Balkrishna Industries Ltd (BALKRISIND) Q3 FY23 Earnings Concall Transcript

Balkrishna Industries Ltd (NSE:BALKRISIND) Q3 FY23 Earnings Concall dated Feb. 13, 2023.

Corporate Participants:

Rajiv A. Poddar — Joint Managing Director

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Analysts:

Annamalai Jayaraj — Batlivala & Karani Securities India Private Limited — Analyst

Binay Singh — Morgan Stanley — Analyst

Ashutosh Tiwari — Equirus Securities — Analyst

Arvind Sharma — Citigroup — Analyst

Sonal Gupta — HSBC Mutual Funds — Analyst

Siddhartha Bera — Nomura Capital — Analyst

Priya Ranjan — HDFC AMC — Analyst

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Nishit Jalan — Axis Capital Limited — Analyst

Pramod Amthe — Incred Capital — Analyst

Abhishek Jain — Dolat Capital Market Private Limited — Analyst

Ankit Kanodia — Smart Sync Services — Analyst

Aniket Mhatre — HDFC Securities — Analyst

Lokesh Manik — Vallum Capital Advisors — Analyst

Mayur Milak — Asian Market Securities — Analyst

Prolin B. Nandu — Goldfish Capital — Analyst

Joseph George — IIFL Capital — Analyst

Saif Gujar — ICICI Prudential AM — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Balkrishna Industries Limited Q3 FY ’23 Post Results Conference Call hosted by Batlivala & Karani Securities India Private Limited.

This conference call may contain forward-looking statements about the Company, which are based on the beliefs, opinions and expectations of the Company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]

I now hand the conference over to Mr. Jayaraj from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.

Annamalai Jayaraj — Batlivala & Karani Securities India Private Limited — Analyst

Thanks, Seema. Good morning, everyone. On behalf of B&K Securities, welcome to 3Q FY ’23 post results conference call of Balkrishna Industries Limited. I also take this opportunity to welcome the senior management team of Balkrishna Industries Limited. We’ve with us today, Mr. Rajiv Poddar, Joint Managing Director and other senior members of management team.

I would now invite Mr. Rajiv Poddar for their opening remarks to be followed by question-and-answer session. Over to you, sir.

Rajiv A. Poddar — Joint Managing Director

Thank you, Mr. Jayaraj. Good morning, everyone, and thank you for joining us today. With me, I’ve Mr. Bajaj, Senior President, Commercial and CFO; and also SGA, our Investor Relations Advisors.

Let me begin with performance updates. As indicated, during our previous interaction, we’re experiencing channel inventory clearance in our market. The distribution channel across the globe has excess inventory not only in Off-Highway Tire segment, but also other tire segments as well. So with this, the slow lowering of raw material prices and improvement in delivery timelines owing to better availability of containers has led to a lower reordering cycle by the channel. The end demand is still holding up, but the channel issues…

Operator

Sorry to interrupt management. I’m sorry to interrupt. Sir, your voice is breaking up. I would just…

Rajiv A. Poddar — Joint Managing Director

Is it better now? Hello?

Operator

Allow me one minute, sir. Management — while we reconnect the management — participants, while we reconnect the management, please stay connected. Ladies and gentlemen, thank you for holding. We have the management line reconnected. Please go ahead, sir.

Rajiv A. Poddar — Joint Managing Director

I’ll restart the speech just for clarity purposes. Apologies for that. So, good morning, everyone, and thank you for joining us today. Along with me, I’ve Mr. Bajaj, Senior President, Commercial and CFO; and also SGA, our Investor Relations Advisor.

Let me begin with performance updates. As indicated during our previous interaction, we’re experiencing channel inventory clearances in our end markets. The distribution channel across global markets has excess inventory not only in Off-Highway Tire segment, but also other segments of tires as well. Along with this, the slow lowering of raw material prices and improvement in delivery timelines, owing to better availability of containers has led to a slower reordering cycle by the channel. The end demand is still holding up, but the channel issues of reordering continues to impact the volumes. Therefore, as expected, our Q3 volumes were at 66,480 metric ton. We continue to face challenges of destocking in Q4. However, the intensity of the situation is residing on month-to-month basis. The situation has been relatively better in North America. However, recession fears can continue to impact demand. India continues to be stable, supported by a better economic environment.

Our EBITDA margin had two elements that broadly negated each other. The freight cost corrections that we’ve been witnessing in the last few months has led to improvement in our margins, which is reflected in our freight costs which now stand at approximately 9% of sales in Q3 versus approximately 14% in the previous quarter. We expect further benefit on the account of freight to reflect in Q4 and fully in Q1 of FY ’24. Please also note, we’ve lowered the surcharge to end customers on account of freight, and the same is reflected in our average selling price, which has moved down by 6% on Q-on-Q basis.

The aspect, which impacted our margins negatively and almost negated the benefit of freight costs were raw material costs. Please note that while raw material prices have corrected, we could not fully enjoy the benefits due to high cost of raw material in our inventory. Further, lower volumes clocked in Q3 led to a lower absorption of fixed cost as against the expectations of higher volumes built in at the start of the financial year. We expect some improvement in Q4 and a meaningful recovery in margins in FY ’24. Lower raw materials and freight costs, better hedge rates, better end-market situation gives us ample hope of margin recovery in financial year ’24.

Let me now update you on the CapEx. The CapEx of Carbon Black project along with the power plant has been completed. With the commissioning of 55,000 metric tons per annum, power achievable capacity stands at 170,000 metric tons per annum. The advanced Carbon Black project of 30,000 metric tons per annum is on track, and we expect to commission the same by the end of the current quarter or early part of next quarter. The CapEx for brownfield capacity issue of 35,000 at Waluj has commenced. We expect the same to be completed in the first half of next financial year. Post completion of this brownfield project, Waluj will have a total capacity of 55,000 tons at a single location. At a company level, our achievable capacity will increase back to 360,000 metric tons per annum by end of first half of financial year ’24.

With this, I now move on to the operational highlights. Our sales volume for the quarter was at 66,480 metric tons, a degrowth of 5% year-on-year. For nine months, sales volume stood at 228,505 metric tons, a growth of 8% year-on-year. Our stand-alone revenue for the quarter stood at INR2,215 crores, which includes realized gain on foreign exchange pertaining to sales of INR73 crores. For nine months, revenue stood at INR7,748 crores, which includes realized gain on foreign exchange pertaining to sales of IN255 crores. For financial — for the nine months of financial year ’23, 49% of the sales came from Europe, 21% from India, 19% from America and the balance from rest of the world. In terms of channel contribution, 70% was contributed from replacement segment, while OEM contributed to 28%, with the balance coming from offtake. In terms of category, agricultural segment contributed to 63%, while OTR, industrial and construction contributed 34% and the balance came from other segment.

The stand-alone EBITDA for the quarter was at INR423 crores with a margin of 19.1%. While for nine months, it was recorded at INR1,534 crores, translating to a margin of 19.8%. Other income for the quarter stood at INR43 crores, while unrealized loss stood at INR166 crores. The sharp rise in euro rates in Q3 to the tune of 10% impacted our ForEx borrowing, leading to M2M loss. The other income for nine months stood at INR86 crores, while unrealized loss stood at INR91 crore.

Coming to net ForEx item. For the quarter three ended ForEx loss of INR88 crores, which includes realized gain of INR78 crores and unrealized loss of INR166 crores. For nine months financial year ’23, we had a net ForEx gain of INR198 crores, which includes realized gain of INR289 crores and an unrealized loss of INR91 crore. Profit after tax stood for the quarter was recorded at INR100 crores versus — for nine month financial year, it stood at INR823 crores. Our gross debt stood at INR3,464 crores at the end of 31st December ’22, of which about 75% is relating to the working capital debt. Our cash and cash equivalents were INR2,082 crores. All the CapEx programs bearing Carbon Black are over. We have minor amounts and retention monies to be spent.

For Q3 financial year ’23, the euro hedge was at INR85. Forward hedge rate currently stands at INR86 for the financial year ’23 due to the sharp uptick in Europe — euro rate. For financial year ’24, we were able to achieve INR87 for financial year ’24. The Board of Directors have declared a third interim dividend of INR4 per share. This is in addition to an earlier interim dividend of INR8 per share.

With this, I conclude my opening remarks and leave the floor open for question and answers.

Questions and Answers:

Operator

Thank you very much. We’ll now begin with the question-and-answer session. [Operator Instructions]

We take the first question from the line of Binay Singh from Morgan Stanley. Please go ahead, sir.

Binay Singh — Morgan Stanley — Analyst

Hi, team. Thanks for the opportunity. The first question is on the volume side and second on margins. So, on the volume side, could you update us on the inventory levels that you have now? You had added that it’s around three months in the September conference call. Where is inventory now, what is the ideal level of inventory would like to go at? And linked to that, when we look at the volume breakdown by region, we see that the biggest drop sequentially is in the U.S. market, in the North America market. So if you could comment a little bit on that also. That’s the first question. Thanks.

Rajiv A. Poddar — Joint Managing Director

So, on the — when you asked about the inventory, I’m assuming that is for raw materials. We would ideally like to be around 45 days. We’re currently between 60 and 65 days.

Binay Singh — Morgan Stanley — Analyst

Sir, I meant inventory at the dealer level of the stock — of the tire stock, because earlier, we had talked about that we’re destocking inventory. So we were at three months in September, we were planning to bring it down to two months.

Rajiv A. Poddar — Joint Managing Director

So, it has come down to about 2.5.

Binay Singh — Morgan Stanley — Analyst

Okay. So that process will continue into the coming quarter?

Rajiv A. Poddar — Joint Managing Director

Yes.

Binay Singh — Morgan Stanley — Analyst

And sir, within the breakdown of volumes, we see that the biggest sequential drop is in the North America market. So, could you talk a little bit about that. On a Y-o-Y basis, it has grown well, but sequentially, we see a sharp drop. Is it due to seasonality or something?

Rajiv A. Poddar — Joint Managing Director

Yes. That is the seasonality, but we’re, overall, not very concerned about that. America is going well for us.

Binay Singh — Morgan Stanley — Analyst

Okay. And sir, secondly, on the margin side, if I look at your other expenses, excluding freight cost, they have also sequentially gone up. So, any comments on that, what was the driver there?

Rajiv A. Poddar — Joint Managing Director

So, basically, some minor promotional activities, which have been done, which have come into account — been accounted in that quarter.

Binay Singh — Morgan Stanley — Analyst

Okay. So, to an extent, this should sort of normalize back in the coming quarter?

Rajiv A. Poddar — Joint Managing Director

Yeah.

Binay Singh — Morgan Stanley — Analyst

Great. I’ll come back in the queue for follow-on question.

Operator

Thank you, sir. We take the next question from the line of Mr. Ashutosh Tiwari from Equirus Securities. Please go ahead, sir.

Ashutosh Tiwari — Equirus Securities — Analyst

Yeah. Hi, sir. Firstly, on this — your gross debt numbers, what is the interest costs we now have on the working capital and long-term debt, because I think the LIBOR is — and everything has gone up over the last one year?

Rajiv A. Poddar — Joint Managing Director

Between 3.5% and 4%.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. 3.5% to 4%. And this is true for both your working capital as well as long-term debt?

Rajiv A. Poddar — Joint Managing Director

Yeah. I’ve given you the average for both. Long-term is lower, but if you include the working capital and everything, that will give you the average.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. And in terms of demand, I mean, you said that retail is still holding up and inventory correction has now moderated. So, can we go to say 75,000, 80,000 tons kind of run rate from Q4 or Q1, is that visibility coming through because we’re already impaired right now?

Rajiv A. Poddar — Joint Managing Director

It’s too early to comment on that.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. And lastly, on the demand side, is it like across the board, the volumes are contracted across construction and mining or — and agri or maybe mining is still holding up and what’s the current sense on that?

Rajiv A. Poddar — Joint Managing Director

Yeah. So, agri is more effected. Industrial construction is, yeah, it’s holding up.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. Thank you. I’ll join back the queue.

Operator

Thank you. The next question is from the line of Mr. Arvind Sharma from Citi. Please go ahead, sir.

Arvind Sharma — Citigroup — Analyst

Hello. Good morning, sir, and thank you for taking my questions. Two from my side. First on the realizations. This decline, is it entirely attributable to the lower surcharge or is there a mix impact as well? I’m talking about ASPs.

Rajiv A. Poddar — Joint Managing Director

So it is only due to the lower surcharge.

Arvind Sharma — Citigroup — Analyst

So apart from that, there is no change quarter-on-quarter?

Rajiv A. Poddar — Joint Managing Director

Yes.

Arvind Sharma — Citigroup — Analyst

Sir, secondly and more of an accounting question. In the reported format, not the presentation, but the reported format, where are your unrealized FX losses that INR177 crores, where is it located in the reported format?

Rajiv A. Poddar — Joint Managing Director

It is included in the other expenditure in the reported format.

Arvind Sharma — Citigroup — Analyst

Okay. So that could be one of the reasons why it would have gone up, right, that INR175 crores there, incremental this quarter, because — and the FX gains, I believe, were reported as a part of other income?

Rajiv A. Poddar — Joint Managing Director

Yes.

Arvind Sharma — Citigroup — Analyst

Right. All right, sir. Thank you, sir. That’s all from my side. Thanks so much.

Operator

Thank you, sir. We’ll take the next question from the line of Sonal Gupta from HSBC Mutual Funds. Please go ahead.

Sonal Gupta — HSBC Mutual Funds — Analyst

Hi. Good morning and thanks for taking my questions. So, just continuing with this ASP decline versus the fleet surcharge. So essentially, this should not be negative for your numbers, right? Like I mean, what’s going out of the topline is going out of cost as well, I mean, like in absolute EBITDA per ton basis?

Rajiv A. Poddar — Joint Managing Director

Yeah. I mean, basically, the freight costs [Phonetic] have contracted, and that is why the ASPs were down.

Sonal Gupta — HSBC Mutual Funds — Analyst

Right. I mean, if I looked at…

Rajiv A. Poddar — Joint Managing Director

When we say that, even the earlier quarters, they were never passed on to that burden as yet. They were not fully passed on. So that is why the impact is yet coming. It is getting negated.

Sonal Gupta — HSBC Mutual Funds — Analyst

Right. No, so if I see like on a per ton basis, your freight cost would be down like say, like $250 per ton and your ASP is down more than that. So just trying to understand what is the factor here. And is that like — because like you mentioned that your freight cost was only — some amount of freight cost decline was not passed — freight cost increase was not passed on to customers. So ideally, your ASP decline should be lower than the decline in freight cost, right?

Rajiv A. Poddar — Joint Managing Director

So, we were not able to pass through — in the earlier quarters, we’re not able to pass through the full amount. Thereby, it was impacting on our — it was stemming on our ASP. But now, with that being withdrawn, even this has come down.

Sonal Gupta — HSBC Mutual Funds — Analyst

Yeah. So — but I’m just trying to understand, sir, are there any other factors that is driving the ASP down, other than the freight cost?

Rajiv A. Poddar — Joint Managing Director

No.

Sonal Gupta — HSBC Mutual Funds — Analyst

No other factor. And I mean, and this decline should not really be negative for margins, right? Because the same freight cost…

Rajiv A. Poddar — Joint Managing Director

No, there is no change of the product mix or there is no change in the overall working of principal of the company. So that has no other impact on ASP apart from the freight.

Sonal Gupta — HSBC Mutual Funds — Analyst

And just coming back to the question on other expenses other than freight. I mean, we’ve seen like a INR50 crore quarter-on-quarter increase. So is that you’re saying mainly marketing spend or are there other factors which have driven like — because the level of activity has gone down, right? Like your volumes are down 16% Q-o-Q, but your other expenses ex-rate is up 10%.

Rajiv A. Poddar — Joint Managing Director

So, mainly, it is a benefit of the marketing expense, which has gone up and also some foreign exchange gain, which is loss which is coming to account for.

Sonal Gupta — HSBC Mutual Funds — Analyst

FX loss.

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

So, typically, when you have a net ForEx loss, it sits in the other expenses, which is why on a quarter-on-quarter basis, the other expenses look higher. If you negate the loss situation, the quarters may look slightly more comparable. In quarters, where there is a net ForEx gain, it sits in other income.

Sonal Gupta — HSBC Mutual Funds — Analyst

So could you quantify that, how much is the loss?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

The loss for Q3 this quarter on a net basis is about INR88 crores. That is what is sitting additionally in the other expenses, which if you negate, looks more comparable from a Q-on-Q basis.

Sonal Gupta — HSBC Mutual Funds — Analyst

Got it, sir. This is on current liabilities and current assets, not related to that, right?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

That’s right.

Sonal Gupta — HSBC Mutual Funds — Analyst

Got it. Great, sir. Thank you so much.

Operator

Thank you, sir. The next question is from the line of Mr. Siddhartha Bera from Nomura Capital. Please go ahead, sir.

Siddhartha Bera — Nomura Capital — Analyst

Hi, sir. Thanks for taking my questions. Sir, again on this realization drop, will it be fair to say that the competition would have taken similar cuts as well and our discount versus the Tier 1 players of about 10% to 15%, which we’ve maintained that remains largely relative?

Rajiv A. Poddar — Joint Managing Director

So, the difference of — between us and the Tier 1 yet continues to be the same. Their costs have also gone up.Being in the western world, the power cost and also they have also been — the difference is currently being maintained.

Siddhartha Bera — Nomura Capital — Analyst

Okay. So, I think, they also must have taken similar cuts in the surcharge which they are charging to customers?

Rajiv A. Poddar — Joint Managing Director

They may have not passed it on in form of surcharge, but in other ways, I am not sure. But the difference is the end product remains the same.

Siddhartha Bera — Nomura Capital — Analyst

Okay. And on the freight costs, obviously, they have come down, but I mean, we expect more reduction in the coming quarters. So that should again lead to a conventional drop in ASPs, as in it passes on those surcharges as well?

Rajiv A. Poddar — Joint Managing Director

Yes.

Siddhartha Bera — Nomura Capital — Analyst

Okay. And sir, on this RM side, we had a higher cost inventory in the Q3. But looking at current levels, how much commodity cost, benefit cost can we expect in the coming quarters from Q3 levels?

Rajiv A. Poddar — Joint Managing Director

We can’t give you exact quantification of that, but it will definitely come down.

Siddhartha Bera — Nomura Capital — Analyst

I mean, in high-single digits can be the right assumption or — in terms of part time decline?

Rajiv A. Poddar — Joint Managing Director

No, we can’t quantify that.

Siddhartha Bera — Nomura Capital — Analyst

Okay. And sir, last question is on the CapEx side, if you can highlight the nine months, how much has been done, and any thoughts you have for the next year as well?

Rajiv A. Poddar — Joint Managing Director

Around INR1,300 crores has been done in the nine months.

Siddhartha Bera — Nomura Capital — Analyst

INR1,300 crores?

Rajiv A. Poddar — Joint Managing Director

Yes.

Siddhartha Bera — Nomura Capital — Analyst

Okay. So that is largely for the whole year or do you expect something more in Q4?

Rajiv A. Poddar — Joint Managing Director

There will be some minor amounts which are left over because all our projects are over apart from the Carbon Black and the brownfield project at Aurangabad, at Waluj.

Siddhartha Bera — Nomura Capital — Analyst

Okay. Understood, sir. Okay. And any number for next year, if you can share?

Rajiv A. Poddar — Joint Managing Director

Around INR300 crores — INR300 crores to INR400 crores.

Siddhartha Bera — Nomura Capital — Analyst

Okay. Got it, sir. Thanks a lot.

Operator

Thank you, sir. We’ll take the next question from the line of Priya Ranjan from HDFC AMC. Please go ahead, sir.

Priya Ranjan — HDFC AMC — Analyst

Thank you. So my question is related to the volume. I mean, the — whatever we’ve — in terms of what we were used to do around 78,000, 80,000 a couple of quarters. And then we’ve again come back to roughly 66,000, 70,000. So is it ideal to assume like, say, 70,000, 75,000 number is the right number, because in previous quarter, there has been overstocking in this channel and the demand is actually of around 70,000, 75,000. Is this the right way to look at?

Rajiv A. Poddar — Joint Managing Director

Sir, it is too early to give a view on the volumes for next year, but trends are slowly improving.

Priya Ranjan — HDFC AMC — Analyst

Okay. And what is the net debt number right now, I mean at the third quarter?

Rajiv A. Poddar — Joint Managing Director

Around INR1,350 crores.

Priya Ranjan — HDFC AMC — Analyst

INR1,350 crores. Okay. And just coming back to — on the cost element. So on the raw material side, so gradually, I mean, are you seeing any kind of, I mean, inventory still left of the previous high cost inventory or do you think now the normalized level of inventory will, I mean, the pricing of the inventory will be there in the system?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Inventories is still higher, but reduction, you will see next quarter also. In the coming quarter, there will be reduction. And from April onwards, we can expect the normal price.

Priya Ranjan — HDFC AMC — Analyst

Understood. And just on the pricing front, so because there has been some inventory destocking, etc. So, do you see the industry level, there has been some price connection as well apart from whatever you have done in terms of surcharge, etc. Is there some pressure in terms of pricing as well in the industry?

Rajiv A. Poddar — Joint Managing Director

No, not at the moment.

Priya Ranjan — HDFC AMC — Analyst

Not at the moment. But it can come back, because the…

Rajiv A. Poddar — Joint Managing Director

It’s difficult to say today, but we’re not seeing any of this, because these surcharges, which have some have already had a positive impact in [Indecipherable]. So, it’s difficult to say.

Priya Ranjan — HDFC AMC — Analyst

Okay. And how much extra surcharge is still left? I mean, so I guess it was around 5% to 6% earlier of freight cost used to be. But it has to got up to a 14%. So 6% you have already corrected. So is it fair to assume that 3%, 4% is — can additionally be cut when formally the entire trade cost normalizes?

Rajiv A. Poddar — Joint Managing Director

No. So basically, our surcharge from 1st January has come to zero for most of the regions. So whatever you — as you rightly said, whatever freight benefit you will see, it will have an impact on the positive side of the margin.

Priya Ranjan — HDFC AMC — Analyst

Understood. But surcharge you will not, I mean, it’s almost zero now?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

From 1st January.

Priya Ranjan — HDFC AMC — Analyst

Yeah. Understood. Thank you, sir. Best of luck.

Operator

Thank you, sir. We will take the next question from Mumuksh Mandlesha from Emkay Global. Please go ahead, sir.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Thank you so much for the opportunity, sir. Sir, the Off-Highway Tire segment continue to remain on positive trajectory. Can you guide what kind of growth expected going ahead, sir?

Rajiv A. Poddar — Joint Managing Director

It will grow in single digit.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

And sir, on the rest of world region, sir, which has witnessed a decline on a year-on-year basis, despite the better availability of capacity, sir. So what drove the correction — contraction in this those markets, sir?

Rajiv A. Poddar — Joint Managing Director

Sir, could you repeat your question, the voice was muffled?

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Yeah. So the rest of the world regions have witnessed a decline on a year-on-year basis in terms of volume-wise despite having better availability of capacity, sir. So what drove the correction in those markets, sir?

Rajiv A. Poddar — Joint Managing Director

It’s just an economic cycle seasonal factor.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Right, sir. Sir, can you guide a path to improve the margin to the target range of 20% to 30% over the coming quarters. So what will lead to those target ranges, sir?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Meaningful recovery in EBITDA is due to raw material and freight cost. We’ll grow at least 300 basis points in that financial ’24.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

So, 300 bps improvement due to RM and freight in FY ’24, you expect, right?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Yes.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Got it, sir.

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

At least — it is the minimum, at least.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Got it. Thank you so much for the opportunity, sir.

Operator

Thank you. We will take the next question from the line of Mr. Jinesh Gandhi from Motilal Oswal. Please go ahead, sir.

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Hi, sir. Couple of clarifications. One is with respect to the power hedge rate, you indicated 86 against euro would be for fourth quarter FY ’23.

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

So — that is for the full year for the January, February, March, we’ve 50% freight at the rate of 89.

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Okay. Right. And for FY ’24, we indicated 87, so is that for our entire exposure or that is…

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Average we’ve taken, but currently, we’ve covered up to 50%, which is also at 89.

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Okay. 50% exposure is at 89. Okay. Got it. And second clarification was with respect to the RM cost benefit. So, did you indicate that we expect the cost to reflect from April ’23 onwards by then our high cost inventory will be totally absorbed?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

You will see some correction in the January to March also, but full recovery from the April onwards.

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Okay. Got it. And third question was pertaining to the freight cost side. So, are we also passing on the freight cost benefit for contracts which are on CIS basis or this is only for contracts where — which are on FOB basis?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

FOB basis, question does not arise. But on CIS basis, yes, whatever surcharge we’ve added that we’ve withdrawn from 1st of January.

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Got it. And lastly, with respect to the U.S. market, we’ve seen Y-o-Y decline of 9% in volumes. So is that a reflection of inventory correction or this is end-market, which is weak?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

General market condition.

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Okay. Not the inventory correction-related impact?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

No. General market.

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Got it. Great, sir. Thanks. I’ll come back in queue.

Operator

Thank you. The next question is from the line of Nishit Jalan from Axis Capital. Please go ahead, sir.

Nishit Jalan — Axis Capital Limited — Analyst

Yeah. Hi, sir. Two questions from my side, mostly on the volume side. You have talked about the dealer inventory levels have come down to 2.5 months. I’m assuming you’re giving an average number for Europe and U.S. Typically, what is the normalized inventory level, sir, that we should be looking at given our regional mix?

And second point you talked about was that end-market demand is holding up well. But we understand is that in Europe, especially in the agri segment, there is a double-digit volume decline. Is that not the case or what exactly do you mean when you say demand is holding up well, there’s a decline, there’s a growth, it’s flattish? How should we look at the demand side, especially in the agri segment that I’m talking about?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

So, what we understand from our dealers, they’re able to sell what they were selling. So that is why we’re telling end-to-end market demand is impacted. However, due to the raw material price decrease they were expecting, and they were not having the space to unload the further tires which they were keeping higher inventory during the COVID times, so they’ve been liquidating that inventory. Once that correction is over, the full cycle should start.

Nishit Jalan — Axis Capital Limited — Analyst

And sir the…

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

It already started reducing.

Nishit Jalan — Axis Capital Limited — Analyst

Normalized inventory levels, how should we look at from 2.5 months, how much more room is there to — for the inventory levels?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

45 to 60 days normally, minimum they will keep.

Nishit Jalan — Axis Capital Limited — Analyst

Okay. And just one follow-up on the — typically, when RM prices come down so sharply that we’ve seen, there is some price correction also that happens in the market. And probably that is another reason why dealers are not — are looking to lower the inventory levels. Are you seeing any signs or any price cuts happening on gradual pass-on happening of lower RM costs by any players or by yourself and — in Europe other than U.S. market?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

So far, we’ve not come across. Only the shipping surcharge which we were charging that we have passed on from the 1st of January.

Nishit Jalan — Axis Capital Limited — Analyst

And none of your peers have taken any prices or do you see any price cuts happening because the RM costs have come down very sharply? So…

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Not — we’ve not come across so far. We have not heard from our dealer.

Nishit Jalan — Axis Capital Limited — Analyst

Okay. And just one last thing on accounting thing. This unrealized losses that you have. These will be largely for the working capital because your debt levels are fairly low, right? So the currency fluctuation happening in your receivables and payables. And that is the main reason why you are seeing these kind of unrealized losses coming or are these also presence to the future hedges of revenues that you have done and you are doing value on getting some mark-to-market losses on that?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Nishit, this is largely due to the borrowings that are there in the system.

Nishit Jalan — Axis Capital Limited — Analyst

Only borrowing. It’s not the working capital is it?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

No. Working capital debt and the long-term debt, they’re not the mix.

Nishit Jalan — Axis Capital Limited — Analyst

Okay. Got it. Thank you so much.

Operator

Thank you, sir. The next question is from the line of from Pramod Amthe from Incred Capital. Please go ahead, sir.

Pramod Amthe — Incred Capital — Analyst

Yeah. Hi, sir. This is with regard to the ASP where you were talking about freight costs. Can you help us understand in the bigger market like Europe, what is the extent of imports from Asia and what is the extent of locally produced ones for overall as the industry?

Rajiv A. Poddar — Joint Managing Director

We don’t do have…

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Finished goods or raw material?

Pramod Amthe — Incred Capital — Analyst

No, sir. For the finished goods, for whatever Europe agri tire consumption happens, what is the extent of imports from Asia, because only the Asia imports might be the ones which might have been reducing the freight cost, right, not the locally manufactured ones?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Difficult for us to estimate from where they’re importing.

Rajiv A. Poddar — Joint Managing Director

We don’t have those numbers.

Pramod Amthe — Incred Capital — Analyst

No, are they 15%, 20% or the 50% of the industry?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

No idea.

Pramod Amthe — Incred Capital — Analyst

But the reason why I was asking is, if this is the case and the other guys are holding on your cutting rates, so you might be competitively priced more now versus the might be six months back when the freight rates were going up?

Rajiv A. Poddar — Joint Managing Director

Difficult to put a number. It’s very difficult to answer.

Pramod Amthe — Incred Capital — Analyst

And second one is with regard to the overall industry itself again Europe. Looking at your volume decline versus the — again, industry decline, there seems to be almost on par, like 15%, 16% Q-o-Q decline. So, then why do you say that you have cut the inventory versus the industry is also falling in a similar manner, one. Second, would you be — since now this is the issue for last one or two quarters, would you be able to disclose on a regular basis, what are your retail volumes versus wholesale volumes, so we can get some more color in terms of what’s the underlying demand?

Rajiv A. Poddar — Joint Managing Director

No. We don’t have that data. We don’t get that data.

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Difficult to get data of the retail volume. So, it is very difficult to provide that number on a quarter-on-quarter basis.

Pramod Amthe — Incred Capital — Analyst

No, since you said the dealer inventories has reduced by 15 days, so you may be having a retail versus wholesale, right?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

What we understand from our dealers that we’ve only informed.

Pramod Amthe — Incred Capital — Analyst

Okay. And the last one is with regard to costs. Since the margins have been under pressure for the last couple of quarters, and now you’re almost running — nearing your completion on CapEx, would you be focusing now on cost reduction, so that you can come back to the — your normalcy of corporate margins much sooner? If that is the case where you want to focus on the cost side?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

So, we’re always conscious about the cost part. But once the volume increases, it will definitely come down.

Pramod Amthe — Incred Capital — Analyst

So, you will wait for operating leverage to play out?

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Yes.

Pramod Amthe — Incred Capital — Analyst

Okay. Thanks and all the best.

Operator

Thank you, sir. The next question is from the line of Mr. Abhishek from Dolat Capital. Please go ahead, sir.

Abhishek Jain — Dolat Capital Market Private Limited — Analyst

Thanks for the opportunity, sir. Sir, you have recently done full automation and modernization of Bhuj plant and also invited dealers and clients for plant visit. So, how is the customer feedback and how much benefit you will get in terms of the operational efficiencies and what is your plan to reduce power costs?

Rajiv A. Poddar — Joint Managing Director

So, customer feedback is, I mean, good because they’re getting a more — just the product is much more consistent. So, that is what we’re getting from them. Regarding power reduction or any other efficiency improvement, it is a continuous journey that we do at BKT. There is no destination. Every time we reach a new bench — milestone, that becomes a benchmark and we continue to improve from there.

Abhishek Jain — Dolat Capital Market Private Limited — Analyst

Okay, sir. Sir, in the past, you have done a lot of the land acquisitions near Bhuj. So what is your long-term plan for capacity additions in both tires and the Carbon Black, sir?

Rajiv A. Poddar — Joint Managing Director

We’re evaluating. We’ve not made up any firm decision yet. As and when we do, we’ll let everybody know after the Board’s approval.

Abhishek Jain — Dolat Capital Market Private Limited — Analyst

Okay, sir. So right now, the current capacity is still at 365,000 tons. Can we assume that in the next two years, you can use to the 500,000 kind of the numbers?

Rajiv A. Poddar — Joint Managing Director

We can’t give you a number on that or comment on that, because as of now, we’ve not drawn up anything neither have we gone to the Board. So it’s difficult to put a number to we can get there or we can’t get there. At the moment, what we’re saying is by end of financial year of first half of next year, our number will go to 360,000 tons, our capacity.

Abhishek Jain — Dolat Capital Market Private Limited — Analyst

Okay, sir. And my last question is related with your expansion on network. So, what have you done to expand in your global network in the last couple of quarters and how do you see opportunities in the South American market?

Rajiv A. Poddar — Joint Managing Director

So we have built our local debt potential in this. And of course, that is done because we see an opportunity for us to grow. That is our view.

Abhishek Jain — Dolat Capital Market Private Limited — Analyst

So, what is the contribution of the South American market in overall volume right now?

Rajiv A. Poddar — Joint Managing Director

We don’t break it up into South and North America. We can give you for Americas. The total Americas is currently contributed to about 90% from Americas.

Abhishek Jain — Dolat Capital Market Private Limited — Analyst

For nine months?

Rajiv A. Poddar — Joint Managing Director

For nine months.

Abhishek Jain — Dolat Capital Market Private Limited — Analyst

Okay, sir. Thank you, sir. That’s all from my side.

Operator

Thank you. We’ll take your next question from the line of Mr. Ankit Kanodia from Smart Sync Services. Please go ahead, sir.

Ankit Kanodia — Smart Sync Services — Analyst

Yeah. Thank you for taking my questions. So sir, after the results, as in Q1 FY ’23 result, we made a commentary regarding the cautionary or the recessionary situation in Europe. But when we look at the volumes in Q2 and Q3, it looks like the Europe volumes have been pretty resilient. Can you throw some light on this as to what is happening in the industry and how are we positioned there?

Rajiv A. Poddar — Joint Managing Director

So as we mentioned that, yes, Europe is under recessionary. So, we’re also seeing that and there is destocking at the dealer network. So, we’re continuing to see that. The retail is holding up the demand, and that is why we’re confident of getting some numbers back in the coming quarters. The trends increase [Indecipherable].

Ankit Kanodia — Smart Sync Services — Analyst

And how are we doing in terms of market share there? I’m not looking at any numbers, but how are we doing?-Is our market share increase during this period of remain largely the same?

Rajiv A. Poddar — Joint Managing Director

Our market share is stable. So, we’ve not lost market share.

Ankit Kanodia — Smart Sync Services — Analyst

Okay. My next question is on the CapEx thing. So largely, most of our CapEx has been done in as per your presentation, the Carbon Black project and also the Waluj brownfield CapEx, I think both will be done by — maximum by Q1 FY ’24. Is it fair to assume that next year FY ’24, we’ll get double benefit, one from the operating leverage if the volumes go up? And also from the point of view of incrementally, we’ll see our interest and depreciation not arise and currently going down. And in depreciation can’t go down, but incrementally, it will not rise. Is it fair to assume?

Rajiv A. Poddar — Joint Managing Director

Yes.

Ankit Kanodia — Smart Sync Services — Analyst

Okay. Thank you. All the best.

Operator

Thank you. The next question is from the line of Priya Ranjan from HDFC AMC. Please go ahead.

Priya Ranjan — HDFC AMC — Analyst

Yeah. Thanks. Just one thing on the — how do we plan to ramp up the Carbon Black? I think the specialty Carbon Black will be mostly sold outside, and do we — what kind of contribution we’re seeing the normal Carbon Black sales from the overall topline?

Rajiv A. Poddar — Joint Managing Director

Around — so Carbon Black will be about 5% of topline and specialty will be sold outside in 100%.

Priya Ranjan — HDFC AMC — Analyst

100%. And additional 55,000 ton, which is the normal Carbon Black, that will all mostly consume in-house or that will also have some…

Rajiv A. Poddar — Joint Managing Director

So that will have some sales outside. But overall, our sales turnover, about 5% will be — Carbon Black will be sold outside.

Priya Ranjan — HDFC AMC — Analyst

Okay. And specialty, I mean, do we have identified the — how should we look at the ramp-up of that specialty?

Rajiv A. Poddar — Joint Managing Director

Yes, we’ve identified markets. We’re going to do testing, so we can ramp up in about a year’s time.

Priya Ranjan — HDFC AMC — Analyst

Understood, sir. Thank you. Thant’s all.

Operator

Thank you, sir. The next question is from the line of Mr. Aniket Mhatre from HDFC Securities. Please go ahead, sir.

Aniket Mhatre — HDFC Securities — Analyst

Hi, sir. Thanks for the opportunity. [Technical Issues]

Operator

Mr. Aniket, your line is in talk-mode, sir. Please go ahead with your question.

Aniket Mhatre — HDFC Securities — Analyst

Hello?

Operator

Yes.

Aniket Mhatre — HDFC Securities — Analyst

Yeah. Sorry. Just a quick clarification, sir. When you said low-single-digit growth, you meant this for near-term or for FY ’24?

Rajiv A. Poddar — Joint Managing Director

At this moment, we’re only commenting on near-term, so we’re commenting on the near-term that will be low-single-digit.

Aniket Mhatre — HDFC Securities — Analyst

So, that’s one should expect for Q4, basically?

Rajiv A. Poddar — Joint Managing Director

Yes.

Aniket Mhatre — HDFC Securities — Analyst

And when you said the benefit from raw material and freight of about 300 basis points that would be after, I mean, the entire benefit would flow in from Q1 FY ’24, right?

Rajiv A. Poddar — Joint Managing Director

Yes.

Aniket Mhatre — HDFC Securities — Analyst

So by when should one expect our margins to bounce back to 28% to 30%, could you guide — could you provide any guidance?

Rajiv A. Poddar — Joint Managing Director

So on the quarter, when you asked about the volumes, I’m just reiterating to clarify, quarter-on-quarter, it will be better, a little better, so sequentially.

Aniket Mhatre — HDFC Securities — Analyst

Okay. Sequentially, it would be a bit better. Okay. And on margins, can we go back to the — our guidance of 20% to 30%?

Rajiv A. Poddar — Joint Managing Director

We’re working towards that. I mean, we would — we’ve always mentioned that in the long-term, we would like to be at that. So basically, there is no principal change in the way we operate over here. These are minor cyclic effects, which are coming in, but we expect it to — we would like to go back to there. But in the next coming quarters, we’ll have a meaningful recovery in EBITDA due to raw material and freight costs going down. We expect it to be — to around 300 basis points from current level at least.

Aniket Mhatre — HDFC Securities — Analyst

Sure. So from current levels of 19%, you expect 300 basis points improvement at least by Q1, and any ForEx benefit would be over and above that?

Rajiv A. Poddar — Joint Managing Director

Yes.

Aniket Mhatre — HDFC Securities — Analyst

Okay, sir. Thank you. That’s it form my side.

Operator

Thank you, sir. We’ll take the next question from the line of Mr. Lokesh from Vallum Capital. Please go ahead, sir.

Lokesh Manik — Vallum Capital Advisors — Analyst

Hi. Good morning, Rajiv and team. Couple of questions from my end. One is on the ForEx on the unrealized loss of INR166 crores attributed to borrowings. If you can share the average duration for these borrowings, ballpark number would be fine.

Rajiv A. Poddar — Joint Managing Director

So, average duration is three years for long-term and six months for short-term.

Lokesh Manik — Vallum Capital Advisors — Analyst

Okay. So is it right to assume then, if, let’s say, in the next six months, the euro is at 88 and it does not come down, this provision would not be written back. Is it fair to assume that, if euro is at the current rate?

Rajiv A. Poddar — Joint Managing Director

Yes.

Lokesh Manik — Vallum Capital Advisors — Analyst

Great. Second, Rajiv, on the ASP front. So, we’re seeing raw material prices coming down. Going forward, how would you like to play this? Would you pass it on to your dealers or would you want to play this with volume which is coming up with your capacity?

Rajiv A. Poddar — Joint Managing Director

At the moment, we’ll wait and watch, because what is happening in the industry, how everybody is moving, what is happening. So, it’s too early to comment. We’ve not made up our mind, but we’re waiting…

Lokesh Manik — Vallum Capital Advisors — Analyst

Actually you play as for what the market demand is and how the situation is?

Rajiv A. Poddar — Joint Managing Director

Yes.

Lokesh Manik — Vallum Capital Advisors — Analyst

Great. Thank you so much. That’s it from my side.

Operator

Thank you, sir. The next question is from the line of Mr. Tanik from Asian Market Securities. Please go ahead, sir.

Mayur Milak — Asian Market Securities — Analyst

Hi. This is Mayur. Just wanted to understand, so now that we’ve been hearing that China is kind of reopened and would normalize production. Have you seen any trend of the Chinese tires coming back into the European replacement market yet or all of that yet needs to be factored in?

Rajiv A. Poddar — Joint Managing Director

No, it’s not — we’ve not seen any spend.

Mayur Milak — Asian Market Securities — Analyst

Okay. And is it fair to assume that you would have significantly gained, because tires from Russia and China both were possibly not there. And since the European counterparts would have seen some significant increase in their operating cost as well due to higher energy cost. We would have gained — is it fair to assume that we’ll be able to retain most of this gain or you could see some loss of share once all of these factors also kind of normalize?

Rajiv A. Poddar — Joint Managing Director

So we would — we can retain this [Indecipherable].

Mayur Milak — Asian Market Securities — Analyst

All right. Great. Thank you so much.

Operator

Thank you, sir. We’ll take the next question from the line of Prolin Nandu from Goldfish Capital. Please go ahead.

Prolin B. Nandu — Goldfish Capital — Analyst

Yeah. Hi, sir. A couple of questions from my side. First would be over the medium-term, right, I mean what kind of market share gains should we assume? Because in the past, you have mentioned that you’re somewhere at 5% to 6% market in the relevant markets that you are present in. And I mean, two, three years back, I think this number was 3% to 4%. So could you help us understand as we enter new markets as the local dynamics in some of the markets where we’re present changes, is it fair to assume that the market share gains will accelerate year-on-year over the medium-term?

Rajiv A. Poddar — Joint Managing Director

So, currently, we’re — as we mentioned, 5% to 6%, our aspect is to go to 10%. We’re trying to accelerate this growth to reach our goal. But how much will it accelerate in the mid-term is difficult to say. We’ll be prepared for it and we’re ready to reach those numbers.

Prolin B. Nandu — Goldfish Capital — Analyst

But is there anything happening in the market, which gives you confidence that this 10% number would be achievable sooner rather than what we had previously assumed. Is this anything happening in the market that gives you that confidence or not yet?

Rajiv A. Poddar — Joint Managing Director

So. I think we’re working from whatever we can do, we’re working. We’re creating the distribution. We are creating the product. And of course, we’re — over the last three to four years, we’re putting in a lot of money in marketing. So, the brand recognition will go up, brand proportion is being done. So those things will always have an impact.

Prolin B. Nandu — Goldfish Capital — Analyst

Sure. And sir, my second question is on your treasury book, right, I mean, if I’m not on cash and cash equivalent at the end of this quarter, is also somewhere close to INR2,000-odd crores, right? So, can we have — and we’ve carried on that as well. And there have been questions in the past and you mentioned that you want to play that real advantage that we’ve.

And if I look at your annual report for FY ’22, I see lots of different types of investment in direct equities, in some of the IIFs, in some of the venture capital funds as well. So could you help us understand as to what kind of an objective does the Board or the senior management provide to treasury and what kind of constraints does the treasury team work with, and what’re the expertise of the treasury team to make some of these investments into VC funds and some of the IIFs as well, if you can help us understand that?

Rajiv A. Poddar — Joint Managing Director

So as we had earlier mentioned that, that was done for short-term party. So we’ve already done that. We’ve already guided that we will be slowly moving that money towards repayment and also towards future capital — CapEx expansion.

Prolin B. Nandu — Goldfish Capital — Analyst

Sure. But are there any constraints? Are there any yield targets that you give your treasury team or are there any no go areas which our treasury team work with, while I understand that before short-term and now is that we’re in the CapEx mode. If you can give some constraints with which they work with, it would be great for us?

Rajiv A. Poddar — Joint Managing Director

The no go zones are basically taken out to anything that is firstly risky. We don’t know, I mean, it’s a short-term paper, safe papers, government papers mainly which gives us good protection on the financial as well as gives us a good, I mean, yield. So that is the objective.

Prolin B. Nandu — Goldfish Capital — Analyst

Sure, sir. Thanks a lot for these answers and all the best.

Operator

Thank you, sir. We take the next question from the line of Joseph George from IIFL. Please go ahead, sir.

Joseph George — IIFL Capital — Analyst

Thank you for the opportunity. I have two or three questions. One is, you mentioned that starting Jan 1st, the freight surcharge has gone to zero. So how much further speed decline should we think of — when we think of 4Q compared to 3Q?

Rajiv A. Poddar — Joint Managing Director

Very much.

Joseph George — IIFL Capital — Analyst

Okay. The second thing is, — I mean, the second question that I had was in relation to how the pricing of BKT tires is in, say, Europe compared to the peers? So in the past, you have mentioned that you’d like to keep the price discount versus the larger peers at about 12% to 15%. Now with the levy of freight surcharge, had that discount narrowed or was it still at 12% to 15%. Now with the removal of the surcharge, it will increase further. How should we think about the pricing there versus the peers compared to the 12% to 15% discount range that you have given us earlier?

Rajiv A. Poddar — Joint Managing Director

We’ve always indicated that we would be 12% to 15%. We try to be as close, but yes, of course, during the last couple of quarters it had gone down to maybe between 11% to 13%, which are now we will take it back to 12% to 15%. But again, I reiterate that our principal policies of operating the business are not changing. We would like to maintain all the same principles that we’ve been running the business with. So that will continue.

Joseph George — IIFL Capital — Analyst

Understood. And sir, the last question that I had was in relation to end demand. So I think this question has been asked by previous callers in this call. But so what I’m trying to figure out is, when you mentioned that currently, volumes are impacted by destocking, it automatically implies that in the preceding quarters, there was overstocking.

So what I’m trying to figure out is when I look at the average volume, say, in the March quarter and the June quarter, September quarter, which was about 80,000 tons per quarter. How much of it was inflated by overstocking by dealers, and in those quarters, what was the — what was the volume implied by the genuine underlying end retails?

Rajiv A. Poddar — Joint Managing Director

So there was about 5% to 10% overstocking at their level as well.

Joseph George — IIFL Capital — Analyst

So you’re saying that those 80,000 numbers, I mean, when I look at the quarterly numbers, March quarter was 77,000; June was 83,000; September, 79,000. So, you’re saying, out of this, about 5% to 10% was over inflation because of overstocking by dealers. Is that the right — understood, sir. Thank you. That’s all I had.

Operator

Thank you. The next question is from the line of Saif Gujar from ICICI Prudential AMC. Please go ahead, sir.

Saif Gujar — ICICI Prudential AM — Analyst

Thank you for this opportunity. Sir, just regarding the Indian operations. So this quarter, we had around 15,972 tons out of the 66,480 tons this quarter from India. So is there any focus on increasing the market share from Indian operations or it is just like a hedge from the European operations?

Rajiv A. Poddar — Joint Managing Director

No, we’re working actively to increase the margin in India. We’ve always mentioned that there is an area of opportunity for us to grow. And you can see that in the — if you look at the last two or three years, we’ve — of the bigger pie also, increased our market share in India. So, that will continue to be there. It’s sort of hedge against Europe. It’s a targeted approach that we’ve made to grow in it.

Saif Gujar — ICICI Prudential AM — Analyst

So how is the strategy here and I — there would not be any significant low-cost advantage as we enjoy in overseas operations, right? So how do we compete with another…

Rajiv A. Poddar — Joint Managing Director

So, we’re competitive in the marketplace. At the end of the day, we’re selling ourselves and we are — our quality is being accepted. Our brand is now being recognized, and all those things are placing us as a premium product and we’re competing with them at selling.

Saif Gujar — ICICI Prudential AM — Analyst

And it would be more towards the agri side or the off-highway side, particularly in India?

Rajiv A. Poddar — Joint Managing Director

Both. Agri is also off-highway side. But agri and mining both industrial, all segments of ours, we’re pushing in India.

Saif Gujar — ICICI Prudential AM — Analyst

Okay. Thank you, sir.

Operator

Thank you very much. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.

Rajiv A. Poddar — Joint Managing Director

Thank you, everyone, for taking out time to join us. See you next time. Stay safe.

Madhusudan Bajaj — President of Commercial & Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]