Let’s look at data points. It isn’t that bad a situation NOW. It could get worse, though.
Bhuj Plant has about 40-45% OTR Capacity specific for larger sizing Mining OTRs. The rest is geared for Agri and other sector. The other plants had 30-35% OTR capacity but of smaller sizes.
The company is pretty smart on execution - it is this flexibility in producing as per demand, changing production lines flexibly for different SKUs, even for low volumes that has been the main key to their competitiveness. Managing a larger SKU size ~2000 now up from ~1600 BKT maintains is their biggest competitive advantage - the Management Q&A elaborates on this aspect.
The debt situation too is not that bad - certainly not astronomical. BKT has always been careful to maintain debt/equity not exceeding 1.3x. It is currently at 1.15x (~1460 Cr). The company has clarified that the debt levels will remain at these levels for the year. They would not need to draw more as they already have about 540 Cr left over. The interest coverage ratio is really handsome at 21x. (Remember they have access to low cost Libor+3% Funds; considering hedging costs WACC may not exceed 8-9%). I will be worried on debt servicing front only if this ratio comes less than 3x.
The REAL situation is that if demand situation doesn’t pickup, growth will be slow, capacity will not be utilised optimum, higher depreciation and interest costs will impact margins. And who knows how long the demand slump continues or worsens from here!
My submission is that its not all hunky-dory. There are tough times ahead! So not the best time to add. Perhaps a good time to reduce exposure if it is high. And there will be a time to load up - when the demand situation turns for the better. BKT will definitely weather this situation - just as it has so many times in the past.