Chrysler capital has been one of the best investor n more importantly exits at right time.numerous example like Suzlon,Bharti,Shriram group are there .so their exiting BkT is a very important event.Why have they exited at this juncture fully.
That is something which concerns me as well. But on the other hand, it is good that part of the offloaded stake has been picked up by the four largest mutual fund houses in India - Reliance, SBI, ICICI and Franklin.
Guys,
Meeting with Balkrishna Industries Senior Management coming up next week.
Please fire away your questions and help us make the most of the opportunity.
Rgds
Donald
I have the following questions:
1). As rubber prices have corrected in the last few months, is the company planning to cut prices of their products? Whatâs the expected EBITDA margin going forward?
2). Is the company witnessing any slowdown in sales both abroad and India?
3). How much is the sales expected to be increased during the next few years and what will drive the growth (new markets, growth in existing markets, pricing power). How much has the market been growing as a whole?
4). How is the expansion going and when is the plant expected to be ready
5). Alliance tire Group (ATG) is also undertaking a $160mn expansion; how would this impact the overall market and wouldnât this put pressure on companyâs margins?
http://articles.economictimes.indiatimes.com/2012-07-05/news/32551627_1_rubber-prices-balkrishna-industries-tyres
Heard on the Street: Balkrishna Industries rises as top fund houses buy stock
Jul 5, 2012, 06.41AM IST
Leading fund houses have been accumulating shares of tyres and rubber product manufacturerBalkrishna Industrieson the back of declining raw material prices. Six leading fund houses have been buying shares of the company at every opportunity over the past two days market sources said.
According to analysts, the company is likely to post good earnings, thanks to declining rubber prices. Slowing global demand and the ongoing crisis in Europe have impacted rubber pricesin a big way. RT1, the benchmark for international rubber prices, has fallen by over 20% over the past six months.
Lower rubber prices benefit tyre companies in a big way as it accounts for a major part of the operating expense. Shares of Balkrishna Industries ended 5.1% higher at Rs 271.9 on theBSEon Wednesday.
ChrysCap sells over 9% stake in Balkrishna Industries for $38M
BY MADHAV A CHANCHANI & POOJA SARKAR
The PE firm has pocketed modest returns on its seven-year-old investment, as per VCCircle estimates.
Private equity firm ChrysCapital has sold off most of its 9.59 per cent stake in the public-listed Balkrishna Industries Ltd, selling over nine million shares in the largest Indian manufacturer of off-highway tyres (OHT) for Rs 217 croreâŚ
http://www.indiainfoline.com/Markets/News/IIFL-recommends-Buy-on-Balkrishna-Industries/5433089970
IIFL recommends 'Buy' on Balkrishna Industries |
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http://www.derivatives.capitaline.com/newsdetails.aspx?sno=559965&opt=CN&secid=3&subsecid=110&SelDt=
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Thanks Tcx. Useful links
We were missing your contributions:) Pls participate regularly when you can.
-Donald
Some queries which came up after reading the recent concall & some recent co visit notes:
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Some more insight on European & US mkt scenario (considering shrinkage in Europe)
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tentative schedule for Bhuj capex
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Margins going forward in Agriculture & OTR respectively (considering the mix heading towards being even going forward)
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Current gap in pricing compared to Michelin/Bridgestone etc⌠Is the gap expected to narrow down considering that co doesnt intend to reduce prices in a hurry�
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Plans for paper & other legacy biz.
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Steps co. is taking to reduce high transit time in delivery- as it results in higher debtor days/prolonged operating cycle etc.
Guys,
Quick update on BKT Management Q&A
BKT can do no wrong - it appears:))
As you might have noticed from its recent (and long-standing track record) that it manages the challenges in its environment very very smoothly. RM Going up or down, and Currency fluctuations up or down.
Rubber - there is a glut (2004-5 plantations coming off age in 2012 season. So prices are on a downtrend. Company has reduced inventory to 2 months from 5 months
Forex - RM import and US$ Sales (US & RoW) neutralise each other. Euro sales realisation was on an average Rs 62-63 basis in FY12, and this year its like Rs 70 basis. They are hedged simple 1 year forward on a rolling basis on the Euro. So whether rupee goes up or down, BKT is unaffected.
Bhuj Plant - execution on track
We are at a loss - to crack open any weakness - where can BKT falter??
Please wait for Management Q&A update. May take upto 2 weeks - next week in Delhi. Other quick takes on Management Q&As in Mumbai - Vinati, Ajanta Pharma, Pls check individual threads.
Rgds
Donald
http://www.thehindubusinessline.com/companies/article3646473.ece
cAN gOVIND rUBBER BELONGING TO SAME GROUP IS COMING OUT OF ITS SLUMBER N CAN IT TOO BE AWELATH CREATR LIKE ITS SIBLING?VIEWS INVITED.
Govind rubber has a very high Debt level. Majority of the Operating Profit goes into interest payment. Now they are planing to do 850cr (750cr for Dahej plant, and 100 cr for modernization). Seems to me a case of debt funded growth, which can fizzle out very quickly with worsening of any factor which can effect its operating profit.
How are the latest results of BKT?
Also read today in chairman address of JK tyres about their new plant of OTR tyres coming on stream at Mysore. What could be its implication ? How is BKT facing slowdown abroad ?
7 August BKT Industries Concall Transcript ( My quick notes)
1). Pricing - No pricing change in last 3-4 months
2). RM
Rubber - 135 down to 126 Rs/Kg
prices will soften further
Carbon Black & Nylon - not much changes
2). Order Book - run rate increased 10-11 K MT to 13-13.5 K MTper month. Some slowdown. Customers are taking cautionery steps- reducing tehir own inventory levels (like we hav done onRubber)
3). titan in Us, michelin in Eu - slowdown
effects will be minimal on us. as our business model is towardsreplacement market.
so sticking to guidance -160-165 K MTPA- oh yes. v much
4). Agri : OTR -new plant 55:45 in new plant ; 70:30 in oldplants
5). Capex -895 till june; FY13? another 500 Cr; balance will beincurred in FY1`4
6). Other Exp - variable in nature; increases in proportion tovariation in Sales. Exchange loss of 17 Cr on Sales & purchase transactions- thats more like a one-time hit; rest are variable in nature
7). Rm - prices on declining trend. No posssibility of priceincrease.
8). Eu situation vs Capex expansion - we will go ahead. confident to maintainguidance. Current situation - is going on for almost 4years.There may be impact on order flowâŚbut our focus onreplace markets impact will be minimal
9). better Realisation - On account on better currency realisationrubber average cost - around 3500 $ per tonne. will come downto $3200 levels
10). OEm seg effected first in a recession situation. Peoplecontinue to operate the existing equipment - for which theyneed to keep buying replacement tyres.
11). mining & Construction - bullish - by Titan & others.
SKUs fro MIning mostly ready. Chopanki & Waluj plant we have smallcapacity OTR âŚwe are just enhancing thisOut of total 30-35% is OTR. Mining will be around 9-10% . withnew plant OTR share will go to 45%
12). capex 600-700 Cr in FY13. another 500-600 in FY14.
13). Hedging
Exports 90% ; imports is 50% . Net exposure is 50% in Euro.rolling basis ----forward covers for next 12 months. euro 71rs; and $ 52-53;BS : no hedging: repayment is 3 yeras later
20 Cr forex loss - purely notional. On the working capitalborrowings
13). Radial share will go upto 35% from 25% earlier.
14). Titan or MIdas expansions. Dont have much idea about our
peers. Dont think they are expansing in any big way
15). Global otr market 8 bn $. growing at 4-5%
16). FY14-15 picture :ebitda groos - 18-21% - tragetspat front - around 9-10%
So you dont seea ny declines? No
17). 70:30 agri & OTR-capacities fixed; biasd & radial - again fixed. Butcan be changed with additional equipment. radial & biasdifference tyre cost - 10-15%.
18). Cost of plant on TPD basis ; hard to say, but ball park - 4 cr per TPD cost.
19). debt - 1600 CR - cash of 100 cr. net borrowings 1500. termloan is 850 Cr; balance is working capital
20). 200 distributors across 120 locations.
21). Rubber inventory of 2 months - average cost $3500 per tonne
22.Any impact of carbon black anti-dumping- No, we are not impacted by that.Scheme of advanced licensing - we can do duty free imports.
23). Q2 - margisn to improve definitely. RM going down to 3200$.
24). Target margins - are at 20% for the year
My impressions
1). Results are good. Margins have expanded.
2). Q2 Results should be better - primarily because of lower RM; and Forex loss on Sales/Purchase transactions may not be there (can be considered one-off in nature - actual sale/forward coming due in the quarter vs SPOT purchase during the Qr). Someone knowledgable on this can dissect this better?
3). Forex loss -20 Cr - purey notional; on the Working capital borrowings
4). Expansion on Schedule. Production at Bhuj to start in Sep. expect 25000 MT for half year. Sales guidance FY13 160000-165000 MT intact. EBITDA can be 20% as indicated by Management. PAT will be more like 9%
I donât see much to worry about. BKT is in a sweet spot. Let me get down to capturing back the Management Q&A we did last month - so all of you can appreciate just how sweet a spot that is:)
Pls excuse the delays - just caught in too many activities
-Donald
I read through the thread and found it very informative. As I understood, the key determinant for BKT value (and continued performance) is the price differential it enjoys as compared to the other players (specially the international ones), something thatâs stated to be in the range of 25% or so today.
But I could not really find an analysis on the drivers of this price advantage, outside the 7% or so difference in the employee cost. Has there been any discussion on where does the balance 18% or so come from, and its continuity?
Hi Amit,
Thanks for your perceptive queries.
Yes this aspect has not been analysed much. Its difficult to put a finger on it! But there are enough clues if you have followed the detailed questioning in the MAnagement Q&As.
What I have understood that the real differentiator is in the manufacturing process that BKT has refined over the years. Maintaining a low-volume, large variety 2000-3000+ SKUs product range requires a very different kind of factory, with different man ufacturing than in large volume commercial tyre manufacturing.
BKT has refined this over the years and has got better at it. Some of the biggies have exited this market altogether. Only Alliance can pose a serious challenge to the sustainability- they have the knowhow but they can only reach where BKT has in 5 years. This is as BKT maintains a manufacturing challenge, there are no shortcuts, ramping up beyond 30000 MT a year is very very difficult. one has to go at iot in the sloiw steady way.
Besides the market is huge. at $13-14 Bn annually , growing at 4%-5%, BKT has only a 5% market share. It will easily go to a 10% market share in next 5 years, growing at the rate it is. There is no one coming close in terms of capacities - with the advantages that BKT has. So it will keep taking away market share from the biggies for the next 5 years - without really troubling any of the biggies either.
Disc: I have significant holdings and my views are biased.
Hi Guys,
Sorry for the delay. The much awaited BKT Management Q&A update.
As usual, we came away very impressed. It seems the Management is on top of most of the challenges and poised to harness the opportunities in front of it.
This looks like a good candidate even for fresh allocations, at current levels.
Please go through the Q&A carefully. Why is an investment into Balkrishna Industries NOT a no-brainer? The only RISK is a sudden demand-crash (given the continuous capacity build-up). We have tried to quiz this aspect extensively from the management, and I for one could not pick holes in the Managementâs defense. They are very very confident of the 160000-165000 MTPA Sales guidance for the year. Q1 results have confirmed that confidence. Q2 will need watching.
My sense is, it will keep growing at 30% plus levels for the next 2-3 years. From current 5% market share, it may easily go to a 10% market share in next 5 years, my conservative projections indicate.
Like the natural skeptics to have a go. I can find no holes:).
1). The Euro region slowdown is a smoke-screen, it has not affected the replacement market, which is BKTâs business model.
2). The Agri segment constitutes 63% of BKT Sales - has always been evergreen, it is recession-proof. Farmers may not buy enough new equipment for sure, but they will continue to operate existing equipment - which if needs replacement tyres - they will buy.
But then I am an Optimist always, and am probably biased on this story. But I sure like to bet where the odds lie. **In this case the odds seem to be stacked very much in favour of BKT.**FY13 growth is very much protected??
Like to know why NOT? Strong Views Invited 
. Letâs spar on this and dissect this one RISK threadbare.
-Donald
Disc: I have significant holdings. My views are biased.
http://www.indiainfoline.com/Markets/News/Balkrishna-Industries/4446375318
Balkrishna Industries |
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