Tyre Industry ICRA 03-2015

Tyre Feature - March 2015
ICRA RESEARCH SERVICES
Contacts:
Subrata Ray
+91 22 3047 0050
subrata@icraindia.com
Pavethra Ponniah
+91 44 4596 4314
pavethrap@icraindia.com
K Srikumar
+91 44 4596 4318
ksrikumar@icraindia.com
A M Pradeep
+91 44 4596 4312
arockia.pradeep@icraindia.com
Source: houseofjapan
Indian Tyre Industry

Tyre demand to pickup during 2015-16; margins to correct to more
sustainable long term levels
Page 1
ICRA LIMITED MARCH 2015
Table of Contents
Tyre demand to pickup during 2015-16; margins to correct to more sustainable log term levels ----------------------------------------------------------- 3
Indian Tyre industry performance: Industry profit margins operating at historic high levels ---------------------------------------------------------------- 4
Demand scenario: Domestic tyre demand to expand by 9-10% during 2015-16--------------------------------------------------------------------------------- 5
Supply scenario : Industry turns to consumer segment with bulk of capacities being added in 2W & PV segments ------------------------------------ 6
Tyre Imports: Imports surges in 2014-15 after a three year slowdown -------------------------------------------------------------------------------------------- 8
Tyre Exports : Heightened competition from Chinese players lead to flat tyre exports; ADD on Chinese tyres by USA provides good
opportunity for Indian tyre makers in US over medium term --------------------------------------------------------------------------------------------------------- 9
Raw material price trends: Domestic NR prices inch up with rise in global prices and government initiatives -----------------------------------------10
Raw material price trends: Fall in crude oil prices keep the prices of synthetic rubber and other chemicals lower -----------------------------------11
Outlook: Growing tyre demand and softer inputs to support margins during H1, 2015-16; future investments to increase ------------------------12
COMPANY SECTION ------------------------------------------------------------------------------------------------------------------------------------------------------------14
APOLLO TYRES LIMITED (Apollo) – Performance Overview (Pg 1 of 3) ---------------------------------------------------------------------------------------------15

BALKRISHNA INDUSTRIES LIMITED (BIL) – Performance Overview (Pg 1 of 3) -----------------------------------------------------------------------------------18
CEAT LIMITED (CEAT) – Performance Overview (Pg 1 of 3) -----------------------------------------------------------------------------------------------------------21
ELGI RUBBER COMPANY LIMITED (Elgi) – Performance overview (Page 1 of 3) ---------------------------------------------------------------------------------24
GOODYEAR INDIA LIMITED (Goodyear) - Performance Overview (Pg1 of 3) ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ 27
JK TYRE AND INDUSTRIES LIMITED (JKT) – Performance overview (Page 1 of 3) --------------------------------------------------------------------------------30
MRF LIMITED (MRF) – Performance overview (Page 1 of 3) ----------------------------------------------------------------------------------------------------------33
TVS SRICHAKRA LIMITED (Srichakra) – Performance Overview (Pg 1 of 3) ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 36
ICRA LIMITED Page 2

Tyre demand to pickup during 2015-16; margins to correct to more sustainable long term levels
ICRA continues to maintain a favourable outlook for the Indian tyre industry over the next 12 months . Expected growth in Industry Factsheet
domestic tyre volumes of 9-10% during 2015-16, with pickup in auto demand and an improving economy; continued Size: Rs. 525 Billion (FY14)
benefits of lower raw material costs, particularly during H1, 2015-16; and anticipated increase in exports are expected
Revenue CAGR (FY11 to FY14): 13.5%
to support demand for the industry.
Segment mix (in tonnage): FY14
With fall in global demand, prices of several key inputs are currently at all time lows. Over the next two-three quarters OEM 60%
we expect input prices to gradually increase, capping further margin expansion in 2015-16; ICRA expects margins Replacement 30%
during 2015-16 to correct by about 100-120 basis points. Exports 10%
Product mix (in tonnage): FY14
Capacity addition in the industry remains strong in anticipation of recovery in auto demand, supported by improved Commercial vehicles 54%
accruals generated on the back of a benign rubber prices. However, there appears to be a marked shift in the capex Passenger vehicles 17%
plans of tyre majors with the focus shifting from the commercial to the consumer segment. Two wheelers 14%
OTR 4%
Tyre imports have witnessed a sharp 22% YoY (annualized) growth in the first nine months of 2014-15 led by Tractors 9%
passenger vehicle and two wheeler segments. Subdued domestic market in China and anti dumping duties (ADD) on Others 2%
passenger and light vehicle on Chinese tyres imports into the US market has led to China diverting these surplus
capacities to countries like India. Market Share of OEMs – FY14
Following a 7.3% growth in FY-14, tyre exports from India witnessed flat volume growth for the first nine months (April 2014
to December 2014) of FY 15 due to the subdued global auto demand, and rising competition from Chinese tyre makers.
Industry growth Drivers

» Automobile demand
» Increasing radialisation with
strong thrust from OEMs
» Steady aftermarket demand
» Focus on geographical
diversification
ICRA LIMITED Page 3

Indian Tyre industry performance: Industry profit margins operating at historic high levels
Following a moderate 5.1% YoY growth during Q2 FY15, tyre manufacturers recorded almost flat (y-o-y) revenues during
Q3 FY15 (marginal 1.3% YoY growth). While tyre demand during Q3 FY15 was largely stable with decline in tractors and
Light commercial vehicles (LCV) being compensated by the Medium and Heavy Commercial Vehicles (M&HCV) and two
wheeler segment, falling input costs and heightened competition led to most players taking price cuts ranging 1-3%.
During Q3 FY15, key players like MRF and JK Tyres reported a 4-6% YoY growth while Apollo and CEAT witnessed a 1-2%
de-growth. TVS Srichakra, which enjoys a leadership position in the Indian 2W industry, continued to grow at a healthy
rate-recording a strong 16.9% (Y-o-Y) growth aided by strong demand from OEMs like Honda Motorcycle & Scooter India
(HMSI) and TVS Motor Company Limited (TVS). However, weak performance of players like Falcon Tyres (85% Y-o-Y
decline), the tractor dependant Goodyear India (11% Y-o-y decline) and Govind Rubber (12% Y-o-Y decline) dragged down
industry sales growth.
Aided by declining natural rubber (NR) and crude oil prices, the industry posted historic high profit margins in Q3, FY15
with operating and net profit margins reaching 16.2% and 7.8% respectively. With improved operating profit margins,
interest coverage ratio for the industry continues to trend high, reaching 7.6x during Q3 FY15.
Price cuts across segments
While most players posted expansion of 100-200 bps (Y-o-Y) in their operating margins, improvement for MRF (550 bps)
impacts revenue growth during and TVS Srichakra (300bps) were significantly higher. MRF enjoys the highest margins (next to the export focused
Q3 FY15; EBITDA margins at Balkrishna) in the peer group aided by favourable product mix (higher exposure to replacement & the brand conscious
historic highs as prices of NR and non-truck segments). However, despite the decline in RM costs, there was a drop in operating margins for players like
other crude linked derivatives Goodyear (130 bps, Y-o-Y) and Govind (62 bps, Y-o-Y) due to their sales skew restricted to declining segments. With shut
remains low down of key factories and significant decline in sales in the last three quarters, Falcon continues to report operating losses
for the fourth quarter in succession.
Exhibit 1: Trend in Revenue & Profitability Indicators Exhibit 2: Trend in Interest Coverage
8.0
OI (Rs. Bn.) OPM (%) NPM (%) Interest coverage (times) 7.6
120 16.2% 18% 7.0
16% 6.0
100
14%
5.0
80 12%
10% 4.0
60
6.3% 8% 3.0
3.2
40 6%
2.0
4%
20 1.0
2%
0 0% -
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Source: Company Data, ICRA’s Estimates
ICRA LIMITED Page 4

Demand scenario: Domestic tyre demand to expand by 9-10% during 2015-16

ICRA expects the domestic tyre industry to expand by 9-10% during 2015-16, supported by 10% pickup in OE demand and 8-
9% growth in replacement demand. We expect demand for automobiles in 2015-16 to be driven by the improvement in
economic environment, lower interest rates, increased public sector spend in infrastructure and improving consumer
confidence. Demand for two-wheelers is however expected to slow down as Motorcycle demand is likely to be impacted by
high base effect and relatively muted rural demand during H1,2015-16. Replacement market demand is expected to grow by
8-9% in 2015-16 benefiting from higher miles driven and increase in goods movement across the country. Upside to these
domestic demand estimations include, higher than anticipated pick up in two wheeler sales and T&B tyre both in the OEM
and replacement markets. ICRA expects export demand for tyres to grow by 10-12% (from flat to marginally down exports in
2014-15).
Exhibit 3: Automotive industry growth trend
Segment FY 11 FY 12 FY 13 FY 14 10m FY15 FY16(e)

Passenger Vehicles 26.5% 5.5% 2.7% -4.9% 3.4% 5-6%
Two-Wheelers 27.0% 15.6% 2.1% 7.2% 11.5% 1-3%
LCV 30.7% 31.2% 1.4% -13.5% -11.6% 4-6%
Pick-up in OEM demand coupled M&HCV 38.3% 11.3% -27.1% -21.0% 19.2% 12-14%
with higher replacement and Three-Wheelers 29.1% 10.0% -4.5% -1.1% 15.9% -
exports to spur demand in 2015- Tractors 23.0% 18.0% -7.6% 22.4% -10.4% 6-8%
16 Source: ICRA Estimates
Exhibit 4: Volume trends in demand for tyres Exhibit 5: Industry volume growth estimates
12%
500 10%
9-10%
511
10%
471
6-8%
Volume in Lacs
448
446
400 8%
435
427
6%
360
357
344
300
327
319
4%
265
200
2%
0%
64
0%
58
54
100
50
46
59
55
54
56
56
45
43
-2%
152
195
155
213
159
150
154
169
168
213
179
274
-2%
-
FY-11 FY-12 FY13 FY14E FY15E FY16P -4%
FY-12 FY13 FY14E FY15E FY16P
T&B Passenger Car LCV Scooters/3W Motorcycle Tractors
Source: Company Data, ATMA, ICRA’s Estimates
ICRA LIMITED Page 5

Supply scenario : Industry turns to consumer segment with bulk of capacities being added in 2W & PV segments
Exhibit 6: Trends in Industry wide capex and capacity utilisation
200 Capacity (Mn.) Completed Capex (Rs Bn) Capacity utilisation (%) 100%
180 95%
178.7
173.4
160 90%
171.9
86.5%
167.0
140 85%
151.0
144.0
120 79.4% 78.9% 80%
100 75.1% 75%
104.6
69.0% 70.9% 73.0%
80 70%
41.4
40.0
60 65%
33.3
29.0
24.2
23.8
40 60%
8.5
20 55%
0 50%
FY 09
FY 10
FY 11
FY 12
FY 13
FY 14
FY 15(e)
Tyre manufacturers now focusing
efforts on consumer segment
with capacity addition in the PV
and 2W segment gaining ground
Over the last few quarters, it has become evident that the tyre industry is investing in capacities with renewed vigour, in
anticipation of recovery in auto demand. The capex push has been supported by sizeable surplus generated on the back
of benign rubber price regime. However, there appears to be a marked shift in the capex plans of tyre majors with the
focus shifting from the commercial to the consumer segment.
Based on industry estimates and announced capex over the past several years, it is seen that as against 40+% of
investments (in volume terms) being dedicated to the TBR segment between 2010 to 2014, only 15% of the capacity
additions between 2015 and beyond will be in the TBR segment.
In contrast, the 2W and PV segments are seeing the highest capacity additions with these respectively forming 50+%
(32% between 2010-14) and 25+% (17% between 2010-14) of the total capacity additions beyond 2015.
Both 2W and PV are a direct play on the Indian consumption story and has strong potential for establishing a brand
driven market. Major investments in these segments are being made by MRF (across plants), CEAT (at Butibori) and by
TVS Srichakra (at Pantnagar and Madurai).
That said, bulk of the investments (in cost) continue to be skewed towards TBR segment given the higher per tonne
investment needed; almost 1.6x times the investment needed in similar bias capacity. The segment is also witnessing a
favourable trend where in radialisation at the OE level has crossed 70%, with overall industry radialisation levels being
pegged at over 35%.
ICRA LIMITED Page 6

Supply scenario (Contd...)
The T&B segment has finally crossed the inflexion point with radialisation 80% Exhibit 7: Trends and estimates in T&B Radialisation levels
levels set to cross over 50% over the next 2-3 years, supported by 70% 59%
increasing awareness of cost benefits, improving road infrastructure and 60%
52%
stringent implementation of overloading norms. With revival in the
50% 45%
domestic economy fuelling CV growth, investments in radial capacities are
40% 35%
expected to reap rich dividends. With radial demand replacing bias tyres,
30% 26%
tyre majors are witnessing a drop in bias capacity utilisations where 22%
15% 17%
competitive forces are leading to price revisions as well. 20%
9% 10%
The next phase of investments will also be towards conversion of idle bias 10% 5%
capacities into other product categories, as bias exports are also losing 0%
FY15(e)
FY 08
FY 09
FY 10
FY 11
FY 12
FY 13
FY 14
FY16 (e)
FY17 (e)
FY18 (e)
momentum given the global phenomenon of radialisation in the CV
segment.
Exhibit 8: Planned capacity additions over medium term

Company Location Product Category Capacity p.a Amount [Rs. Bn] Status
Apollo Tyres Kalamassery (Kerala) TBR 9.6 lac nos 16.5 Before Mar-16
Orgadam, Chennai (TN) OTR 1-2 lac nos 4.0 Sep-16
Balkrishna Industries Bhuj (Gujarat) Specialty OTR 9.0lac nos 4.0 Dec-15
Bridgestone India Chakan (Pune) PCR - Phase II 18 lac nos 28.1 Dec-15
TBR - Phase I 3.7 lac nos Dec-15
TBR - Phase II 7.3 lac nos After Mar-17
CEAT Halol(Gujarat) Radial tyres (UV&PC) 120TPD 6.5 Jul-15
Butibori (Maharashtra) Phase - I (2W) 15.5 lac nos 4.2 Mar-16
Butibori (Maharashtra) Phase - II & III 8.0 After Mar-17
JK Tyres Sriperumbudr (TN) TBR 8.0 lac nos 15.0 Apr-16
PCR 20 lac nos
Metro Tyres Manesar, Haryana Motorcycle, 2W/3W 36.0 lac nos 0.5 before Mar-16
Michelin Chennai (TN) TBR 17.0 lac nos 30.0 After Mar-17
MRF Limited Across all plants n/a n/a 40.0 Before Sep-17
Maxxis (Taiwan) n/a n/a n/a 4.0 Announced
TVS Srichakra Pantnagar (Uttarakhand) & Madurai (TN) 2w 2.4 lac nos n/a Dec-15
Source: CMIE, Company announcements and ICRA estimates
ICRA LIMITED Page 7

Tyre Imports: Imports surges in 2014-15 after a three year slowdown

Exhibit 9: Historical trends in Tyre Imports Exhibit 10: T&B tyre imports continues to decline
100 100%
91.9% In lac nos. FY11 FY12 FY13 FY14 9M FY15
80%
92
80
90
Truck and Bus 24.6 13.4 16.6 12.8 6.9
86
78
60% Growth 81% -46% 24% -23% -28%
71
60
15.7% 40% % of tyre demand 16% 9% 10% 8% 5%
21.9%
40
48
20%
-2.7% -4.3% Exhibit 11: PCR tyre imports rises sharply during 9m, FY15
20 0%
0 -20% In lac nos. FY11 FY12 FY13 FY14 9M FY15
-9.4%
Passenger vehicles 48.6 52.8 53.7 51.2 42.3
FY10
FY11
FY12
FY13
FY14
9mFY15
Growth 62% 9% 2% -5% 10%
Imports (lakh nos) Growth (%) % of tyre demand 16% 17% 15% 15% 16%
Source: DGFT, ICRA estimates Source: DGFT, ICRA Estimates
Following a 6% annual decline in tyre imports during the period FY11-14, partly due to the slowdown in domestic
tyre demand and a depreciating INR, imports have witnessed a sharp 22% YoY (annualized) growth in the first nine
months of 2014-15 led by passenger vehicles and two wheeler segments.
While import of passenger vehicle tyres (10% annualized growth) and two wheeler tyres (182% annualized growth)
grew in 9m FY15, T&B tyre imports continued to contract in 9m FY15 (28% annualised decline, following almost 23%
decline during 2013-14) with imports meeting only about 5% of the domestic demand, compared to 8-10% in the
previous years. Passenger vehicle and two wheeler tyres represents 72% of overall tyre imports into India during 9m
FY15 compared to 60-62% in the previous years.
Passenger and two wheeler
In January 2015, the US Commerce Department’s International Trade Administration levied preliminary anti dumping
tyre imports rise during 2014-
duties (ADD) on passenger and light vehicle Chinese tyres imported into the US market; currently duties vary
15 between 19.17% and 87.99% depending on the manufacturer. Final determination of the ADD is expected by mid
June 2015. This coupled with a relatively muted Chinese domestic market led to Chinese Tyre manufacturers
diverting their surplus capacities to countries like India.
Several other countries like Brazil also have ADDs/countervailing duties against Chinese tyre imports. India too, has
been requesting the GoI to correct the inverted duty structure in India under the peak import duty on NR stands at
20% while the duty for imported tyres is 8%.
While China is the largest exporter of tyres to India across all segments, other countries such as Thailand, Taiwan,
Spain, Vietnam and South Korea have a presence in specific segments. Despite their perceived inferior quality and
shorter life, Chinese tyres, by virtue of their price competitiveness, have dominated tyre imports to India.
ICRA LIMITED Page 8

Tyre Exports: Heightened competition from Chinese players lead to flat tyre exports; ADD on Chinese tyres by USA
provides good opportunity for Indian tyre makers in US over medium term
Exhibit 12: Export sales (in volume terms) Exhibit 13: Country wise Tyre exports (in value terms)
Segment wise FY14 9M, FY15 Country-wise sales FY14 10M, FY15
exports Volumes Growth Volumes Growth % of total YoY growth % of total YoY growth
(In lacs) (%) (In lacs) (%)* USA 9.8% 5.8% 10.8% 12.0%
Passenger cars 10.0 -6% 10.7 43% Germany 6.2% 20.0% 5.7% 4.0%
Motorcycle/Scooters 15.1 -10% 10.9 -4% UAE 5.0% -15.4% 4.4% -21.6%
Bicycles 202.2 -7% 153.4 1% Philippines 4.7% -14.8% 5.3% 7.5%
Truck and Bus 37.4 -74% 24.7 -12% Netherland 3.9% 23.0% 3.4% -7.9%
Tractors 14.1 208% 16.8 59% Bangladesh 3.7% 9.0% 3.6% -1.1%
Brazil 3.7% 67.6% 4.3% 29.7%
OTRs 6.1 202% 7.1 53%
Indonesia 3.3% -12.2% 3.2% -10.4%
Aircraft 0.1 -3% 0.1 85%
France 3.2% 20.3% 3.2% 12.2%
Others 20.3 -40% 5.1 -67%
United Kingdom 2.6% 24.7% 2.8% 18.1%
Total 305.3 -29% 228.7 -0.1%
Top 10 countries 46.0% 7.4% 46.8% 3.6%
* annualised Source: Department of Commerce, ICRA estimates
Source: Department of Commerce, ICRA Estimates
Following a 7.3% growth in FY-14, tyre exports from India witnessed flat volume growth for the first nine months (April
2014 to December 2014) of this fiscal. The modest growth is due to the subdued global auto demand, and rising
competition from Chinese tyre makers whose pricing are at significant discount to market rates. In value terms, for the
same period under comparison, total tyre exports stood at Rs.74.9 billion, representing a flat 1% YoY growth.
USA, Germany and UAE continue to absorb more than 20% of overall tyre exports (value) while the top ten countries
Tyre export volumes largely flat accounted for ~47% of overall tyre exports during 10m, FY15. During this period, exports to UAE and Indonesia (whose
during 2014-15. Heightened cumulative share of exports is 7.5%) declined by over 20% and 10% respectively due to higher competition from China.
global competition from Chinese However, exports to geographies like USA, Germany, Brazil, Philippines, France and United Kingdom (their cumulative share
tyres which have been hit by an of exports being 32%) has remained strong.
ADD from US, and the relatively Top six industry players account for ~77-79% of overall tyre exports led by Balkrishna Industries at 32% and MRF at 13%.
muted 7.1% growth in China’s Export focussed BKT enjoys strong demand from the farm segments in USA/Europe while other key players like MRF, JK
domestic automotive market Tyres, CEAT and Apollo have a more diversified product/geographic mix
coupled with the fall in demand
Going forward, while the competition from China will continue to remain a challenge, domestic tyre manufactures will
from Europe played spoil sport
benefit from the recovery in global auto demand over the next two to three years. Further if the recent levy of preliminary
anti-dumping duty (ADD) by the US on Chinese tyres is ultimately finalised in June 2015, this could translate into better
opportunities for Indian tyre exporters to the US.
ICRA LIMITED Pagea 9more broad based

Assuming a relatively stable currency, we expect 10-12% growth in tyre exports for 2015-16 and
Raw material price trends: Domestic NR prices inch up with rise in global prices and government initiatives
Exhibit 14: Monthly NR prices (domestic and global prices) Exhibit 15: Trends in NR supply gap and price movements
300 India NR (RSS-4) prices NR Supply gap (tons) Imports (tons)
275 Bangkok NR (RSS-3) prices Indian RSS-4 prices (Rs./kg) Bangkok RSS-3 prices (Rs./kg)
250 400,000 250.0
225 350,000 225.0
200 300,000
200.0
175 250,000
150 175.0
200,000
125 150.0
150,000
100
125.0
75 100,000
50,000 100.0
50
Rs. per kg
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
- 75.0
FY11 FY12 FY13 FY14 10M FY15
Widening supply gap propels NR Source: Company Data, ICRA’s Estimates

imports further in 9M, 2014-15
while the domestic NR prices rise Domestic Natural rubber (NR) prices hovered between Rs. 115-130 for the six months ending December 2014 following
weak domestic NR off-take, lower international NR prices with subdued global auto demand and declining crude oil prices.
with measures taken by the
However, prices have been on a gradual rise following the measures taken by the Government in December 2014 to
Government
support rubber farmers and also due to the rise in global NR prices.
Owing to the sustained lower level of NR prices, domestic rubber farmers cut down NR production. To protect their
interests and to boost NR prices, the Government took the following measures - (i) incentivise tyre OEMs to procure NR
locally with concessional sales tax, and (ii) reduced timeframe (18 months to 6 months) to meet export obligations (where
NR is procured through advance license scheme). These measures, along with the impact of rise in crude oil prices, pushed
domestic NR prices to Rs. 135-140 per kg in early March-15
Owing to the dip in domestic NR production, NR demand-supply dynamics shifted with the supply gap (32% of consumption
and 2.72 lacs MT for 10m FY15) met through imports. NR production and consumption in India stood at 574,000 MT and
846,065 MT respectively for the ten month period ending January 2015. For this period, while NR consumption rose by
3.8% YoY with improving auto demand, production declined by a sharp 14% despite conducive climates in Kerala. Steep
drop in NR production, especially during the peak season, is largely attributed to the lower tapping by rubber growers in
the wake of unfavourable realisations. For 2014-15, ICRA expects NR imports to breach 4 lacs MT (up 11% YoY) as global
prices continue to trade at a 15% discount on an average.
Going forward we expect domestic NR prices to remain range-bound; movement in global NR prices in the wake of volatile
crude oil prices and global auto demand will continue to drive domestic NR prices.
ICRA LIMITED Page 10

Raw material price trends: Fall in crude oil prices keep the prices of synthetic rubber and other chemicals lower
Exhibit 16: WTI Crude oil prices (USD per barrel) Exhibit 17: Price index-Crude oil, Synthetic rubber and Butadiene
115 Synthetic Rubber WTI Crude Oil Butadiene (Korea)
120.0
105 110.0
100.0
Crude oil prices plunge with rising 95 90.0
supplies of shale oil in USA, 85 80.0
70.0
OPEC’s reluctance to cut down 75 60.0
production, and demand 65
50.0
40.0
slowdown in Europe, Japan and 30.0
55
China 20.0
45 10.0
Jan-13
Mar-13
Jan-14
Mar-14
Jan-15
Nov-12
Nov-13
Nov-14
Sep-12
Sep-13
Sep-14
May-13
May-14
Jul-12
Jul-13
Jul-14
Oil prices
Aug-12
Aug-13
Aug-14
Dec-12
Dec-13
Dec-14
Apr-12
Oct-12
Feb-13
Apr-13
Oct-13
Feb-14
Apr-14
Oct-14
Feb-15
Jun-12
Jun-13
Jun-14
Prices of carbon black, rubber chemicals and synthetic rubber have dropped significantly in the recent months. Despite
their independent demand-supply dynamics, being crude derivatives, their prices exhibit a noticeable correlation to the
movements in crude oil prices, apart from currency rates.
Global crude oil prices, which declined by ~58% from US$ 107/bbl (WTI) in June 2014 to US$ 44/bbl by end of January 2015
due to - (i) the rise in supplies from the US shale fields and Canadian oil sands (ii) demand slowdown in Europe, Japan and
China, and (iii) reluctance of OPEC to cut production. However, prices gradually moved up to US$53 in February-15 and
have since remained volatile. Overall, oil prices are expected to remain significantly lower vis-à-vis previous years’ levels.
Synthetic rubber (SR) prices have fallen by 17% in the last six months – dropping from Rs. 194 per kg in August 2014 to Rs.
160 per kg in February 2015. Global SR prices typically trend in line with the prices of Butadiene as over 60% of Butadiene
production goes into manufacture of SR. In line with crude oil prices, Butadiene prices have also plunged considerably by
52% in the last six months but the impact on SR prices is generally seen with a time lag. Hence, we expect the SR prices to
correct further in the next one quarter.
Prices of other raw materials namely caprolactum (down 31%), carbon black (down 21%) and other rubber chemicals have
also declined in the last six months.

Outlook: Growing tyre demand and softer inputs to support margins during H1, 2015-16; future investments to increase
ICRA continues to maintain a favourable outlook for the Indian tyre industry over the next 12 months. Expected growth in
domestic tyre volumes of 9-10% during 2015-16, continued benefits of lower raw material prices, particularly during H1,
2015-16, and anticipated increase in exports are expected to support fortunes for the industry.
With fall in global demand, prices of several key inputs are currently at all time lows. Over the next two-three quarters we
expect input prices to increase gradually, although they are unlikely to reach the past highs anytime over the medium
term. Impact of these increases is expected to cap margin expansion in 2015-16; ICRA expects margins during 2015-16 to
correct by about 100-120 basis points.
Prices cuts and selective discounts in non moving brands and particularly in bias tyres is expected to continue in H1, 2015-
16, as few players realise the full impact of falling prices.
While the industry has already invested sizably in building capacities (over Rs. 110 billion) over the past three years, we
expect accruals build up over the past three years to be deployed in yielding capacities shortly. Focus has shifted from
capacity creation in the TBR segment to the consumer segments of 2W and Passenger vehicles.
ICRA anticipates some consolidation in the industry, as fringe players are absorbed by larger cash rich companies. In-
organic investments may also help cut down on the 18-24 month lead time required for any Greenfield/Brownfield
ICRA forecasts revenue CAGR of projects.
9-12% during 2014-17; Credit Despite these investments, net debt levels for the industry is expected to stay fairly stable over the next two years.
profile of the industry to improve
Exhibit 18: NR price movement and operating margins Exhibit 19: Projected Revenue trend
Revenue (Rs. bn) Growth (%)
OPM (%) NPM (%)
600 32% 35%
14% 14%
500 26% 30% 13%
14% 12%
25% 11% 11%
400 12%
20% 9%
300 10% 8%
9% 11% 10% 15%
200 8% 8% 6% 6%
6% 7% 10% 5%
6% 5% 5%
4% 4%
100 4%
256
338
370
391
418
451
499
547
5%
4%
0 0%
2%
FY11 FY12 FY13 FY14 FY15P FY16P FY17P FY18P
FY11 FY12 FY13 FY14 FY15P FY16P FY17P FY18P

Exhibit 20: Capital expenditure plans Exhibit 21: Estimated Leverage ratios
60 Capex (Rs. bn) Tangible Networth (Rs. bn) Net Debt (Rs. bn)
44
38
40 34 33
28
24
17
20
107
135
201
103
62
59
92
90
-
FY12 FY13 FY14 FY15P FY16P FY17P FY18P FY11 FY12 FY13 FY14 FY15P FY16P FY17P FY18P
Exhibit 22: Capital structure Exhibit 23: Coverage indicators
Net Debt/Tangible Networth Net debt/OPBDITA OPBDITA/Interest Expense NCA/Net Debt (%)
3.2
10 100%
3.0 2.6 2.3
1.8 8 6.6 80%
1.7 1.8 1.7
2.0 1.5 5.7 5.3
1.2 1.1 6 4.8 60%
1.0 0.9
1.0 0.7 0.7 0.6 0.5 41%
4 40%
34% 39%
- 2 20%
FY11 FY12 FY13 FY14 FY15P FY16P FY17P FY18P FY11 FY12 FY13 FY14 FY15P FY16P FY17P FY18P

COMPANY SECTION

APOLLO TYRES LIMITED (Apollo) – Performance Overview (Pg 1 of 3)

Price cuts, closure of South African manufacturing unit and weak EU demand resulted in revenue de-growth; however, profitability is expected to be sustained
supported by demand recovery in India and sustained benign rubber prices nd
Ratings
Company Profile -Apollo Tyres Limited (Apollo) is the 2 largest
Apollo - Fact Sheet (Accounting period-April to March) manufacturer of tyres in India with a market share of ~18% (in NA
Year of Incorporation 1972 tonnage terms). Apollo currently has manufacturing facilities Shareholding Pattern (%)
Chairman Mr. Onkar Kanwar located in Kerala, Gujarat, and Tamil Nadu. With a strategic
Promoters 44%
Product Portfolio Automotive tyres and tubes intent to establish a global footprint, Apollo acquired Dunlop
FIIs 35%
Kerala (2), Gujarat, Tamil Nadu, Europe and Tyres (South Africa) in FY2007 and Vredestein (Netherlands) in
Manufacturing Facilities DIIs 8%
South Africa (1) FY2010. In FY2014 Apollo Tyres sold its Ladysmith passenger car Others 13%
Segments Present T&B, Passenger Car, LCV, 2W/3W, OTR tyre plant in South Africa (SA) and Dunlop brand rights in 32
Revenues FY14 (Consol) Rs. 133.1 billion countries to Sumitomo Rubber Industries for US$ 60 million. Price Performance (%)
PAT FY14 (Consol) Rs. 10.1 billion
Apollo has now closed its Dunlop plant under a business rescue
Net Worth FY14 (Consol) Rs. 45.7 billion 3M 12M
plan and only has trading operations in SA. Apollo supplies tyres
Apollo -23.4% 32.9%
Consolidated Q3 FY15 Q3 FY14 Q2 FY15 9m FY14 9m FY15 to wide range of passenger cars, SUV, MUV, light truck, BSE Auto 4.0% 58.6%
Operating Income 31.0 34.8 33.2 101.0 96.7 truck‐bus, agriculture, industrial, specialty, bicycle and BSE Sensex 2.3% 39.0%
Growth (%) - YoY -6.3% 8.0% 2.1% 3.5% -4.3% off‐the‐road. Production of winter tyres in the European market
OPBDIT 4.9 4.8 4.9 13.0 14.1 further adds diversity to product offerings. Apollo’s overall Stock Movement
Less: Depreciation (0.9) (1.1) (1.1) (3.1) (3.0) capacity stood at ~1,685 MTPD (metric tonnes per day) as of
2,000 Volumes (in lacs) 300
Less: Int. Charges (0.5) (0.7) (0.5) (2.2) (1.5) December 2014. Apollo is uniquely positioned as a player with a
Stock Price (Rs.)
250
Other Income 0.1 1.3 0.2 1.6 0.6 strong domestic as well as overseas presence. With incremental 1,500
200
Exceptional P/L 0.8 0.3 - 0.3 0.8 spends to expand capacities, grow its channel network and
1,000 150
PBT 2.8 4.1 3.6 9.0 9.4 aggressively market its brand across the globe, Apollo has strong
PAT (Concern Share) 1.8 3.4 2.6 7.2 6.7 100
ambitions to be a global leader in the tyre industry. As a result, 500
50
Stock price
Apollo is open to both organic as well inorganic growth options,
Volumes
OPBDIT/OI(%) 15.8% 13.9% 14.9% 12.9% 14.6% 0 0
as seen in the past where acquisitions drove growth.
Feb-14
Apr-14
Aug-14
Feb-15
Jun-14
Dec-14
Oct-14
PAT/OI (%) 5.9% 9.7% 7.8% 7.2% 6.9%
Source: Company, ICRA Estimates; Amounts in Rs. billion
Business Profile - Apollo has a diversified geographical mix of revenues. In 9m FY2015, 65% of the total revenues were derived from the Indian Bloomberg Code APTY
operations while the other geographies, namely Europe and South Africa added around 30% and 4% respectively. Segment-wise on consolidated Market Cap. (Rs. Billion) 88.7
basis, around ~79% of total sales was from the replacement market; this insulates revenues from the cyclical risk in the automobile industry,
especially in the OEM segment (Apollo’s revenue from OE business is ~20%).Product-wise, Truck & Bus (T&B, including LCVs and off-highway Valuations
vehicles) and passenger vehicles added ~65-70% (~46% from T&B alone) and 36% to the total revenues, respectively in 9m FY2015.
FY15e FY16e
Standalone Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Price/Earnings 8.7x 7.5x
Operating Income 20.4 20.4 21.6 21.1 22.3 22.1 23.1 22.5 21.2 Price/Sales 0.7x 0.6x
Growth (%) - YoY -2.7% -9.9% 0.6% -7.7% 9.4% 8.7% 6.6% 6.7% -4.8% Source: Bloomberg consensus estimates
OPBDIT/OI (%) 10.1% 10.9% 11.4% 12.7% 13.8% 12.0% 12.5% 14.5% 15.3%
PAT/OI (%) 3.6% 3.1% 4.0% 5.2% 9.9% 6.9% 6.0% 7.2% 7.6%
Source: Company, ICRA Estimates; Amounts in Rs. billion


Higher share of revenues from the T&B segment exposes Apollo’s revenues and profitability to the cyclicality in
EBIT / Sales the CV industry, although the company’s diversified geographical presence, wide product offerings and large
-1.0%
RoW Sales mix
1.1% client base at the consolidated level mitigates the risk to a large extent. In the Indian operations, Apollo’s
11.9%
replacement to OEM mix is 80:20, within which the share of income from the commercial segment, T&B, is
India
65.2% above 60%. Aided by strong market presence, established brand name and a wide distribution network, Apollo
-4.9% is the market leader in the T&B radial segment with an estimated market share of ~28% (in volume terms).
South Africa
4.2% Share in the PC and T&B bias also stood at ~20% and ~25% respectively.
12.5%
Europe Revenue Growth - During Q3FY15, Apollo’s revenues de-grew by 6% on a consolidated basis and by 5% on a
29.5%
standalone basis. On the domestic front, price cuts in bias tyre segment and weaker demand from tractor and
0%
10%
20%
30%
40%
50%
60%
70%
-10%
LCV segments contributed to de-growth. On a consolidated basis, closure of operations in South Africa, weaker
Figure 1 :Consolidated sales breakup and margins [Q3, 2014-15] winter tyre demand in EU (owing to late onset of winter) coupled with price reduction owing to competitive
pressures have led to revenue decline on a sequential and yoy basis. That said, domestic revenue growth is
T&B PV Others
100% expected to be supported by auto demand recovery. However, with the closure of manufacturing operations in
35% 17%
35% 17%
35% 17%
18%
18%
18%
34% 19%
32% 20%
32% 20%
South Africa and prevalent muted demand in EU, overseas revenues are likely to be muted over the near term.
80%
36%
36%
37%
60% Profitability - On a consolidated basis, operating margins expanded by 190bps (yoy) while on a standalone basis
40% the margins expanded by 150 bps supported by benign raw material prices, despite price cuts. Lower production
costs (owing to stock clearance) and lower marketing expenses (PY - large spend on advertisement) also
48%
48%
48%
48%
48%
47%
46%
46%
45%
20%
supported the margin expansion. For 9MFY15, the margin expansion has been at similar levels, expanding by
0% 170bps on a consolidated basis and 140 bps on a standalone basis. At the net level, the growth has been equally
Q3 FY13
Q4 FY13
Q1 FY14
Q2 FY14
Q3 FY14
Q4 FY14
Q1 FY15
Q2 FY15
Q3 FY15
strong supported by lower debt leading to lower interest costs in the India operations. At consol level, however,
the impact of scale de-growth and that of one-time provisioning for retrenchment in SA operations (~Rs. 790
mn) have led to lower net margins. Going forward, expected increase in depreciation and interest expense on
Figure 2:Quarterly trends in Category mix [Consolidated] the back of debt funded capex is expected to further temper consolidated net margins. Operating margins,
NR SR Carbon black NTCF
however, are likely to be sustained, owing to extended periods of benign NR prices given the current surplus
supply situation in the global rubber markets, notwithstanding competitive pressures on pricing.
235
230
230
255
260
295
295
295
290
Outlook and capex plans- Apollo is on track to augment TBR capacities at the Chennai plant (before Mid-2016)
by ~190TPD with a capex of Rs. 15bn, apart from a Rs. 5bn capex over three years to convert the Kerala
150 80
140 80
140 78
130 87
120 85
140 80
160 140 87
150 140 87
137 140 86
capacities into OTR from T&B cross ply. The focus in India will be on growing the radial business where per tyre
margins are higher and also to try and convert truck bias capacities into other products to optimize utilisation.
At global level, Apollo is now focusing on expanding operations in Europe, ASEAN and Africa. While in ASEAN
190
182
180
178
175
160
and Africa, Apollo will only have marketing offices for trading and expects to utilise Indian capacities to cater to
Q3 FY13
Q4 FY13
Q1 FY14
Q2 FY14
Q3 FY14
Q4 FY14
Q1 FY15
Q2 FY15
Q3 FY15
this region, in Europe, the management is investing EUR 500mn (~RS. 40bn, starting April 2015) over a period of
five years to setup a Greenfield capacity of 330MT/Day (16,000 car and 3,000 truck tyres per day). The
investment will be initially funded by accruals (30%) with back ended debt to be drawn in FY2016 and FY2017.
Figure 3:Quarterly trends in raw material costs (Rs / kg) The management is also investing heavily in improving its brand image in the market in line with its ambitious
global expansion plans. Given its currently healthy balance sheet (D/E 0.2x and cash of ~Rs. 6 bn), improving
Source: Company Data and ICRA research
brand and geographic presence, coupled with proposed investments to augment global capacities, Apollo is well
positioned to leverage the expected growth in demand over medium to longer term.

Table: Key financial indicators (Consolidated annual trend)
Profit & Loss 2011-12 2012-13 2013-14 Key Financial Ratios 2011-12 2012-13 2013-14
Net sales 121.5 127.9 133.1 Growth indicators
Other related income - - - Sales Growth 37.1% 5.3% 4.0%
Operating Income (OI) 121.5 127.9 133.1 EBITDA Growth 19.2% 24.9% 21.8%
OI Growth Profitability indicators
EBITDA 11.7 14.6 17.7 EBITDA Margin 9.6% 11.4% 13.3%
Depreciation 3.3 4.0 4.1 EBIT Margin 7.2% 9.0% 11.7%
EBIT 8.7 11.5 15.6 PAT Margin 3.4% 4.8% 7.6%
Interest expenses 2.9 3.1 2.8 RoE 15.7% 19.7% 25.2%
Other income/expense 0.3 0.9 2.0 RoCE 15.9% 20.0% 23.9%
PBT (before extraordinary income) 5.9 8.4 12.8 Liquidity ratios
Extraordinary Gain/Loss - 0.3 0.2 - 0.5 Debtor (days) 34 28 29
PAT 4.1 6.1 10.1 Inventory (days) 72 72 74
Minority interest (MI) 0.0 0.0 - Net working capital/Revenues 11.4% 11.1% 10.4%
PAT (concern share) 4.1 6.1 10.1 Capitalization Ratios
Liabilities Total Debt/ Equity + MI 1.0 0.8 0.4
Net worth 28.3 34.0 45.7 Interest coverage 4.1 4.7 6.3
Minority interest 0.0 - - Total Debt/EBITDA 2.5 1.8 0.9
Total Debt 25.5 22.8 9.9 Amounts in Rs. Billion
Non-Operating Non Current Liability 0.5 1.4 1.4
Deferred Tax Liability 4.0 4.9 5.2
Trade Creditors 12.9 10.1 12.5
Other Current Liabilities and Prov. 12.7 12.1 15.5
Total Liabilities 83.9 85.3 90.3
Assets
Net Fixed Assets 44.9 46.3 46.4
Capital Work in Progress 2.0 3.0 4.0
Total Net Fixed Assets 44.9 46.3 46.4
Total Long-Term Investments 0.2 0.5 0.6
Cash and Bank Balances 1.7 3.3 6.5
Receivables (incl. bills discounted) 11.5 9.9 10.4
Inventories 20.0 20.3 20.7
Loans & Advances - - -
Other Current Assets 5.7 4.8 5.7
Total Current Assets 38.9 38.4 43.3
Total Assets 83.9 85.3 90.3

BALKRISHNA INDUSTRIES LIMITED (BIL) – Performance Overview (Pg 1 of 3)
Sales growth decelerates and margins drop during Q2, 2014-15; weak demand outlook in Europe and US to impact revenue growth Ratings
BKT- Fact Sheet (Accounting period - April to March) Company Profile: Incorporated in 1961, Balkrishna Industries NA
Year of Incorporation 1961 Limited (BIL) is the flagship entity of Siyaram Group. BIL produces
Chairman Mr. Dharaprasad Poddar Off-Highway Specialty Tyres (OHT), which finds application in Shareholding Pattern (%)
Product Portfolio Rubber tyres agricultural, industrial, material handling, construction, forestry,
Promoters 58%
Aurangabad (Maharashtra), Bhiwadi & earthmoving, lawn and garden vehicles and all terrain vehicles.
Manufacturing Facilities FIIs 13%
Chopanki (Rajasthan), Bhuj (Gujarat)
DIIs 16%
Segments Present OTR, Agricultural and Industrial tyres Business Profile: Segment wise, agriculture segment contributes Others 12%
Revenues FY14 (standalone) Rs. 31.9 billion 63% of total sales and OHT segment represents 33%. BIL derives
PAT FY14 (standalone) Rs. 4.9 billion major portion of revenues from exports (88% of sales in H1 FY15)
Net Worth FY14 (standalone) Rs. 18.8 billion Price Performance (%)
and largely caters to replacement market. BIL has been working
on improving its direct supplies to the global OEMs; accordingly 3M 12M
Standalone Q3FY14 Q3FY15 Q2FY15 9MFY14 9MFY15
replacement sales have dropped to 76% in 9M, FY15 (from 90% BIL -4.8% 52.8%
Operating Income 8,844.2 9,602.8 9,251.5 25,398.8 28,464.1
BSE Auto 4.0% 58.6%
Growth (%) - YoY 25.5% 8.6% 10.2% 12.1% two years back).
BSE Sensex 2.3% 39.0%
OPBDIT 2,289.0 2,640.9 2,082.9 6,099.7 7,110.1
Less: Depreciation (425.4) (657.8) (600.3) (1,170.9) (1,825.1) BIL exports tyres to customers in over 130 countries and has a
Less: Int. Charges (58.8) (110.5) (152.1) (171.0) (379.2) strong global network comprising of above 200 distributors. BIL’s Stock Movement
Other Income 52.3 32.8 10.5 266.7 53.8 key markets are Europe and America; and has expanded into 80 Volumes (in lacs) 1,000
Stock Price (Rs.)
Exceptional P/L - - - - - other markets like Asia, Africa, Middle East and Russia in recent 800
60
PBT 1,857.1 1,905.4 1,341.0 5,024.5 4,959.6 years. Europe, which accounted for 51% of sales volume in 9M, 600
PAT 1,238.5 1,299.0 900.0 4,418.1 3,277.3 40
FY15 has been BIL’s growth driver in the recent years; but near 400
term demand outlook is subdued. Sales to USA, which accounted 20 200
OPBDIT/OI (%) 25.9% 27.5% 22.5% 24.0% 25.0% for 20% of sales volume in 9M, FY15 is showing signs of demand
Stock price
0 0
PAT/OI (%) 14.0% 13.5% 9.7% 17.4% 11.5%
Volumes
Feb-14
Apr-14
Feb-15
Aug-14
Jun-14
Dec-14
Oct-14
revival especially in mining and construction sector. Domestic
Source: Company, ICRA Estimates; Amounts in Rs. Million market, adding 12% of sales in Q2 2014-15, add strong visibility
Note: Standalone financials are considered; consolidated data includes textile and paper to revenues as auto demand is gaining traction in the recent
operations too – these segments are in the process of demerger.
past.
In the global OHT segment, BIL is a small player commanding 4% market share; however it enjoys strong pricing advantage as compared to other Bloomberg Code BIL
Market Cap (Rs. bn) 59.3
key global majors due to its lower cost of manufacturing in India. Further with its new capacities at Bhuj facility getting on stream, BIL enjoys strong
headroom for sales growth from next fiscal.
Standalone Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Valuations
Operating Income 8,853.7 7,047.3 7,793.0 8,158.8 8,395.8 8,844.2 10,368.4 9609.8 9251.5 9602.8 FY15e FY16e
Growth (%) - YoY 31.7% -7.1% -1.2% -1.9% -5.2% 25.5% 33.0% 17.8% 10.2% 8.6% Price/Earnings 12.5x 10.3x
OPBDIT/OI (%) 21.0% 22.1% 20.0% 21.9% 24.1% 25.9% 25.8% 24.8% 22.5% 27.5% Price/Sales 1.5x 1.2x
PAT/OI (%) 14.0% 10.6% 10.9% 12.6% 12.9% 14.0% 14.9% 12.0% 9.7% 13.5% Source: Bloomberg consensus estimates
Source: Company, ICRA Estimates; Amounts in Rs. Million

BALKRISHNA INDUSTRIES LIMITED (BIL) – Performance overview (Pg 2 of 3)

Sales Volumes (MT) Volume growth (%) Revenue Growth: Following a 10.2% YoY sales growth during Q2FY15, BKT reported an 8.6% YoY sales
Blended realisation growth (%) growth during Q3FY15. The sales was affected by a sharp 10% YoY decline its blended realisations due
50,000 25%
to the pricing cut taken on the back of steady decline in rubber prices. Volumes, which were impacted
20%
40,000 during Q1FY15 and Q2FY15 due to weak demand in Europe, recovered in Q3FY15 with a sharp 20% rise
15%
with improved demand in USA. For 9MFY15, BIL achieved 12% sales growth aided by 12.6% jump in
30,000 10%
volumes while realisations declined by 0.5%. BIL targets sales volume of 155,000 MT (up 8.5% YoY) for
5%
FY15, implying 2% volume de-growth in Q4FY15. BIL expects to achieve 13% volume growth (guidance
20,000 0%
revised from 25%) for FY16 with ramp up of Bhuj plant and expected demand recovery in Europe.
-5%
10,000
-10% Profitability: BIL’s operating margins have been traditionally high aided by better realisations with its
- -15% presence in niche product segments in export markets and favourable currency movements. BIL’s
Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 margins have remained higher than other established domestic peers owing to its presence in the OTR
segment, which typically is of higher tonnage / superior technology than traditional T&B or consumer
Figure 1: Trends in BKT’s sales volume and realizations
tyres and commands better realisations. Within exports, BIL has a large exposure (76%) to replacement
Operating Income (Rs. Mn) YoY Growth (%) segment, which offers steady volumes and stable margins. BKT’s margins declined during Q2FY15 due
12,000 60%
50%
to high levels of discounting despite lower NR prices, however improved by 162 bps during Q3FY15
10,000
40% (despite pricing cut) as NR prices remained lower on a sustained basis. Going forward, while operating
8,000 30% margins are likely to remain strong, net margins are likely to be affected with the rise in interest costs
6,000 20% on debt taken for Bhuj project and depreciation charge upon phased ramp up of operations.
4,000 10%
0% Capex: BIL has its manufacturing facilities at Waluj, Bhiwadi, Bhuj and Chopanki with a total capacity of
2,000 -10% 160,000 MT. BIL is in midst of a major capex with plans to reach 300,000 MT by end of 2015-16, the
0 -20%
incremental capacities of 140,000 MT being built at Bhuj. BIL has commissioned 60,000 MT during
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
2013-14 and expects commissioning of another 60,000 MT by 2014-15. As BIL currently operates at 78%
capacity utilisation, the expansion and ramp up of operations will provide headroom for improvement
in market share. BIL plans to manufacture radial, large and ultra large specialty tyres from its new
Figure 2: Growth trends in Operating Income
30.0%
facility. BIL also expects sizeable cost reduction due to the plant’s proximity to the port and better
Operating Margin (%) Net Margin (%)
savings on fuel costs apart from higher focus on non-agricultural tyres. For the project, Rs. 25.7 billion
25.0%
has been incurred; of this Rs. 19.5 billion has been capitalised till December 2014.
20.0%
15.0% Outlook: BIL’s strong presence in the niche segment and replacement markets, entry into new
10.0% geographies, expected increase in global market share (currently stands at ~5%-6%) and higher share of
5.0% relatively high margin radial OHT tyres (currently stands at 30%) should support the revenue growth in
0.0% the long term. On the margin front, the change in product mix, expected reduction in overall costs with
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
the phased ramp up of new plant and softer currency should support the margin expansion. However,
once Bhuj project is operational, the impact of interest costs and depreciation upon capitalisation of
project costs is likely to keep net margins under pressure for next 2-3 years.
Figure 3: Movement in margins
BALKRISHNA INDUSTRIES LIMITED (BIL) – Performance overview (Pg 3 of 3)

Profit & Loss 2011-12 2012-13 2013-14 Key Financial Ratios 2011-12 2012-13 2013-14
Net sales 27,948.2 31,730.8 35,356.9 Growth indicators
Other related income 251.4 174.9 410.3 Sales Growth 45.8% 13.1% 12.1%
Total revenue 28,199.6 31,905.7 35,767.1 EBITDA Growth 87.6% 29.1% 31.8%
OI Growth 4.6 1.3 1.2 Profitability indicators
EBITDA 5,250.3 6,780.1 8,937.9 EBITDA Margin 18.6% 21.3% 25.0%
Depreciation 831.4 1,077.1 1,649.6 EBIT Margin 15.7% 17.9% 20.4%
EBIT 4,418.9 5,703.0 7,288.3 PAT Margin 9.5% 11.2% 13.7%
Other income/expense (159.2) (92.8) 138.4 RoCE 23.7% 24.6% 23.9%
PBT (before extraordinary income) 3,982.2 5,352.0 7,177.0 Liquidity ratios
Extraordinary Gain/Loss - - - Debtor (days) 62 57 63
PAT 2,685.2 3,558.3 4,883.7 Inventory (days) 85 71 87
Minority interest (MI) - - - Net working capital/Revenues 32.3% 26.8% 29.2%
PAT (concern share) Capitalization Ratios
Liabilities 2011-12 2012-13 2013-14 Total Debt/ Equity + MI 1.5 1.5 1.2
Net worth 10,800.9 14,189.7 18,848.0 Interest coverage 18.9 26.3 35.8
Minority interest - - - Total Debt/EBITDA 3.2 3.1 2.6
*Total Debt 16,731.8 20,744.3 23,500.1 Amounts in Rs. million
Non-Op. Non Current Liability - - -
Deferred Tax Liability 625.9 998.6 1,721.8
Trade Creditors 2,344.7 2,425.4 3,430.8
Other Current Liabilities and Prov. 1,912.4 1,529.3 1,239.5
Total Liabilities 32,415.7 39,887.2 48,740.2
Assets 2011-12 2012-13 2013-14
Net Fixed Assets 10,530.7 15,131.8 24,703.5
Capital Work in Progress 4,498.7 9,455.1 4,763.4
Total Net Fixed Assets 15,029.4 24,586.9 29,466.9
Total Long-Term Investments 87.4 - 3,650.0
Cash and Bank Balances 3,574.0 2,663.1 98.0
Receivables (incl. bills discounted) 4,801.0 5,044.9 6,184.7
Inventories 4,810.7 4,325.5 5,290.8
Loans & Advances 377.8 329.1 671.1
Other Current Assets 3,735.3 2,937.7 3,378.7
Total Current Assets 16,921.1 14,971.2 14,952.2
Total Assets 32,415.7 39,887.2 48,740.2
Amounts in Rs. million

CEAT LIMITED (CEAT) – Performance Overview (Pg 1 of 3)
Moderate revenue growth; margins recover in Q2, 2014-15 backed by lower raw material prices Ratings
CEAT - Fact Sheet (Accounting period-April to March) Company Profile - Part of the RPG group, CEAT is engaged in NA
Year of Incorporation 1958 manufacturing/trading of automotive tyres, tubes and flaps.
Chairman R.P. Goenka CEAT and MRF are the domestic tyre entities to have presence
Product Portfolio All segments of automotive tyres Shareholding Pattern (%)
Bhandup, Nashik – Maharshtra
across all automotive segments (T&B, LCV, Industrial, OTR,
Manufacturing Facilities Promoters 51%
Halol – Gujarat Farm equipments, Car & Jeep and 2W and 3W segments).
FIIs 25%
Segments Present T&B, P. Car, LCV, 2W/3W, Motorcycle, OTR tyres CEAT has three manufacturing facilities with a total installed
Revenues FY14 (Consol) Rs. 60.5 billion DIIs 6%
capacity of 600 MTPD located at Bhandup (Mumbai), Nasik
PAT FY14 (Consol) Rs. 2.7billion Others 18%
and Halol (Gujarat). Besides its own capacities, CEAT also
Rs. 10.2 billion
Net Worth FY14 (Consol) outsources a portion of its production, including which Ceat’s
(not adjusted for revaluation reserves) Price Performance (%)
total capacity is estimated to be ~750 TPD. Apart from its
Standalone Q3FY14 Q3FY15 Q2FY15 9MFY13 9MFY14 plants in India, CEAT had three manufacturing facilities in Sri 3M 12M
Operating Income 13,858.3 13,656.7 13,816.4 39,468.6 41,580.1 Lanka in a joint venture (JV) company-Kelani Tyres Limited. CEAT -17.5% 165.3%
Growth (%) - YoY 15.3% -1.5% 7.9% 5.3% The company has a pan Indian distribution network consisting BSE Auto 4.0% 58.6%
OPBDIT 1,483.3 1,706.3 1,622.2 4,598.9 4,608.7 of 3,500+ dealers and 300+ franchisees. BSE Sensex 2.3% 39.0%
Less: Depreciation (203.6) (232.0) (214.2) (619.9) (656.4)
Less: Interest Charges (410.5) (305.5) (346.1) (1,272.5) (1,041.5) Business Profile - CEAT is the fourth largest player in the
Stock Movement
Other Income 39.8 46.7 156.1 172.8 230.6 Indian tyre industry in terms of revenues after MRF, Apollo
Tyres and JK Tyre and had an overall market share of ~11% in Volumes (in…
Exceptional P/(L) - - - - - 400 1,000
PBT 909.0 1,215.5 1,218.0 2,879.3 3,141.4 2013-14. T&B segment is the major revenue driver accounting 300 800
PAT (Concern Share) 608.5 806.3 821.0 1,952.3 2,095.3 for 46% of revenues. However, CEAT has been consistently 600
200
focusing on increasing its presence in the relatively more 400
100
OPBDIT/OI (%) 10.7% 12.5% 11.7% 11.7% 11.1% profitable non-truck segment which includes the passenger 200
Stock price
PAT/OI (%) 4.4% 5.9% 5.9% 4.9% 5.0% car, 2W and farm equipment segments. As a result, the 0 0
Volumes
Feb-14
Aug-14
Feb-15
May-14
Nov-14
Source: Company Data, ICRA Estimates, Amounts in Rs. Million contribution of non-truck segment to revenues has increased
from 44% in FY11 to 58% in 9M FY15.
Segment mix FY10 FY11 FY12 FY13 FY14 9MFY15
Product mix FY10 FY11 FY12 FY13 FY14 9MFY15
OEM 10% 13% 16% 20% 22% 21%
Replacement 73% 69% 61% 57% 58% 61% Trucks 60% 58% 53% 52% 46% 42% Bloomberg Code CEAT
Exports 17% 18% 23% 23% 20% 18% Non-trucks 40% 42% 47% 48% 54% 58% Market Cap (Rs. bn) 31.5
Source: Company Data, ICRA Estimates Source: Company Data, ICRA Estimates
Standalone Q2FY13 Q3 FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Valuations
Operating Income 11,731.5 12,051.0 13,106.4 12,800.2 12,810.2 13,858.3 14,079.6 14,107.0 13,816.4 13,657 FY15e FY16e
Growth (%) - YoY 4.9% 13.3% 7.2% 7.6% 9.2% 15.3% 7.4% 10.2% 7.9% -1.5% Price/Earnings 9.8x 8.4x
Source: Company Data, ICRA Estimates; Amounts in Rs. Million

CEAT LIMITED (CEAT) -Performance Overview (Pg 2 of 3)

Figure 1: CEAT - Product wise (volumes in tonnages) Revenue Growth - CEAT’s standalone revenues de-grew by 1.5% YoY during Q3FY15 as the company (like other
major players) took price cuts as the company passed on the benefit of lower raw material costs. For 9MFY15,
Others
6% CEAT’s standalone revenues grew by 5.3% YoY; the growth being affected in the last two quarters with pricing cuts
M. Cycle effected across the product segments. During Q3FY15 CEAT’s overall sales volumes remained flat even as export
22% T&B volumes de-grew by ~10% while OEM volumes were up by a modest 5% YoY. Exports remained sluggish due to
42%
increased competition from Chinese tyre manufacturers whose pricing continues to remain at discount to market
Tractor rates. In the domestic market, OE demand remains steady especially in the passenger car, motorcycle and UV
7% segments while replacement demand was flat during Q3 FY15. Increased demand and brand awareness has
LCV helped CEAT to increase its market share in the 2W segment from 8% in 2011-12 to above 20% in 9M FY15.
13% P.Cars/UV
10%
Profitability- Favourable product mix coupled with a benign raw material environment has supported CEAT’s
Figure 2: Growth trends in Operating Income
profit margins in the last few quarters. Following a 120 bps decline (YoY) in Q2FY15, the company’s standalone
Operating Income (Rs. Mn) YoY Growth (%)
16,000 18.0% operating margins bounced back recovering by 180 bps in Q3FY15 aided by lower raw material costs. Decline in
14,000 16.0% natural rubber and crude prices have significantly benefitted domestic tyre manufacturers in last two quarters. In
14.0%
12,000 12.0% line with improvement in operating margins, net margin also improved by 150 bps.
10,000 10.0%
8.0% Capex – CEAT’s Halol plant which was commissioned in October 2011 reached near full capacity utilisation in FY14.
8,000
6.0%
6,000 4.0%
In view of the healthy demand from passenger car and UV segments, CEAT is planning to expand the capacity at
4,000 2.0% Halol by another 120TPD by incurring a capex of Rs. 6.5 billion spread over 2014-16. CEAT is also in the process of
0.0%
2,000 setting up a 65 TPD bias tyre project in Bangladesh (in a 70% JV with Bangladesh based AK Khan & Co) at ~Rs3.6
-2.0%
0 -4.0% billion. The plant is expected to be commissioned by H1FY16 and will cater to the T&B, LCV and 2W segments.
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
CEAT is also forming a JV for setting up a 2W tyre manufacturing plant with a capacity of 60TPD. CEAT plans to
invest Rs. 4.2 billion in setting up a green field in 2/3W plant with an installed capacity of 120 TPD. The new plant
is likely to be commissioned by Q1 FY17 (and will take the company’s installed 2W tyre capacity to ~380 TPD.
15.0% Operating Margin (%) Net Margin (%) Outlook – Over the recent quarters, CEAT’s revenue growth has been impacted by the persisting sluggishness in
13.0% domestic auto demand, weakening of demand in key export markets such as Brazil and Indonesia on account of
11.0%
currency depreciation in these nations and increasing competition from China. Over the medium to long term,
CEAT’s consolidated sales growth is expected to be driven by capacity increases at Halol plant, commissioning of
9.0%
Bangladesh plant and expected recovery in domestic automotive demand. CEAT’s effort in moving towards non-
7.0% truck segment and increasing proportion of radial tyres in the sales mix is expected to cushion the impact of
5.0% decline in demand in bias truck segment over the medium term. However increasing proportion of sales to OEMs
in the product mix is likely to pressurize margins to some extent going ahead. Moreover pricing pressures in the
3.0%
export markets on account of higher competition could also pressurize the margins. Despite these pressures, we
1.0% expect margins to remain at healthy levels supported by lower raw material prices. While gearing is expected to
increase in 2015-16 owing to the relatively high capex planned by the company, capital structure is expected to
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
F…
F…
F…
F…
F…
F…
F…
F…
F…
F…
-1.0%
Source: Company presentations and ICRA Research remain strong aided by adequate internal cash accruals and recent QIP raised to the tune of Rs. 4 billion.

CEAT LIMITED (CEAT) -Performance Overview (Pg 3 of 3)

Profit & Loss FY12 FY13 FY14 Key Financial Ratios FY12 FY13 FY14
OI Growth 27.9% 8.7% 9.8% Profitability indicators
EBIT 2,158.7 3,865.1 5,713.3 PAT Margin 0.4% 2.4% 4.9%
Interest expenses 1,967.0 1,975.7 1,720.4 RoE 2.8% 16.6% 29.4%
PBT (before extraordinary income) 274.3 1,941.9 4,132.8 Liquidity ratios
Extraordinary Gain/Loss -31.6 -277.0 -100.4 Debtor (days) 48 46 46
PAT 181.8 1,201.9 2,708.0 Inventory (days) 54 49 63
Minority interest (MI) - - -4.5 Net working capital/Revenues 7.5% 4.6% 10.3%
PAT (concern share) 181.8 1,201.9 2,712.5 Capitalization Ratios
Liabilities FY12 FY13 FY14 *Total Debt/ Equity + MI 2.0 1.4 1.1
Tangible Net worth 6,686.0 7,764.5 10,286.1 Interest coverage 1.5 2.4 3.8
Minority interest - - 362.9 Total Debt/EBITDA 4.5 2.3 1.8
Total Debt 13,137.8 10,623.1 11,719.9 Amounts in Rs. million
Non-Operating Non Current Liability - - - #Note: Net worth has not been adjusted for revaluation reserves
Deferred Tax Liability 247.9 786.3 1,148.4
Trade Creditors 6,689.4 7,925.0 6,942.9
Assets FY12 FY13 FY14
Cash and Bank Balances 15,951.4 15,940.7 16,636.1
Receivables (incl. bills discounted) 309.1 27.4 -
Inventories 359.6 1,120.8 1,678.7
Total Assets 864.5 1,015.4 1,118.1

ELGI RUBBER COMPANY LIMITED (Elgi) – Performance overview (Page 1 of 3)
Loss of production in Netherlands and continued weakness in Brazilian operations have adversely impacted growth and profitability; long ICRA Ratings
term outlook remains positive given ongoing restructuring efforts and large potential for retreading fuelled by T&B radialisation in India
Long term [ICRA]A
Company Profile - The Elgi rubber group is a Coimbatore
Elgi - Fact Sheet Consol(Accounting period –April to March) Short term [ICRA]A1
(Tamil Nadu) based group primarily offering tyre retreading
Year of Incorporation 1981 (Renamed in 2008 post group level restructuring) services and manufacturing allied retreading and repairing Outlook Stable
Chairman& MD Mr. Sudarsan Varadaraj products for the domestic and international tyre industry. The
Product Portfolio Re-treading, reclaimed rubber, retreading machinery group traces its roots to Elgi Tyre and Tread Company, Shareholding Pattern (%)
Coimbatore (2), Palakkad (2), Chengalpattu, Colombo- established in 1981 for the purpose of re-treading of tyres Promoters 63%
Manufacturing Sri Lanka , Nairobi - Kenya, Lorena, SP - Brazil, Luling, with technical licensing agreement with Oliver Rubber FIIs 0%
Facilities Texas - USA, Maastricht - The Netherlands , New South Company of United States (during 1984-1994) for acquiring DIIs 5%
Wales - Australia technologies for large scale production of retreading Others 32%
Segments Present Tyre retreading and related services materials and commenced commercial operations in 1984. In
Revenues FY14 Rs. 4,945.9 million 2007, the company was restructured and demerged into two
PAT FY14 Rs. 109.6 million Price Performance (%)
prominent companies – Elgi tread India Limited and Treads
Net Worth FY14 Rs. 2,959.5 million direct Limited and the former was renamed as Elgi Rubber 3M 12M
Company Limited (Elgi) in 2008. In late 2010, the two Elgi 5.9% 35.6%
Q3FY15 Q3FY14 Q2FY15 9mFY14 9mFY15 companies underwent another merger and restructuring BSE Auto 4.0% 58.6%
Consolidated
process, post which Elgi became the holding company and
Operating Income 976.5 1116.4 1108.7 3647.5 3265.3 BSE Sensex 2.3% 39.0%
Treads direct Limited and Titan Tyrecare Private Limited
Growth (%) –yoy -11.9% -8.1% -14.9% -0.8% -10.5%
became wholly owned subsidiaries of ERCL. ERCL also has
OPBDIT (62.3) 67.0 38.0 275.3 33.2 Stock Movement
Less: Depreciation (47.0) (39.0) (39.0) (97.7) (121.9) several foreign subsidiaries in locations like Brazil, Kenya, Sri
Less: Interest Charges (33.2) (27.1) (27.1) (70.0) (90.4) Lanka, USA, Netherlands and Australia. In FY2014, ERCL Volumes (in lacs)
Other Income 10.2 14.9 5.5 54.3 37.3 acquired the assets of Titan Tyrecare Private Limited as a part 12 Stock Price (Rs.) 35
Exceptional P / (Loss) 0.0 0.0 0.0 0.0 0.0 of another round of restructuring of its organization. 10 30
8 25
PBT (132.4) 34.5 (22.5) 161.9 (141.7)
Business Profile - Elgi is one of the leading players in the 20
Less: Tax 9.5 (21.4) (21.4) (94.2) (22.0) 6
15
PAT (Concern Share) (122.8) 4.5 (43.9) 67.7 (163.6) organised domestic tyre re-treading segment with a market 4 10
share of ~10-12%. On a standalone basis, Elgi is engaged in 2 5
OPBDIT/OI (%) -6.4% 6.0% 3.4% 7.5% 1.0% manufacturing of reclaimed rubber, which is mainly sold to 0 0
Stock price
Volumes
Aug-14
Oct-14
Dec-14
Feb-14
Apr-14
Feb-15
Jun-14
PAT/OI (%) -12.6% 0.4% -4.0% 1.9% -5.0% tyre majors in India and also manufactures retreading
Source: Company, ICRA Estimates; Amounts in Rs. million machines (operations earlier carried out by Titan Tyrecare).
Elgi, through its subsidiary Treads Direct, is also engaged in the manufacture of tread rubber and bonding gum, which is sold through the
Bloomberg Code ELGI
Company’s re-treading franchisee network (~ 200 in numbers). There are twelve foreign subsidiaries (including step down) under ERCL, which
Market Cap. (Rs. Crore) 1.4
are engaged in manufacture of reclaimed rubber, tread rubber, bonding gum and other tyre repair products.
Consolidated Q1 FY14 Q2FY14 Q3FY14 Q4FY14 Q1 FY15 Q2FY15 Q3 FY15 Valuations

Operating Income 1,228.7 1,302.4 1,116.4 1,298.4 1,180.1 1,108.7 976.5 FY15e FY16e
Growth (%) –yoy -1.1% 6.7% -8.1% 6.6% -4.0% -14.9% -12.5% Price/Earnings NA NA
OPBDIT/OI (%) 8.0% 8.4% 6.0% 8.4% 4.9% 3.4% -6.4% Price/Sales NA NA
PAT/OI (%) 3.2% 1.9% 0.4% 3.2% 0.3% -4.0% -12.6% Source: Bloomberg consensus estimates
Source: Company Data, ICRA Estimates; Amounts in Rs. Crore;

ELGI RUBBER COMPANY LIMITED (Elgi)–Performance Overview (Pg 2 of 3)

The group has been actively acquiring foreign companies in the last few years to access
Operating Income
-1.1% (Rs. 6.7%
Mn) YoY Growth (%) technology, infrastrcture and acquire brands/customers. The three larger entities acquired during
1,400 10.0%
6.6% the past few years are Rubber Resources in Netherlands, TDL in Brazil and ERC in USA. The
1,200 5.0%
Company’s latest acquisitions are American Manufacturing & Equipment Inc (USA, Jan 2015) for
1,000
0.0% expanding its base for manufacturing retread equipments and Parani Steels (India, Jan 2015) for
800 -2.8% -4.0% -5.0% utilising the infrastructure to expand its reclaimed rubber business. In terms of key products and
600
-10.0% services of the group (ERCL consolidated), retreading raw materials like tread rubber and bonding
400 -12.5% gum account for ~50% of sales followed by reclaimed raw material accounting for ~45% of sales.
200 -14.9% -15.0%
The remaining sales are driven by sale of retreading accessories like envelopes, patches and string
0 -20.0% repair products (~3% sales) and retreading machinery and accessories (~2%).
Q2FY14
Q3FY14
Q4FY14
Q2FY15
Q3 FY13
Q4 FY13
Q1 FY14
Q1 FY15
Q3 FY15
Revenue Growth – Elgi has recorded a sharp 12.5% de-growth on a consolidated basis during the
quarter and a 10.5% de-growth overall during the first nine months of the fiscal. This has been led
by weakness in the overseas operations, especially, Brazil wherein the Company is undertaking
Figure 1: Growth trend in operating income [consolidated]
restructuring of operations focusing on trading of products made in India instead of the current
20.0% high cost manufacturing setup. Temporary shutdown of operations owing to shifting of existing
facility in Netherlands to a new location and overall lower demand / realisations for reclaimed
rubber on account of competitive natural rubber prices also impacted overall revenues.
10.0% 11.4%
8.0% Profitability–Ongoing restructuring activity in Brazil, branding efforts aimed at improving long
4.9%
3.2% 3.2% term business prospects, higher administrative expenses on account of beefing up of senior
0.0% 5.9%
-6.4%
management across divisions / subsidiaries, coupled with revenue de-growth have cumulatively
impacted operating margins. On a consolidated basis, operating margins recorded a 650 bps de-
-10.0% growths during 9m FY2015, with Elgi recording losses at the net level. While the performance on a
standalone basis continues to remain stable, the consolidated profitability is likely to be under
-12.6% pressure over the next 2 years till such time as the ongoing restructuring efforts fructify.
-20.0%
Figure 2: Quarterly trends in profit margins [consolidated] Capex – The group has a two pronged strategy. [1] In the domestic markets, the group intends to
consolidate its re-treading operations and expand its reclaim rubber business which is expected to
1,800.0 Capex (Rs million) witness traction owing to cost rationalising measures of tyre manufacturers in line global peers [2]
at the global level, the group intends to cut costs, restructure operations and integrate capabilities
1,500.0
to offer a bouquet of tyre repair and retreading services. Cumulatively the management intends to
1,200.0 incur ~Rs. 2 bn towards capacity augmentation, restructuring and business re-organisation
activities during the next 2 fiscals. This debt funded capex is expected to temporarily stretch the
900.0
consolidated capital structure over the near term. To support growth, the Company is open to
600.0 inorganic growth as seen by the Rs. 450 mn investment in January 2015 for two acquisitions.
324.7
610.1
579.3
Outlook –With strong fundamental drivers such as expected increase in radial tyre penetration in
1453
300.0
120
the CV segment which would lead to greater emphasis on retreading to extend tyre life,
0.0
FY12 FY13 FY14 FY15 E FY16 E
improvement in highway infrastructure and likely traction in reclaim rubber demand, Elgi’s long
term prospects appear favourable. Increase in retreading will also boost demand for retreading
Figure 3: Capex trends and outlook machinery, further presenting a favourable outlook. However, ability of the company to
Source: Company and ICRA research restructure and enhance profitability of its operations while tiding over the current trough will be
key towards reviving growth.

ELGI RUBBER COMPANY LIMITED (Elgi)- Performance Overview (Pg 3 of 3)

Other related income 10.8 9.9 5.4 Sales Growth 48.3% -0.2% 2.5%
Total revenue 4,783.9 4,774.7 4,887.9 EBITDA Growth -27.5% 35.8% -13.4%
OI Growth Profitability indicators
EBITDA 277.5 376.8 326.2 EBITDA Margin 5.8% 7.9% 6.7%
EBIT 156.9 262.0 192.4 PAT Margin 3.0% 4.7% 2.2%
Extraordinary Gain/Loss - 3.8 - Debtor (days) 53 53 55
Liabilities FY12 FY13 FY14* Net working capital/Revenues 27.0% 29.0% 32.7%
Tangible Net worth 2,487.8 2,700.9 2,959.5 Capitalization Ratios
Minority interest - - - Total Debt/ Equity + MI 0.1 0.3 0.5
Total Debt 346.9 927.8 1,514.5 Interest coverage 5.4 4.7 3.1
Non-Operating Non Current Liability - - - Total Debt/EBITDA 1.3 2.5 4.6
Deferred Tax Liability - 21.9 - 12.6 - 20.1 Amounts in Rs. million
Trade Creditors 301.8 489.6 517.3
Net Fixed Assets 1,118.7 1,638.7 1,872.7
Receivables (incl. bills discounted) 719.9 730.7 767.9
Inventories 1,015.5 1,037.4 1,259.7
Total Assets 3,467.8 4,427.6 5,387.8

GOODYEAR INDIA LIMITED (Goodyear) - Performance Overview (Pg1 of 3)

Sharp drop in revenues during Q4, impacted by weak tractor demand; financial profile remains strong with large cash reserves Ratings
GOODYEAR - Fact Sheet (Accounting period - Jan to Dec - CY) NA
Company Profile - Incorporated in 1922 as The Goodyear Tire &
Year of Incorporation 1922 Rubber Co. (India) and subsequently re-christened as Goodyear
Shareholding Pattern (%)
Chairman Daniel Lawrence Smytka India Limited (Goodyear) in 1961, the company is among the
Promoters 74%
Product Portfolio P. Car, TF & TR, OTR tyres and tubes earliest MNC entrants in the domestic tyre industry. Goodyear FIIs 0%
Ballabgarh (Haryana) and Aurangabad Tire & Rubber Co (USA), one of world’s largest manufacturers
(Maharashtra) of tyres, holds 74% stake. Goodyear has a leading market share Others 17%
Leading market presence in the Tractor in the domestic farm equipment tyre segment, besides a
Segments Present (Front & Rear) segment; sizeable market respectable presence in the passenger car OE business. The Price Performance (%)
share in PCRs
entity operates out of its Ballabgarh (Haryana) and Aurangabad 3M 12M
Revenues CY14 Rs. 15.8 billion Goodyear -9.1% 52.1%
(Maharashtra) plants in India. It also has an off-take agreement
PAT CY14 Rs. 1.0 billion BSE Auto 4.0% 58.6%
with Goodyear South Asia Tyres Private Limited from which PV
Net Worth CY14 Rs. 5.0 billion BSE Sensex 2.3% 39.0%
tyres are procured.
Q4 CY14 Q4 CY13 Q3 CY14 CY13 CY14 Business Profile - Goodyear is sixth largest tyre manufacturer in Stock Movement
Operating Income 3,600.0 4,055.0 4,016.0 15,716.0 15,817.0 India; product composition largely consists of agri-equipment Volumes (in lacs)
Stock Price (Rs.)
Growth (%) - YoY -11.2% 5.7% -1.2% 5.8% 0.6% grade tyres, with tractor tyres taking up over 95% of the overall
12 700
10 600
OPBDIT 301.7 391.3 398.4 1,338.2 1,542.8
volumes in terms of volumes. PCRs and T&B cross ply tyres 8 500
Less: Depreciation (76.7) (64.4) (73.9) (251.8) (285.1) 400
form the remaining portion. Goodyear is a market leader in the 6
300
Less: Interest Charges (6.9) (6.7) (7.9) (21.6) (34.2) 4
tractor tyre with ~17-18% market share in tractor industry and 200
Other Income 69.6 91.5 66.3 287.0 311.4 2 100
is also among the top four / five players (~10-12% share) in PCR 0 0
Exceptional Gain / (Loss) - - - - -
Stock price
segment. Benefiting from the association with its global parent,
Aug-14
Dec-14
Feb-14
Apr-14
Oct-14
Feb-15
Jun-14
Volumes
PBT 287.7 411.7 382.9 940.1 1,247.2
Less: Tax (97.7) (135.7) (130.7) (478.5) (522.7) Goodyear is considered to be a strong technology leader; the
PAT (Concern Share) 190.0 276.0 252.2 873.3 1,012.2 introduction of India’s first tubeless PV tyre being a point in
case. Goodyear’s products (esp. PCRs) are positioned as a Bloomberg Code GDYR
premium brand in the highly commoditized market and are Market Cap. (Rs. billion) 13.3
OPBDIT/OI (%) 8.4% 9.6% 9.9% 8.5% 9.8%
PAT/OI (%) 5.3% 6.8% 6.3% 5.6% 6.4% supplied to leading luxury car OEs such as Audi, BMW, Porsche,
Valuations
Source: Company, ICRA Estimates; Amounts in Rs Million Mitsubishi and Land Rover.
FY15e FY16e
Price/Earnings NA NA
Price/Sales NA NA
Q2 CY13 Q3 CY13 Q4 CY13 Q1 CY14 Q2 CY14 Q3 CY14 Q4 CY14 Source: Bloomberg consensus estimates
Operating Income 4,229.9 4,065.3 4,055.00 3,870.70 4,330.30 4,016.0 3,600.0
Growth (%) - YoY 5.5% 10.1% 5.7% 15.0% 2.4% -1.2% -11.2%
OPBDIT/OI (%) 9.6% 7.6% 9.6% 10.2% 10.3% 9.9% 8.4%
PAT/OI (%) 6.1% 4.9% 6.8% 7.3% 6.7% 6.3% 5.3%
Source: Company Data, ICRA Estimates; Amounts in Rs. million

GOODYEAR INDIA LIMITED (Goodyear)- Performance Overview (Pg 2 of 3)

The Company was one of the earliest manufacturers of PV radial tyres in India, aiding it to participate in
5,000 18.1% Operating Income (Rs Mn) 20.0%
Growth (%) - YoY
the rapid growth witnessed in the domestic PV market. However, the entity’s relatively modest scale in
2.4% 15.0%
4,000 -1.6% 1.7% 15.0% comparison to players such as MRF and Apollo stems from the entity’s absence in T&B cross ply segment
10.0% where radialisation has not caught up with global standards. However, the entity does have a small light
3,000
5.0% CV tyre capacity which it is likely to expand over the medium term. In comparison to peers, Goodyear’s
2,000
0.0% product portfolio is fairly narrow exposing it to cyclicality in key end user segments as seen over the last
1,000 -5.0% few quarters when tractor volumes have been impacted. The entity’s revenue mix also has a marginally
0 -10.0%
higher skew towards OE markets. Nonetheless, Goodyear’s financial profile is the strongest among tyre
makers, with no debt and large cash balances (~Rs. 3.6 bn) aided by consistent profitability of operations.
Q1CY12
Q4 CY11
Q2 CY12
Q3 CY12
Q4 CY12
Q1 CY13
Q2 CY13
Q3 CY13
Q4 CY13
Q1 CY14
Q2 CY14
Q3 CY14
Q4 CY14
Revenue Growth– On a quarterly basis, Goodyear has recorded a sharp revenue de-growth of ~11.2%
Figure 1: Growth trend in operating income [standalone] YoY impacted by weak tractor demand (main revenue driver) and corrective pricing actions taken given
that has a sizeable share of OE revenues where weak rubber prices have to be passed on. However, on a
12.0% full year basis (CY14) the Company has recorded a relatively flat ~1% revenue growth supported by
OPM NPM 9.6% 10.2%
10.0% healthy growth in volumes during Q1 of CY14 and relatively flat volumes in Q2 CY14. While volumes
8.7%
8.0% 6.8% could remain tempered by weak tractor demand (owing to unseasonal rainfalls impacting agri activity)
7.3% 8.4%
6.0% 6.2%
over the near term, the long term prospects for continue to remain favourable.
4.0% 5.1%
3.6% 5.3%
2.0%
Profitability–On a quarterly basis, the impact of scale de-growth has led to 120 bps reduction in
0.0%
operating margins on yoy basis negating the benefits of lower rubber prices. Net margins, too,
contracted by 150 bps on account of the same. However, on a full year basis (CY14) both operating and
Q1CY12
Q4 CY11
Q2 CY12
Q3 CY12
Q4 CY12
Q1 CY13
Q2 CY13
Q3 CY13
Q4 CY13
Q1 CY14
Q2 CY14
Q3 CY14
Q4 CY14
net margins expanded by 130bps and 90bps, respectively, as a stronger H1 and overall benefit of
sustained lower rubber prices supported profits. While near term volume and consequently profit
Figure 2: Quarterly trends in profit margins [standalone] expansion could remain flat, given the favourable long term outlook, the Company’s margins are
600.0
expected to improve to higher levels as seen in the past.
Capex (Rs. Million)
500.0 Capex – Goodyear has had a fairly conservative capex policy in the past, incurring Rs. 450- 500 million p.a
on an average in the last 4-5 years. With demand in PV (other key segments for the company) showing
400.0
only gradual signs recovery, there is no significant capex plans over medium term. However, focus would
300.0
be on improving the product offerings and working on supply chain efficiencies to cut redundancies.
200.0
Outlook – Expectation of benign NR prices globally and in India as well, should facilitate the sustenance
100.0
500
544
450
of the elevated levels of operating profitability despite potentially muted volumes in the near term. With
450
0.0 the demand from PV, tractor and OTR poised to improve gradually in next 12- 18 months, the entity’s
CY13 CY14 CY15 E CY16 E
established strong linkages with OEs in these segments, as evidenced by award wins from Hyundai,
Figure 3: Capex trends and outlook Caterpillar, Eicher, TAFE and John Deere would provide Goodyear the platform to derive a greater share
of revenues from these segments as the economy revives. The same will enable margin expansion,
besides aiding the Company in de-risking its high dependence on the tractor industry where demand
tends to be intertwined to the agro-climatic conditions.
GOODYEAR INDIA LIMITED (Goodyear) - Performance Overview (Pg3 of 3)

Table: Key financial indicators (annual trend)
Profit & Loss CY12 CY13 CY14 Key Financial Ratios CY12 CY13 CY14
Other related income 80.6 51.5 20.4 Sales Growth -2.1% 5.9% 0.5%
Total revenue 14,893.5 15,738.7 15,811.9 EBITDA Growth -10.9% 52.5% 118.0%
OI Growth -1.6% 5.7% 0.5% Profitability indicators
EBITDA 991.6 1,512.2 1,556.3 EBITDA Margin 6.7% 9.6% 9.8%
EBIT 750.7 1,260.4 1,271.2 PAT Margin 3.8% 6.0% 6.4%
PAT 563.2 940.7 1,012.4 Inventory (days) 31 29 32
Liabilities CY12 CY13 CY14 Net working capital/Revenues -4.3% -5.7% -7.0%
Tangible Net worth 3,510.0 4,206.6 4,968.3 Capitalization Ratios
Minority interest - - - Total Debt/ Equity + MI - - -
Total Debt - - - Interest coverage 26.0 70.0 45.6
Non-Operating Non Current Liability - - - Total Debt/EBITDA - - -
Deferred Tax Liability 111.3 129.4 135.7 Amounts in Rs. million
Trade Creditors 2,572.5 2,916.7 2,465.9
Assets CY12 CY13 CY14
Net Fixed Assets 1,948.4 2,124.6 2,567.4
Capital Work in Progress 174.9 318.2 -
Total Long-Term Investments - - -
Inventories 1,042.6 990.0 1,233.6
Total Assets 7,391.0 8,565.1 8,934.7

JK TYRE AND INDUSTRIES LIMITED (JKT) – Performance overview (Page 1 of 3)

Revenues impacted by auto slowdown during 2013-14; margins improve sharply aided by softer rubber prices and stable pricing Ratings
JK Tyre - Fact Sheet (Accounting period-April to March) NA
Company Profile – JK Tyres Limited (JKT) is the flagship of
Year of Incorporation 1951 the JK Group (Eastern Zone) headed by its Chairman Mr.
Chairman Hari Shanker Singhania
Hari Shankar Singhania. JKT has manufacturing facilities at Promoters 52%
Product Portfolio T&B, P. Car, LCV and OTR tyres
Kankroli (Rajasthan), Banmore (Madhya Pradesh), Mysore FIIs 12%
Manufacturing Facilities Rajasthan, Madhya Pradesh, Karnataka, Mexico
(Karnataka) and Sriperumbudur, Chennai (Tamil Nadu). JK DIIs 6%
Market leader in TBR segment;
Segments Present Tornel, a subsidiary, also has a manufacturing facility in Others 30%
Strong presence in all segments expect 2W/3W
Mexico. JK Tyres manufactures the entire range of radial
Revenues FY14 (Consol) Rs. 76.5 billion
as well as bias tyres for trucks, buses, LCVs, utility vehicles, Price Performance (%)
Net Profit FY14 (Consol) Rs. 2.6 billion
Net Worth FY14 (Consol) Rs. 11.0 billion
cars, jeeps and tractors.
3M 12M
Consolidated Q3 FY14 Q3 FY15 Q2FY15 9m FY14 9m FY15 Business Profile- JKT is the third largest player in the Indian JKTIL -11.5% 329.9%
Operating Income 17215.4 18377.9 18724 54041.3 55743.5 BSE Auto 4.0% 58.6%
tyre industry in terms of revenues after MRF and Apollo
Growth (%) - YoY 3.0% 6.8% 3.6% 3.3% 3.1% BSE Sensex 2.3% 39.0%
Tyres and has an overall market share of ~12-13%. JKT is
OPBDIT 1,856.9 2,536.0 2,325.9 5,131.1 6,785.1 present across all automotive segments, except 2W/3W
Less: Depreciation (431.4) (400.4) (390.6) (131.1) (1,183.8) Stock Movement
and motorcycle segments. At present JKT has an installed Volumes (in lacs)
Less: Interest Charges (689.9) (612.1) (650.6) (1,997.2) (1,959.6) capacity of 1.5 million tyres in TBR, 8.2 million in PCR and 3,500 140
Stock Price (Rs.)
Other Income 37.6 45.0 35.4 117.5 116.3 3,000 120
3.8 million in truck bias tyres. Besides this, JKT’s 100%
Exceptional P/(L) 73.9 (300.3) (137.2) (566.6) (473.2) 2,500 100
Mexican subsidiary JK-Tornel has a capacity of ~67 lakh
PBT 847.1 1,268.2 1,182.9 2,553.7 3,284.8 2,000 80
tyres p.a. which consists of PCR and Truck/LCV/Tractor bias
Less: Tax 272.3 361.8 427.0 798.5 1,081.5 1,500 60
tyres. Cumulatively it has a capacity of 20 mn tyres p.a. CV
PAT 574.8 906.4 755.9 1,755.2 2,203.3 1,000 40
tyre segment consisting of the T&B and LCV segments is
500 20
OPBDIT/OI (%) 10.8% 13.8% 12.4% 9.5% 12.2% the largest revenue earner for JKT contributing ~80% of
0 0
Stock price
revenues. Within the T&B segment, JKT’s focus has been on
Volumes
Feb-14
Apr-14
Feb-15
Jun-14
Aug-14
Dec-14
Oct-14
PAT/OI (%) 3.3% 4.9% 4.0% 3.2% 4.0%
Source: Company Data, ICRA Estimates, Amounts in Rs. Million the TBR segment where it is the market leader (>30%).
While the JKT’s market share in the T&B segment has remained stable at ~22-23% over the last couple of years, its market share in the TBR
segment -has increased from 31% in FY12 to ~37% in 2013-14. In the passenger vehicle segment, JKT supplies to most of the major OEMs like Bloomberg Code JKI
Maruti Suzuki, Tata Motors, Mahindra & Mahindra, General Motors, Volkswagen and Fiat. Exports contributed ~21% to the revenues during Market Cap. (Rs. billion) 26.3
FY14 as compared to 16% in the previous year. JKT exports both from its Indian plants as well as from its subsidiary, JK Tornel, in Mexico. JK
Tornel has a market share of 10-12% in the PCR segment and ~70% in the T&B segment in Mexico. Valuations
Standalone Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 FY15e FY16e
Price/Earnings NA NA
Operating Income 14,842.9 14,396.6 14,432.4 15,838.9 15,667.4 15,318.6 15,230.7
Price/Sales 0.3x 0.3x
Growth (%) - YoY 2.8% 8.9% 11.6% 14.5% 5.6% 6.4% 5.5%
Source: Bloomberg consensus estimates
OPBDIT/OI (%) 12.1% 11.0% 11.2% 9.8% 10.4% 12.2% 12.9%
PAT/OI (%) 2.4% 2.4% 2.4% 2.0% 2.5% 3.8% 4.6%
JK TYRE AND INDUSTRIES LIMITED (JKT) - Performance Overview (Pg 2 of 3)

20,000 Operating Income (Rs Mn) yoy growth 25.0% Revenue Growth - JKT recorded a healthy 5.5% and a relatively moderate 3.0% growth in Q3FY15 on a
21.0% 14.5% 6.4%
2.1% 2.8% 20.0%
-9.1% 11.6% standalone and consolidated basis, respectively supported by uptick in domestic CV demand (major sales
15,000 15.0%
driver) and also by new customer additions (Chrysler, Volkswagen, John Deere and Nissan) in Mexico which
10.0%
10,000 5.0% boosted exports to USA. For 9MFY15, while India operations grew by 6%, Mexican revenues de-grew by 9%
0.0% (belying the actual volume growth) on account of Mexico peso depreciation, leading to a 3% consol growth.
14,396.6
14,432.4
15,838.9
15,667.4
15,318.6
15,230.7
12,883.3
14,229.4
15,235.5
14,432.6
13,219.6
12,936.4
13,828.3
14,842.9
5,000 -5.0%
-10.0% Profitability - Favourable realisations in the exports segment on account of the weak rupee and higher
0 -15.0% capacity utilisations have also strengthened the company’s profit margins over the last couple of quarters,
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
with domestic operations recording a 170 bps yoy growth in operating margins. The net margin also saw a
220 bps improvement supported by lower debt charges as accruals aided in debt retirement. At consol level,
Figure 1: Growth trend in operating income [standalone]
while operating margins expanded by 300 bps supported by better pricing mix, the net margins grew only by
160bps on account of one-time write-off of Rs. 30 crore owing to the Mexico peso depreciation. Even during
9MFY15, overall margins for standalone and consol operations continued to improve supported by lower NR
JK Tyres - Product wise (volumes in tonnages)
prices and improving volumes with better CV demand in India and new customer additions in Mexico.
Others
8%
P. Car Capex – Over the last two fiscals the company had setup a large (25 lakh PCR tyres and 4.0 lakh TBRs) facility
13% at Sriperumbudur (Chennai) at a cost of Rs. 15 billion. Utilisation levels for domestic operations currently
stand at ~80% for the PCR segment and ~100% for the TBR segment. In order to aid further growth, the
company is incurring a capex of Rs. 14.3 billion over the next 2 years expanding the capacity at the Chennai
plant to 12 lakh TBRs and 40 lakh PCRs. The capex is likely to be largely debt funded (2.6:1). While this could
T&B + LCV
79% lead to temporary rise in debt levels, given the increasing trends of radialisation in the T&B segment (35%
now compared to less than 15% five years back) and the better margins offered, coupled with JKT’s leading
Figure 2: Product mix [Standalone] market position in the same, JKT would benefit immensely. The same would aid in healthy cash generation
buffering the large debt being contracted to support the capex at present.
EBIT / Sales
12.3% Sales mix Outlook – While demand conditions had been subdued in the past, the last few quarters have seen strong
Mexico recovery in sales volumes for CV manufacturers, where radialisation levels have touched 70% (JKT has a
17.3%
market share of ~37% in the TBR segment). Further, other segments of the auto industry are also showing
gradual signs of recovery, where the medium term outlook for the industry appears to be healthy. In
9.8% Mexico, too recent customer additions coupled with healthy export prospects to USA support a favourable
India
82.7% demand outlook for JKT. Thus, we expect JKT to record healthy revenue growth over the short to medium
term. With NR prices remaining relatively low, we expect operating margins to remain healthy going ahead
Over the medium term, however, further margin expansion could come under pressure as competition
10%
20%
30%
40%
50%
60%
70%
80%
90%
0%
Figure 3: Geographic revenue mix [Consolidated] heats up in the radial segment with large recent capacity additions by peers. Despite the large debt funded
capex over the next two years, we expect an improvement in the capital structure from the current highly
leveraged levels on account of strong internal cash generation and stable debt levels.

JK TYRE AND INDUSTRIES LIMITED (JKT) - Performance Overview (Pg3 of 3)

Total revenue 69,471.0 69,852.3 76,517.6 EBITDA Growth -1.1% 44.2% -100.0%
OI Growth 16.2% 0.5% 9.5% Profitability indicators
EBITDA 4,285.8 6,180.1 - EBITDA Margin 6.2% 8.8% 11.4%
EBIT 3,075.3 4,851.9 6,918.4 PAT Margin -0.5% 2.8% 3.4%
Interest expenses 2,869.9 2,327.5 2,762.0 RoE -4.3% 24.6% 26.5%
Extraordinary Gain/Loss -470.8 -18.7 -595.2 Debtor (days) 50 51 59
PAT -167.7 2,642.9 3,818.4 Inventory (days) 47 58 56
PAT (concern share) -319.9 1,968.2 2,630.2 Capitalization Ratios
Liabilities FY12 FY13 FY14 Total Debt/ Equity + MI 3.5 3.4 2.5
Minority interest - - - Total Debt/EBITDA 5.8 4.9 3.1
#Note: Net worth has not been adjusted for revaluation
Non-Operating Non Current Liability - 1.0 2.0 reserves
Deferred Tax Liability 1,475.6 1,920.5 2,524.2
Trade Creditors 12,845.2 8,999.2 10,532.3
Net Fixed Assets 18,747.7 27,098.6 28,674.3
Capital Work in Progress 7,651.5 762.0 -
Total Long-Term Investments 100.7 1,192.6 1,561.3
Inventories 7,818.5 9,337.5 9,367.9
Other Current Assets 3,137.5 2,224.7 210.7
Total Assets 51,120.5 55,447.1 60,426.1

MRF LIMITED (MRF) – Performance overview (Page 1 of 3)
Revenue growth during Q1SY15 affected by weak realizations due to price cuts; profit margins at life-time highs with low NR prices Ratings
MRF - Fact Sheet (Accounting period - Oct to Sep-SY) Company Profile: Incorporated in 1960, MRF Limited is the largest LT ratings: [ICRA]AA+(Stable)
Year of Incorporation 1990 tyre manufacturer in India producing the widest range of tyres
Chairman Mr. K M Mammen and commanding the highest market share (both in volume and
Product Portfolio Automotive tyres and tubes value terms). With a diversified product portfolio comprising of
T&B, PV, 2W/3W, tractors, motorcycles and OTR segments, MRF Promoters 27%
Tiruvottiyur, Arakkonam, Trichy,
enjoys market leadership in most of the segments it operates in. FIIs 9%
Gummidipoondi (all Tamil Nadu), Ponda
(Goa), Medak (Andhra Pradesh), Kottayam MRF has a total installed capacity of 42.1 mn (as of March 2014)
Others 55%
(Kerala), Pondicherry tyres and tubes, with its manufacturing plants spread across eight
Segments Present T&B, P. Car, LCV, 2W/3W, OTR locations- Trichy, Tiruvottiyur, Arakkonam, Gummidipoondi (Tamil
Revenues (SY2014) Rs. 132.0 billion Nadu), Kottayam (Kerala), Ponda (Goa), Medak (Andhra Pradesh) Price Performance (%)
PAT (SY2014) Rs. 9.0 billion and Pondicherry. MRF also has strong R&D support and marketing 3M 12M
Net Worth (September 2014) Rs. 45.0 billion team buttressed by a wide distribution network. MRF 27.8% 106.0%
BSE Auto 4.0% 58.6%
Standalone Q1SY14 Q1SY15 Q4SY14 SY2013 SY2014 Business Profile: MRF is the leading tyre maker in India with an BSE Sensex 2.3% 39.0%
Operating Income 32,005.7 33,530.1 33,611.2 121,311.6 131,975.8 estimated 27% market share (in value). With established brand
Growth (%) - YoY 5.8% 4.8% 6.8% 2.2% 8.8% presence and strong distribution network, MRF maintained its Stock Movement
OPBDIT 4,188.6 6,263.2 6,075.1 18,125.9 19,772.5 leadership position over years amidst rising competition. Diverse
Less: Depreciation (993.4) (1,160.0) (1,110.3) (3,729.3) (4,230.9) Volumes (in lacs)
product offerings with presence in all segments and strong focus 8 Stock Price (Rs.) 50,000
Less: Interest Charges (585.7) (601.9) (564.5) (1,959.4) (2,315.8) on replacement markets have enabled MRF to command and 6 40,000
Other Income 99.4 256.2 248.8 (169.2) 163.1 sustain a strong market position over years, even during periods of 30,000
4
Exceptional gain/loss - - - - - 20,000
demand slowdown. MRF has diversified product portfolio with a 2
PBT 2,708.9 4,757.5 4,649.1 12,268.0 13,388.9 10,000
relatively equal exposure to commercial segment (largely T&B) and
0 0
Stock price
PAT (Concern Share) 1,798.9 3,235.0 3,169.1 8,022.1 8,978.9
non-commercial segment (PV, 2W/3W & OTR). MRF derives over
Feb-14
Apr-14
Feb-15
Aug-14
Jun-14
Dec-14
Oct-14
Volumes
50% of its sales from the T&B segment, ~15% from PV, ~20% from
OPBDIT/OI (%) 13.1% 18.7% 18.1% 14.9% 15.0%
2W segments and balance from segments like tractors, OTR etc.
PAT/OI (%) 5.6% 9.6% 9.4% 6.6% 6.8%
Steady demand from these segments has enabled MRF to post
Source: Company, ICRA Estimates; Amounts in Rs. Million;
healthy revenue 5-year CAGR of 18.6% (SY09 to SY14) against Bloomberg Code MRF
Note: MRF does not provide consolidated numbers on a quarterly basis
industry CAGR of 17.4% (FY09to FY14). More than 90% of revenues Market Cap (Rs. bn) 174.2
are derived from domestic operations, balance is from exports.
Standalone Q4SY12 Q1SY13 Q2SY13 Q3SY13 Q4SY13 Q1SY14 Q2SY14 Q3SY14 Q4SY14 Q1SY15 Valuations
Operating Income 29.9 30.3 29.1 30.5 31.5 32.0 33.0 33.4 33.6 33.5 SY15e SY16e
Growth (%) - YoY 14.3% 5.2% -2.9% 1.4% 5.1% 5.8% 13.5% 9.4% 6.8% 4.8% Price/Earnings 18.8x 13.7x
Source: Company Data, ICRA Estimates; Amounts in Rs. billion

MRF LIMITED (MRF) - Performance Overview (Pg 2 of 3)

The T&B segment’s demand, which is directly correlated to the health of economy, is vulnerable to
Operating Income (Rs. Mn) YoY Growth (%) the economic downturns; however MRF’s large non-commercial (non-truck) segment insulates it
34,000 16.0%
from cyclicality to an extent. Further, bulk of MRF’s revenues-supported by its brand pull are from
33,000 14.0%
the replacement market (73%); this segment has exhibited stability in demand and higher margins.
12.0%
32,000 Exposure to the relatively lower margin OEMs have been limited (19%) in the past buffering MRF’s
10.0%
31,000 revenues from economic slowdowns to a considerable extent. Strong growth in the OEM segment
8.0%
(during FY11 and FY12) has translated into a healthy replacement demand in the last two years for
30,000 6.0%
the company amidst sharp slowdown in OEM demand.
29,000 4.0%
2.0% Revenue growth: For the quarter ending December 2014, MRF witnessed a modest 4.8% YoY sales
28,000
0.0% growth; the performance was constrained by continuing OEM demand slowdown and also price
27,000 -2.0% cut taken by the company as the rubber prices remained at lower levels. Pickup in auto demand,
26,000 -4.0% especially in M&HCV segment, should support MRF’s sales growth in the ensuing quarters. With a
Q4 SY12
Q1 SY13
Q2 SY13
Q3 SY13
Q4 SY13
Q1 SY14
Q2 SY14
Q3 SY14
Q4 SY14
Q1 SY15
strong brand name and wide distribution network, the company is one of the major beneficiaries
of the M&HCV revival. For the full year ending September 2014, MRF recorded a strong 9% YoY
sales growth fuelled by stable replacement volumes and export demand.
Figure 1: Growth trend in operating income [standalone]
Profitability: Lower NR prices supported profit margins for all tyre companies in last few quarters.
20.0% MRF too clocked strong margins, benefiting from the favourable raw material prices although the
18.0% company took price cuts. Following a strong 18.1% OPM achieved during Q2 SY14, MRF reported a
16.0% robust OPM of 18.7%; life time high levels for the company. MRF’s margins are the second best in
14.0% the industry (next to Balkrishna Industries due to its export focus) aided by better product mix,
12.0% strong pricing power and full capacity utilisation. For the full year ending September 2014, MRF’s
10.0% operating and net margins stood at 15.0% and 6.8% respectively (vis-a-vis 14.9% and 6.6% in 9M,
8.0% SY2014).
6.0%
4.0%
Capex: The Company operates at almost full capacities necessitating investments to meet the
future demand and maintain market share. MRF is investing Rs. 10-15 billion annually over the
2.0%
next three years; the current capex are underway at Trichy and Ankampally involving additions on
0.0%
both radial and bias capacities.
Q4 SY12
Q1 SY13
Q2 SY13
Q3 SY13
Q4 SY13
Q1 SY14
Q2 SY14
Q3 SY14
Q4 SY14
Q1 SY15
Outlook: Over the medium term, MRF’s strong market share, healthy replacement demand and
favourable exports market is expected to support revenue growth MRF. On the margin front,
Figure 2: Quarterly trends in profit margins [standalone]
MRF’s better product mix, and strong brand should aid in faring better than the peers, although
Source: Company Data and ICRA research any steep rise in rubber prices can affect the margins for all players including MRF. Considering
the current high capacity utilisation at MRF and the ongoing capacity additions, the company is
well positioned to meet the overall recovery in domestic automotive industry.

MRF LIMITED (MRF) - Performance Overview (Pg 3 of 3)

Profit & Loss SY12 SY13 SY14 Key Financial Ratios SY12 SY13 SY14
OI Growth 22% 2% 0.9 Profitability indicators
Depreciation 3,011.1 3,729.3 4,230.9 EBIT Margin 8.4% 11.9% 11.8%
EBIT 9,928.4 14,396.6 15,541.6 PAT Margin 4.8% 6.6% 6.8%
Interest expenses 1,587.7 1,959.4 2,315.8 RoE 22.3% 24.7% 22.1%
Other income/expense (9.5) (169.2) 163.1 RoCE 22.3% 25.2% 24.1%
PBT (before extraordinary income) 8,331.2 12,268.0 13,388.9 Liquidity ratios
PAT 5,723.6 8,022.1 8,978.9 Inventory (days) 61 69 64
PAT (concern share) 5,723.6 8,022.1 8,978.9 Capitalization Ratios
Liabilities Total Debt/ Equity + MI 0.9 0.7 0.7
Minority interest 0.9 - - Total Debt/EBITDA 2.0 1.5 1.5
Total Debt (incl. dealer deposits) 26,104.4 26,381.2 30,316.7 Amounts in Rs. million
Non-Operating Non Current Liability - - -
Deferred Tax Liability 1,867.2 2,223.1 2,353.1
Trade Creditors 6,145.3 7,014.2 7,996.6
Assets
Net Fixed Assets 29,324.0 30,422.0 35,910.4
Capital Work in Progress 4,146.5 3,591.2 6,266.7
Total Long-Term Investments 4,447.0 9,215.9 11,033.4
Cash and Bank Balances 611.0 3,308.1 7,079.7
Inventories 16,453.4 17,952.9 17,997.0
Loans and investments 1,185.4 1,156.6 1,103.9
Total Assets 72,122.7 82,573.4 97,842.0

TVS SRICHAKRA LIMITED (Srichakra) – Performance Overview (Pg 1 of 3)
Sales growth run-rate maintained in Q3FY15; margins continue to trend despite one-off charge towards sales tax demand Ratings
TVS Srichakra - Fact Sheet (Accounting period-April to March) Company Profile - Part of the TVS group, TVS Srichakra Limited NA
Year of Incorporation 1982 (Srichakra) is engaged in manufacturing of Two (2W) and Three-
Chairman S. Narayanan wheeler (3W) tyres apart from supplying industrial pneumatic Shareholding Pattern (%)
Product Portfolio Two wheeler, Three wheelers and industrial tyres tyres, farm and implement tyres, skid steer tyres, multi-purpose
Promoters 46%
Manufacturing facilities Madurai and Uttaranchal tyres, and vintage tyres for overseas markets. Srichakra’s has
FIIs 0%
Segments Present 2W/3W three manufacturing facilities (two in Madurai and one in
DIIs 0%
Revenues FY14 Rs. 18.1 billion (Consol) Uttarakhand) with an installed capacity of 20 million tyres p.a. (as
Others 54%
PAT FY14 Rs. 0.6 billion (Consol) of March 2014). Srichakra has an established distribution
Net Worth FY14 Rs. 2.0 billion (Consol) network; and acts as major supplier to TVS Motors, Bajaj Auto,
Price Performance (%)
India Yamaha Motor and Hero MotoCorp. Exports are made to
Standalone Q3FY14 Q3FY15 Q2FY15 9MFY14 9MFY15
customers in USA, Europe, Asia, Africa, South America etc. 3M 12M
Operating Income 4,176.0 4,893.7 4,906.4 12,142.0 14,310.1
Srichakra -1.4% 472.2%
Growth (%) - YoY 14.7% 17.2% 18.5% 17.9% Business Profile - Srichakra is among the largest 2W and 3W tyre BSE Auto 4.0% 58.6%
OPBDIT 307.4 507.1 506.7 830.2 1,414.1 manufacturers in India catering to both OEM and replacement BSE Sensex 2.3% 39.0%
Less: Depreciation (56.0) (74.1) (71.7) (178.4) (210.8) segments. In 2W OEM segment, Srichakra is the market leader
Less: Interest Charges (113.8) (73.2) (84.6) (354.2) (257.6) while in the higher margin replacement segment it is positioned Stock Movement
Other Income (13.9) 2.6 6.3 50.5 9.8 as the third largest player behind MRF and CEAT. Srichakra has
Exceptional P/(L) - - - - - 10 Volumes (in lacs) 2,000
also strengthened its presence in export markets, which accounts Stock Price (Rs.)
PBT 123.7 362.4 356.7 348.1 955.5 8
for 13% of sales in 9MFY15. Srichakra exports OTR tyres to 80 1,500
PAT (Concern Share 105.0 264.8 260.4 257.6 697.8
countries and also 2W tyres to South America and SE Asia. 6
1,000
4
OPBDIT/OI (%) 7.4% 10.4% 10.3% 6.8% 9.9% Owing to the inherently thin margins in 2W segment, Srichakra 500
2
PAT/OI (%) 2.5% 5.4% 5.3% 2.1% 4.9% has been de-risking its business model over the last few years
Stock price
0 0
Source: Company, ICRA Estimates; Amounts in Rs. Million
Volumes
which have provided strong operational flexibility at lower risks.
Feb-14
Apr-14
Feb-15
Aug-14
Jun-14
Dec-14
Oct-14
Segment-wise sales (2013-14) In % Top 3 customers % of sales Traditionally, Srichakra was supplying only to TVS Motors,
Scooter & 3 Wheelers 27-30% Hero Motocorp 16% however in recent years, it has started supplying tyres to other
Motor Cycle 62-65% TVS Motors 12% major 2W OEMs apart from increasing its focus on replacement
Industrial (and ADVs) 7-8% Bajaj Auto 10% and export markets. Bloomberg Code SRTY
Capex: Following an addition of 10% to its capacities in 2013-14, the company is increasing its capacity by another 12% in 2014-15 taking the Market Cap (Rs. bn) 11.7
overall capacity to 24.0 million tyres per annum. Further capex is proposed for FY17 although details are currently undisclosed.
Standalone Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4 FY14 Q1FY15 Q2FY15 Q3FY15 Valuations
Operating Income 3,724.6 3,640.4 3,775.0 3,824.3 4,141.7 4,176.0 4,567.9 4,510.0 4,906.4 4,893.7 FY15e FY16e
Growth (%) - YoY 4.7% 4.2% 6.9% 5.6% 11.2% 14.7% 21.0% 17.9% 18.5% 17.2% Price/Earnings 15.4x 11.8x
PAT/OI (%) 0.9% -0.8% 8.9% 1.8% 2.0% 2.5% 4.7% 3.8% 5.3% 5.4% Source: Bloomberg consensus estimates
TVS SRICHAKRA LIMITED (Srichakra) - Performance Overview (Pg 2 of 3)

TVS Srichakra - Sales mix (2013-14) Through these diversification efforts, Srichakra has reduced its concentration risk significantly over the last
few years. Hero Motocorp, TVS Motors, Bajaj Auto, Hero Motorcycles, and Yamaha are its key customers,
Exports
the top five customers collectively accounted for ~50% of total sales in 2013-14. Currently Srichakra meets
12%
the entire requirements of TVS Motors and supplies major portion of requirements of Bajaj Auto and Hero
Motocorp. Segment wise, Srichakra derives major share of revenues from sale of motor cycle tyres,
After followed by scooters, three wheelers and industrial tyres. Of the total sales, OEM sales represent ~58%
market OEM
30% 58% (used to be ~65% three years back), with whom the company has a pass through clause on rise in raw
material costs. Replacement sales add ~33% of sales, the balance 10% is contributed by exports sales.
Revenue growth: Srichakra continued its strong sales growth run-rate for the fifth quarter in succession,
with a robust 17.2% Y-o-Y sales growth during Q3FY15. Despite concerns on monsoons, 2W OE sales have
Operating Income (Rs. Mn) YoY Growth (%) been strong in the current fiscal leading to healthy business for players like Srichakra. The growth was also
6,000 25.0% fuelled by stable replacement and export demand. Srichakra’s monthly production volumes had increased
5,000 20.0% to 1.9-2.0 mn tyres in current year from 1.6-1.7 mn tyres last year; it targets to achieve 2.3mn by FY16. For
4,000 the nine month period ending December 2014, Srichakra reported a healthy sales growth of 17.9% YoY
15.0%
3,000 primarily led by the double digit growth in 2W OE segment, with Scooters dominating the growth. While
10.0% 3W and moped segments continue to de-grow, motor cycles segment reported a moderate growth during
2,000
5.0% 2013-14. The growth was also fuelled by increasing share of replacement and export sales. The company
1,000
continues to invest in brand promotion activities and addition of dealer networks, this supported by
0 0.0%
strong customer profile and favourable demand outlook should translate to healthy sales performance
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
going forward.
Profitability: Srichakra’s operating margins are generally lower than peers owing to the (i) being a 100%
Figure 3: Growth trends in Operating Income 2w/3w focused entity where value additions are relatively less due to the tyre size, (ii) high competitive
12.0% intensity, (iii) longer replacement cycles and (iv) price sensitive end customers. The margins are further
compressed by Srichakra’s stable spend on brand promotion activities. However in the last three quarters,
10.0%
Srichakra’s operating margins have been steadily increasing led primarily by lower rubber prices and
8.0% improving demand scenario. For Q3FY15, Srichakra’s operating and net margins stood at 10.4% and 5.4%
6.0% respectively; an increase of 300bps and 290 bps respectively over the similar period of last fiscal. Also,
4.0% Q3FY15 results include a one-time charge of Rs. 12.0 crore demanded by Sales Tax department towards
short reversal of input tax credit on stock transfer relating to prior years. Adjusting the same, Srichakra’s
2.0%
operating and net margins stood at 12.8% (up 545bps YoY) and 7.9% (up 535bps YoY) respectively.
0.0%
Srichakra has preferred an appeal with Sales Tax Tribunal disputing the demand.
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY14
Q2FY15
Q3FY15
-2.0%
Outlook: Improvement in urban consumer sentiment and consequently automobile demand (2W industry
in particular) should support the company’s sales growth going forward. Profits should be supported by its
Source: Company Data and ICRA research reputed brand name, strong OEM tie ups, increasing exports sales and recovery in domestic demand. That
said, movement in NR prices and pricing pressures owing to threat of low priced Chinese tyres will
ICRA LIMITED continue to remain a challenge for the company. Page 37
TVS SRICHAKRA LIMITED (Srichakra) - Performance Overview (Pg 3 of 3)

Other related income - 51.7 120.9 Sales Growth 33.2% 14.2% 15.7%
Total revenue 14,460.9 16,519.4 19,119.4 EBITDA Growth 32.5% -13.6% 40.7%
OI Growth 33% 14% 16% Profitability indicators
EBIT 993.7 790.6 1,213.0 PAT Margin 2.2% 2.0% 3.3%
Extraordinary Gain/Loss - (17.8) - Debtor (days) 62 57 64
Minority interest (MI) 1.9 56.4 86.1 Net working capital/Revenues 32.3% 26.7% 32.4%
PAT (concern share) 317.9 271.8 551.2 Capitalization Ratios
Liabilities FY12 FY13 FY14 Total Debt/ Equity + MI 1.5 1.5 1.2
Minority interest 60.4 223.4 306.9 Total Debt/EBITDA 3.2 3.1 2.6
Non-Operating Non Current Liability - - -
Deferred Tax Liability 130.2 228.4 219.4
Trade Creditors 2,936.4 3,575.1 2,682.5
Other Current Liabilities and Prov. 547.3 817.1 1,042.1
Net Fixed Assets 2,797.6 2,817.1 3,424.3
Inventories 3,316.9 2,898.2 2,538.4
Loans and investments 336.2 43.7 48.4
Total Assets 9,108.9 9,423.6 10,103.7

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CORPORATE OFFICE
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Email: info@icraindia.com, Website: www.icra.in
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Tyre Industry ICRA 03-2015

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Tyre Feature - March 2015

ICRA RESEARCH SERVICES

Indian Tyre Industry

COMPANY SECTION ------------------------------------------------------------------------------------------------------------------------------------------------------------14

APOLLO TYRES LIMITED (Apollo) – Performance Overview (Pg 1 of 3) ---------------------------------------------------------------------------------------------15

ICRA LIMITED Page 2

Industry growth Drivers

ICRA LIMITED Page 3

Source: Company Data, ICRA’s Estimates

ICRA LIMITED Page 4

Demand scenario: Domestic tyre demand to expand by 9-10% during 2015-16

Segment FY 11 FY 12 FY 13 FY 14 10m FY15 FY16(e)

ICRA LIMITED Page 5

ICRA LIMITED Page 6

Supply scenario (Contd...)

Exhibit 8: Planned capacity additions over medium term

ICRA LIMITED Page 7

Tyre Imports: Imports surges in 2014-15 after a three year slowdown

ICRA LIMITED Page 8

ICRA LIMITED Pagea 9more broad based

Widening supply gap propels NR Source: Company Data, ICRA’s Estimates

ICRA LIMITED Page 10

ICRA LIMITED Page 11

Source: Company Data, ICRA’s Estimates

ICRA LIMITED Page 12

Exhibit 22: Capital structure Exhibit 23: Coverage indicators

Source: Company Data, ICRA’s Estimates

ICRA LIMITED Page 13

ICRA LIMITED Page 14

APOLLO TYRES LIMITED (Apollo) – Performance Overview (Pg 1 of 3)

ICRA LIMITED Page 15

APOLLO TYRES LIMITED (Apollo) – Performance Overview (Pg 2 of 3)

APOLLO TYRES LIMITED (Apollo) – Performance Overview (Pg 3 of 3)

ICRA LIMITED Page 17

BALKRISHNA INDUSTRIES LIMITED (BIL) – Performance Overview (Pg 1 of 3)

ICRA LIMITED Page 18

BALKRISHNA INDUSTRIES LIMITED (BIL) – Performance overview (Pg 2 of 3)

BALKRISHNA INDUSTRIES LIMITED (BIL) – Performance overview (Pg 3 of 3)

ICRA LIMITED Page 20

CEAT LIMITED (CEAT) – Performance Overview (Pg 1 of 3)

ICRA LIMITED Page 21

CEAT LIMITED (CEAT) -Performance Overview (Pg 2 of 3)

ICRA LIMITED Page 22

CEAT LIMITED (CEAT) -Performance Overview (Pg 3 of 3)

ICRA LIMITED Page 23

ELGI RUBBER COMPANY LIMITED (Elgi) – Performance overview (Page 1 of 3)

Consolidated Q1 FY14 Q2FY14 Q3FY14 Q4FY14 Q1 FY15 Q2FY15 Q3 FY15 Valuations

ICRA LIMITED Page 24

ELGI RUBBER COMPANY LIMITED (Elgi)–Performance Overview (Pg 2 of 3)

ICRA LIMITED Page 25

ELGI RUBBER COMPANY LIMITED (Elgi)- Performance Overview (Pg 3 of 3)

ICRA LIMITED Page 26

GOODYEAR INDIA LIMITED (Goodyear) - Performance Overview (Pg1 of 3)

ICRA LIMITED Page 27

GOODYEAR INDIA LIMITED (Goodyear)- Performance Overview (Pg 2 of 3)

GOODYEAR INDIA LIMITED (Goodyear) - Performance Overview (Pg3 of 3)

ICRA LIMITED Page 29

JK TYRE AND INDUSTRIES LIMITED (JKT) – Performance overview (Page 1 of 3)

JK TYRE AND INDUSTRIES LIMITED (JKT) - Performance Overview (Pg 2 of 3)

ICRA LIMITED Page 31

JK TYRE AND INDUSTRIES LIMITED (JKT) - Performance Overview (Pg3 of 3)

ICRA LIMITED Page 32

MRF LIMITED (MRF) – Performance overview (Page 1 of 3)

ICRA LIMITED Page 33

MRF LIMITED (MRF) - Performance Overview (Pg 2 of 3)

ICRA LIMITED Page 34

MRF LIMITED (MRF) - Performance Overview (Pg 3 of 3)