Market Strategy


Parvatha Vardhini C | Updated on June 09, 2012 Published on June 09, 2012

Spiralling prices of rubber, the key raw material and tepid demand played spoilsport on tyre companies' performance for most part of last year. Balkrishna Industries (BKT), however, managed to buck the trend. For the year ended March, the company's net sales grew by 48 per cent to Rs 2,795 crore and net profits, by 45 per cent to Rs 268 crore. Operating margins came in at 18 per cent, only a tad lower than the 19 per cent recorded in 2010-11.

One reason for BKT's outperformance is that the company supplies tyres to off-highway (agriculture, mining and earth moving) vehicles. It has, hence, been shielded from the slowdown witnessed both in new car sales and in tyre replacement demand during this period. The second reason is that the company is a leading exporter of these off-highway tyres, and derives most of its revenues from markets outside India.

It supplies to companies such as Volvo, John Deere, Ferrari and JCB across the world. Besides, it caters to the global tyre replacement markets through its strong distribution network in over 100 countries. This diversification put the company in a sweet spot as first, replacement market sales are more margin-yielding than direct sale to carmakers; second, exports per se also bring in higher realisations — more so, with a depreciating rupee.

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