Balkrishna Industries recovers 8% from day's low, up 3% in a weak market

The company announced commencement of commercial production from its brownfield expansion & debottlenecking project at the Bhuj plant.

Shares of Balkrishna Industries (BIL) moved 3 per cent higher to Rs 1,815, recovering 8 per cent from the day's low of Rs 1,682 in Monday’s intra-day trade on the BSE.

The tyre maker in a regulatory filing on Friday after market hours informed exchange about commencement of commercial production from its brownfield expansion & debottlenecking project at the Bhuj plant. The board of directors at its meeting held on February 8, 2021 had approved the aforesaid project.

“The company has successfully commenced commercial production of the brownfield expansion and debottlenecking project at Bhuj plant ahead of schedule. This will result in increased production of tires up to 50,000 MTPA. The complete ramp-up in production is expected to be achieved in the next 6 months,” BIL said.

The said project was envisaged to be commissioned by H2FY23. Hence, such early commissioning comes as a positive surprise. It will add ~50,000 tonne of capacity per annum with BIL’s present capacity pegged at 285,000 tonne. Such a step bodes well for the company as it was already clocking ~70,000-75,000 MT per quarter at ~nearly 100 per cent capacity utilisation thereby limiting its ability to supply to its end markets, ICICI Securities said in a note.

The brokerage firm expects BIL to report healthy profitable growth, going forward. Capex costs for the project was around Rs 800 crore with revenue potential of around Rs 1,450 crore with RoCE in excess of 30 per cent, it said.

However, despite today’s outperformance, BIL has underperformed the market by falling 19 per cent in the past one month, due poor operational performance. Higher rubber, energy and freight costs impacted BIL’s margins during October-December quarter (Q3FY22).  In the past six months, the stock has slipped 27 per cent, as against a 9.5 per cent fall on the S&P BSE Sensex.