segments. Middle East performance was, of course, subdued, but other geographies came back strongly, and our order base is pretty robust.

Premiumization, we got some good nominations in premium vehicles, and our volume and share continue to grow in the premium segment in OEM as well as in replacement market. We found ourselves in the top 10 in the Brand Finance ranking, which is a good indicator.

Overall sales volume of premium tyres, which is 17-inch-plus rim size tyres, grew by 100% in replacement. Two-wheeler premium portfolio comprising of radials and tyres fitted onto 250cc-plus bikes also grew handsomely.

On digital and AI, at CEAT, we are scaling across the enterprise and embedding it into our business processes. In Q1, we continued to expand our agentic AI initiative to drive productivity, accelerate automation across the value chain.

In parallel, we are making steady progress our enterprise data lake program, creating a unified data foundation for AI and advanced analytics, while our SAP RISE transformation remains on track. Our premium sales through lead generation grew two times in quarter one, while overall four-wheeler sales through lead generation grew 32 period 32% over the same period last year.

Implementation of agentic website increased traffic from home to products by 14%, positive sentiments for brand moved up 46% with 16% increase in average interactions per post YoY. US tariffs, a short mention, the applicable duty on auto components remains at 25% in addition to the original 4%, total 29% on on-road tyres, including TBR and PCR, this 29% applies.

Off-highway tyres are subject to a lower 10% global tariff, and on Sri Lanka exports, also the same 10% applies. In tracks, which is coming out of Sri Lanka, the same 10% applies.

However, for the metal component of tracks, which is primarily steel, it continues to attract a 25% tariff. On the sustainability front, we achieved EcoVadis Gold rating, which places us in the top 5 percentile of the companies globally for sustainability performance.

CEAT received Best Practices in Corporate Governance and Compliance Award '26 from World Circle, and ISO 27001 certification for its head office, Halol, Chennai, and Ambernath facilities reinforcing our commitment to best-in-class governance. Our focus on people and transparency has resulted in employee happiness score to move up to 87% from 85% previous year.

As we move forward in Q2, we expect margin pressure to continue, and we expect demand to moderate a little bit, but as I mentioned, it's not going to fall off its cliff. With this, I would like to hand over to Kumar for his remarks.

Thank you, Arnab. Good afternoon, ladies and gentlemen, and thank you for joining our Q1 FY27 earnings call.

I'll share some further financial data points with you all, post which we can enter the Q&A session. First, on overall financial performance, our consolidated revenue for the quarter stood at ₹4,318 crores with a year-on-year growth of about 22.3%.

As we did not have the Camso business in the corresponding period of last year, I would like to keep sharing our standalone numbers alongside consolidated numbers so that the numbers are more comparable. Our standalone revenue stood at ₹4,163 crores with year-on-year growth of 18.2% and quarter-on-quarter of growth of 3.2%.

On year-on-year basis, two-thirds of the standalone revenue growth came from volumes and balance one-third of the growth came from price and mix. Pricing impact was positive across all segments during the quarter one, with replacement and international business segments leading with price increase.

Far, replacement has been receptive to our pricing actions, where demand has been robust. We have effected approximately 7% increase in our price in replacement and about 5% in international business and OEMs approximately 3%.

Considering our pricing model of quarterly pricing with large percentage of our OEMs, the price increase on OEM segment is expected to be there in quarter two. Coming to operating margins, our consolidated EBITDA for quarter one stood at ₹370 crores, translating to 8.6% EBITDA margin.

It's a contraction of about 562 basis points sequentially and 238 basis points year on year. Our standalone EBITDA for quarter one stood at ₹380 crores versus ₹391 crores in quarter one of last year and ₹587 crores in quarter four.

The EBITDA of ₹381 crores of standalone translates to 9.1% of margins. Our consolidated gross margin stood at 33.9%, contraction of about 575 basis points sequentially in the face of unfavorable raw material costs and rupee depreciation during the quarter.

Coming to raw materials, during quarter one, crude oil prices remained at high levels. Average price of crude surged past $100 per barrel in the beginning of the quarter in April and May, although the June average was a little lower.

Supply chain disruptions remained heightened throughout the quarter. Coming to natural rubber, the international benchmark SICOM started in quarter one at around $1,950 per ton and has since moved higher month on month.

Prices averaged approximately about $2,050 in April, $2,200 in May, and around $2,240 in June. They are currently hovering around $2,180 to $2,200 per ton, which remains elevated and represent a significant increase from the levels that we saw in quarter four and whole of previous year.

In line with this movement and prevailing parity dynamics, domestic rubber prices have also remained elevated and currently hovering around ₹280 per kg, which is more than a 15 years high, the last 15 years and beyond. Domestic prices are currently at a premium to international prices in the range of ₹15 per kg to ₹20 per kg.

The rupee continued to weaken and it weakened in the quarter one from about 93, 94 level to around ₹96.5 to a dollar level. The depreciation also added to our cost pressure in quarter one and would continue to have an impact in quarter two.

Overall, as shared with you all, raw material costs surged in high teens in the range of about 16% to 18% in quarter one compared to quarter four. Moving into quarter two, despite some recent correction in the crude oil prices, the cost pressure is likely to continue as we do not have the benefit of lower-cost raw material inventory in the beginning of the quarter as we had in quarter one.

Further spike in the prices of natural rubber and currency depreciation is expected to have an impact of about 8% to 10% in quarter two versus quarter one. The commodity market continues to be volatile, which is also impacting the currency and ocean freight rates.

We expect the commodity prices to stabilize once the West Asia war comes to an end, which may lead to some stability in the commodity prices, hopefully the second half of the year. While we have taken pricing increases across all segments in quarter one and some more in July, there is a lag between the cost increase and our product pricing increase, which will have an impact on our margins as we go into quarter two.

Coming to capital expenditure, working capital, and debt, we spent about ₹293 crores of capex in the standalone entity during the quarter. We prioritized capacity-related capex over normal routine capex during the quarter one.

Our capacity utilization has remained high on most of the categories across all our plants in quarter one, hence we would continue to invest in adding capacities and scale them up faster to support the demand growth. As shared earlier, we intend to incur capex in the range of ₹1,300 to ₹1,400 crores during FY27, and we would like to stick to the above plans as of now.

On a consolidated level, our working capital moved up by about ₹138 crores as compared to quarter four, and standalone working capital increased by about ₹105 crores. The primary reason for the increase was on account of higher raw material inventory, both in volume and value.

We operated with higher physical inventory during the quarter to manage the supply-related challenges and also to ensure the supply security for our factories. We look forward to normalizing this in quarter two.

Further, there has been some accumulation in our GST balances arising out of some mismatch between GST on inputs versus output, which we hope to unlock it in the next two quarters. Our consolidated debt stood at ₹3,243 crores, an increase of about ₹232 crores over quarter four.

Our debt-EBITDA on a consolidated basis stood at a comfortable level of about 1.6 and marginally higher over quarter four level of about 1.46, and our debt-equity ratio remained healthy at 0.65. Coming to operational expenses, our standalone employee cost in quarter one was similar to quarter four at around ₹248 crores level.

In order to mitigate the impact of increase in raw material costs, we exercised strong control over all discretionary costs through various steps, including cutting down our discretionary expenses like travel, conferences, consulting, and factory-related, etc., which helped in keeping our consolidated other expenses at 18.6% level similar to previous quarter despite higher marketing costs due to IPL and infrastructure costs that Arnab was talking about in overseas operations. Overall, we kept tight control on costs between the gross margin and EBITDA lines during quarter four despite an overall inflationary scenario beyond just direct input costs.

Coming to depreciation and interest cost, depreciation of a consolidated level for the quarter remained at similar levels as that of the previous quarter. However, consolidated finance cost during the quarter increased by about ₹61 crores.

Arnab already explained the one part of it, which is about ₹48 crores, was attributable to the depreciation of Sri Lankan currency versus dollar and on $80 million loan that they received from parent entity, CEAT India. The impact of that was reflected as finance cost during quarter four quarter one.

The board, in order to ensure that the Sri Lankan entity is adequately capitalized, approved as to convert part of the debt into equity to the extent of about $24.5 million and to ensure that adequate capitalization of that entity at 1:1 debt-equity level. Overall, the consolidated profit after the quarter stood at ₹4 crores compared to about ₹112 crores during the same quarter of last year and ₹244 crores in previous quarter.

Our standalone profit after tax is more relatable and one could draw inference from that better compared to consolidated number. Our standalone profit stood at about ₹98 crores for the quarter versus about ₹283 crores in quarter four and ₹135 crores in the same period last year.

Our quarter one profit after tax was after adjusting about ₹7 crores of exceptional cost towards extension of our current running voluntary retirement option scheme in one of the factories. We would like to inform you that our board of directors in the meeting that we had yesterday approved a capex of about ₹1,205 crores for setting up additional 53,000 two-wheeler tyres capacity.

This is over and above the additional capacity which is already under implementation at Nagpur. The company is evaluating various locational options for this additional capacity.

We expect this capacity addition to be progressively implemented over and by FY31 in stages. The capex would be funded with a mix of debt and internal accruals, as we have been doing in the past.

While executing the proposal, we'll continue to monitor our leverage levels and ensure that the balance sheet remains strong going into the future. During the quarter, India Ratings carried out an annual survey and reaffirmed credit rating of AA with a positive outlook for long-term and A1+ for short-term.

With that, thank you once again. With that, we can now open the floor for Q&A.

Hello, am I audible?

Yeah. Good evening, sir.

Thanks for the opportunity. First, we just wanted to know what is the greater than 17-inch and EV revenue share for CEAT?

Is the market share here better than overall industry?

You mean in replacement or OE? In OE, we have a increasing share in excess of 20%, and we intend to take it up a little bit higher.

It won't go too much higher because of the OE policies. In replacement, it is more or less indexed to our overall market share.

The market saliency is about 13%, and it'll grow to 30%-40% in the next five years.

Thanks. Secondly, on the price hikes, just wanted to understand given the current commodity index, do we need to take further price hikes, or the price hikes we have taken so far are sufficient to fully pass on the cost?

No, we have to take further price hikes. We have taken price hikes on 1st July also, and we have got our indexed price hike from OEMs.

We need to take further price hikes in replacement and international, which we are doing through the month of July, and this will continue into August as well.

Okay. Just lastly on Camso, what is the FY28 revenue potentials when operations come under our full control?

Our current run rate at customer prices is about $10 million, which is about $120-odd million. We would expect to grow it from there in FY28.

Okay. Thank you.

Thanks a lot, sir. Best wishes.

Good evening, sir. Thank you so much for the opportunity.

Firstly, on the requirement of price hike, would my understanding be correct that the total commodity or raw material basket increase will be about 26%, Q1 and Q2 put together, the price hike requirement would be around 15% to 16%, and so far you have taken about 7%-8% price hike in replacement? Just wanted to understand from you how do you see both for CEAT and industry, how is the market and competitors responding to price hike?

How much more price hikes do you expect in Q2? Your thoughts both on market acceptance and on the demand?

Yeah. As we speak, that 7%-8% has moved up to 11% already, and you are right in your estimate of about 16%.

We will endeavor to take another 4% to 6% through the month of July and August in replacement. Coming to industry, I really can't predict or say anything on behalf of industry, but so far competition has been taking up price hikes in different measures, in different categories, a little bit here and there on dates, but the price table is moving up.

Thank you, sir. Good to hear that.

Secondly on Camso, you indicated that H2 revenue should be better as that customer transition will be completed by Q2. H2, the growth prospects will be better.

Two, three years ago, Camso had a much higher revenue. How do you see the trajectory of the revenue levels going back to the previous peak?

How do you see H2 growth and FY28, '29 trajectory in terms of going back closer to the earlier levels of revenue?

That's a benchmark that was a couple of years back, as you rightly pointed out. The H2 growth will come initially because if we start handling the customers directly, whatever the customer pays comes to us.

When we sell to Michelin instead, we get a much lower realization because the balance goes to cover Michelin's distribution cost, holding cost, as well as a little bit of margin is left with them transparently as per the transition agreement. That growth in value sale will come at constant volume terms, to say, in half two.

Further, when we handle it, we have some visibility of replacement growth coming back on track, not to the highest levels of which we witnessed two years back, but definitely on a positive move. The OEM growth will take time to recover because we need to get into the OEM programs with NPD, etc.

That's the situation right now, and on both these counts, we expect H2 to be better. I believe Amit is on call, right?

Amit, would you like to add anything more?

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I think that was somebody else. Maybe you'll have to disconnect someone who was talking.

Okay. Amit will come back during the course of the call in case he wants to clarify.

We can move to the next question.

Kumar sir, if you can indicate for this Q1 Camso, how was the margin, because when I do consol minus standalone, the EBITDA is negative. Was there one-offs which was mentioned during the opening remarks, like startup costs, new hirings?

Just wanted to clarify whether all these one-offs have led to a negative margin in Q1. If the one-offs are over, whether Q2 will revert back to 8%-9% kind of margin?

Raghu. The margins were negative in quarter one, and I think Arnab updated in terms of customers are coming to our fold progressively.

As of end June, half of the customers have migrated, and by September end, we expect it to be around 90%. Okay.

For us to start servicing our customers in different geographies, we had to set up our warehouses, have people in overseas locations like Germany, UK, France, Poland. We had those infrastructure, warehousing-related costs.

Those costs would be absorbed once we start servicing all our customers from September. Gross margin still looks healthy, and in fact, there's a gross margin differential between CEAT business and Camso business.

What we would request is that give us one or two more quarters for us to provide more clarity, because only half of the customers, and that too in the month of June has come, we have to advance our expenses. Setting up systems for us to meet the requirements locally, it could be a supply chain systems, it could be VAT-related systems.

Those costs are already accounted and absorbed. Gross margin looks okay.

Operating margins were negative. However, I think in a quarter or two, things should become normal as there'll be a matching revenue.

Noted, sir. Thank you so much.

I'll fall back to the queue.

Hi, sir. Thank you for taking my questions.

Sir, firstly on the natural rubber prices, even though the crude prices has come down slightly, natural rubber prices are still, especially on the domestic side, is still remaining high. Just want to understand what is driving that dynamics.

Also, I heard that Kerala government is putting a minimum floor price of ₹250 from ₹200. Do you expect this natural rubber prices to come down below ₹250 or ₹250 is going to the base case scenario going forward?

Okay. See,

largely, Indian prices with a lag is linked to international prices. Okay.

In a high demand, low inventory situations, local rubber prices would be at a premium, and in a reverse situation, local could be either at parity or a little bit of a discount. That's what it happens.

Today, domestic prices of ₹280 is at a premium to the international prices to the extent of about ₹20 per kg. Local prices are largely driven by the international.

Because of supply chain-related disruptions, the transit times increased during the intervening period and therefore overall inventory level in pipeline came down, particularly physical inventory part of it, and therefore that would have necessitated the local consumers of natural rubber to approach local market to buy more, and that has caused little bit of a premium. We expect the local prices to move in tandem with international prices going forward.

The premium could come down once the situation becomes normal. Ideally, based on the movement of other commodities, okay, it could be even aluminum or copper, even precious metals, steel, many of them reacted to correction in crude oil prices in terms of moving in the same direction, though the proportion was a little lower.

Natural rubber has not happened yet. Though Shanghai market corrected about 4% or 5% on one or two days, otherwise the international price is still at an elevated level.

There's no commodity in the world which will operate independently and not move in line with the crude. Therefore, with a lag, as far as the current quarter is concerned, quarter two is concerned, natural rubber prices are kind of a fixed for us at least, okay, because of the pipeline, physical inventory, imports.

We hope the prices would correct, move down to the levels that you indicated as a first step. Maybe it'll happen during the course of the later part of the quarter or in the subsequent quarters when things normalize.

It will work. I also wanted to check in terms of the floor price, is it okay to assume that by Q3 or Q4 it may come down to ₹250, or do you expect because government has set a floor price of ₹250?

No, I don't know. It's difficult to comment if it is high, okay, and consumers where they have already seen a high inflation, okay, whether they will be able to afford to buy at that level, only time will tell.

As of now, short term, because it's volatile, we should accept that quarter two natural rubber prices is kind of fixed for us. We look forward to SICOM prices coming down once the normalcy returns, and then the local prices will adjust for itself.

Sir, what will be our mix in terms of domestic and international procurement? If that's alright.

No, see, it

varies from category to category. Approximately two-thirds of the natural rubber currently is block, international, and one-third of it is local sheet rubber.

Plus or minus 5%, that is a range in which normally our consumption is.

Okay. Okay.

Sir, about the price hike, can we just get the quantum of price hike you have taken in June and one in July?

I think Mr. Banerjee mentioned to you, up to June end, progressively from beginning of the quarter to the end of the quarter in the replacement market, about 6.6%, 6.7% kind of a price increase has happened.

He also mentioned it in response to other question that has kind of become about 11% after taking into consideration price hike happened at the beginning of the quarter. Something more has been announced for the second half of the month, and something more will happen.

As of now, about 11% in the replacement. International business, about 5% to 7% has happened on fresh supplies.

OEM double digits, I think the number is not closed. It should be in a double-digit number effective 1st July in addition to some 3% that happened in April.

Sure, sir. I'll fall back in the queue.

Thank you.

Hi, sir. Firstly, can you please tell me the overall volume growth for the quarter?

For CEAT standalone, it's in about 13%

to

14% year on year.

All right. My second question is regarding our finance cost, which is gone up, which was explained that because Sri Lankan currency had depreciated, we got an impact of around ₹48 crores for the quarter.

Now going forward, what can we expect the quarterly run rate to be for our interest expense? Do we see this loan amount getting lower?

Okay. See, look.

This ₹48 crores impact is basically on the loan given by parent entity, CEAT India, to our own 100% subsidiary entity called as Lanka OHT, which takes care of the Camso business. If we remove that ₹48 crores, that would have been the normal finance cost that we would have incurred.

We expect debt level to marginally increase in the subsequent quarters at a consolidated level, okay, and therefore within a 5% level without that ₹48 crores of impact would be the range in the next one to two quarters. Because the interest rates are stable, okay, we'd like to keep the debt level within a range.

That's the kind of a number in the next one to two quarters that you can expect.

Okay. Is the understanding correct that the interest cost would be in the range of ₹100 to ₹110 crores going forward quarterly?

Yeah. See, it not only interest cost, it also has all the banking-related expenses into it.

The number that you have for quarter one excluding ₹48 crores plus 5% kind of a range is what is likely to happen in next one, two quarters.

Okay. Understood.

Thank you.

Thanks. Sir, almost 15%-16% price hike in a span of 4 months seems like a hardly ever we have seen that in many, many years.

On the other side, post-rainy season and the premium of domestic rubber prices or crude falling down,

Am I audible?

I'm saying on the back of almost 15%-16% cumulative price hike as sir was saying, and post-September quarter, in case the commodity basket stabilizes or turns favorable, will there be scope of price cuts or then one should be looking for much elevated profitability because the price hikes have been supernormal? Hardly we see such 15%-16% price hike in a span of four months.

The price hikes is lagging the raw material price increases. The price hikes have to happen first to cover the margin.

Our normal gross margins are 40%-41% in normal times. First quarter saw us going down to 33%, there is a big gap to be covered.

If the raw material prices fall off in second half sometime, we would intend to hold on to the price till we recover to our normal level of operation if we can, given the competitive situation. That's how it is.

The past experience of such situations indicate that the industry holds the price when the raw material tapers off. What will happen is difficult to predict, but that's what we intend to do.

Sure, sir. That's what I was trying to understand because quantum of cumulative price hike is too much on the higher side because market requires that kind of hike, which we generally don't see.

If market is able to hold on to these hikes when commodities starts reversing, then that can be a very positive development for the overall industry.

Yes.

Yeah. Second thing, sir, even one, two quarters back in the result call commentary, more or less when you are saying ₹1,000, ₹1,200 crore of Camso revenue and 12%-13% margin, from that scenario, what has changed in three to six months and where do we see now compared to those numbers?

The top-line indication, as I mentioned, we are moving at about $10 million-odd per month at customer prices. The top-line indication continues to be in that direction.

That's the current status, and we are not handling the sales to our customer. It's a transition period.

Nothing will change either too much on the positive or negative side. It'll hold like this till we have control of the customers, which will be from quarter three of this financial year.

Second half of this financial year, we'll know what to do with the business that we have inherited, obviously on a positive side. On the bottom-line front, right now we are EBITDA negative because the volumes are low, scale is low, and there are some, as Kumar explained, we are setting up new offices, new warehouses, hiring new people without commensurate revenue because revenue is being handled by somebody else.

We will start ramping up revenue with these resources when we start having control over the customer, which is again second half of this financial year. We are positive about going back to that margin level, but it'll take some time when we start handling the value chain ourselves.

No change in outlook as far as Camso business is concerned. It's a matter of time is what we believe.

Last question for Kumar sir. Sir, as you are saying around ₹1,200, ₹1,250-odd crore capex, consol capex for the year, and in the press release that incremental capacity addition till FY31 for which you're going to spread the new project capex, would that add on to the existing capex number or including that ₹1,200, ₹1,300 per annum would be okay?

No,

I indicated ₹1,300 to ₹1,400 crores capex was our outlook when we had a call quarter back, and we are holding on to the same as we speak. The amount of capex outflow on account of this new capacity for the current year is not likely to be significant.

This ₹1,300 to ₹1,400 crore outlook for the current year includes all, including this one.

Thank you. That's all.

Hi. Thank you.

I had a couple of questions. One is you mentioned that you've increased prices about 11% in replacement and you plan to do another 4%, 3%-4%.

What is the situation with respect to competitors, especially MRF? Is there a risk that because of aggressive price hikes by some of the players, is there a risk to market share?

If you see any negative impact of market share, is there a risk of you holding back some of the price hikes that you've taken?

Price hikes are being taken with a lag to raw material price hike, and it is so far inadequate, as you can see from our margins in quarter one. Price hikes need to be taken by us.

As far as industry is concerned, so far most of the competitors have taken price hikes in different categories at different points of time, and the price table is moving up in quarter one is what I reported. If this continues, then we shall be able to take this balance price hike also.

If it doesn't continue, we'll evaluate. There is no question of any rollback of price at this moment.

Got it, sir. The second question that I had was on the one-time MTM impact that you have taken in the Sri Lankan operations for the loan.

I think the amount was some ₹46, ₹48 crores. You mentioned that this is on a loan given by the parent to the subsidiary.

If it is within the system, if the subsidiary books a loss, shouldn't the parent book a gain and the two offset each other in the consolidated level? It's a little confusing if you can just clarify that.

No, it happens, assuming if the currency was rupee, what you said was right. Okay.

Or assuming both the currencies had moved in the same proportion, okay, yes, cost in one place would be a income in another place at consolidated level, it will get eliminated. What happened in quarter one was the rupee, I'm saying 31st March forex rate, because generally these are booked on the last day of the quarter based on how currency has moved.

Okay. It represents the position as on that particular day, which was 30th of June.

During the quarter, rupee versus dollar depreciation was small. 30th 30th June versus 31st of March.

Therefore, on the loan given to the subsidiary company, there is no appreciation-related benefit or the appreciation means dollar appreciating against rupee, whereas in Sri Lanka, the Lankan rupee went down, that is from 312, 315 to a dollar to around 335 to a dollar. That impact came as a currency impact for the quarter in that entity without a corresponding income in our books, in the standalone parent company.

Sir. Got it.

Thank you.

Yeah. See, this is $80 million.

Yesterday, we got board's approval, because that entity needs to be adequately capitalized in the form of equity. Therefore, we have also got an approval from the board of parent company CEAT India yesterday to convert part of the debt into equity, which was anyway part of our original plan when we infused capital into that entity.

Part of that, about 30% of the total debt will now get converted into equity, and to that extent will come. One, in the normal course, it wouldn't have come as a loss.

For example, we have in much larger proportion exposure of currency in our CEAT India books, you would not see that kind of a impact because these are all hedged. In Sri Lanka, that currency of Lankan rupee could not be hedged against the dollar in the absence of any mechanism to do so.

Therefore, we are constantly studying to find out how to make sure that this is handled in future. One of them through conversion of debt into equity, okay, which was a planned one.

It has nothing to do with what has happened in quarter one. We'll have to find other ways in which this is better managed.

Got it, sir. Thank you.

Thank you, sir, for the opportunity again. Sir, just a housekeeping question.

For standalone business, export you shared was 20%. Can you share the mix of replacement and OEM for Q1?

Also for the revenue mix, if you can give it between trucks and buses, two-wheeler, LCV, PV, specialty, that will be helpful.

Revenue mix for standalone is about 20-odd percent for international business and about 50% and 30% for replacement and OE. That's the business mix.

What was your other question? The growth, right?

No, sir. The product-wise mix: trucks and buses, two-wheeler, LCV, four-wheeler, and specialty, that mix, if you have it handy.

Otherwise, I can take it later.

Yeah.

Yeah. Generally, we don't share so much, Raghu.

These are there in the annual report, quarter-on-quarter we have not shared it that way. I don't think it was very different from our annual numbers of last year.

Noted, sir. Noted.

Noted. Just one last question.

On the two-wheeler capacity side, the one which is being set up at Nagpur, that would be roughly about 100,000 tyres per day, just clarifying that, and then over and above that this new additional capacity will come up?

Yes, that's correct.

Got it, sir. Thank you.

Thank you so much, sir.

thank you for the follow-up. I just wanted to check that MTM cost, the interest expense, because that's dependent upon the currency fluctuation, how do you see this thing moving forward?

What is the base interest expense for that $80 million borrowing?

See, it's a related-party transaction, we we have we have to ensure that the interest rate on such related-party transaction is on arm's-length basis, therefore we we have benchmarking mechanism in terms of what the interest rates are, and accordingly we have done it. It's very close to the rate of interest, say, about in the range of around 8% kind of a interest rate.

Whether it will happen in the future, look, Lanka's rupee has been little bit volatile. After the crisis, Sri Lankan rupee depreciated to a dollar to the it went up to 370, 380 to a dollar, and once economy stabilized, it came to around 290, 295.

Prior to crisis, Lankan rupee used to be 185 to a dollar, 185, 190 to a dollar. The going forward, if the currency Lankan currency depreciates further, it'll have an impact not on $80 million, hopefully once the conversion happens, it'll be on a, say, $56 million.

We we will also parallelly trying to find out whether the currency-related impact can be mitigated in in any other way. It can also work other way around also.

If the current Sri Lankan rupee were to appreciate, it may also have a positive balance. Therefore, it's it's linked to this.

See, today, because of macroeconomic reasons, that country is impacted on account of, lower number of tourists, higher crude oil prices, higher inflation. That is playing a role, and the drop that we saw in last quarter was quite steep.

We haven't seen it that kind of a steep depreciation of that currency post that crisis period. It it entirely depends on it.

Okay. Sir, just one question on marketing expense.

Can you provide the quantum of marketing expense in Q1 and fourth quarter for standalone business?

Our expenses are in the range of 2% to 2.1% of sales. It was slightly higher in quarter one because of the spends on IPL that we do, and for the year it should be around that level.

Okay. Okay.

Thank you.

Thanks, everyone, for attending the call patiently, and we would look forward to meeting you again at the end of quarter two. Thank you.