Tyre replacement market can recover and grow in FY-21: Anant Goenka, MD, Ceat Ltd

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MUMBAI: Tyre maker Ceat Ltd sees a “clear growth” in demand stemming from replacement of tyres in the latter three quarters of this fiscal even as sales to vehicle manufacturers and exports market remain under pressure.

Anant Goenka, managing director of the RPG Group company, said demand in the segment got back to pre-Covid levels in June and the growth in the coming quarters could even possibly compensate for the lost sales during the June quarter on account of Covid-induced lockdowns.

“The replacement segment, which is more profitable, has bounced back to normal or even higher than normal levels, whereas the OEM (original equipment manufacturers) segment continues to be in a difficult position,” he said.

The replacement market accounts for 60% of Ceat’s sales, with OEM sales accounting for 27% and exports about 13%.

“We are in a much better position than we had anticipated. It looked much worse in April,” Goenka said.

The company has resumed production at full capacity across most of its six manufacturing locations. However, Goenka said while demand was higher than anticipated, the situation was still uncertain given the rising Covid-19 infections in the country. It would be difficult to predict the demand for the rest of the year, he said.

The government’s recent move to put imports of tyres, among other commodities, into restricted category could also give fillip to local manufacturers. Imports make for 6-10% of the Rs 60,000-crore domestic tyre market and these restrictions could potentially cut them in half, Goenka said. However, the impact of this would be difficult to isolate in the uncertain market at present, he said.

Ceat has pruned down its planned capital expenditure by 30%, Goenka said. “We will continue to be cautious. We will look at investment as and when we see the market picking up. It’s too early to make a call on the revival of investments to normal level.”

Ceat on Wednesday reported a consolidated loss of Rs 34.8 crore for the first quarter of this fiscal as revenue contracted by over 36% to Rs 1,123 crore. It had reported a profit of Rs 82.6 crore on Rs 1,764 crore revenue during the corresponding quarter in the previous financial year.

The company’s stock fell 2.27% to close at Rs 847.75 per share on the BSE on Thursday.

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