CEAT lines up Rs 750 cr capex for FY24

Tyre maker CEAT Ltd has lined up a capex of around Rs 750 crore for the ongoing fiscal, mostly to be deployed in increasing production capacity of agri-radial tyres at its Ambernath plant in Maharashtra, according to the company MD & CEO Arnab Banerjee. The company expects volume of its supplies to original equipment manufacturers (OEMs) to pick up in the third and fourth quarter of this fiscal, as it completes transition from smaller rim size to bigger sizes, with approvals from automobile manufacturers expected soon.

In the replacement market, where CEAT has seen good growth in the first quarter specially in motorcycle tyres, the company expects the momentum to continue although in the rural market which has been dormant for sometime it may take another two more quarters for growth visibility to come.

“We have been talking about Rs 700 crore to Rs 750 crore for the year. Out of which around Rs 220 crore we have done in quarter one,” Banerjee told PTI.

He was responding to a query on the company’s planned capex for the ongoing fiscal.

Most of the investment will be deployed in increasing production of agri-radial tyres at Ambernath plant, where the company manufactures specialty tyres.

“The capacity at Ambernath will reach about 105 tonnes per day in the second quarter. The current installed capacity is around 85 tonnes per day and next year in quarter two we will reach about 160 tonnes per day,” Banerjee said. Besides, he said there will be some miscellaneous capex for other plants, including Nagpur and Chennai and “Rs 200 crore will be routine capex”. CEAT Ltd has six manufacturing plants in India located at Halol, Nashik, Nagpur, Bhandup, Ambernath and Chennai.

Banerjee further said the company’s OEM supplies for passenger vehicle tyres dropped in the first quarter and is also expected to drop in the second quarter as well, due to the company transitioning its products from lower rim size to bigger rim sizes but it will pick up in the third and fourth quarters.

“A lot of approvals are coming our way and we see perfect visibility of that in quarter three and four… So, the volume will recover and go past and go to our normal share of business in passenger car tyres,” he said, adding in future CEAT will have rim sizes ranging from 16 inch to 18 inch.

On the motorcycle tyre replacement market, he said the growth has been good in the first quarter.

“Demand from 50,000 plus population, which is mostly the urban clusters, is good for motorcycles but we are yet to see rural demand coming up. This market has been dormant for quite some time. Another quarter or two will tell us whether the growth is coming from here,” he said.

On the reasons for the drag in the rural market, Banerjee said while the farm side of the rural economy is doing well, the job-dependent, remittances driven and small traders section of it has not recovered in the post-COVID era.

“So they are postponing their purchase of a two-wheeler even though it’s a commuter vehicle… people are postponing the purchase of a two-wheeler and postponing the purchase of tyres also,” he said, adding it would have to be seen how the impact of a normal monsoon percolates to the overall rural economy.