Ladies and gentlemen, good day and welcome to the JK Tyre & Industries Limited FY 2026 earnings conference call hosted by Emkay Global Financial Services Limited. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Chirag Jain, Deputy Head of Research from Emkay Global. Thank you, and over to you, sir.
Thank you, Huda. Good afternoon, everyone. On behalf of Emkay Global, I would like to welcome you all to the FY 2026 earnings conference call of JK Tyre & Industries Limited. Today, we have with us the senior management team represented by Mr. Anshuman Singhania, Managing Director, Mr. Arun K. Bajoria, Director and President International, and Mr. Sanjeev Aggarwal, Chief Financial Officer. We will begin the call with opening comments from the management team, followed by the Q&A session. Over to you, sir.
Yeah, a very good afternoon to everyone. I welcome you all for the JK Tyre FY 2026 earnings call. I'm happy to be here, and I have with me Dr. Arun K. Bajoria, Director and President International, and Mr. Sanjeev Aggarwal, who is the CFO. India continues to remain a bright spot in the world, struggling with growing uncertainty and trade-related disruptions. The Indian economy has done incredibly well with the GDP growth of 7.4% in FY 2025, taking the FY 2025 growth to 6.5%, which is double the global average growth, underscoring the country's resilience on the back of its robust macroeconomic strength. As per RBI, the GDP is projected to grow at 6.5% FY 2026. Growing private investments and increasing localization make India the key drivers, fostering India into becoming a more meaningful part of the global supply chain.
Lower interest rates and improved liquidity situation, declining crude oil prices, and normal monsoons argue well for the growth going forward. However, global fluctuation due to U.S. tariffs and geopolitical situation continue to pose challenges. The India-U.K. Free Trade Agreement has been recently signed. It is a breakthrough opportunity which is expected to align customer interests with broader goals of Indian industry, as it maintains a balanced approach to tariff commitments, benefiting both India and U.K. manufacturing industry. Recently announced, the U.S. has imposed a 50% tariff on Indian imports. In FY 2026, the performance of the auto industry was relatively flat. Growth in tractors, two-wheelers, and exports helped in holding the growth in the industry well. Domestic commercial vehicle volumes have remained flat, and export has registered high growth of 23% on a year-on-year basis.
The PV segment continues to perform well with an increased share of SUVs, along with the overall PV sales crossing the one million mark, which is encouraging and increasing the total pool of cars. With the upcoming festive season, coupled with the benefit of the recent rapid rate cuts and favorable monsoon conditions, we expect the consumer sentiments to improve further. FY 2026, Indian tire industry is expected to achieve 7%-8% growth on the back of the strong domestic replacement demand, despite muted OE offtakes. Premiumization continues to play a pivotal role in improving the realization. The Indian tire industry is an export-heavy manufacturing sector with outbound shipments, which surpass INR 25,000 crore FY 2025, registering a growth of 10% on a year-on-year basis, despite global economic uncertainties.
This growth is attributed to constant investment in capacity expansion, improvements in manufacturing efficiency, and increased focus on enhancing the R&D capabilities. The Indian mobility landscape is witnessing a radical shift owing to the emergence of artificial intelligence and machine learning, which are regarded as the modern drivers of transformation. JK Tyre is embracing this technological shift by leveraging the use of advanced technologies at every stage of manufacturing and across functions, helping us to deliver best-in-class products. With great pride, I would like to share with you that JK Tyre is ranked amongst the top 15 strongest tire brands globally by Brand Finance. This recognition marks a significant endorsement of our global competitiveness, technological strength, and brand leadership. Our core focus is on delivering products and solutions which offer a seamless blend of comfort and high performance for our customers.
Recent expansions in PCR capacities have helped JK Tyre to consolidate its position among the top PCR tire manufacturers in India. I'm happy to share that JK Tyre is already moving well ahead on its sustainability path by achieving a 70% reduction in GHG emissions by 2025, much ahead of the original plan of a 50% reduction by 2030. In this quarter, we deepened our market penetration and have onboarded 240+ dealers and 35 exclusive branch shops across India. Also, 40+ new fleet accounts have been added, nearly 1,500 mark. Moving on to the financials of this quarter, JK Tyre witnessed the best-ever domestic performance. The domestic revenue grew in double digits with innovative and premium products. Digitalization and focus on enhancing operational efficiencies are some of the other key drivers which are helping the revenue growth.
Volumes in both commercial and passenger categories achieved the highest sales in this quarter, driven by strong brand-building initiatives, underscoring the enhanced customer's trust in our product quality. To further reinforce our brand credibility, we have launched targeted digital campaigns across the product categories, achieving an impression of over 53 million consumers. In the mobility space, 125 electric buses from Ashok Leyland and Switch Mobility were launched in Chennai and were flagged off by the Tamil Nadu Chief Minister. We are proud that all these buses were equipped with our tires, JUXe tubeless tires, which reinforces our leadership in the EV segment. The momentum has been really good in this quarter. We are fully ready to build upon the same going forward and with all our effort and dedication to serve the customers proactively while sustaining profitable growth, benefiting all our stakeholders.
Now, I would like to take you through some of the key operational highlights. Best-ever performance of India operation clocked quarterly revenue of INR 3,475 crore, up by 9% on a year-on-year basis, as against INR 3,188 crore in the corresponding quarter. The growth momentum in the domestic market remained robust in Q1, with JK Tyre clocking a sales growth of 11% on a year-on-year basis, equally contributing by the OEM and the OE segment. TBR volumes in the replacement and OE market grew by 7% on a year-on-year basis. Passenger Car Radial category registered a significant volume growth in the replacement market by 32% on a year-on-year basis. Similarly, export volume also registered a robust growth of 39% on a year-on-year basis. Farm category volume picked up pace with replacement and OE markets, achieving a growth of 26% and 69% respectively on a year-on-year basis.
Two- and three-wheeler category volumes registered a robust growth in the OEM segment by 53% on a year-on-year basis. Raw material and selling price: On a quarter-on-quarter basis, raw material prices remained flattish, whereas average net sales realization improved by 1.3%, mainly through product mix improvements. As a part of the deleveraging journey, we have been constantly reducing our debt levels. As of June 30th, 2025, gross debt on a consolidated basis stands reduced by INR 324 crore. Projects under implementation involving a CapEx of INR 1,400 crore are progressing as per schedule. CapEx outlay for the full year stands at INR 902 crore. Now, I would request Bajoria to talk about the performance of JK Tornel.
Thank you, MD Sir. I'll start by sharing some brief highlights of the Mexican economy, followed by JK Tornel's performance for this quarter.
Mexico is one of the largest trading partners of the USA, with 80% of its exports going into the U.S. Given such huge exposure to the U.S., the heightened volatility continues to remain an area of concern. But on the other hand, around 50% of Mexican exports are USMCA (United States-Mexico-Canada) agreement compliant, which are projected to rise to 75% in 2026, attracting a 0% tariff. Mexico's central bank is also playing a crucial role in stabilizing the economy by easing the monetary cycle, and it has lowered the policy rate (TIIE) to 8.5% by the end of this quarter. Further, local currency, the Mexican peso, has depreciated against the US dollar by 13% year-on-year, which was 19.5% in Q1 FY 2026 versus 17.25% in Q1 of financial year 2025, which bodes well for our future exports.
Revenues of JK Tornel for FY 2026 were recorded at INR 505 crore, up 12% over the previous quarter of FY 2025, reflecting continued resilience of our products in domestic and export markets despite the ongoing uncertainties. Further, revenues in constant currency stood at INR 1,147 million, up by 7% quarter-on-quarter versus INR 1,234 million in Q1 FY 2025, lower by 7%. To further strengthen our product portfolio and enhance the customer base, we have started the development of ATV, which is all-terrain vehicle tires, a profitable business in the USA. In addition to the above, we are foreseeing a revival of sales in the U.S. markets on account of clarity with respect to non-applicability and further postponement of tariffs on tire exports from Mexico to about 90 days as of now.
Further, we are fully ready to capture a potential opportunity in the passenger and light truck market on account of the closure of competing tire companies' Mexican plants. Now, I would request Mr. Sanjeev Aggarwal, our CFO, to talk about the financial performance of JK Tyre for the first quarter of FY 2026.
Thank you very much, sir. I will briefly share the key highlights for FY 2026. The first one is the consolidated revenue for FY 2026 was recorded at INR 3,891 crore, which is up by 6% on a year-on-year basis, as against INR 3,655 crore in the corresponding quarter. Consolidated EBITDA for FY 2026 was recorded at INR 424 crore versus INR 516 crore in the corresponding quarter last year. However, over the previous quarter, EBITDA improved by about 10%. EBITDA margins during Q1 were recorded at 10.9% versus 10.2% in the previous quarter. Cash profit for Q1 stood at INR 309 crore, up by 17% on quarter-on-quarter basis.
Profit after tax for the quarter stood at INR 155 crore. Capacity utilization for Q1 was nearly 80% on a consolidated basis. However, the utilization of radial capacities remained over 85%. Exports remained resilient during Q1 despite the ongoing U.S. tariff-related uncertainties and other geographical challenges.
However, exports of passenger car tires witnessed strong traction on both a year-on-year basis and on quarter-on-quarter basis. Cavendish Industries Ltd. posted a top line of INR 800 crore in Q1 and recorded an EBITDA of INR 51 crore in the quarter. Both the subsidiaries, Cavendish Industries and JK Tornel, Mexico, continue to add significantly to the overall financials of the company. Consolidated earnings per share nearly doubled at INR 6.03 per share in Q1, as against INR 3.54 in the previous quarter. Return ratios, ROCE and ROE, continue to remain at high levels, and net debt stood at INR 3,862 crore for the quarter, as against INR 4,081 crore in the previous quarter, a net reduction of INR 219 crore on a net basis. The balance sheet of the company continues to remain healthy, with robust key financial ratios.
Leverage ratios, that is, net debt to equity and net debt to EBITDA, were 0.74x and 2.4x, as of June 30th, respectively. The scheme of amalgamation of Cavendish with JK Tyre is progressing well and has already been approved by stock exchanges and SEBI, and shareholders' and creditors' meetings have been convened by NCLT, which are scheduled to happen on the September 3rd this year. We have already circulated the earnings presentation, which is available on our website and on the website of stock exchanges. We can open the forum for questions- and- answers, please. Thank you.
Thank you very much. We will now begin with 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 Abhishek Jain from AlfAccurate Advisors. Please go ahead.
Thanks for the opportunity and congrats for the decent set of numbers. Sir, in this quarter, we have seen that margin has improved, basically driven by the standalone numbers. So, how will the margin trajectory improve in the coming quarter, given that there is a fall in the rubber prices in the last couple of months? If you can give some guidelines?
There has been a margin improvement versus the previous quarter, and here, with our new and innovative products, which are very well received in the market, are gaining traction. Our OEM approvals and plus in the higher rim sizes in the PCR are driving good margin expansion, and as well as our in the replacement market as well.
We have in the replacement market in the passenger, we were up year-on-year in terms of the numbers, 32%, and that is in the passenger car line, and even in the truck bus radial, we were high single-digit on a year-on-year basis, so this is giving us confidence that going forward, this will definitely have good traction because, as you heard, that the repo rate has cut, there has been good monsoon, and the thrust on the infrastructure push by the government is coming in very clearly. This all argues well for the demand generation.
Gross margin expansion on the first quarter for 2026 was around 120 basis points quarter-on-quarter. How the numbers will reflect from the second quarter onwards, that as most of the tire companies are expecting that the benefit of the fall in rubber prices will accrue from the second quarter significantly. If you can give some guidelines on the gross margin from that.
Yes, sir, you are right, so, as we mentioned earlier, the raw material price scenario is likely to remain benign, and if that is the case, then definitely we will be able to, in the demand increasing scenario, we will be able to increase our prices, which will be supported, as Anshuman mentioned, with the increased improved product mix and increased volumes. Because, as you are aware, we have already been implementing projects in PCR, TBR, and all steel LTR tires, which are margin-accretive products, and this will definitely help us in improving the margins going forward. The NSR improvement will happen, and we are expecting that, hopefully, if the raw material prices remain within what we are expecting, we will be able to come back to the guidelines which we have been talking about for the margins, range of margins on a better level.
Okay. And, sir, my next question on the Mexico business. Rupee versus Mexican peso average relation was 4.28 in this quarter. While it has now, this exchange rate has moved to the 4.7 in the last 2-3 months. So, how do you see the benefit of it?
You see, the benefit will definitely occur when we convert the peso to rupees while consolidating the profit and loss and the balance sheet in India. So, certainly, you are right. It is going to benefit us.
Also, the export.
This will be because there is a depreciation of the peso, so that will help us in exporting more. In any case, you have heard in the opening remarks by Anshuman Singhania that there is a nil tariff which has been imposed on the exports from Mexico to U.S. markets. We will have the opportunities to grab, actually, and we will increase our exports to North America as well as to other countries.
Brazil and Latin America.
Brazil and Latin America, so we are hoping that in addition to the increased domestic demand, the exports will also help us in improving the volumes and improving the margins.
So, this quarter, despite the top-line growth, margins turned negative in Mexico. So, how can we see the numbers in the coming quarter in terms of the top-line growth and plus that margin improvement? Because this is the first time we are seeing the negative margin in the Mexico business, EBIT margin.
Yeah, as you had heard our managing director say about the disruption in the Mexican market and all the industries because of the tariffs, which the tariff was going on, the tariff war, and all that was going on. And they shifted from February to March, and then again they shifted till the end of July. And now, in August, they have shifted by another 90 days. So, now we are feeling that it is settling down, and therefore our sales will go up, and therefore our bottom line is going to improve. And just to give you some kind of a sense of comfort, July has been a very, very good year in the top line as well as in the bottom line.
So, that makes sense.
Just to complete that part, hello? Can you hear me?
Yeah, yeah, sir. Go ahead.
Okay, so in the first quarter, there was an increase on constant currency basis. There was an increase in revenue by about 7%. And overall, when the pesos depreciated, that has also helped us with the rupee on consolidation basis. The revenue has gone up by 12% in a way. This is going to be the case going forward as the uncertainties are not there now, and we can focus on increasing our exports from the Mexico market.
Absolutely. So, that means that EBIT margin of this business, which is used to be 78%, that will come back in the coming quarter?
Yes, absolutely. You are right.
Okay, sir, and my last question on the Cavendish. Sir, what was the revenue and EBIT of Cavendish in the first quarter?
The revenue was slightly lower because of, again, we saw some kind of a slow demand for the TBR from OEM side on that front. But I think now the replacement market, of course, has helped us to pick up the volumes, and the EBITDA margin was suffered lower because of this reason only, lower revenue. But I think now we will come back to almost about INR 1,000 crore-INR 1,100 crore of average revenue for the quarter, and just will then allocate expenses over the larger number, and therefore the margin will go back to the same levels as we have seen in the case of JK Tyre on standalone basis.
Thank you, sir. That's all from my side.
Thank you. The next question is from the line of Mitul Shah from DAM Capital. Please go ahead.
Sir, thank you for the opportunity, and congratulations on a good standalone performance. Sir, my first question is on the Mexico operation, whereas previous participant also asked about the losses for the first time after a long time, and we are indicating normalized profit in the next 1-2 quarters. So, which area you think would be the progress in terms of either on the raw material side will get benefited or operating leverage or any other cost-cutting thing bringing down the promotional expense incentive? Which are the areas you see scope of improvement on a sequential basis going forward?
The raw material will certainly help. We are seeing stability in the raw material index in the prices. So, raw material will definitely help. The other, also, we have also expanded our market within continuous expansion of the market within Mexico and our export market, which is Brazil and LatAm. We are continuously engaging and expanding our dealer and channel here. That will definitely help. Also, that we have also introduced our constant introduction of new ranges. We have introduced all-terrain vehicle tires, which are also highly profitable.
So, these are some of the areas in which our margin expansion will come. It is a continuous process of operational efficiency, which we are continuously focused on. The volume gain with premiumization is going to definitely, going forward, is going to be helping us. Our plan of $27 million is also on track, which is adding capacity in the passenger car, and that too in the premium category only.
Premium category. So, that will further improve the margins.
Yes. Do you think we'll see the similar margins which you wished to report earlier, or it will take 2-3 quarters to come to normalized level for Mexico?
We will come back to the normal levels of margins in Q2 onwards. Because up to last quarter in Q1, there was an efficiency of exports and the revenues, and therefore the allocation of the expenses was not. We were not able to do it properly. That will happen from now onwards.
Out of this INR 5 billion revenue for Mexico reported, how much would be, sir, purely U.S. dependence? How much non-U.S. part?
Sir, presently, about 7%-8% exports are there to North America from Mexico, and that is going to go up because of the benefits of the known tariff regime. That is going to continue for another about 90 days and subsequently also. I think this is going to continue under the USMCA.
Okay, sir. And last question on the domestic business side. In the replacement, Q2, do you see replacement growth would be higher than the OEM for the industry? And if yes, then within replacement, which segment should perform or outperform in terms of higher growth, and which segment would be flattish or maybe decline also or lower growth?
Sir, in the Q2, there is definitely an element of the festive season, which argues well. So, here in the passenger car radial, year-on-year basis, we were in the replacement market 32% higher in terms of the volumes in the passenger car radial. And in the truck radial, we were high single-digit. And we are definitely, and in the farm, we were high of 26% on year-on-year basis. So, as we go along, we see a good growth coming in in the replacement market. Even in the two-wheeler, it signals well that it is on a high single-digit as well. So, on a whole, we see that the replacement market will grow steadily as we go along in the quarter. The OEM has remained flattish, but there is definitely sentiment in terms of the festive season with some new launches in the passenger car.
The sentiments are good. So, it should have a growth. And in the commercial trucks, there is a little bit of a flattish movement right now, but going forward, there should be some pickup which should come the post monsoons.
Understood, sir. Thanks. Thanks, and all the best.
Thank you. The next question is from the line of Aditya Shah from Omkara Capital. Please go ahead.
Hello.
Yes, sir.
Am I? Hello. Am I audible?
Yes, sir.
Yes, you are audible.
Please continue.
I wanted to understand how is your Indian market revenue mix, and what would the category mix for India in this quarter?
The revenue mix has been 63% in the replacement market, 25% in the OEM, and export was about 13%.
Okay. And how was the category mix in this year?
In terms of our total truck, it is around 60%, and around 30% is passenger car radial line and non-truck buyers, which is like the LCVs and farm, has been around 12%. Hello?
Are you there, sir?
Thank you.
Thank you. The next question is from the line of Nilesh, who is an individual investor. Please go ahead.
Hello?
Yes, please.
Yes. Good setup numbers, sir. Congratulations on the sequential basis. There is improvement in margin. But sir, what is the percentage of our premium product versus regular one?
So, premiumization.
Because that will give you, going ahead, the margin expansion.
Yeah. So, premiumization, when we are talking about that, in the passenger car radial, 16-inch and above, FY 2023, we were 18%, and now we are trading at 26%, and our capacities are also coming in in the passenger car, so we are planning to increase this 25% mix to around 40% in the coming quarters. That is one. The other in the truck tires, our XF Series, which has gained very well acceptance in the OEM and as well as is gaining a lot of traction in the replacement market, even the XD Series and XM Series tires, which are our premium truck radial offering, which is gaining a lot of traction there, so these are the products in which we are having a good drive of sales, which will ultimately improve the profitability going further.
Correct. Whether JK Tyre has any internal target to be a net debt-free in next three years or five years?
So, basically, see, this is a capital-intensive industry, as you are aware. And we have been constantly reducing our overall debt. But at the same time, in order to grow, we have to increase our capacities as well. Right? And therefore, we have to keep implementing projects. And with God bless, I think going forward, we will be able to increase our margins and increase our profitability. So, the larger amount of the projects going forward will be funded through our internal accruals rather than through loan. But that is the reason why I've been saying that the overall debt to EBITDA should remain within a range of about 1.5-1.8X rather than having 4X, which used to be the case earlier about three, four years ago. So, now we are targeting to remain less than, I would say, less than 2X.
That is a very comfortable range, and we should take the benefit of the interest rates, which are prevalent in India, in order to get a better profitability also. Debt is not bad always if it is well-managed. I'd like to only add that we are very much focusing on deleveraging, and we have been able to significantly reduce the net debt at a peak level FY 2020 from INR 5,400 crore to INR 3,800 crore as of now. This is a continuous process, and we have also cash over INR 600 crore in our books, which will be utilized for our capacity enhancements.
Okay, sir. Thank you, and all the best for the subsequent quarters. Yeah. Thank you.
Thank you.
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question is from the line of Nandan Pradhan from Emkay Global. Please go ahead.
Yeah. Hi. Can I add a bit?
Yes, sir.
Can I add a bit?
Yes.
Okay.
Yes, sir.
Hello, sir. Good afternoon, and congratulations on a great set of results . So, just two questions on my side. Because we've seen the RM being flattish this quarter, if you could just quantify the kind of price hikes that we've been able to take, because we mentioned better realizations, also better products as well. So, first, the price hikes. And the second question was, in our Q4 results, we had called out for double-digit revenue, consolidated revenue growth for the full year largely led by the replacement. So, if you could just shed some color on what kind of growth we are expecting for the full year and replacement as well as OEM, or if you could break it down into further subcategories, that will be all from my side. Thank you.
RM?
RM, go ahead.
Yeah, so the RM prices have actually declined into 2.5% on a quarter-on-quarter basis, but there has been a flattish net sales realization, which is the price increase on a quarter-on-quarter basis. Our growth of 11% in the domestic market, basically, it is the volume push which has helped, and we continue to do that both in the OEM and in the replacement market, which has really helped us, and we continue to focus on that and what was.
Full-year guidance is asking.
The full year, we see good growth coming in, and the growth is going to be better than last year. As you know, it was an election year, and then a lot of infrastructure projects, etc., were stalled. CV market was rather muted. With the auto industry also having good traction, we are seeing for ourselves an initial double-digit growth.
Thank you, sir. And if I could just squeeze in a last question. We had mentioned that the INR 1,400 crore of CapEx was possibly going to be over by December. Do we still stand on that, or do we see some kind of delay in that? Will the capacity come on stream by December?
It's progressing very well, so this is progressing very well and as per schedule, and from the third quarter of this financial year, we will be starting these projects, and then, of course, ramp-up will happen over the next six months' period, so the projects are on. We have been investing money into these projects, and that is how we are seeing that the volumes will increase going forward, and we will get the benefit of the operating leverages.
Thank you so much, sir. That is all my side. I'm all the way there.
Thank you.
Thank you. A reminder to all participants, you may press star and one to ask a question. Ladies and gentlemen, let us give a moment till the queue assembles. As there are no further questions from the participants, I now hand the conference over to the management for the closing comments.
No. Thank you very much to all of you for joining this con call, and we look forward to meeting you next quarter. Thank you so much.
Thank you. All the best.
Thank you. On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.