🧠 At a Glance
Balkrishna Industries Ltd (BKT), a specialist in Off-Highway Tires (OHT), went from being a darling of global mining and agri demand to facing margin skids and growth speed bumps. Over the past 5 years, it expanded capacity, launched a Europe strategy, and weathered global slowdowns — but can it justify its 28x P/E anymore? From high torque to low traction: Where is this global OHT giant headed next?
🛞 1. Business Model: All Terrain, No Brakes?
Here’s what BKT does — and does well (mostly):
- 👷 Off-Highway Tyres: 100% of revenues from niche tyres used in:
- 🚜 Agriculture (tractors, harvesters)
- 🏗️ Construction & Industrial (loaders, backhoes)
- ⛏️ Mining (giant dumpers, earthmovers)
- 🏁 Others: ATV, turf, airport equipment
- 📦 Over 3,200 SKUs — because one tyre does not fit all, apparently.
- 🌍 Export King: 80% of sales come from Europe and Americas. This is NOT your typical India-focused tyre company.
- 🏭 5 Manufacturing Plants:
- 4 in India (Bhuj, Aurangabad, Chopanki, Bhiwadi)
- 1 carbon black plant
- 🇳🇱 2025: Incorporated BKT Netherlands B.V. — to “focus on marketing” (read: closer to European clients, closer to the wine).
📈 2. Financial Performance: From Inflation-Proof to Pothole-Prone
Let’s talk numbers — no tyre smoke, just the raw rubbery truth.
🧾 Revenue (₹ Cr)
| FY | Revenue | Growth |
|---|---|---|
| FY21 | ₹5,783 | — |
| FY22 | ₹8,295 | +43% 🚀 |
| FY23 | ₹9,760 | +18% |
| FY24 | ₹9,369 | -4% 📉 |
| FY25 | ₹10,447 | +11% 🔄 |
- Massive COVID bounce in FY22 (revenge agriculture?).
- FY24 hit by global agri slowdown + inventory destocking.
- FY25 tried to recover, but still not at FY22 volumes.
🧮 Net Profit (₹ Cr)
| FY | Net Profit | EPS |
|---|---|---|
| FY21 | ₹1,178 | ₹60.9 |
| FY22 | ₹1,435 | ₹74.3 |
| FY23 | ₹1,057 | ₹54.7 |
| FY24 | ₹1,471 | ₹76.1 |
| FY25 | ₹1,655 | ₹85.6 |
- Peak EPS was 85.6 in FY25, still lower than the hype in FY22.
- FY23 was the pothole year: OPM collapsed to 18% due to raw material costs (natural rubber inflation, logistics).
🧪 3. Margins, Cash Flows & ROCE: A Mixed Tread
- 🧈 EBITDA Margins: Averaged 24-30% until FY21. Now stuck at 22-24%.
- 💸 Cash from Ops (FY25): ₹1,764 Cr
- 🏦 Capex: Still going strong — ₹1,479 Cr in FY25
- 💥 ROCE: Stable around 18%. Not bad. But was 24% in the glory days.
So margins are decent, but not what they used to be, while capex keeps rolling like an SUV on a fuel budget.
📦 4. Balance Sheet: Strong But Getting Leveraged
| Item | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Gross Debt (₹ Cr) | 1,001 | 2,529 | 3,347 | 3,099 | 3,267 |
| Reserves (₹ Cr) | 5,961 | 6,894 | 7,518 | 8,815 | 10,349 |
| Net Debt/Equity | 0.0x → 0.3x | 📈 |
Not dangerous yet — but increasing debt, increasing CWIP (₹986 Cr), and continuous capex pressure might start hurting returns.
🌍 5. Global Positioning: Strong Brand, Weak Cycle
- BKT owns ~5–6% of the global OHT market.
- Known for reliability, but dependent on farm cycles and mining capex.
- 🧾 80% exports = highly exposed to:
- Eurozone farming subsidies
- US inflation
- OEM inventory planning
📉 FY24-25 commentary cited “weak global demand from agri and infra sectors”.
🛑 Risk: What if green tech shifts kill agri exports or construction slows down further?
📉 6. Valuation: Why Is This Still At 28x?
Let’s crunch the numbers:
- CMP: ₹2,420
- TTM EPS: ₹85.6
- P/E: 28.3x
- FY25 PAT: ₹1,655 Cr
- Mcap: ₹46,800 Cr
- Dividend Yield: 0.66%
🧠 Fair Value Range:
| Scenario | EPS (FY26E) | PE Range | FV Range |
|---|---|---|---|
| 🐢 Base Case | ₹90 | 20–24x | ₹1,800–2,160 |
| 🚀 Bull Case | ₹100 | 25–28x | ₹2,500–2,800 |
| 🫠 Bear Case | ₹80 | 16–18x | ₹1,280–1,440 |
👉 At ₹2,420, the stock is pricing in a margin expansion + global recovery already. Not cheap. Not distressed. Just… fully pumped.
🤡 7. Edu Take: Tyre Dekha, Brake Nahi
- 🥇 Yes, BKT is a global leader in a niche.
- 🤨 But the valuations? Hmm.
- 📉 Growth is slowing. ROCE is plateauing. Inventory cycles are unpredictable.
- 🏗️ They’re spending like it’s 2021 but margin support is weaker.
So unless your portfolio is craving some off-road exposure… this tyre may not grip the next rally.
🏷️ Tags:
Balkrishna Industries, BKT, Off Highway Tyres, Tyre Stocks India, Agriculture Equipment, Construction Equipment Stocks, Export Based Tyre Companies, Tyre Sector India, EduInvesting 5-Year Recap
✍️ Written by Prashant | 📅 June 21, 2025
