Ladies and gentlemen, good day and welcome to the JK Tyre & Industries Ltd. conference call hosted by Emkay Global Financial Services. 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 the 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 from Emkay Global Financial Services. Thank you, and over to you, sir. Thank you. Good morning, everyone. On behalf of Emkay Global, I would like to welcome you all to the 3Q FY25 earnings conference call of JK Tyre & Industries Limited. Today, we have with us senior management team represented by Mr. Anshuman Singhania, Managing Director, Mr. Arun K. Bajoria, Director and President International Business, Mr. Anuj Kathuria, President India Operations, Mr. Sanjeev Aggarwal, Chief Financial Officer, and Mr. A.K. Kinra, Financial Advisor. We'll begin the call with opening comments from the management team, followed by Q&A session. Over to you, sir. Yeah, a very good morning to all of you. It is my great pleasure to welcome you all to the JK Tyre Q3 FY25 earnings call. First of all, I would like to extend my warm wishes to all of you and your family for a very happy new year, 2025. To begin, I would like to share some broad highlights of the Indian economy and then the auto sector, followed by the Q3 business performance. The Indian economy continued to maintain its position as a bright spot in the global economy landscape. However, its performance during the year 2024 was a mixed bag. While the economy displayed a remarkable resilience in the face of global uncertainties, continued domestic issues impacted sentiments to a certain extent. Going forward, a robust tax collection, government thrust on infrastructure, and private CapEx aided by policy reforms is likely to drive the GDP growth. As per the RBI forecast, the real GDP growth of the Indian economy for the FY24/25 is expected to be around 6.6%, which continues to remain the fastest growing globally. The Indian automobile industry is one of the key drivers of growth for the economy, presently third largest in the world and expected to become the number one in the next five years. The auto sector has started showing signs of the recovery. Two/Three-Wheeler sales have witnessed a strong growth, and the passenger car segment continues to grow at a low single digit. Tractor demand is also rising, supported by healthy agri-production. The CV segment is anticipated to benefit from the increased public and private CapEx and consumption boosting measures announced in the Union Budget. Coming to our quarter performance, Q3 FY25, we achieved a healthy growth in the replacement market on a Q&Q basis. However, modest growth in the OEM limited the overall domestic growth, which reflected a broader economic trend. Going forward, the replacement market demand remains promising, and the OEM segment is on a recovery path. Export was sustained on a Y-on-Y basis despite global uncertainties, trade challenges, and supply chain constraints. In Q3 FY25, operating margins were impacted by rising raw material costs, particularly in the natural rubber. To mitigate cost pressures, the company continues to take necessary measures, including price revisions, enhancing product mix, and cost optimization. TBR and PCR continue to be critical for the business segment for us. We are strategically enhancing capacities in a collaborative manner. Earlier announced expansion projects at Banmore Tyre Plant for PCR and Laksar Tyre Plant for TBR are progressing well, and with state-of-the-art equipment being installed. Our radial capacity continues to be optimally utilized, and our focus is to sweat our assets to maximum to generate higher returns for shareholders. Our clear focus and technologically advanced advancements in product design and research and development have allowed us to set new benchmarks within the industry. Further, we are strengthening our tech-enabled manufacturing efforts to improve efficiency while ensuring highest quality standards. These efforts are being recognized by the OEMs and are facilitating the expansion of our global footprint. As a part of our digital transformation journey, we have recently established a digital and analytics center of excellence to enhance data-driven operational efficiencies. JK Tyre is the first Indian tire company to join the global RE100 club, targeting 100% renewable electricity by 2050. JK Tyre is a sustainably led organization focusing and investing resources in developing sustainable, innovative, and value-added products in line with our vision to be a green and trusted mobility partner. We have tied up sustainability-linked loans with International Finance Corporation, a first in India in the tire industry. Now, I would request Bajoria Ji to talk about the performance of Tornel, Mexico. Thank you very much, MD sir. I will now share the highlights of the Mexican economy and thereafter JK Tornel, Mexico, for the third quarter of financial year 2025. As per the IMF's World Economic Outlook report, Mexico's real GDP is projected to grow by 1.8% in 2024 and 1.4% in 2025. Now, moving on to the financial performance of JK Tornel, revenues for Q3 stood at MXN 1,282 million, equivalent to INR 507 crore, compared to MXN 1,301 million in constant currency terms. The decline in revenue was primarily due to the Christmas holidays and the appreciation of the Indian rupee against the Mexican peso. However, EBITDA margins remained steady at 7.9%. High raw material costs, particularly natural rubber prices, continue to be a key area of focus. The overall raw material basket in Q3 increased by approximately 12% on a quarter-on-quarter basis, which we have largely passed on to the customers. Additionally, the Mexican peso depreciated by 6% against the U.S. dollar in the last quarter, which should support JK Tyre's exports in the coming quarter. Our capacity utilization in the PCR category remained high at 90% plus. To reinforce our dominance, we have launched new premium products in higher rim sizes, further strengthening our product portfolio, catering to the evolving needs of advanced markets like the USA, including the domestic market. As part of our strategy to expand in the domestic market, we continue to expand our distribution network. Additionally, we are supplying more cost-effective products to mass merchandisers. We are proud to announce that JK Tornel's plants in Mexico have been awarded with the prestigious Sword of Honour by the British Safety Council. This recognition is a testament to our unwavering commitment to workplace health and safety management. I would now request Mr. Sanjeev Aggarwal Ji to talk about the financial performance of this quarter. Thank you, sir. Thank you very much. So let me brief you about the key highlights for Q3 FY25. The first one is the consolidated revenue for the quarter was recorded at INR 3,694 crores, which remained flat on a Y-on-Y basis. EBITDA margins during the quarter were recorded at 9.1%, which was 12.2% in the previous quarter, which was contracted by 309 basis points due to sluggish demand in OEM and the higher raw material cost, primarily driven by a significant rise in natural rubber prices. Profitability at EBITDA level was recorded at INR 335 crores in this quarter. Cash profits stood at INR 212 crores, and the profit after tax was recorded at INR 57 crores. Consolidated capacity utilization for the quarter was 78%. The utilization of radial capacities remained over 80%. Consolidated exports stood at INR 560 crores, flattish on a year-on-year basis. Subsidiary companies, Cavendish Industries Ltd. and JK Tornel Mexico contributed significantly to the revenues and profitability on a consolidated basis. Cavendish posted a top line of INR 1,025 crores, the highest ever for a quarter, with EBITDA of INR 92 crores, registering a margin of 9%. Earnings per share on a consolidated basis stood at INR 1.88 per share during the quarter. Return ratios, ROCE and ROE, continued to be in double digits, and net debt stood at INR 4,319 crores for the quarter ended December 2024, as against INR 4,340 crores in the previous quarter, and leverage ratios, net debt to equity and net debt to EBITDA were at 0.89x and 2.4x as on December 2024, respectively. The balance sheet of the company continues to remain healthy. We have already circulated our earnings presentation, which is available on our website as well as on stock exchange websites. Now we open the forum for the questions and answers. Over to you, Chirag. Thank you. Ladies and gentlemen, 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 comes from the line of Abhishek Jain from AlfAccurate Advisors Private Limited. Please go ahead. Thanks for the opportunity, sir. Sir, in this quarter, we have seen a very significant increase in the RM cost, despite a small increase in the overall RM basket. So just wanted to understand what is the reason of this much of increase. Is there any high cost of the inventory, which is likely to go down in the coming quarter? And the second is that the replacement volume was much better than the OEMs in this quarter, despite we have seen a contraction in the margin. So you can throw some color on it. Yeah, the average raw material prices have increased 2% on a quarter-on-quarter basis. Here, I would say that the natural rubber prices have actually played a little havoc here. The reason for which is actually because of the season changing and the climatic impact on the availability of natural rubber, plus labor availability as well in the Southeast Asia belt. All these have impacted in terms of the increase in the natural rubber prices. The whole basket of raw material prices have increased to 2% on a quarter-on-quarter basis. But in our numbers, basically, we see that there is an impact of the 320 basis points on the quarter-on-quarter on the RM cost. That is much higher than the increase in the RM basket. So just wanted to understand, is it because of the higher cost of the inventory that was lying at the company or something else? Yeah, actually, what had happened is that in quarter one and quarter two, we had taken some strategic stocking of the material, which helped us to evade some of the cost in quarter two. But then that strategic inventory had depleted, and quarter three saw the full impact of the raw material. Okay. So most probably that. If I may add to what Anuj ji just mentioned, the good thing is that most of the inventory has already been consumed in Q3, first price hike. So in Q4, we can expect improvement, some improvement probably on this side, unless there is again some increase in raw material prices going forward. So that is uncertain, but yes, there has been the major impact of the raw material prices in Q3. Okay. And your other question was on the replacement volumes being higher and still the margins kind of see. Margins have been impacted overall by the raw material, as we explained. And just to clarify, replacement margins and OE margins are not very different as of now. And wherever the OEMs, they've also been kind of the indexation is there with the raw material price increase. So we have been able to get, although it comes at a lag, but still we get it. In the replacement market, passing on the raw material is again depending on the market dynamics. So it has to be seen quarter by quarter, but I think so margins are not very different between replacement and OE. But just to tell you that replacement market in terms of the numbers from the previous corresponding quarter, we had grown at 16%. And a Passenger Car Radial had grown at 24%. Okay. And sir, on the Mexico, basically, there's a significant depreciation of Mexican pesos versus INR. So that has gone down to 5 to 3.8 this time, despite the. 3.9. Yeah, 3.95. Despite that very strong revenue growth we have seen quarter on quarter, in last three, four quarters in Mexico in terms of the Mexican pesos. So just wanted to understand, if we convert into the rupee, we get a very hard impact on the revenue and the margin. So going ahead, what is your strategy to overcome from this problem? Is there any hedging policy or anything else? And what is the impact of this depreciation? Yeah, we are doing two things. One, straight away, due to the peso, which has gone down to almost 20.5. In fact, the day the president announced 25% import duty from Mexico into USA, the peso touched 21 pesos to a dollar. But now it is back to about 20.55. So our exports already, they were taking place, but now we are going to increase our exports many more times so that we can get advantage of this higher peso earning. So that is one. And secondly, as I had mentioned, that we are now supplying the tires to the evolving needs of the advanced markets, that is, higher rim sizes. And that is going to be a little higher profitability margin as compared to the present product portfolio where we had lower higher rim sizes. And now we have taken care of that action. But what we have seen that in the last quarter, there was an anti-dumping duties on the Chinese tires, plus you are talking of the export will grow significantly. Despite all these things, we have not seen any improvement on the numbers, even on the top line or even on the bottom line. So just wanted to understand how the revisions will come. See, the first thing which I had mentioned in my small opening remarks, the quarter three typically is a shorter quarter because we have 16 days of closed plant in December due to Christmas holidays. In Mexico, the third quarter, we are only working effectively for two months and 17 days. So that is the main reason that despite all this, you are seeing a lower top line, which you are absolutely right. But that will not happen in the Q4, which is January to March 2025. Okay. And my last question on the Cavendish. So we have seen a very strong growth quarter on quarter-wise on the Cavendish. Is it because of some benefit of the amalgamation, or is there any increase in the capacity utilization? Plus, there's a decline in the margin of the Cavendish. So despite the increase in the scale, there is a significant decline in the margin. And what is the reason for the significant increase in the top line quarter on quarter? Now, Cavendish, as we said, that it has done the ever-best quarterly sales of INR 1,025 crores. We have increased, as we had earlier shared, we have had a CapEx plan where the TBR capacity was increased. So the impact of that is being seen now. And going forward, further impact will also be seen. On the declining of margins, it is in line with the impact of the raw material, although we have been trying our best to pass it on to the market. But again, Cavendish also has a sizable amount going into the replacement market. So that is the reason. Moreover, the other things are exactly in line with the parent company. And on amalgamation, you asked, on the merger, I don't think so there are any things as of now. Once it happens, then we will have to see the impact of that. Thank you, sir. That's all from my side. Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Mitul Shah from DAM Capital. Please go ahead. Sir, thank you for the opportunity. Sir, just one clarification on this carry-forward inventory of high value in this quarter. So as previous indicated, due to raw material pressure, Q3 versus Q4 gross margin would be more or less flat-ish or maybe even slightly adverse. Compared to that, because of those carry-forward inventory, our margin impacted much in Q3. So do we expect Q4 margins for JK gross margin level should be much better compared to Q3 if we assume raw material prices remain at the stable level? Is what you want to highlight? Our outlook going forward is that demand in the replacement market is going to be promising. OE sector is right now in the recovery path. We are expecting the demand to improve and pick up in the government infrastructure, public and private CapEx cycles also to normalize in terms of the construction and industrial and mining activities. And I think the budget has also given a lot of emphasis to the MSME sector and the increase of spending from the middle class. So on the whole, we are very optimistic on the outlook. Our trust on premiumization continues. Sir, I'm asking for the impact of the carry-forward inventory on the margins, Q3 versus Q4? Mitul Shah, I have already indicated that because Q3 the major impact was of the carry-forward inventory. So that has almost been utilized, and unless there is some increase in raw material prices going forward again, so we can expect some improvement in margin. Yes, sir. And second question is on Mexico operation. From Mexico to how much would be the export to North America right now, roughly? North America, our total exports is about 5% of the total export because we are exporting more to Brazil and to Latin America. But we are now increasing our exports to USA with the higher rim sizes. But then on the other hand, I must tell you that this 25% duty on the imports from Mexico into America has been put on hold by the president of USA for about one month, during which time some negotiations are taking place because, as you read from the papers, immediately Mexico has imposed 25% duty on any import from USA into Mexico. So naturally, now the Americans are reconsidering, and let us see what happens. That export is only 5%, right? On the exports to USA from Mexico. Understood. So 95% of the export is already protected. Thank you. Yes, sir. So last question is again on the replacement side. Within replacement, which segment from FY 26 point of view, you see with the highest growth generator, be it a CV or farm equipment? Because CV has not been great in past one or two years. So on that base, do you think CVs to come back significantly on the replacement side? I'm talking about domestic market. In the replacement market, we expect both the truck and bus radial as well as the passenger car radial to be the two growth segments. We have to wait and watch because one thing which is clearly coming out is that the number of passenger cars that are getting into the market every month is at a very high level. Also, the replacement cycle of the tires because of the additional running of the vehicles is also, so we expect that the total market potential for PCR to further grow, and the TBR also with the road infrastructure, the other government thrust on infrastructure, further mining activities will drive the demand for TBR as well, so these are the two growth segments we look forward to. Understood, sir. Thanks. Thanks and all the best. Just sorry, just to add, the two-wheeler also is doing well. The two-wheelers also will see a very good demand in the market because both in the OE as well as in the replacement. Thanks, sir. A reminder to all participants, please press star and one to ask a question. The next question comes from the line of Chirag Jain from Emkay Global Financial Services. Please go ahead. Yeah, sir, just wanted to get a sense in terms of pricing action that we have taken in various segments. If you can just share some thoughts over there. We have increased our pricing on a quarter-quarter basis to 1%, and wherever price revision we could do, we have done that, and also we have improved our product mix. There is still some recovery, 4%-5% to be done. We have to abide by the competitive market scenario, and so we will take that adequately when the opportunity is there. Okay. And how is the capacity utilization looking like for us in terms of the key product segments, including the recent expansion that we have undertaken? So in terms of capacity utilization for radial, we are in excess of 80%. Bias utilization is at around 70 plus percent. And this includes whatever capacities have already been expanded that have been taken into consideration. For PCR? PCR, as I said, it is close to 90%. Okay. And do we see further scope for, let's say, major CapEx for the next one and a half years, or we are fairly comfortable in terms of the capacities that we have? We already have an ongoing CapEx program of INR 1,400 crores, out of which 1,000 plus crores is for the PCR expansion, which we have already shared, and another 400 odd crores is a combination of TBR and All-Steel Light Truck Radial. So that is going on track. So we are right now undergoing this implementation of our project. We will assess the market going forward and announce CapEx further. Okay. This capacity utilization numbers that we shared, that doesn't include these two expansions on PCR and All-Steel Radial. No, these are not yet in place. Understood. Yeah, that's it from my side. I'll fall back in the queue. Thank you. The next question comes from the line of Amar Kant Gaur from Axis Capital. Please go ahead. Yeah, hi. Thanks for taking my question. I had two follow-up questions. One, if you could please break down your growth in India business in terms of volumes and pricing, if you could, please. Kindly repeat your question, please. Yeah. I just wanted to understand about 2% kind of growth that we have seen in the India business. How much of that was from pricing and how much was volume-led? How much is pricing and volume? Yeah. So on a comparison with the previous quarter, there has been a growth in the volume by around 2% for the India operations. And we have also had an improvement in the pricing by 1%. So by previous quarter, you mean quarter two of FY25? Yeah, as compared to quarter two of FY25. Okay, and could you also highlight which are the segments where you saw higher growth versus slightly lower growth in which segments? I know you indicated about OE and replacement, but in terms of end markets. So the growth came mainly from the PCR and the TBR segments, and also in the two three-wheelers. So if I understand that correctly, in replacement, all the segments have done very well. But in OEMs, most of the segments have seen a decline. Would that understanding be correct? OEM, the major decline is in the TBR segment. Passenger car was okay. There was a slight on a year-on-year basis, actually, passenger car was okay. So on a sequential basis? Sequential. Sequential. Sequential basis. Previous quarter, sir. Yeah, so it was better than the previous quarter in the OE. Sir, maybe I missed the Cavendish numbers. Is it close to INR 1,000 crores? 1,025 crores, yeah. 1,025 crores. Okay. Okay. And sir, on the RM side, I know you have answered this question. Let me ask it a little differently. So if I look at the RM to sales, it's about 65% for the consolidated business, right? And you are talking about all the higher price RM has already been consumed. So would you expect what kind of improvement can we expect sequentially on the RM side? Would it be 100 basis points, 200 basis points, anything that you can indicate based on your purchases that have happened over the last two months or so? See, just to clarify, what I said is that in Q1 and Q2, we were carrying some low-cost inventories. I'm talking about raw material inventory. Yes. In Q3, we saw the full impact of the raw material inventory. What is expected is that going forward, the RM basket is further likely to increase by 1%-2% in quarter four. Definitely, whatever inventories that we have, which are going to be carried forward from quarter three, will definitely give us some benefit for quarter four. Then again, the quarter four impact of raw material will be seen in the subsequent quarter. Understood. Understood, and finally, if you can indicate what is the YTD CapEx that you have done and what do you expect from the full year? So as we discussed earlier, we have been implementing INR 1,400 crore rupees worth of CapEx at this point in time. And majorly, this is for the expansion of PCR capacity. It is about INR 1,025 crores. And the balance, INR 400 crore rupees, is for the All-Steel Radial truck radial. So I wanted to know, YTD, how much CapEx have you done in this? This is, again, on an annual basis, the outlay is about INR 800 crore in this three-quarters period. We have already spent about INR 600 crore rupees. All right. All right. Thanks so much for that. All the best. Thank you. Participants, please press star and one to ask a question. The next question comes from the line of Abhishek Jain from AlfAccurate Advisors Private Limited. Please go ahead. Sir, how much is the current net debt of the company? And what is your debt reduction plan? And the company has taken loan from the IFC. How much benefit will come into the finance? Sir, you are talking about IFC loan. Can you please let me know what is it that you are asking? Sorry, the question was not very clear. How much is the current net debt of the company? And what's your debt reduction plan going ahead? So net debt of the company today is INR 4,317 crore, which is net of the cash available with the company already. And the $100 million worth of loan which we have tied up with IFC is for the expansions which are under implementation at this point in time. And partly, this is also to replace the high-cost dept in Cavendish Industries. Okay. And how much debt reduction plan for the medium term? The line is not very clear. Can you repeat? Sir, how much is the debt reduction plan in the medium term? It's reduction, so the debt reduction on the long-term borrowings basis, we have been going ahead as per schedule, and what we discussed earlier, it's only in the short term. The working capital borrowings have gone up in the last nine months period, and this is to maintain the strategic inventory and also some inventory were accumulated, but this is going to get corrected in next maybe in a quarter or so, in one to two quarters, I would say. So that means that finance cost will go down in the next financial year? Would you correct the answer? Yes. We are hoping for that. Yes, definitely. Okay. And sir, your combined installed capacity is around 35 million per annum. Given that around 82%-83% capacity utilization, currently, the total revenue is around INR 3,700 crores. If you take the 95% capacity utilization, your peak revenue would be around INR 4,300 crores. So you are adding another INR 1,400 crores kind of the revenue, INR 1,400 crores kind of the CapEx. So that means the quarterly revenue of that would be around INR 350 crores. So can you assume that your peak revenue on a quarterly basis would be around INR 4,600 crores-INR 4,700 crores post this completion of CapEx? Two things. One is that the major expansion is for PCR capacities. The total capacity utilization at this point in time in the PCR radial, as Anuj mentioned earlier, was 90% plus. Also for the radial, truck and bus radial is quite high. The overall utilization is at about 80% because of the bias capacity also being there. The overall revenue definitely will go up in two years' period by almost about the same number as we are expanding, which is about INR 1,400 crores plus. That should add to the total revenue. Thank you, sir. And my last question on that, on FY26, basically, what kind of margin target do you have? Given that the RM cost will be stable at this point of time, at this price, then what is your margin target for FY26? See, what is expected is that it all depends on how the raw material basket plays out. We expect that it should not be as volatile as it was in this thing. Plus, we will also be making our best efforts to pass on whatever is the under recovery in FY25 to the market in FY26. So both these efforts on both the sides should help normalization of the margins. So generally, as we had earlier also said, that in the longer term, in the industry, somewhere between that 12%-15% range. So let's see. We'll have to kind of keep it as of now that. But maybe in the next quarter, we'll be able to give you a sharper number on that. Thank you, sir. That's all from my side. Thank you. Thank you. Participants, please press star and one to ask a question. A reminder to participants, you may press star and one to ask a question. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for the closing comments. Thank you. Thank you so much for participating in Q3 earnings call today. And I hope we have given you all the clarifications to your questions. And I would like to once again thank you on behalf of this meeting. Thank you very much. Thank you, ladies and gentlemen. On behalf of Emkay Global Financial Services, that concludes this conference. You may now disconnect your lines.