Despite the Indian auto industry trying to lift itself from the sluggish sales-hit scenario, JK Tyre is eyeing growth. To achieve that, the tyre major is targeting the replacement and export segment instead of domestic OEM demand, which is dampened due to the reasons like Coronavirus pandemic, economic crisis, low consumer sentiment etc.
To penetrate more into the replacement market, JK Tyre has invested heavily in channel expansion in the past six months. It has added around 900 new dealerships in the first six months (April-September) of the current financial year, said JK Tyre Chief Financial Officer (CFO), Sanjeev Aggarwal. He also said that the company will continue to focus on expanding its retail presence in the coming quarters.
This strategy seems to have paid off well, as the increasing demand in the replacement market has contributed around 74% to JK Tyre’s total revenue during Q2 (July-September) of FY21. The tyre manufacturer’s replacement business has grown 20% to Rs 1,470 crores in the July-September quarter.
|Particulars||Q2 FY2020-2021||Q2 FY2019-2020||% change|
|Consolidated profit after tax||109.68 crores||Rs 167.70 crores||– 34.60%|
|Consolidated revenue||Rs 2,274.84 crores||Rs 2,154.95 crores||5.56%|
Also, the tyre manufacturer’s renewed thrust on exports has resulted in higher export sales of Rs 337 crores during the second quarter of the current fiscal. At present, export markets contribute to 17%-18%to its total revenue. As JK Tyre has revealed, the company is continuously updating its product portfolio to the export needs. The company is aiming for further growth in the segment alongside the domestic replacement market.
The imposition of anti-dumping duty in markets like the US, Brazil and Latin America has provided huge opportunities to JK Tyre to supply tyres and enhance its footprints there. Anshuman Singhania, who is elevated to Managing Director of JK Tyre from Deputy Managing Director, effective from 21st October 2020; also said that the company’s focus on technology will also help it to penetrate new regions in the coming quarters.
Talking about the second-quarter earnings for the financial year 2020-2021, Anshuman Singhania said that the truck, bus and farm sectors have contributed significantly in driving positive turnarounds in the replacement sector. He also hopes that the company would see substantial revenue growth in the coming quarters from domestic replacement and export markets.
JK Tyre has reported a decline of -34.60% in net profit after tax at Rs 109.68 crore in Q2 FY21, as compared to 167.70 crores in the same quarter in FY20. The company’s consolidated revenue grew by 5.56% to Rs 2,274.84 crore in the second quarter of current fiscal, as compared to Rs 2,154.95 crore in the year-ago period. Jk Tyre has also reportedly achieved average capacity utilisation of 80% in the second quarter of current fiscal in line with the pre-Covid-19 level of 73% in Q2 FY20.