TVS Srichakra FY26: A Tyre Company That Forgot to Apologize

44 times earnings for a company that returned 5.89% on equity. The market is apparently very optimistic about something. Let’s find out what that something is—if it exists.

Section 1: At a Glance

₹3,643 crore revenue. ₹71 crore profit. A 44x P/E that belongs in a different conversation entirely.

Here’s the tension: TVS Srichakra owns the third-largest market share in India’s two-wheeler tyre aftermarket, ships tyres to 90 countries, and is halfway through a ₹1,000 crore capex binge that includes doubling its higher-margin off-highway tyre capacity. On paper, this is a solid-looking company.

On the numbers, it’s a different story. FY26 saw revenue grow 12% to ₹3,643 crore—respectable. But net profit fell 70% to ₹71.23 crore. The same year, a new ₹220 crore capex was greenlit for Madurai expansion. The company is spending like it’s chasing growth, while the profit statement suggests it’s running from raw material costs.

Three questions: (1) Is this cyclical pain or structural trouble? (2) Does a 44x multiple price in recovery, or delusion? (3) Why is a company with 5.89% ROE and 7.54% ROCE borrowing at this pace?

Section 2: The Company & Its Game

TVS Srichakra is part of the TVS group—one of India’s oldest, most trusted conglomerates. It’s not a startup. It’s not a gamble. It’s a legacy tyre maker.

The company splits its revenue three ways: OEM (supplying Bajaj, Hero, Honda, TVS Motor, and others), aftermarket (the replacement tyre business where you buy tyres for your old bike), and exports. The aftermarket segment contributed 32% of FY26 revenue and is the crown jewel—higher margins, repeat business, brand loyalty. The export story (OHT—off-highway tyres—plus 2-wheeler exports) is the growth narrative. Together, they’re 35% of revenue.

Two factories: one in Madurai, one in Rudrapur. Over 600 distributors across 640 Indian districts. A design centre in Milan. The infrastructure is there. The ambition is clear. But ambition without profit margin is just capex.

Section 3: WTF Do They Even Do?

They make tyres. For two-wheelers (the bulk), for three-wheelers, for farms, for skid-steers, for tractors, for industrial equipment. They also make off-highway tyres (OHT)—the heavy-duty ones that go on mining rigs and agricultural machinery, especially in export markets.

The real business is simpler than it sounds: take commodity rubber and oil, shape it, vulcanize it, and sell it either to OEMs on long-term contracts or to the replacement market through dealers. The OEM game is volume and stability but margin-thin. The aftermarket is where the money is supposed to be. The OHT export game is where the future is supposed to be.

But here’s the twist—and this matters for understanding what happened in FY26: raw material prices (natural rubber, carbon black, synthetic rubber, rubber chemicals) make up 60-65% of revenue. When those rise sharply, tyre companies can’t always pass it through to customers fast enough. FY26 was that story. Margins got squeezed. Hard.

Section 4: Financials Overview

Consolidated, in ₹ crore.

The headline is deceptive. Yes, net profit surged 240% YoY. But that’s because FY25 was a disaster—a ₹21 crore year thanks to natural rubber hitting ₹170 per kg in Q3-Q4. FY26 saw some stabilization. Still doesn’t excuse a 44x multiple.

Revenue growth of 12% is decent in a cyclical downcycle. Operating profit rebounded 22%, which suggests management can defend some margin once input costs stabilize. But the gap between 12% revenue growth and 240% profit growth is purely statistical reversal from a collapsed baseline.

Management on the concall said they expect raw material prices to stabilize going forward, which would unlock margin expansion. Margin expansion—the corporate equivalent of “trust us, it’ll work out eventually.” We’re watching.

Section 5: Valuation

Fair Value Range (Educational Purposes Only).

This fair value range is for educational purposes only and is not investment advice.

Three methods:

Method 1: P/E Approach

• FY26 EPS: ₹92.51
• Peer P/E band: 12x–22x (CEAT, JK Tyre, Apollo Tyres trade here; MRF at 21x is an outlier)
• Fair value range: ₹1,110–₹2,035

Method 2: EV/EBITDA Approach

• FY26 EBITDA: ₹280 crore (operating profit proxy)
• Peer EV/EBITDA: 10x–13x (tyre industry median)
• Enterprise Value: ₹2,800–₹3,640 crore
• Less net debt: ₹744 crore (borrowings ₹767 Cr – cash ₹23 Cr)
• Equity Value: ₹2,056–₹2,896 crore
• Per share: ₹2,671–₹3,760

Method 3: Simplified DCF (assumptions)

• Normalized EBITDA: ₹350 crore (assumes margin recovery to 10% on steady-state revenue)
• Terminal growth: 2% (inflation)
• WACC: 8%
• Implied value: ₹2,400–₹2,800 crore equity value
• Per share: ₹3,116–₹3,636

Consensus range: ₹1,500–₹2,800 (depending on your margin recovery belief).

At ₹4,043, the stock prices in either (a) 15% revenue CAGR + margin expansion to 12% EBITDA, or (b) a sustained belief that raw materials stay cheap forever. The first is possible. The second is fantasy. Raw material cycles are real. Ignoring them is how you get surprised.

Section 6: What’s Cooking

₹220 crore capex approved. May 27: Board approved up to ₹220 crore for tyre capacity expansion at Vellaripalli, Madurai. This is the third tranche of the broader ₹1,000 crore capex cycle. By end-FY26, ₹900 crore was already spent. Another ₹120 crore is earmarked for FY27. So the capex story isn’t done—it’s just entering the final mile. The OHT (off-highway tyre) expansion is done; the 2-wheeler expansion is almost done.

Management’s bet on export margins. The strategy is explicit: grow the higher-margin OHT segment in exports (especially Europe, US, South America). FY26 exports were 18% of revenue, up from 15% in FY23. OHT is the margin-accretive segment. If management can double OHT revenue (which is management’s own stated goal), EBITDA margins could improve 200-300 bps. That’s not a small move. But it’s also not guaranteed. Export markets are competitive. Brand matters. Relationships matter.

Final dividend of ₹37.80 per share. May 27: The board recommended ₹37.80 as the final dividend for FY26, implying a total annual payout of ₹37.80 (since there’s no interim). That’s a 41% payout ratio on reported earnings, which is healthy. It shows management confidence in cash generation, even if profit margins are thin.

CFO transition. K V Ganesh, the CFO, resigned October 2023. B Rajagopalan took over. No dramatic reason cited; just a transition. Governance-wise, clean. Financially, continuity maintained.

Section 7: Balance Sheet