Balkrishna Industries Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Record OHT volumes, margin squeezed: Off-Highway Tire volumes grew 16% YoY to a quarterly record, but EBITDA margin compressed to 20.61% as raw material inflation and a rising India mix bit.
• India overtakes Europe for the first time: India's revenue share exceeded Europe's, driven by broad-based OHT demand across agri, mining and construction; management calls the shift sustainable, not a one-off.
• On-Highway goes live, ramp-up is FY28 story: TBR and 2-wheeler tires launched in Q1 with seed marketing and 70 distributors appointed; management will not disclose revenue yet and frames FY27 as a portfolio-building year before "serious business" begins in FY28.
• Raw material headwind not done: A ~5% cost-side increase will flow through Q2 and Q3, with ~2% margin impact still to come; a 5% price hike taken in Q1 provides a partial offset whose full benefit lands in Q2.
• What to watch next quarter: Whether the 5% price hike fully offsets the remaining raw material drag, the pace of On-Highway volume ramp, and any movement on U.S. tariff refunds.

Off-Highway Tire Performance

• Volume record: OHT delivered its highest-ever quarterly sales volume, up 16% YoY, driven by decent end-market uptick across segments and geographies.
• Europe stable: Growth came from a lower base last year and a good monsoon/season that helped the agricultural segment; management sees a stable environment and is working with channel partners to gain share.
• India exceptional: Performed strongly despite a high base, aided by marketing efforts, a superior product range, and growing infrastructure capex; growth spans industrial construction, agri, and mining, with the replacement side and mining sector both contributing.
• Americas improving: Better performance led by the U.S., where the tariff rate settled at 10%; sharper go-to-market strategy and stable end markets support the outlook, with management expecting U.S. revenue share to return to 15–16% from the current 11–12%.
• No prebuying in Europe: Management does not see any prebuying ahead of price increases; if any occurred, it would be minimal.

Rajiv Poddar: "In the U.S.A., we expect the markets to go back to, as you rightly said, 15%, 16%. ... in Americas, we have a long runway of growth in times to come, given the brand positioning and focus on high-quality products for that market. So we expect this to be a growth area for us."

Margin Walk & Raw Material Pressure

• EBITDA margin at 20.61%: The squeeze came primarily from raw material price increases driven by geopolitical disruption and supply chain impacts, partially offset by price hikes taken during the quarter.
• India mix a marginal drag: India margins are marginally lower than export margins, and India's increased contribution to 40% of volumes had an impact, though the differential is not as wide as it used to be.
• Raw material timeline: Part of the increase was already absorbed in Q1, part hits Q2, and some in Q3; on a cost basis, raw material is up ~5%, translating to a ~3% impact on sales price and an expected ~2% margin impact in the coming quarter.
• Price hike offset: A 5% price hike was taken; its full pass-through lands in Q2, and no further hikes have been announced yet, with management working on the market scenario.
• Employee cost spike: Employee costs rose ₹153 cr, 18% YoY, from a combination of Gujarat minimum wage increases, annual increments, and staff additions for new businesses; this is expected to normalize as turnover from new businesses kicks in.
• Forex drag: A realized forex loss of ₹36 crores on sales was included in revenue.
• Freight risk: If the current geopolitical scenario persists, some freight rate increases may come; management will assess how best to pass them on.

On-Highway Tire Launch

• Go-to-market went live in April: Supplies began in the TBR segment with positive trade response; 2-wheeler tires were introduced with encouraging end-user feedback; the YOU FORWARD 24x7 journey assistance program launched in June.
• Brands and distribution: Loadxpert, Milexpert, Zenova, and Thyros brands launched across trucks and 2-wheelers; 70 distributors appointed pan-India for all categories including cars, with further dealer additions to follow production ramp-up.
• Q1 was seeding: The first quarter focused on setting systems in place, getting the machine running, and seed marketing; ramp-up of sales and production is progressing as per plan.
• FY27 is a building year: Management will refrain from sharing revenue or volume details while the segment remains small; FY28 onwards is described as "serious business," and the vision of ₹5,000 cr revenue from On-Highway tires by 2030 stands.
• Service-led differentiation: The YOU FORWARD program is positioned as a lifecycle commitment to the customer, aiming to stay engaged beyond the point of sale.

Satish Sharma: "From a FY '27, FY '28 kind of a thing that you asked, I think the vision statement states that INR5,000 crores revenue from On-Highway tires by 2030, we're standing on that figure. ... it will be a year of building the portfolio, you should say, FY '27. And FY '28 onwards will be serious business."

Rajiv Poddar: "Having said that, On-Highway segment currently continues to be small, and therefore, we will refrain from sharing revenues or volume details at this juncture."

Carbon Black & Captive Power

• Volume growth and Phase II: Decent YoY volume growth; the new line in Bhuj was commissioned, taking total capacity to 360,000 MTPA.
• Captive power expanded: Power capacity at Bhuj increased from 40 MW to 64 MW.
• Near-term headwinds: Geopolitical challenges are expected to impact pricing and supply on the back of increased crude prices; some price increases are expected to offset raw material inflation, while demand continues to be robust.
• New leadership: Mr. Ashish Kumar Datta appointed as Business Head for Carbon Black effective July 3, 2026, joining from Lubrizol Advanced Materials with 36 years of experience.

Capital Allocation & Balance Sheet

• Capex progressing: Balance capex projects of approximately ₹3,000 crores are on schedule; if ₹1,500–2,000 cr is spent in FY27, the remainder will descend in subsequent years, with a large part front-ended.
• Dividend: The Board recommended a first interim dividend of ₹4 per equity share.
• EBITDA to PAT flow-through: Expected to improve as volumes scale up in On-Highway and the core OHT trajectory benefits.
• Capital return question deflected: When asked whether stronger free cash flow and higher capital return should be expected from FY28 as the major capex cycle ends, management declined to comment, stating the Board decides such matters.

Guidance & Commitments

Key Metrics