Ladies and gentlemen, good day and welcome to the CEAT Q4 FY 2025 earnings conference call hosted by Equirus Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Mr. Mihir Vora from Equirus Securities. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. On behalf of Equirus Securities, I welcome you all to the Q4 FY 2025 results conference call of CEAT Limited. From the management side, we have Mr. Arnab Banerjee, Managing Director and CEO, and Mr. Kumar Subbiah, Chief Financial Officer. I would now like to hand over the call to Arnab, sir, for his opening remarks. Over to you, sir.
Good afternoon and welcome to CEAT's quarter four FY 2025 earnings call. I'll be taking you through the business updates for the quarter, and then I shall hand it over to Kumar for his remarks on the financial performance. Post that, we'll open the floor for Q&A. We continue to be bullish on the prospects of the Indian domestic market, medium and long term. With government investment in infrastructure development and changing habits of the customers, we expect the tyre market to grow at a CAGR of 6%-7% volume terms for a long period of time till 2047. We expect exports to grow faster at about 10%-11% long term. We also expect the percentage of Indian exports to occupy more than 10% of global trade as a whole.
Along with the industry growth, the focus on sustainability and eco-friendly practices is also shaping the future of the tyre market. Supporting this shift, the government's incentive schemes aim to boost electric vehicle adoption and expand the charging infrastructure, which will accelerate the electric vehicle-specific tyres and propel similar market demand. At CEAT, we are fully geared to tap into this trend technology-wise and CRM-wise. Coming to our performance for the quarter and financial year, quarter four, we grew robustly at 14.6% standalone basis. On a full-year basis, in FY 2025, our revenues stood at about INR 13,218 crore, which is about an 11% increase over the previous year. Standalone profit was about INR 100 crore quarter four FY 2025, which is about a 5% higher Qo Q basis. Growth momentum continued in quarter four. I have been maintaining that we are looking for overall double-digit growth for the year.
In quarter four, volume growth was 11%. Replacement grew at a high single-digit level, whereas OEM grew a very strong double-digit, in fact, mid-20s. We had a slight reversal in international business. We degrew slightly because of ongoing global uncertainties, tariff and non-tariff barriers in quarter four. We remain attentive to these developments and will continue to take appropriate actions as international business is a focus area for us, as it is margin-accretive . Overall growth for the year in international business was in mid-double digits. Replacement grew very well in a robust manner in commercial vehicles, double-digit growth. In the two-wheeler segment, it was high single-digit growth, and in the passenger segment, it was mid-single-digit growth. All across, there was a decent growth in the replacement market.
In OEM, we grew both Q o Q and YoY basis, primarily due to growth across segments, whether it is passenger, where we have got approvals in new models with higher rim size tyres, which I've been talking about again. In the past, we had vacated high-volume 12-13 inch tyre models, and now we are coming back on 14-inch and upper models across vehicle owners. In truck bus radials, our enhanced supplies from the Chennai plant have enabled us to take a better position in terms of share of business in OEMs. We still are a small player in truck bus radial and barely double-digit kind of share of business in OEMs. In two-wheeler, we have a good share of business in OEMs, and we continue to build on that. Quarter four volumes were up 3.5% quarter- on- quarter.
As far as demand outlook is concerned, the same trends which were continuing, and we have been talking about, continue into the first quarter of FY 2026, which means the urban demand continues to be soft, whereas the rural demand is definitely much more petty. There is a delta of about 4%-5% in terms of demand level between rural and urban in most segments. This trend will continue, which means that with our extended distribution network into rural territories, we should be able to tap into rural demand better, especially for two-wheelers and for farm tyres. Demand for passenger car tyres will be a little bit soft because that comes primarily from the urban markets. OEM-wise, we expect passenger demand to be low single-digit. Two-wheeler growth also may slow down, but there will be significant growth in two-wheelers.
Commercial vehicle growth may come back into positive territory as we go forward. We have been able to partially mitigate the impact of raw material prices through minor price adjustments in quarter four. We primarily adjusted price in two-wheeler tyres in quarter four, and we achieved a better product mix. Looking at commodity prices, as we know that crude prices were more or less stable across Q3 and Q4, now it is going down. Hence, crude-based derivatives, crude-based raw material prices may come off their current levels gradually, more so into quarter two than in quarter one. Natural rubber prices are still holding firm. International prices have come down. As a mix, we have seen very minor adjustments in Q4 over Q3. We will continue to see a flattish trend with a minor drop in Q1 over Q4.
If there are significant changes, it will come at the end of Q1, more into Q2. Going by past experience, we expect to hold the price line, and our gross margins, which are currently at about 37.5%, may see some improvement thereon in Q2. As we have been saying, we are comfortable with a gross margin of 40% plus, more the better. We are now at quarter four end at 37.5%, so there is some ground to cover. As far as future trends are concerned, electrification, international business, premiumization, and digital, we continue our journey to tap into these opportunities. We continue to hold our position in terms of market share in OEM in four-wheeler as well as two-wheeler electric vehicle.
The visibility that we have on new vehicles getting launched with CEAT gives us confidence that we'll be able to maintain 20%-25% share in both these segments going forward. International business has been a key driver, and we have a new brand in the fold, which is Camso. We have not yet consolidated the result. We won't consolidate the results of Camso for another quarter. Starting quarter two, beginning of quarter two, we would be in a position to consolidate Camso results into CEAT results. All the antitrust regulatory activities are now behind us. Integration work has started in full acceleration. As you know, it's a carved-out business. We have not bought an entity. Our focus will be in business continuity with 100% retention of customers. Initial few quarters shall go in stabilizing the operation, understanding the operation.
We retain our view of medium-term to long-term margin-accretive business, as well as robust growth from the Camso acquisition. Otherwise, also CEAT OHT continues to make steady progress. We got a few OEM additions: Argo, AGCO, Mexico, YANMAR, etc. Our forestry and agriculture product ranges, which have been launched recently, have given us an encouraging response. Our NPD activity continues in full force. We have launched about 49 plus off- highway tyres SKUs in quarter four. For the immediate term, there are some headwinds in international business, as I mentioned, from Latin American markets, where the currency has depreciated to a great extent. Imports into that country have become more expensive, and we have been rendered somewhat uncompetitive. The U.S. tariff situation has thrown some uncertainty into the market.
The rest of the markets, like Europe, Middle East, and Southeast Asia, continue to hold firm and are very stable at this point of time. Going back to Camso and Sri Lanka, the economy there is doing good. It has been slapped with a 44% reciprocal tariff, as we know. As we have been engaging with the political dispensation there, including all senior ministers, including the Prime Minister, we are very hopeful of having, if not favorable, a much better situation emerging over a period of time than the 44% reciprocal tariff that we see today. In fact, as things stand now, we are looking at a mere 4% tariff on the tracks business and, in the worst case, 44% tariff in the tyres business.
We have a mitigation strategy thought through, assuming the worst comes true, but we are pretty much sure and hopeful that the situation will emerge to a much better place than the 44% reciprocal tariff that we see today. On premiumization, you would have heard about launches of three absolutely top-class high-tech tyres, which are the Z-rated 21-inch radials for high-performance mobility. Here, this tyre can exceed and perform at 300 km per hour. These are ultra-high-performance tyres, which cater to high-end vehicles offering superior grip control and stability at extreme speeds. We have the CALM technology, which gives a very, very low-noise tyre and goes well with the electric vehicle trend that we are tapping into.
We have launched the Run-Flat tyres, which is a first by any Indian manufacturer in India, which gives you the leverage to travel to a distance of 80 km before you tend to the tyre after it has been impacted. These premium tyre technologies will give us a fill-in towards our premiumization journey as we go along. In terms of innovation, we have had a two-wheeler tyre, which is extremely high life. It may outlive even the vehicle. We also have got an innovation award by the name of Golden Peacock Award at the IOD Golden Global Convention 2025 for an innovative truck bus radial product. We are proud to share that the Chennai plant is a new lighthouse designated plant by the World Economic Forum. This is the second plant after Halol, which has entered the lighthouse group.
This implies high productivity, higher efficiencies, and lower costs as Chennai scales further. On premiumization, we see the website traffic from high-end car users leapfrogged by 26%. Leads from premium SUV users increased by 33%. Brand positive sentiments moved up by 71%, with a 132% increase in average interactions per post YoY . Our CapEx has been around INR 950 crore for FY 2025, and we expect the CapEx to be INR 900-1,000 crore in the coming financial year FY 2026 as well. Happy to share that the S&P Global CSA ESG scores, in that CEAT stands out amongst the Indian tyre manufacturers with an ESG score of 56. We have a long way to go, but 56 is a good place to start off with. Last year's score was 49. CEAT is committed to set company-wide emission reductions in line with the science-based net zero standards, which is SBTi.
Halol and Ambernath plant have received International Sustainability and Carbon Certificate, ISCC Plus. CEAT has also earned ISO 20400 certification, highlighting our commitment to sustainable procurement and ethical sourcing. Recently, we got ranked by EcoVadis, which is widely respected by our OEM customers. We secured a score of 71, which places us in the top 15% of global companies. This will definitely give us a competitive edge in opening the doors in several OEMs globally. In closing, as we look ahead, we are mindful of the evolving global economic environment, and we are actively adapting to the evolving needs of our customers, especially the premium ones. Our commitment to innovation, quality, and customer-centric solution continues to drive us forward. As we enter FY 2026, we are also excited to bring Camso into the CEAT family and start a new chapter together.
With this, I would hand over the call to Kumar for his remarks.
Thank you, Arnab. Good afternoon, ladies and gentlemen, and thank you for joining our quarter four FY 2025 earnings call. I'll share some further financial data points with you all, post which we can enter the Q&A session. Coming to overall financial performance, we ended the year and quarter with some key milestones relating to revenue. Our consolidated revenue for the quarter stood at INR 3,421 crore, delivering a year-on-year growth of 14.3%. Our full-year revenue stood at INR 13,218 crore, a growth of about 10.6%. The revenue for the year and also in quarter four was the highest that we have achieved till date. This was driven by a combination of both volume and price growth. The replacement and international businesses delivered strong double-digit growth, while international business delivered high single-digit growth during the year.
In quarter four, OEM and replacement businesses continued with strong double-digit growth, and IEM segment was flat. Coming to operating margins, our gross margin witnessed improvement of about 60 basis points quarter on quarter, largely driven by marginally lower raw material prices and selective price increases in some key categories like two-wheelers and passenger. Within the perimeter of price elasticity of demand in the replacement segment, while the operating margin saw contraction of about 189 basis points year-on-year, primarily due to increase in raw material prices. Our consolidated operating margin, that is EBITDA of quarter four, stood at INR 394 crore, translating to 11.5% margin, which is about 101 basis points expansion quarter- on- quarter.
Coming to overall commodity markets and raw material prices, unlike other commodities like steel, aluminum, and other metals, the commodities that go into tyres in the global market saw a very high level but stable during the quarter four. Contrary to our expectations, the international prices remained at $1,900-$2,000 per ton level in all of quarter four, which is at a premium to local rubber prices around INR 15 per kg. Local natural rubber prices remained range-bound in the range of about INR 190-200 per kg during the quarter four. In the last three weeks, as Arnab mentioned, the international prices have come off the peak and corrected by about $200 per ton. Currently, international prices are trading at a discount to local natural rubber prices in the range of about INR 7-8 per kg, as local natural rubber prices have largely remained firm.
Coming to crude, the crude oil prices were largely in the range of about $70-$80 per barrel, except in January where for a short period it crossed $80. However, the crude oil prices have corrected a bit in April. It is currently hovering around $65. The key crude derivatives like butadiene, caprolactam, and CBFS prices largely remained constant in quarter four. However, there has been some downward trend price movement in the month of April to the tune of about 2%-5%. It appears that the crude oil prices would move in the range of $65-$70 in the short term, as OPEC has also announced some increase in production and is also supported by the U.S. government in pushing higher level of crude oil production. The third lever that influences raw material prices is rupee.
While rupee touched all-time low of $88 to $1 in the month of March, it has appreciated since the beginning of April and currently hovering around $85 to U.S. dollar. We feel that the current depreciation of rupee is largely due to depreciation of U.S. dollars against euro and its collateral effect on rupee. Taking all of the above and all inventory levels, we expect quarter one raw material consumption cost to be at the same level as that of quarter four or maybe a percentage lower than that. We are keeping our inventory at the lower range of our normal covers to take advantage of any correction in the commodity prices. Considering these factors, we will continue to keep a close watch on the RM situation and see how it evolves over the next few quarters. We expect them to remain within range.
Coming to debt, CapEx expenditure, and working capital, we spent about INR 235 crore on CapEx during the quarter, which is largely in line with the estimates that we had shared with you in the previous quarterly call. Our overall CapEx for the year was about INR 946 crore in terms of cash outflow, and we capitalized assets to the tune of about INR 1,140 crore during the year. We are working towards incurring a CapEx, as Arnab outlined, in the range of about INR 900-1,000 crore in the year FY 2025-2026. While our overall working capital remained negative, it went adverse to the tune of about INR 98 crore in quarter four, largely due to a higher level of inventory and receivables by end of March 2025. We generated a healthy operating cash flow, which was used to manage largely our CapEx requirement and part of our additional working capital.
Our consolidated gross debt stood at INR 1,928 crore and increased about INR 95 crore over quarter three. We are taking steps to bring efficiencies in cash flows further so that we are able to manage the additional requirement also out of investment where we need to fund for our acquisition of Camso business effective quarter two. Our debt to EBITDA on a consolidated basis stood healthy at 1.3 and debt to equity at 1.44x as of 31st March . Coming to operational expenses and employee costs, employee costs marginally increased in quarter four over quarter three , largely on account of higher headcount and manufacturing locations where capacities have been added.
With respect to operating expenses, we exercised strong controls on all our expenses in quarter four that helped us to bring down operating expenses as a percentage of turnover by about 40 basis points over the previous quarter, despite incurring additional costs towards IPL in quarter four versus quarter three. Our end-to-end cost reduction programs covering all elements of cost helped in delivering sustainable and significant cost benefits to the tune of about INR 180 crore during the year. In the coming year, we will leverage scale and continue to focus on eliminating wastages and improving efficiencies to positively contribute to our margins. During the quarter, we also announced a voluntary separation package for one of our older plants that led to more than 100 employees accepting voluntary retirement schemes that we had announced, involving about INR 37 crore of cost that has been shown as an exceptional item in our financial statements.
Depreciation marginally went up in quarter four versus quarter three on account of higher capitalization of assets. Interest costs marginally went up in quarter four versus quarter three, largely on account of increase in our debt, which I just now explained. During the quarter and the previous quarter, Reserve Bank of India announced reduction in repo rate to the tune of 50 basis points, aggregating to a reduction of 25 basis points each. The same has not been reflected in the MCLRs of banks. The interest rate has seen some corrections in the short-term government bonds as well as treasury bills. We expect the interest rates to soften progressively as we see improvement in the overall liquidity. Overall, our consolidated profit after tax for the quarter stood at INR 93.23 crore, which compares favorably against INR 91.61 crore in quarter three of the current financial year 2024-2025 and INR 92.87 crore in quarter four of the previous financial year.
During the year, the company delivered a profit of INR 449.56 crore, which compared to INR 614.48 crore on a full-year basis in the year 2023-2024. Profit for the current year translates to an EPS of INR 116.84, share value about INR 10. We are pleased to also announce that the Board of Directors in the meeting yesterday recommended a dividend of 300% for the financial year 2024-2025, which translates to INR 30 per share. The dividend will be paid post-obtaining the formal approval of shareholders. Thank you once again. We can now open for Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.
Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities. Please go ahead.
Yeah, thanks, sir, for the opportunity and congratulations on the healthy growth performance. Firstly, on the growth side, we have seen very good market share gains last year. For next year also, how do you see the OEM growth? Where particular, how do you see the CV segment growth, sir?
CV was in negative territory, as you know, in FY 2025. We expect CV to be in OEMs, the vehicle growth to be in single digit. It should be in a positive territory basis, the information that we are receiving. Our play will be we are a small player in TBR.
Our play will be in just about double-digit kind of share of business of that growth.
Got it. Sir, on the exports market, you mentioned some of the challenges there. How do you see next year's growth for that exports market? Also, sir, can you give an update how is the OHT segment in Europe doing, sir?
OHT segment has been facing headwinds since the last two years, if you see. Last several quarters, definitely, primarily from the OEM segments. We have an OEM play there, and OEM margins are not significantly different from the aftermarket. We have been making this up with an aggressive play in the aftermarket. In Europe also, that holds true. The OEM demand is showing signs of revival, but it's not yet in.
The headwinds are still there, and we have to rely on growth through aftermarket for some more time.
Sir, on the Camso part of the business, which is compact segments, how is that market doing, sir, generally, sir?
It is the same situation. Overall, OEM is sluggish, which is the construction, tracks, and tyres. Aftermarket is relatively better, and the performance in aftermarket is steadier. The OEM demand should come back in some time. As I said, green shoots are visible, but not yet in.
Sir, on the overall export side, will there be a growth for next year, sir?
Yes, we are definitely planning a growth in Europe. In Latin America, things have to turn around. The currency situation has stabilized. Southeast Asia, Middle East, those are our traditional areas. We will seek growth there.
We are definitely planning growth in international business as well as in the OHT part of the international business. Overall, we are looking forward to growth, apart from Camso, that is.
Thank you, sir. The next question is from the line of Siddhartha from Nomura. Please go ahead.
Yeah, thanks for the opportunity, sir, and congrats on a great set of numbers. Sir, first question is on the replacement side. Now, can you sort of highlight if the industry growth has been similar or there have been market share gains for us as well, and what will be it for two-wheelers and passenger car in FY 2025? Going ahead, how do you see the scenario? Will it be more steady, or do you still see some scope of market share gains for us?
Yeah, I would first share the market share status.
Year on year, we have seen good gains in truck bus radials. As I mentioned in the context of OEM, in aftermarket also, we are a small player. We are still in single-digit market share. On a small base, good market share gains. Good gains in two-wheelers where we are market leaders. Both in motorcycle and scooter, the scooter market itself is growing very well. Both in motorcycle and scooter, we have seen significant gains over a one-year period. In passenger car tyres, we have had a flattish kind of situation where we have neither lost nor gained market share in aftermarket. As far as demand is concerned, two-wheeler, which is penetrated across the POS data, will see a stronger demand in rural market, is what we think. Passenger, which is relying more on the 50,000-plus population town, will see softer demand. Truck bus radial is steady.
If the GDP is growing at around six or thereabout, the demand is also going to be around that or slightly lower, maybe mid-single digit.
Got it, sir. Sir, second question is on the export strategy. Now, I think you had indicated that we will enter probably the U.S. market from quarter two onwards with the TBR range and all. Any change to that plans, whatever you had, how much do you think we can contribute or get from U.S. market in FY 2026 given the current scenario now? In the longer term, also, you had a target of touching 25% from exports by the next one or two years. Where does some of those targets stand given the current context?
Correct. I'll answer one by one. With the integration of Camso right away in FY 2026, we'll hit the target of 25% saliency of international business.
Number two, in the current tariff situation, the key thing is uncertainty, right? None of us really know where the dust will settle. As far as I'll clarify on the tariff, I'll take this opportunity to clarify on the tariff situation, what is our reading. India is not marginally uncompetitive if the situation remains as it is. Vis-a-vis our key competitors from Thailand, Vietnam, and China, we remain slightly competitive. If the auto component tariff of 25% applies uniformly, we are neither competitive nor uncompetitive. As far as Sri Lanka is concerned, 44% is a big burden. As we think, as we see that in tracks, probably the tariff is already down to 4%. In tyres, if it is 44%, then 28% or 30% of our business is from Sri Lanka to U.S..
That risk has to be mitigated, and we have a mitigation plan, which I may share maybe later on. That is a tariff situation overall. At this moment, if everything is as bad as it is today, our exposure to U.S. is in low single digit. Therefore, whatever we do, the material impact to our numbers will be very, very minimal in FY 2026. Having said that, U.S. is a key investment market, a key growth market for future. We believe that these things will sort themselves out. Our investment plan in terms of product development, product launches in U.S. market in OHT, PLT, as well as truck bus radials will continue as usual.
Got it, sir. Sir, lastly on this Camso, just a clarification. Either the tariff is 25% on auto parts or it is a reciprocal tariff of 10%. Does this 44% tariff apply?
Because as of now, I think that has got delayed.
You're right. Reciprocal tariff has been postponed for 90 days. After 90 days, if it is not postponed again, then a 44% reciprocal tariff is applicable on Sri Lanka. This is the current situation. On tracks, as I mentioned, it has already been re-indexed to 4%, not 44%, 4%, which is 50% of the base. And the other 50%, 44% may apply as things stand now. With the indications that we have got by interacting with the local government officials as well as Michelin, which has got other business interests in Sri Lanka, they are also working hard at Washington. We understand that things may resolve out to be better in future.
Got it, sir. Thanks a lot. I will come back in the field.
Thank you.
The next question is from the line of Mitul Shah from DAM Capital. Please go ahead.
Sir, thanks for my question and congratulations on a very strong performance, particularly in this tough environment having double-digit volume growth. My first question is on clarification on this Camso business to the U.S., you indicated 30%. That includes both tracks and tyres, or only tyre-related, or if at all, then how much would be only tyre from this 30% out of this 30%?
It is total. Tracks and tyres are roughly half and half, so 15% and 15%, roughly.
If I give this 44% impact, it would be only on the 15% of the overall business of Camso, right?
As we speak now, things are very dynamic. Things are changing by the day. Yes, as we speak now, that is the impact.
Now my question is on the average realization in export geographies, considering the slightly favorable currency movement as well as a few price hikes we have taken in the last one year. On a YoY basis or QoQ basis, what was the average realization per ton basis in these geographies, blended average?
On YoY, it is not very relevant. On QoQ basis, we have seen a realization growth in excess of 2% in quarter four over quarter three . If we can manage the mix, then we would like this realization growth to continue [audio distortion] .
Yeah. Despite these volume-related challenges, we are able to increase the prices by 2% in export, right?
Not necessarily prices. It is a mix of price plus volume mix.
Okay.
Lastly, again, on this same similar strategy for considering next few quarters of challenges, what would be your pricing strategy? Whatever benefit from this lower RM basket, is it to pass on or we'll try to maintain pricing or margin benefit?
If the RM basket comes down, definitely the price lines will hold. When the prices were going up, we were unable to pass on the entire effect to the market. I am pretty sure that we will hold the price line as the raw material prices taper off. If they take time to taper off, we'll also be open to looking at some opportunistic price increase in the meanwhile.
Sir, geography-wise, can you give any color that over near-term, first half, maybe which geographies you think will decline in absolute terms and which geography can still continue to grow?
The overall market seems to be challenging, but any geography you see decent growth coming in?
If you're talking about international markets?
Yes, yes, sir.
Yeah. We have stable business and growth in the European Union, Middle East, Southeast Asia. We have headwinds in Latin America and North America. Barring that, it is business as usual in most geographies.
Sir, thanks and all the best.
Thank you.
The next question is from the line of Amar Kant Gaur from Axis Capital. Please go ahead.
Yeah. Good afternoon, everyone. Thanks for taking my question, sir. I had two- part questions. One is related to Camso. Correct me if I heard it right. Your exposure via Camso to U.S. is about 30%. Is that correct?
Yeah, correct.
Yes. Sir, I just wanted to understand a little bit.
In terms of the compensation that we are paying to Camso, would there be any component that is withheld or that is dependent on the performance in the next maybe one, two, three years?
No, nothing is related to performance or anything. There is some deferred compensation, but that's on the grant. And the stocks that we will take over at various points of time, not everything is paid on day one, but there's no correlation to the volume in every quarter or something like that.
Understood. Understood. Sir, the second question was on the other expenses. We have seen other expenses remaining flattish versus typically we have an increase because of the marketing expense that we have, IPL-related and otherwise. What is preventing these?
I mean, not a significant increase we have seen in other expenses, 4% kind of QoQ increase in revenue, while other expenses have only gone up by only 1%.
Yeah, Kumar.
See, other expenses, this is one program that we have been running in terms of bringing efficiencies across all cost lines. Okay, generally, it is reflected. There are two lines where you'd be able to see that impact. One, obviously, on the raw material cost on all programs that we have undertaken to bring efficiencies in raw material cost, either in the buying or in reducing wastages in our factories, okay, or any other programs that have led to reduction in raw material cost. What you see largely in other expenses is programs on utility cost, programs on factory-related cost, programs on supply chain-related cost.
Broadly, despite the fact that revenue has grown quarter-on-quarter by about 3.6%, even after adjusting for IPL expenses, we kept all our other costs either constant or lower than quarter three, which is what you are seeing. There is nothing exceptional about it in terms of there being no one-time cost benefit or one-time cost impact in the previous quarter for the purpose of comparisons. It is largely the programs that we are trying. Our endeavor is to keep it at this level. If you look at it, same period of last year also, we were around INR 660 crore level. Okay. Even quarter three, we are about INR 655 crore. We would like to be at this level, even if we have to incur some IPL-related expenses which would spike up in a particular quarter.
In those quarters, we try to keep other expenses a little lower so that overall costs remain within this range.
Would it be fair to, I mean, assume that with some of the marketing expenses built into this quarter, these numbers would likely on a steady-state basis, those IPL expenses notwithstanding, be slightly lower than these on a steady-state going forward?
No, see, quarter four IPL duration was small. Obviously, such small period-related IPL costs can be mitigated through strong controls and other elements of cost. In quarter one, where you have longer period IPL, where a reasonable portion of our marketing expenses is tilted towards IPL, it will not be able to bring it at par with the quarter four or quarter three. You will see some spike in other expenses, particularly marketing expenses in quarter one.
Okay. Okay. Thanks.
Thanks for that and all the best.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant. The next question is from the line of Naveen Baid from Nuvama Asset Management. Please go ahead.
Thank you. Thank you for the opportunity, sir. And congratulations on the very good set of numbers. I'm not sure if you have spoken about this, but what was the overall volume growth for this quarter and for the full year?
Exact guidance we normally not share, but we are definitely looking at.
No, no, no. The quarter gone by.
Oh, sorry, sorry, sorry, sorry. My mistake. For quarter four, you mean, right?
Yes. For quarter four and for full year.
Yeah. Quarter four growth has been 11%.
Okay. Total growth.
Total quarter four has been 11%. And
volume growth.
Yeah. Yeah, volume growth.
Okay. Okay. And for full year?
And full year, it is about 7%.
Thank you. Thank you, sir.
Thank you, sir. The next question is from the line of Vijay Kumar Pandey from Nuvama. Please go ahead.
Thank you for taking my question, sir. Just wanted to understand about the employee expenses. It has gone slightly up on YoY as compared to last year on full year level. Just wanted to understand what is driving this. Despite we have our, despite the VRS team, this has gone up. Is it something related to VRS cost ? Can you just give some light on that?
Okay. I'm sorry. You want to understand about VRS and other expenses? Can you repeat your question?
The employee benefit expense and the VRS expense.
Yeah. Okay.
VRS cost is what we are showing as exceptional item. We incurred about INR 37 crore during quarter four. We announced a separation package in one of our factories where a little lower than 100 people accepted VRS. Therefore, that we are showing separately. With respect to employee cost, moved up quarter- on- quarter by about INR 10 crore. INR 215 crore was quarter three. Quarter four was INR 225 crore. All of that cost increase in employee cost can be attributed to additional manpower cost incurred in our factories where we have had capacity increase. For example, in Chennai factory, we commissioned our truck bus radial plant in September, which we are scaling up. Therefore, in quarter four, we had to engage more people. Similarly, the volume growth number that we were talking about in quarter four, 11% kind of a volume growth happened.
All that had to be produced. These are directly relating to production activity. That cost was incurred in quarter four, which is the reason as to why quarter four was about INR 10 crore more than quarter three. With respect to other expenses, I think I've already explained. Unless you have any specific questions, I think other expenses have been explained too.
Yeah. That's okay. Sir, can you give us a brief about the equity JV income? Because that has come down on year-on-year level for full year. Just wanted to understand what is driving that.
No. Debt? No. Debt to equity. See, look.
No, no, sir. The JV income.
Huh?
JV income. JV income. Profit from JV.
Okay. You are consolidating that.
Yes. Share of profit of associates and JV.
See, it's more or less in line. Okay. This year, in fact, is higher.
Share of profit this year is about INR 21.8 crore versus INR 20.8 crore the previous year. Okay. The share of profit is largely the JV venture that we have in Sri Lanka. We do not consolidate it with our research. This is our share of profits. It has seen an improvement of about INR 1 crore. Okay. Even in the quarter also, there is a marginal improvement by only about INR 5 lakh quarter- on- quarter. Year-on-year, about INR 1 crore higher.
Okay. Okay.
You look at full year basis, unless you are comparing quarter four of last financial year versus quarter four of current financial year. I think the right comparison is full year, full year, or quarter three to quarter four, where you would see some kind of stability.
Thank you very much. We will now begin the next question from Ankur Poddar from Svan Investment.
Please go ahead.
Hello. Thanks for taking my question, sir. And congratulations on great set of numbers. Sir, my question is regarding the realization for FY 2025 on the overall basis have increased by around 2%, while the RM basket has increased by around 8-10%. So there is roughly an under-recovery of around 6-7% odd. Do you plan to have a price increase in near term? How do you plan to mitigate this kind of under? Your thoughts on that.
See, increase in raw material as a percentage of turnover, when we began the year, was close to about 60% of our revenue. When we say raw material has moved up by 8%, the impact of that on sales is about 60% of that 8%. That is the way we need to look at it.
Our realization has moved up by maybe a little over 2%, both through price increase as well as through mix. The difference is what is the difference between the impact of raw material cost, okay, and the realization part of it, which is evident in the gross margin also. We should also keep in mind, in the previous year, we had a very high level of gross margin improvement also, significant improvement in gross margin, which is why our overall operating margins went up by more than 4% in 2023-2024 versus 2022-2023. On a high base of about 43% kind of a gross margin, okay, maybe the gross margin has shrunk by about 4.5%. I think Arnab also earlier mentioned in response to one of the questions, currently our gross margin is, or in his opening remarks, hovering around 37.5%.
Our endeavor is to take it up to in the range of 40%-41%. Okay. We will do that using both the levers, one of them being like any correction in raw material cost from here on would be retained. Okay. Second was obviously judicious price increases across depending on the categories, geographies, and segments. Both of them will happen so that we get back to the normal level of gross margin and normal level of operating margins.
Fair point, sir. Thank you. Sir, my second question is regarding our export strategy. As Arnab already said that we will be clocking around 25-26% after Camso integration. What is your strategy to scale up the export business from here on for the CEAT as well as Camso in terms of which geographies you want to venture, what kind of products?
Specifically with Camso, if you can throw some light, your broad business plan in terms of scaling up the Camso operations from here on.
Right. When I said 25%- 26%, it is at current level of Camso business, which utilizes the facility that we are purchasing at the level of 50%. Our endeavor is to take the capacity utilization to 80%-85%. That much headroom we are looking at. In what time period? Obviously, in medium term, which is about two to three years. The first year will go in understanding and consolidating business continuity, retention of customers. Not much may happen in the first few quarters. That could lead to that much kind of growth with some inflation, maybe almost 2x of the current volume or 1.7x, 1.8x of the current volume. That is Camso.
On the non-Camso part, we also have Ambernath plant, which is now utilized up to about 65%. About 35% headroom is there in Ambernath. Plus, we are expanding Ambernath as this is our topmost priority of growth to about 150 tons per day. We can, in a reasonable time period, if the OEM volumes come back, double Ambernath volume in some time period of maybe three to four years to five years maybe as well. That is the export growth on OHT of CEAT and Camso. Of course, we have headroom for growth for OTRs as well as bias OTRs from the Bhandup plant as well. Now coming to passenger and truck bus radial, here we have aggressive plans in Europe. In the U.S., there will be some headwind unless this uncertainty is sorted out.
Current impact is very low, as I explained earlier, because our exposure is very low. It is an investment market and we will continue to invest in this market and in Latin America as well. For two-wheeler categories and passenger categories in some select markets in Asia as well, there is a well-laid out plan. Camso, to answer your question, will go primarily to North America and Europe. Most of the business will come from there, about 90%.
Okay. Great, sir. My next question is to Kumar sir. What are our plans regarding post the CAMSO acquisition? There will be a fair amount of increase in the debt level. Any medium-term plans, how will you kind of scale down these debt levels if you can share your thoughts on?
Okay. See, currently, as of 31st March, our debt was about INR 1,922 crore.
That was the level of debt. If you were to look at from leverage ratios point of view, it is about debt equity is about 0.44 and debt EBITDA is about 1.3. Low level of leverage. That's the way one can come to conclusion with respect to the current level of leverage. While the debt might go up because the scale of operations is also increasing. Overall, as a company is also growing, overall absolute EBITDA also, we are almost delivered at INR 1,500 crore EBITDA in the current year. Last year was maybe INR 1,650 crore of EBITDA. In absolute term, everything has moved up. Therefore, debt should be seen in the context of leverage ratios. Our understanding is that it's not that entire consideration of $225 million will have to be invested upfront. Okay.
At least about 20% of that we will be paying after three years, three to three and a half years. Some amount of consideration is relating to finished goods inventory. That will also not happen upfront. It will happen over a period of time as we take possession of those goods in different markets. Since debt is fungible, since the cash is fungible, and we are generating cash profit of INR 1,000 crore plus, even in the year FY 2024-2025, our cash profit was about INR 1,080 crore. We have to decide whether we want to keep the debt low even on a ratio basis or whether we want to keep debt at normal levels and help the business to grow through investment, not only in this acquisition, but also in capacities so that we are able to deliver growth.
I think the growth of 14.5% in quarter four was delivered because we had capacities available to meet the sales growth. Scale does play a role, very important role for a tyre industry in terms of distributing the fixed costs. Coming to your larger question, it's possible that debt can move up in terms of debt equity, debt EBITDA ratio from current 1.3 level to maybe a 2.2 or 2.3. Maybe the peak in a very bad quarter could be 2.4-2.5, which is far lower than where we were even two years back. EBITDA was closer to about 2.8-2.9, that kind of a level. That's the way we see.
As we integrate the business, as we generate more cash, the absolute debt and there will be some improvement in overall debt EBITDA, which would translate to maybe up to INR 3,000 crore kind of a debt level over a period of time. Internally, we would try to keep it below. That's the way we see the debt movement over the next 12 months.
Thank you, sir. Participants are requested to limit their questions to one per participant. The next question is from the line of Mitul Shah from DAM Capital. Please go ahead.
Hello.
Yes.
Hello. Am I audible, sir?
Yes, sir. You're audible.
Yeah, yeah, yeah.
Yes.
Sir, my question is again on the Camso side in terms of the apart we have enough capacity, but apart from that, any strategical investment required in terms of the increasing the network or what could be the ballpark investment or CapEx requirement, even considering the maintenance CapEx from annual point of view?
Okay. No, look, from our point of view, beyond the $ 225 million, which encompasses a lot of other elements in the acquisition of that particular business, we may have to add some key upstream equipment, at least two of them, in the next 12 months, after 12 to 18 months after we acquire the business. Okay. To take care of that and plus normal maintenance CapEx for Camso business in Sri Lanka, maybe we need about, in Indian rupee terms, possibly about INR 100-125 crore per annum for the first two years.
That is the way we see in terms of requirement.
Hello.
Thank you, sir. The next question is from the line of Siddhartha from Nomura. Please go ahead.
Yes, sir. Thanks for the follow-up. Sir, one question on your margins in various segments because we have pushed a lot in OE still, we have not seen any meaningful margin impact. How should we think about the difference in margins between your replacement OE and export markets? Some sense there, sir, will be helpful.
See, look, among all three segments, OEM margins are a little lower, okay, and where our overall revenue share is about 28%, 28%-29%. Okay.
Having said that, OEM business also gives us some cost protection during the period when we see high volatility in prices or high upward trend in prices because we have a mechanism to adjust to any movement in raw material prices with a one quarter lag. For us to grow in the replacement market, it is important that we have a reasonable presence with OEM. In general, in terms of margin distribution, in the normal circumstances, international business and replacement business, operating margins are at similar levels. Gross margins, replacement could be a little higher, but we also need to invest in marketing and therefore at operating margins level similar. In case of OEM business, while operating margin vary depending on the categories, for example, our two-wheeler margins would be a little better.
In passenger car where we are penetrating into high-end tyres, etc., it could be lower. Operating margins of OEM business could be lower in mid-single digits versus replacement and experts at a high level.
Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for closing comments. Please.
Thank you very much for attending the earnings call and being with us through FY 2025. Looking forward to you being with us in FY 2026. Wish you all a very good financial year in FY 2026. Thank you.
Thank you. On behalf of Equirus Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your line.