CEAT Limited (NSE: CEATLTD) Q1 2026 Earnings Call dated Jul. 18, 2025
Corporate Participants:
Unidentified Speaker
Mittul Shah — Moderator
Arnab Banerjee — Managing Director and Chief Executive Officer
Kumar Subbiah — Chief Financial Officer
Analysts:
Unidentified Participant
Raghunandan NL — Analyst
Siddhartha Bera — Analyst
Basudeb Banerjee — Analyst
Mumuksh Mandlesha — Analyst
Rishi Vora — Analyst
Joseph George — Analyst
Presentation:
operator
Good day and welcome to the SEAT Q1FY26 earnings conference call hosted by DAM Capital Advisors Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing STAR and then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mittul Shah from Dam Capital Advisors Limited. Thank you. And over to you sir.
Mittul Shah — Moderator
Thank you Nidhi. Good afternoon everyone. Thank you management for giving this opportunity to hosting this conference call. On behalf of Dam Capital, I welcome. You all to the Q1FY26 result conference. Call of Cat Limited. From the management side we have Mr. Arnab Banerjee, Managing Director and CEO and. Mr. Kumar Subia, Chief Financial Officer. I would now hand over the call. To Mr. Arnab Banerjee for his opening remarks. Over to you sir. Thank you.
Arnab Banerjee — Managing Director and Chief Executive Officer
Good afternoon and welcome to CX401FY26 earning call. I’ll be taking you through the business updates for the quarter and then Kumar shall share his remarks on financial performance and then we’ll have the Q and A. Our market is experiencing a very transformative phase driven by rise of electric vehicles, sustainability demands and digital innovation. Key themes that are playing out include the development of EV specific tires with low rolling resistance and noise. Smart and IoT enabled tires for predictive maintenance and advancements in airless and puncture proof designs. Local manufacturing capacity expansion and a shift towards premium tires are reshaping the market structure across categories and fueling investments.
With these strong drivers in place, the Indian tire market is expected to grow at strong single digit CAGR till 2031 with growth trajectory for the industry. Demand outlook Overall demand outlook for auto sector continues to remain cautiously optimistic. In the near term, above average monsoon forecast should boost rural demand early. Karib soil up 11%. YOY underlined stronger farm incomes and August well for two wheelers and farm tariff simultaneously robust government CAPEX through June to August targeted across roads, railways and green energy projects will underpin commercial vehicle and commercial equipment segments. However, there are geopolitical tensions and potential spillover from US tariff uncertainty which has to be taken care of as we look at supply chain management and this could hinder consumer sentiment across the globe.
In the near term we expect replacement demand for commercial MHCV tyres to be around mid single digits, two wheeler to be high single digits. While there is some concern in the passenger car tire market in replacement where growth could be low single digits in OEM and low single digit growth in passenger segments. As you are aware, growth rates are weakening in two wheeler, more so in motorcycles. Scooter segment is growing in single digits. In international business we are seeing gradual demand improvement in agriculture, radials and OTRs in the OEMs. Global OEMs. We expect seasonal demand from Europe for passenger car tires in Q2.
This will improve and should the tariff situation stabilize, we may expect to see ramp up of operations in the US. Channel destocking may pause leading to better sentiment in Q2. Coming to financial performance, Q1 FY26 continued with good robust revenue growth of 11.5% YY on standalone. Standalone profit was 135 crores in Q1 and we continue to deliver double digit RoC. Post tax growth momentum was close to 9% in Q1 over last year. Our replacement market segment has grown in strong single digits while OEM segment has grown very very strongly in early twenties. International business however faced headwinds in several geographies and sales remained flat.
Replacement saw robust growth in truck and bus segment helped by continuous investments in construction and mining as well as stable overall economic activity. Two wheeler segment was supported by strong rural demand. Growth within passenger segment in replacement was muted and we at SEAT have seen a gain in market share across two wheelers, motorcycle scooter and four wheeler segment in quarter one in replacement on the back of product approvals, CX product approvals in biggest cars and SUVs in OEMs. We have. We have seen a robust growth in share of business.
operator
Sorry to interrupt you, we are losing your audio. I need to reconnect your line.
Arnab Banerjee — Managing Director and Chief Executive Officer
Can you hear me?
operator
Yes. So we can hear you, but your voice is breaking. Okay, I’ll call you back.
Arnab Banerjee — Managing Director and Chief Executive Officer
Okay, fine.
operator
Ladies and gentlemen, we have the management reconnected to the line. Sir, please go ahead.
Arnab Banerjee — Managing Director and Chief Executive Officer
Yeah, I’ll repeat the last couple of minutes. Replacement volumes saw robust growth in truck and bus segment helped by activities in construction and mining as well as overall stable economic activity. In two wheeler segment the growth was robust supported by rural demand. Passenger segment demand was little bit muted. However, we have seen a strong market share growth in two wheeler, both motorcycle scooter as well as passenger segment in quarter one in replacement on the back of product approvals in OEMs in bigger cars and SUVs which we had been pursuing for last several quarters. We have seen a robust growth of share of business in passenger tires in oem.
Similarly in scooter and motorcycle tires we have gained share of business growth in two wheeler. Both motorcycle scooters have been strong. Farm tire growth in OEM was in mid single digits. OEM volumes grew significantly yoy basis therefore across segments led by passenger two wheeler as well as commercial. In international business we faced headwinds in Europe in truck, bus, radial and passenger radial. Our stake in US market is still very low so the impact of tariff uncertainties were not very significant. However, it is our future growth market and therefore we look forward to situation evolving in the future.
Coming to margins Our standalone gross margin witnessed contraction of about 68 basis point QoQ. Main contributing factors included a flattish raw material cost coupled with sales realization which was lower in international market and in OEM market and the business mix which was inferior because of lower international business sales. Our RM basket remained largely in line with previous quarters. As I said that is quarter 4 25. Going forward we expect benefits of lower RM basket to pass through in quarter 2 between gross margin and EBITDA line. We have been continuously controlling our expenses and this time it was 20bps lower than lower on QOQ basis.
This is despite a steady marketing spend, in fact a higher marketing spend in Q1 which happens due to our participation in IPM. Our standalone EBITDA margin the quarter stood at 11.1% while a standalone net profit was 135 crores. On Kamso we are expecting to close the deal in the current quarter. We are awaiting certain regulatory clearances in Sri Lanka. There has been a slight delay but it is expected to close. As I said in the current quarter our onbound teams are working closely with Mishnah and are ready to operationalize the business as soon as we get the green signal from the regulatory authorities.
We have already done extensive town hall meetings in Sri Lanka and addressed the management staff of Campso. We are in advanced stages of discussions in recruiting the right talent in research and development and sales. Sri Lanka is currently facing a 30% reciprocal tariff from us on tariff exports to that country, a rate that was previously 44%. While it’s already lower than the initial rate, we understand that discussions are still ongoing and to negotiate this further down on our future trends of electrification, international business premiumization as well as digitization. First Electrification we continue our dominance in passenger EV segment with close to 32% share in OEMs across EV models and OEMs.
Our fitments are getting approved. We have been also a strong player in two wheeler evolution. However there is a share dip here to 12% of the OEM fitment which we expect to recover with the growing models of EV in two wheeler which are the conventional brands over the next couple of quarters we aim to be present in all these two wheeler EV models. Internationalization has been a key pillar of our growth and profitability. We have been focusing on the OHT business and of course you are aware of our acquisition of CAMSO to become a leading global player in the OHT segment.
We have grown in strong double digits in OHT in quarter one we continue to make progress and with key OEM approvals from Womack, Mahindra, Australia and Fiori during quarter one the business achieved its sales target despite challenging headwinds in geopolitical uncertainty and we launched 22+ off highway SKUs in Q1 and continue to make our product more relevant for the customer. In non specialty business we witnessed muted demand due to uncertainty in the tariff situation and impact on world trade. We witnessed growth within Africa and some scattered geographies. Latin America posed macro economic challenges, rising out of domestic currency depreciation and China’s free access in the region.
Middle east was also which is a big market for us was also impacted due to the geopolitical situation. We are looking forward to stabilization of the situation and growth to bounce back in international business. Premiumization Fiat recently launched tires with advanced high tech innovations like Z rated tires, 21 ring tires, calm technology, run flat tires which you’re aware of. We are taking some of these technologies outside India as well as the next step. We are also investing stepping up our investing in digital marketing and channel development efforts to facilitate the sales of these high quality innovative tires.
We have gained share in replacement and OEM for the premium segment tires which we defined as 17 inch rim size and above. We have also grown in replacement significantly in the larger bikes above 150cc in both bias and radial fitment. We are investing in our plans to ramp up the mix of larger rim size tires for passenger radials and two wheelers. Our brand imagery in the growing segment of premium and luxury cars have shown an uptick in quarter one digitization at seat. We are committed to harnessing the power of digital innovation to grow, drive growth, efficiency and satisfaction of customers.
Our AI powered solutions in the factories are yielding tangible results across the value chain as we build a future ready organization with a strong digital foundation. We look forward to continuing this journey and delivering sustainable value to US stakeholders. We have extended our already proven vendor portals for example from procurement to outsourcing partners which will remove human errors, enhance transparency and agility. The organic website Traffic grew by 2 times. Website traffic from premium users increased significantly, Premium SUV users traffic increased significantly. Positive sentiments for the band moved up by 33% and there was 107% increase in average interaction per post.
Overall Capacity utilization was 80% plus. Expansion projects are progressing as per plan and we expect our total capex for next year as guided will be around 1000 crores which will also include the maintenance capex of Seat and Campso. On sustainability we were awarded the Ecowadis Silver Medal placing us in 89th percentile of the companies. Our renewable energy power consumption in the manufacturing setup was 42%. We expect this to grow up grow up to 60% by FY27. We are committed to sourcing material from regions that are free from deforestation and degradation which is aligned with 100% EUDR compliance readiness.
We are also actively collaborating with USDMA to explore alternatives to 6 ppd which are going to be banned and so we are future ready as far as sustainability is concerned, not only from a regulatory perspective but also from the perspective of human rights ethics and sustainable sourcing. As we enter Q2 we are looking forward to the macroeconomic landscape, stabilizing bounce back in international business, better raw material cost pass through in our PNL and holding our prices across segments for a better growth and better profitability. I would like to hand over the call now to Kumar for his remarks.
Kumar Subbiah — Chief Financial Officer
Thank you Arnav Good afternoon ladies and gentlemen and thank you for joining our Q1 FY 25th earnings call. I’ll share some further financial data points with you all post which we can enter the Q Index issue first regarding our overall financial performance. Our consolidated net revenue for the quarter stood at rupees 3529 crores with a strong year on year growth of approximately about 10.5% and we crossed revenue of 3500 crores in a quarter for the first time. This was driven by a combination of both volume growth as well as price growth on year on year basis and our growth was predominantly in OEM and replacement segments while our international business revenue remained flat.
Our consolidated EBITDA for quarter one stood at rupees 386 crores with 10.9% margin which is about 56 basis points contraction on quarterly basis largely on account of lower realization arising out of changes in the mix and about 122 basis points contraction on year on basis primarily due to raise in raw material prices in the last 12 months which we could not pass on fully to our customers. Coming to Gross margins Our gross margins for the quarter stood at 36.8%. The raw material basket in quarter one largely remained flat as compared to the previous quarter which was lined with our expectations.
On year on year basis our gross margin contracted by about 245 basis points. The drop is primarily on account of rise in raw material basket. Our EBITDA margin Contracted by about 56 basis points Quarter on quarter due to marginally lower realization coupled with flattish RM basket and marginal increase in our marketing spend. Coming to raw materials the key factor that determines the raw material prices which is Crude oil remained rangebound during the quarter, though it flared up during the quarter in between due to geopolitical reasons. Brent is currently hovering around $69 with some upward bias as regards natural drum work driven by little softer demand in the international market.
Crude sorry natural rubber prices fell from about $1,900 to about $1,700 in the SAICOM exchange. However, domestic rubber prices have remained high supported by supply demand gap in the Indian market. It is currently trading around 200 rupees per kilogram and we hope the prices to come downwards once the availability of international rubber improves in India. Coming to Rupee Rupee has been mildly volatile around 85 to 86 to a dollar during the quarter, having appreciated against US dollar by about a rupee on an average against quarter four. Considering volatility in markets, we’ll continue to keep a close watch on RM’s situation and take necessary action as it involves in the coming quarter coming to debt, CapEx and working capital as regards CapEx, we spent about 231 crores during the quarter which is in line with our annual guidance number of about 900 to 1000 crores.
The entire capex of 231 fully funded through our internal approvals. Working capital has improved sequentially predominantly on account of better management of payables and also maintaining other elements like inventories and receivables constant in terms of number of days. Happy to share with you all that our working capital has come down by about 64 crores during the quarter, so we ended the quarter with a negative working capital of about 94 crores. We continue to drive efficiency in working capital and use the cash judiciary to fund our growth. We generated healthy operating cash flow which was used to manage our CapEx requirement and also to reduce debt.
Our consolidated debt stood at about 1814 crores, a drop of about 115 crores during the quarter. Our standalone non operating income for the quarter includes rupees 21.5 crores of dividend that we received from our subsidiary in Sri Lanka. Coming to Campso, we have already secured funding, necessary funding to provide capital for the acquisition of CAMPSO as and when it happens. Our debt to EBITDA on a consolidated basis stands at a healthy level of 1.2x and debt equity stood at 4. As of in June. In order to secure additional limits for our NCDs and CPs, we got ourselves assessed by credit rating institutions during the quarter and both of them affirmed AA with positive outlook rating for long term and A one for short term. Coming quickly to operating expenses, employee costs remained largely at the same level as of quarter four. Other expenses were kept under check during the quarter. Our freight cost and outsourcing expenses went up during the quarter due to higher scale of operations. We also had higher marketing spend on account of activities relating to IPL which would normalize in quarter two and beyond.
Depreciation for the year for the quarter stood at the same level as that of quarter four. Interest cost increased primarily on account of the fact that the debt average debt in the quarter was higher than quarter four. Though the debt levels came down during the later part of the quarter, the effective rate of interest have remained same or little down in quarter one versus quarter four, largely arising out of reduction in the interest rates in the market. Overall, our consolidated profit after the tax stood at about 112.3 crores which compares to about 154.2 crores during the same period of last year and rupees 98.7 crores in quarter 4 2025.
Also happy to share that the Board of Directors of SEAT yesterday after board meeting approved a Capex ban of about rupees 450 crores to be spent over the next 18 to 24 months in our Chennai factory in passenger car radial tires largely to readjust our upstream capacities arising out of changes in the weight of the tires. Lastly, our strategies are in place to strengthen our brand. We remain vigilant of global economic macroeconomic trends, adjusting our strategies as needed to remain agile. Additionally, our continuous focus on free cash flows with flexibility to adjust it during difficult periods and healthy balance sheet in terms of leverage ratios continue to reinforce financial strength.
Thank you. Now we can open the floor for Q and A.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. 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 Raghunandan from Nuvama Research. Please go ahead.
Raghunandan NL
Thank you sir for the opportunity. Revenue growth has been good at double digits and companies have been gaining market share for Q1. Can you indicate how was the breakup between volume growth and realization and also within the volume growth. If you can share the trend for OEM replacement and exports.
Arnab Banerjee
So I’ll answer the second part first. Volume growth of export was flat. The volume growth of domestic was much higher in OEM strong 20s and the volume growth in replacement was in single digit. So that was the business unit wise volume growth and overall volume growth was about 9% and overall value growth was about 11 and a half percent. So that can give you an idea of the volume and price.
Raghunandan NL
Thank you sir. Continuing the same question within the replacement growth. If you can talk about tbr, PCR and two wheeler, how have they done and whether you expect the same trend to continue for the full year.
Arnab Banerjee
Yeah, so pcr. I will start with pcr. Urban demand was soft in replacement and our growth was in low single digit in pcr.
operator
Sorry to interrupt. Can you mute your lines when you’re not speaking?
Raghunandan NL
Yeah, sure.
Arnab Banerjee
Yes, so I was talking about passenger car tire market and replacement which was the growth itself was muted in replacement segment and our growth was single digit growth and we have gained market share and vis a vis quarter four and we are very near to our all time high market share in this passenger car tire. But overall growth was muted in two wheeler. Market has grown better driven by rural demand and our growth has been pretty good in double digits in replacement with higher growth in scooter tires and slightly lower growth in motorcycle tires in CV in truck bus radial.
Truck bus bias. There’s been a slight degrowth. Truck bus radial has grown in strong single digit yoy.
Raghunandan NL
Thank you sir, that’s very helpful. And second question to Kumar sir, if you can clarify on the raw material side for Q2, how do we see the benefit given the fall in the global rubber prices and also some of the crude derivatives have seen a decline. So how do you see the benefits?
Arnab Banerjee
See it’s going to be mixed bag. In quarter two with respect to natural rubber, International prices have corrected progressively to the tune of about $200. So what used to be in SAICOM about doll 900, it’s close to about $1,700. So about 60% of our natural rubber is international. So we the benefit of that drop in prices we started getting from June. So we will have that benefit in quarter two. But the local prices, which was hovering around about 180 to 185 as we speak today, is about 205. So part of that some portion of the benefit on import will get neutralized to the extent of local.
But at an aggregate level, I think our expectation is the raw material cost could go down by about 1 to 2% in quarter two versus quarter one. Quarter one remains.
operator
Ladies and gentlemen, sorry for interrupting. The management line has been disconnected. Please be on hold. I’ll be reconnecting the management line. Sam. Ladies and gentlemen, the line for the management is reconnected. Please go ahead.
Arnab Banerjee
Yeah, okay. I think so just to summarize, we expect raw material prices in quarter two to be about 1 to 2% lower than quarter one. That is what we are expecting in quarter one. It remained flat at quarter four level after taking into account overall impact in some increase in some raw material feedstocks and reduction in other feedstocks.
Raghunandan NL
Thank you very much. Sir, just a last question on Canso. Can I express some historical numbers for revenue and EBITDA either for FY25 or CY24? And also if you can speak on tariff at 30% on tire, 4% on track, possibly the tire tariff might come down. Is CAMPO partially absorbing the tariffs impact on Europe currently? And how do you see the outlook in this business?
Arnab Banerjee
So historically the recent trend of turnover of KEMSO is about $150 million. And the tariff situation is 44%. Was a reciprocal tariff announced? It has come down to 30 applicable from 1st of August. And so the situation is not yet clear whether it will stay at 30 or go down further. Hopefully it will go down further. And if it stays at 30, for example, then as I mentioned in the earlier call, we are working on a plan of where to produce what for which market. We also have two bias factories in India and we are inheriting one bias factory in Sri Lanka.
So there is a possibility of rejigging the mix to see where to produce what. That is a backup plan. But we are pretty hopeful that something some negotiations are going on and it will work out. At present it is still stays at 30.
Raghunandan NL
Thank you so much, sir. I’ll fall back to the que. If you can just share the margin on cancer. Thank you.
operator
Thank you. I request participants to limit your questions to two questions per participant. Thank you. The next question is from the line. Siddhartha Bera from Namura, please go ahead.
Siddhartha Bera
Yes, sir. Thanks. For the opportunity. So my first question is on this realization where you mentioned that we had. Seen some reduction in the realization for the international markets possible to highlight what. Is the reason for this? Did we need to absorb some tariffs or why? Or it is a function of mix. So if you can just help us understand why it was lower.
Arnab Banerjee
In international markets. We did look at absorbing some tariffs. So. But that is one part because as I mentioned, our dependence on USL at this moment is pretty low. We also executed a large order, which is a one time thing of private label where the margins were. Where the realizations were low. So these are primarily the reason, not so much result of mix or anything. Europe. Yes, Europe, which is high margin and high realization. Europe, we had lower volume realization in quarter one also. So in a way all these three factors would have impacted. These are assignable one time causes. So all happened together in Q1.
Siddhartha Bera
Got it. And secondly sir, on this tariff scenario. Now like for this year also, we are nearly half of this year already done. So for the current environment, what is the scenario? Is CAMSO able to sort of pass on the entire tariff or how much. They need to absorb as of now? If you can share some thoughts there for the near term, that will be very helpful.
Arnab Banerjee
Yeah. So assume it stays at 30%. So we have to see the competitive set which is China, Canada, Vietnam and of course India in a way. So if you look at the competitive set, there is no incremental competitive disadvantage as far as Campflow will face. However, the US customer will experience an overall inflation. So there could be some impact on demand because of that. But otherwise competitively, I think the situation will be similar to the situation when. There was no tariff. Okay. Okay. And this $150 million you mentioned, is it for CY24 or it is your target for CY25? You can say it is a current transit.
Siddhartha Bera
Okay. Okay.
Arnab Banerjee
And margins also will be around mid teens now. Or there is a bit of a softness there because of this direct scenario. The margin, the historical margin was around mid teens.
Siddhartha Bera
Yes. Okay. Okay. Got it. Okay, sir. Thanks. Sir, I’ll come back.
operator
Thank you. The next question is from the line of Basudev Banerjee from CLSA India Private Limited. Please go ahead.
Basudeb Banerjee
Yeah, thanks. A couple of questions, just you. I missed out. You initially said what percentage of natural rubber you use as international.
Arnab Banerjee
I said 60%.
Kumar Subbiah
60.
Basudeb Banerjee
Yeah. Okay. So then this 10% decline in SAICON prices should come get reflected in your calculation of 200bps raw matte basket reduction next quarter.
Arnab Banerjee
Yeah, I think 2% of cost quarter on quarter. Yes.
Siddhartha Bera
And crude benefit of all both included.
Arnab Banerjee
Including you know this also rupee related.
Basudeb Banerjee
All of that.
Arnab Banerjee
Our estimate is about 1 to 2% quarter on quarter reduction of cost.
Basudeb Banerjee
Second see this 450 crore Chennai PCR capex. This will be included in this thousand crore overall annual capex numbers.
Arnab Banerjee
Yeah true, that’s True. On the 450 the outflow during the current year is not very significant. But we will maintain the capex relating to that 450 also within that basket of within the total thousand crores that was indicated.
Basudeb Banerjee
And this quarter as you highlighted OEM growth was healthy.
Arnab Banerjee
20.
operator
I’m sorry to interrupt but please I request you to please come back for the follow up question.
Basudeb Banerjee
Yeah, thank you.
operator
Thank you. The next question is from the line Mumuksh Mandlesha from Anandrati Institutional Equities. Please go ahead.
Mumuksh Mandlesha
Yeah, thanks for the opportunity and congrats on the continuing double digit revenue growth. So firstly on the margin side for a standalone business how do you see the drivers for the improvement further from here on where we can again take back the margin towards 30 14% level in the past. So what are key drivers do you see here to further improve the margin? Sir?
Arnab Banerjee
So one thing is the raw material situation which Kumar has explained. So we expect the margin to accrue on account of that. On the sales side we look at gaining back the volume in international market. We have a clear view of the order book in quarter two. And the reason is that the channel downstocking which was there due to uncertainty in quarter one is now partially over and we have a seasonal offtake of orders in Europe. So Europe is the highest sales realization zone. U.S. we are not yet significant. So we would like to see that situation improve in quarter two.
That’s the second point. And there are some long term drivers of premiumization in OEM as well as replacement which will continue which are steadily progressing. So on the sales side sales realization there are initiatives tactical as well as long term which are going to take it up. And raw material pass through is going to happen in quarter two. So we should see some improvement in margin going forward. Hello.
operator
Thank you. The the next question is from the line of Rishi Vora from Kotak Securities Ltd. Please go ahead.
Rishi Vora
Yeah, thank you for the opportunity. So I just wanted to clarify on chem. So you highlighted that current revenue run. Rate is around $150 million but the. CY23 revenues was around 230 million. Is that right?
Arnab Banerjee
Understanding. Yeah, it’s over. Yeah, it was around 200. But I think we did when we shared the financial data that was they work on a calendar year basis that was a full year data that was available. But in all our conversations we had indicated the 2024 numbers are lower, little lower. And so but 2023 was the only full year data available at that point in time which was for and 2023. Add some kind of one off of 2022 also some part of that first part of 2023.
Rishi Vora
But so the right number right now is we are right now annually clocking.
Kumar Subbiah
In $150 million at this point current.
Arnab Banerjee
Rent it, you might take it as approximately $150 million.
Rishi Vora
And then profitability at this point in time we are about low teams because the revenue base has come off.
Arnab Banerjee
Yeah, see look, we still need to take possession of the business and what we get is only some some management information. We’ll be able to share more insights once you know it comes into our fold. But we can assume at that reach.
Rishi Vora
Understood. And second, just wanted to clarification on the tracks tariff. Right.
Arnab Banerjee
So our we are seeing that it’s around 4% tariff.
Rishi Vora
So is there any exemption for rubber tracks?
Arnab Banerjee
Because generally if it’s 30% then both for bias tires and rubber tracks it has to be 30%. So yeah, 30% is a reciprocal tariff. It’s not a category tariff. It’s a tariff on the country. And there are possibilities that, you know, some categories like textile is also important in Sri Lanka. Tire exports is important for Sri Lanka. So some categories may be lower than 30% possible. We will know once the situation becomes clearer. Okay, but at this point in time if it’s 30% then it can be. 30% or you think there can be exam you are assuming that there is. An exemption at this point it is 30 both for trucks and tires. And you know we also talked about if let’s say the situation remains status quo, then we might ship some of the tires or bias tires capacity to. India from Sri Lanka.
Rishi Vora
But if in India also the tariffs are obviously right now it’s not decided. But if it’s hypothetically 20, 25% then. Does it make sense for us to shift to India?
Arnab Banerjee
And if we are also shifting to India, assuming that India has lower tariff, then will there be additional capex for this or we can accommodate in the existing facilities without much capex? No. So the tires can be shifted here and there both sides depending on where the tariff is lower and lower tariff country can send it to us and the other country, other country can send it to Europe for example. These are the two main markets. If the tariff situation is similar in both countries, it does make sense to shift from one place to the other, as you rightly said. And tracks can be manufactured only in Sri Lanka.
Rishi Vora
Understood. And just last question on other expenses.
operator
Sorry to interrupt. I request you to come back for the follow up question.
Rishi Vora
Thank you.
operator
Thank you. The next question is from Joseph George from iifn. Please go ahead.
Joseph George
Hi. Thank you for the opportunity. I have two questions. One is when I look at your. Interest expense, it’s about 80 crores in the quarter translating to an annualized 320 crores. And when I look at that in the context of your debt number which is about 1800 crores, the rate of. Interest seems very high. So if you can just clarify what all is included in that 80 crore interest expense, that is one and second is the share of profits from associates. And JVs which used to have a run rate of about 50 crores per. Quarter has dropped to a loss of. 15 crores this quarter. So we can just clarify on that as well. Thank you.
Arnab Banerjee
Okay, I’ll take the second one first. You know in Sri Lanka business last quarter they distributed, they distributed dividend. So we received about 21 0.5 crores of dividend which we have reported as other income. But when a dividend is paid, if you look at our total dividend for last that we received was equivalent to the profit or marginally higher than the profit that the business generated because the business has enough cash with them. There is a withholding tax on the dividend transfer which is adjusted in the consolidated profit. Considering the dividend itself is as much as the annual, our share of annual profits and even little higher in the current dividend.
The withholding tax is adjusted in the consolidated profit and therefore it is showing as a loss. You won’t see it in the subsequent quarter. It’s only because of the dividend related withholding tax on the first point with respect to the interest cost. Okay, so interest has one component which is our direct debt. We said debt was little higher in the first half of the quarter and moved on in the second half of the quarter. Our May month and June month collections were better relative to April month and the capex was little skewed towards the beginning of the quarter and therefore we ended up with about 114, 115 crores drop in debt as of 30 June compared to 31 March.
Average debt was little higher. Second, we also have one debt interest component that we pay on some security deposits part of it which is also to be added while comparing it with the total debt. When you arrive at the average interest on the total debt.
Joseph George
So what is the split of actual. Interest on the debt versus the amount. On security deposit etc. Because when we calculate the rate of interest it turns out to be a fairly high number.
Arnab Banerjee
See approximately about 25% of the interest that we have reported here would have on the security deposit Balance portion is on the the other debt, other gross debt.
Kumar Subbiah
So your rate of interest is like 12 13% now on the total debt. The rate of interest on our borrowings is would be average would be around 8% for the quarter.
Joseph George
Okay. Okay, maybe I’ll take it offline. Thanks. Okay.
operator
Thank you. The next question is from the line Basudev Banerjee from Clsal India Private limited. Please go ahead.
Basudeb Banerjee
Yeah, thanks. A couple of questions quickly. One, as you mentioned this quarter OEM revenue growth was in mid 20s and replacement was mid single digit. So I hope that also contributed partly to the gross margin contraction. Koq, will that be right to assume in the overall situation if you include international business also then our mix is usually let’s say 71, 72%, 28% of OE. So yes to a certain extent it is responsible but more so because of the flat growth in international business. And second quick question as you said will be closed sometime during Q2.
So what should be the right timeline that how many months of consolidation in FY26 approximately. So six months of second half is what we can look at. Could be seven months also so something like that. So sure. Thanks.
operator
Thank you. The next question is from Vishant Jain from Anandrati Institutional Equities. Please go ahead.
Unidentified Participant
Thank you for the opportunity Sir. My question will be regarding the debt. So what was the debt at the end of FY26 including Camso and what would be the interest rate for that?
Arnab Banerjee
I think we have not exactly arrived at the date but it can give some sense. Okay, assuming in the beginning of the year we started closer to about 2000 crores beginning of the current financial year or as of 31st March when we were carrying out an exercise in terms of what would be our debt by end of the year building little bit of, you know, sensitivity analysis with respect to revenue and profitability I think our debt number was coming in the range of about 353600 crores. Assuming we’ll spend thousand crores of capex and after taking into consideration the dividend outflow and also the campso related that’s what we had assumed in our internal working.
Unidentified Participant
Okay.
Arnab Banerjee
It could vary Quarter one our debt came down contrary to our initial plan where we thought it will be flat. So some minor tweaking will happen as we go into the year as we continue to focus on cash flow efficiencies it could be in that range.
Unidentified Participant
And what would the interest rate average.
Kumar Subbiah
Interest rate see currently on our borrowings Incremental borrowings would be sub 8% incrementally what we borrow. The current borrowing has some component portion which is term loan that is linked to MCLR and public sector banks. MCLR still hovering around 8.25% 8.3%.
Unidentified Participant
Okay.
Kumar Subbiah
So therefore we hope you know that MCLR correction will happen in the coming months incrementally. I think we are confident in terms of borrowing whatever is additional requirement at below 8%.
Unidentified Participant
Thank you sir. Thank you.
operator
Thank you very much. The next question is from the line of Raghunandan from Nuama Research. Please go ahead.
Raghunandan NL
Thank you sir. For the opportunity for FY26. Double digit revenue growth is expected within this. How do you see the growth in replacement and exports and if you can elaborate on exports post a flat Q1, the pickup which is expected in Q2, Q3 be it destocking and which regions do you expect to contribute to the growth? Thank you.
Arnab Banerjee
Yes, so international business has been flat and that we expect to come back in Q2 and we have the complete visibility of order base of Q2, Q3 and Q4. We’ll have to wait and see how various things pan out. So it will be definitely positive if not double digit growth for the entire year. But we’ll try to reach there for the remaining quarters Replacement growth also with more production coming online with existing capacity we expect to move on from here which is. I’m talking of volume growth here. We expect higher growth in two wheeler to continue and higher growth in commercial vehicles to continue.
Replacement market in passenger is little bit muted so share gain may be there but the growth will also continue to be lower than the other two categories. So OEM growth will taper off a little bit but we’ll have strong stronger because of the higher in sizes, higher approvals that we are getting. And those volumes are coming on stream from OEMs even in quarter 2, quarter 3 and quarter 4. So the mix will slightly be better going forward.
Raghunandan NL
Thank you sir for that. Secondly to Kumar sir, how much would be the maintenance cost for Fiat and CAMSIL in FY26? Maintenance means maintenance CAPEX is it?
Kumar Subbiah
Yes sir.
Arnab Banerjee
Okay. See maintenance capex for C8 is normally in the range of about you know 200 to 250 crores is what we are estimating it to be. This maintenance capex includes R and D. It includes growth related molds. Okay. It includes digital IT related. Sometimes we also drive some cost improvement programs that might call for some investment which is also part of that. So all of that we accommodate within this 250crores of maintenance CAPEX that we have kept it. We are little flexible on this for any good project, any other good innovation or something like that.
We have no issues in terms of funding sometimes improvement like solar, rooftop in factories and things like that because it helps in terms of making our operations more cost efficient. As regards CAMSO part of it or steel and pen operations part of it in the current year it is likely to be very not very significant because you know we are almost in the first end of first month of say quarter two. Let us assume it happens in quarter two. Cancer we are talking about six months kind of operations in the current financial year. Internally we have assumed, you know it could be anywhere between 50 and 100 crores.
It’s unlikely to be anything in excess of that with respect to, with respect to routine or a maintenance capex. But in case of Sri Lanka we also intend to create some upstream related capacities so that the manufacturing becomes independent to produce all aspects of tires and tracks. So that might require about 150 to 200 crores of invest capex over a two year period. Let’s say in the next two financial years. That’s what we expect.
Raghunandan NL
Got it sir. Thank you for that. And that is part of the thousand crore which is planned FY26.
Arnab Banerjee
No see look anything everything relating to C8 India is part of the thousand. Okay. And camps were being about a six month kind of an operation. I said about it could cost about 50 crores or something like that. That’s not considered thousand but if need be. So I don’t think that would be a big challenge in terms of keeping it within a thousand but I feel it will be in addition to the thousand.
Raghunandan NL
Got it sir. Thank you very much.
operator
Thank you. The next question is from the line of Nitin Agrawal from JM Financial Ltd. Please go ahead.
Unidentified Participant
Thank you. Thanks for the opportunity. Just wanted to clarify on the camp source consolidation or you had indicated that it start consolidating from the quarter two. So are we going to do it from quarter two?
Arnab Banerjee
See look as and when it happens I think Arnab outlined in terms of possible consolidation. Say first, say let us assume first September.
Unidentified Participant
Okay.
Arnab Banerjee
So that, which means that first September.
Unidentified Participant
Onwards it will get consolidated when we consolidated quarter two results. Okay.
Arnab Banerjee
It will be a one month impact of CAMSO for the current quarter and the next quarter onwards, all three months impact.
Unidentified Participant
Okay. Okay. Okay. So it will happen. Yeah.
Arnab Banerjee
It will be 100 consolidation because it will be a 100 subsidiary of state India.
Unidentified Participant
Okay. So we can assume that it either can happen Q2 or Q3, not beyond that.
Arnab Banerjee
Yeah.
Kumar Subbiah
Yeah.
Unidentified Participant
Okay.
Arnab Banerjee
I think it’s here and there. That’s all it looks like. I think he indicated already we are working towards first September. Let’s assume it is for September at.
Unidentified Participant
This point in time. Okay. All right. Thank you. That was from my faith.
operator
Thank you. The next question comes from the line of Andre Purushattam from Cogito. Please go ahead.
Unidentified Participant
Yeah, sorry. Can you hear me? Yes, yes, yes. You have set aside a lot of your goals to gain market share and you have gained some market share in the past and market share acquisition remains. Part of your strategy. Can you tell us what you think. Has helped you gain market share in the recent 24 months and what are your plans, particularly in marketing, to continue to spend the gain some market share and from who on how?
Arnab Banerjee
So I presume you are indicating the replacement market. So there are. In two wheeler we have a very strong dominant position. So I think very quantum gain of market share we are not looking at. So it will be creeping gain of market share and that’s the way it has been in the past also for the past 7, 8/4. In some odd quarters it dips by 0.2, 0.3% also. So broadly it is slowly moving up kind of market share on the back of a strong distribution strength which we have and which we continue to hone and strengthen over the years, more and more.
So that’s a unique strength of fiat for two wheelers only, I’m saying. And there are opportunities where we have relatively lower market share even now. It’s not that the market share is uniformly high across the country. So we focus on the zones of low market share to bring it up and then the overall market share grows up. But overall the impact is a creeping market share gain. That has happened and will continue to happen. Our brand is very strong in two wheeler commuter segment. So we are focusing on building the brand stronger in the top end, which is just about 3,4% of the market today, which is the radial segment and the higher CC bikes.
That’s the emerging segment. Where we would focus our marketing effort. And so that’s broadly the. And of course the usual stuff like continuous product enhancement and newer patterns and newer vehicles and OE also has a rub off. So we are strong in OE in four wheeler the market is congested in the sense that a lot of good players in the market and it’s going to be a different kind of game. But the opportunity here is that the premium segment is exploding which is very small today of 10, 11% of the market. But this will grow to 25, 30% in three to four years time.
And that is where most of the marketing efforts are going to be focused. With the right kind of products such as RFP, the 21 inch tire, we can move even higher the run flat tires.
operator
Ladies and gentlemen, sorry to interrupt but the line for the management has been disconnected. Please be on hold. Meanwhile I’ll reconnect the management. Thank you. Sadies and gentlemen, the line for the. Management has been reconnected. Please go ahead.
Arnab Banerjee
Yeah, I was continuing on the four wheeler part and we have invested massively on cricket for keeping the saliency high. And lot of unique marketing programs are being designed and some are already on to cater to this evolving SUV stroke premium customer. So broadly that is the thrust of the whole thing. Seat Shopee is a unique initiative of CET. 50% of our sales happen through exclusive channel which is going to be stronger in future. So yeah, these are some of the initiatives that are going to help us in taking our market share further.
Unidentified Participant
Thank you. Thank you very much.
operator
Thank you. The next question is from the line of Disha Sheth from Anvil shares and stock. Please go ahead.
Unidentified Participant
Good afternoon sir. Sir, wanted to check once we consolidate cancer in Q2, what would be the cost structure as in how much would adjudic interest, depreciation and currently I believe they are in losses. So what will be the impact on a consolidated basis in terms of margin or cost? Can you repeat depreciation is it? Yeah, additional cost for cancer and. Which. Will be added in a consolidated in terms of employee or interest and replication.
Arnab Banerjee
Okay, now I just to make it simple, one way to do it is that we indicated some kind of a margins. So it’s better to. If you’re trying to make a model element wise, possibly we can do it later. But revenue numbers broadly we have given you a sense. We have given a sense in terms of our operating margin. So it’s better to add that level. If you want to know about depreciation standpoint, we still don’t have complete details of it. Nothing wrong in taking a 5% of the capital value of the asset as the depreciation which is what the normal case but we don’t have the full breakup of capital value of the assets.
So to arrive at the PBT beyond.
Unidentified Participant
EBITDA okay great sir and last question from my side in terms of CS panel on replacement growth from your study and the past OEM growth do we expect coming three to five years and replacement overall and the category wise.
Arnab Banerjee
So replacement growth it sometimes moves in cycles, especially the commercial tire segment. But I think we are looking at I can talk about our share growth strategy right? So I will repeat just now what I said. 2 Wheeler will expect to to hold or grow marginally the share market share and our penetration of two wheelers is abysmally low. So is the penetration of cars and roads are becoming better, people are traveling more not just for commuting but also for hobby and weekend tours and long tours etc. So tyre wear is going to be higher, usage of tyre is going to be higher.
So we are quite bullish on the replacement demand. Long term though there will be an operational down cycle here and there. So expect we should expect double digit growth in two wheeler going forward in passenger it will depend on our success of market share growth in passenger car tire. If we can ride our marketing initiative of premium tyre growth we can grow in strong single digit in passenger truck bus radial. I am talking of all volume here so no the inflation of that and truck bus radial will be in strong single digit as well.
operator
Thank you. We’ll take this as the last question for today. I would now like to hand the conference over to the management for closing comments.
Arnab Banerjee
Thanks very much. We had little bit disruptions in the call once or twice so we regret that. But otherwise thanks for the very interesting questions and hope we have answered them transparently and adequately. Looking forward to continue our interaction in future. Thank you very much.
operator
Thank you on behalf of Dam Capital Advisors Ltd. That concludes this conference. Thank you for joining us and you may now disconnect your lines.