Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
CEAT Limited (NSE: CEATLTD) Q3 2026 Earnings Call dated Jan. 20, 2026
Corporate Participants:
Arnab Banerjee — Managing Director & Chief Executive Officer
Kumar Subbiah — Chief Financial Officer
Analysts:
Mihir Vora — Analyst
Mumuksh Mandlesha — Analyst
Unidentified Participant
Rishi Vora — Analyst
Vijay Pandey — Analyst
Unidentified Participant
Mitul Shah — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the CEAD Q3FY25 conference call hosted by iCVirus securities Private 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 then zero on your touchstone phone. I now hand the conference over to Mr. Mihir Vora from Aquirus. Thank you. And over to you, Mr.
Mihir.
Mihir Vora — Analyst
Yeah, thank you Rutuja. So good afternoon everyone. On behalf of Equirus Securities, I welcome you all to the Q3FY26 post result conference call of C8 Limited. From the management side, we have with us Mr. Arnab Banerjee, MDA and CEO and Mr. Kumar Subhaya, CFO. So without further ado, I now hand over the call to the management for the opening remarks. Over to you sir.
Arnab Banerjee — Managing Director & Chief Executive Officer
Good afternoon everybody and Happy New Year to you and all your near and dear ones. Welcome to CF’s Q3 26 earnings call. I will be taking you through the business updates for the quarter and then I shall hand over to Kumar for his remarks on financial performance post which we will take all the questions. The Indian tire market delivered an upbeat finish to the calendar year 2025 supported by GST revision which has improved affordability and overall consumer sentiment. Reforms have also led to broader participation across urban as well as rural markets both for OEMs as well as aftermarket for tires.
Overall, we believe that supportive tax policies, increasing EV adoption and ongoing premiumization trends are likely to position the tire industry for a healthy single digit growth through FY31 next five years. Overall demand outlook now the outlook for auto sector continues to be supportive. Macro tailwinds like RBI reducing repo rate in December is a positive robust. Rabi sowing and completion of Khari harvest has also supported disposable cash flows and rural demand. Additionally, OEM price hike expectations have helped maintain near term purchase activity.
In the near term we expect replacement demand for MHCBs to be mid to high single digit. Any further upside could come from the annual seasonality during the summer months for two wheeler. Demand has been consistently encouraging and growth could be high single digit in oem. MHCV is showing signs of recovery post GST rationalization. Growth has been robust in Q3. High double digit LCV growth is expected to be similar. Increase in E Commerce and Q Commerce activity would result in better sales of three wheelers in passenger segment.
Near term growth is expected to be in double digit with strong revival aided by consumer preference towards smaller vehicles easing financing access. Growth rates in 2 Wheeler are strong and expected to be in double digit. However we have to wait for a couple of quarters to see how the impact of GST will pan out. In international business, demand for radial CVs of highway tire and PCUV is strong where India is emerging as an alternate and credible sourcing base for these tyres on back of improved brand credibility with global OEMs and replacement distributors.
Seared performance Q3FY26 we had a good Q3 where we grew 20% plus YoY on standalone basis. The standalone EBITDA stood at 557 crores rupees volume performance growth momentum continued during the quarter over last year 20.9% volume growth. Replacement segment has grown in about mid teens for us where demand came in strongly post GST rationalization in September. In OEM we had a base effect last year base was not very high so OEM has grown well as well and international business has grown in the 20s because of Channel access improving in several geographies.
In replacement passenger segment grew well very strongly. Two wheeler continues to do well over the quarters and with support coming from both urban and rural clusters and grew in high teens. OEM volumes grew strongly yoy basis across segment. In PCUV we had a low base effect so growth was optically very high in OEMs. In two wheeler we continue to have a good share of business growing in high single digit. Farm growth in OEM was also strong where there was a demand revival and growth was very strong double digits.
Truck and bus radials also saw a very strong double digit growth. In international business we saw growth across segments passenger car tires and two three wheelers as well as in farm. In US tariff headwinds persisted preventing us from growing faster. We have been making steady improvements across all segments and categories. In replacement market our share of business was positive across truck, bus, radial across motorcycle and there was some marginal drop in share in scooter and in passenger which is much less than 1% in OEMs our share grew across the passenger truck.
In international business share of exports grew across all categories. Coming to margins, our Q3 stand alone gross margin witnessed a contraction of about 109 basis point QoQ. This was primarily driven by increased input cost from appreciated USD. We expect commodity prices to be benign and maybe a mild increase in Q4 which gives us an opportunity to achieve a consistent margin profile over time. Our standalone EBITDA stood at 14.1%. Standalone net profit was 191.6 crore which accounted for the effect of provisioning related to compliance with new labor codes.
Coming to camso, the business transition is progressing smoothly with key sales hiring completed and plant operations running steadily. On the sales front, the SEAT team is currently taking over direct customer relationships from Michelin. Majority of existing customers have approved the business transfer ensuring uninterrupted continuity of operation. A further ramp up of operation for the current 50% utilization is expected to take another few quarters. Post adequate changes in the marketing mix, CAMSO P and L has experienced some one time transition cost which will not recur.
Quarter four onwards operating profit was in double digits as per expectations. After absorption of all operating costs, it will take three to five quarters more to control the entire value chain at the purchasing end and the sales end and exit transition margin profile shall keep improving and volume traction shall increase. Also commenting on the other trends future trends Electrification, International Business premiumization and digital and AI during Q3 on electrification, Seat consolidated its leadership with 30% plus share in OEM PCUV EV segment and it maintained the two wheeler EV share at about 20%.
We continue to invest in products in these two categories and we continue to get approvals for new OEM vehicles. International despite uncertainty surrounding the U.S. Trade Agreement and pricing pressure from Asian competitors particularly in European market, Seattle Specialty business delivered its strongest performance to date in Q3 FY26 growing strongly in mid to 20s percent and year to date growth also has been high teens. During Q3 we introduced 32 plus new offay tire skus and we continue to expand our product portfolio to serve as a one stop shop for our customers.
In non Specialty we clocked high 20s growth on YOY basis in the overall non specialty business with strong growth coming up in passenger segment as well as in truck bus radial. Europe has been a strong geography for us along with Latam and Africa coming to Sri Lankan operations. Market challenges persisted in Q3 as Cyclone Ditwa affected operations and local competition further intensified particularly in two wheel and this year categories. Focus is here to hold on to our already high market shares in all categories and maintain our market leadership.
Overall saliency of international business was about 19.4% and if we consider the CAMSOR turnover which is actually consumed in international markets, this figure technically works out to 23% premiumization. We continuously are building upon our cutting edge technologies in premium categories. OEM approvals in high volume premium vehicles are building the foundation for future replacement demand. We are investing significantly to ramp up the mix of larger rim size tires and we continue to see gains in market share for our premium car tires across both replacement and OEM segments.
Our two wheeler premium portfolio comprising of motorcycles, steel radials and fabric radial as well as motorcycle tires for 250cc plus bikes continue to see traction and increase in market share Digital and AI At CEAD we are committed to becoming an AI led organization. To achieve this, we are planning to embark on a centralized data lake initiative that brings all enterprise data into one place providing a solid foundation for AI driven use cases across the value chain. Additionally, we are preparing to migrate to SAP Rise which will enable next generation AI capabilities and help achieve cost efficiency while unlocking advanced analytics and automation.
To amplify this transformation, we are automating our entire budgeting process using AIML. During Q3, organic traffic in our website increased 12% while premium tire sales through leads grew 64% over the same period. Positive sentiments for the brand moved up by 36% with 24% increase in average interactions per post yoy US tariffs as we speak, auto component duty on India continues to be 25%, so on road tires, TBR and PCR fall under this category. For off highway tires total duty continues to be 50%.
Sri Lanka is currently facing a 20% tariff and has a temporary advantage while we wait for India U S agreement to reach its finality. Capex overall capacity utilization is around 80 to 85%. Our capex guidance remains constant as shared with you over the last few quarters. Sustainability at SEAT we remain committed to net zero journey. We recently partnered with CleanMax to develop 59 megawatts of hybrid wind solar projects, provided our manufacturing facilities at Halol and Chennai with renewable energy.
This marks a significant step in advancing our aim towards achieving approximately 60% clean energy share in operations by FY27. Also during Q3CF Sambarnath plan for off highway tires was awarded the Gold medal at the 11th India Green Manufacturing Challenge. Overall Q3 closed on a strong growth note with a jump in margin in the stand alone business, strong product pipeline and a more confident customer and we look forward to continue this momentum heading into the New year. With this I would like to hand over the call to Kumar for his remarks.
Kumar Subbiah — Chief Financial Officer
Thank you Arnab Good afternoon ladies and gentlemen and thank you for joining our Quarter three earnings call. I’ll share some financial data points with you all post which we can enter the Q and A session. Overall Financial Top Line Performance Our consolidated net revenue for the quarter stood at 4,157 crores with a year on year growth of about 26% aided by strong volume growth across all segments. We are happy to share with you that the company crossed milestone number of rupees 4000 crores of revenue for the first time in a quarter and the revenue reported in quarter three has been the highest achieved so far.
While OEM and international business grew by more than 20%, replacement grew in mid teens during the quarter supported by positive momentum in domestic sales post drop in the GST rates in the month of September. I would like to bring it to your attention that consolidated year on year and quarter on quarter numbers are not comparable as CAMPSO revenue numbers were not part of the previous year’s quarter three numbers and with respect to the previous quarter, the revenue of Campso was considered only for a month as the acquisition of the business happened effective from 1st of September 2025.
The standalone revenue numbers which are more comparable for the quarter stood at 3,957 crores translating to a growth of about 20.1% year on year and 6.91% quarter on quarter. Hence, the financial insights that I will share with you today would focus more on standalone numbers coming to operating margins. Our consolidated EBITDA for quarter three stood at rupees 568 crores translating to 13.7% margin. It’s a 13 basis point improvement sequentially and 317 basis points improvement year on year basis, while our standalone EBITDA stood at 556 crores translating to a margin of about 14.08%, a 39 basis point improvement quarter on quarter and 364 basis points improvement year on year.
Our standalone gross margin for the quarter stood at 39.9%, a marginal contraction of about 109 basis points sequentially, largely arising from drop in finished goods inventory and also drop in other income along with some impact on raw material cost Coming to raw materials during quarter three, our raw material costs were in line with our costs in quarter two. The crude prices remained stable and moved in the range of $60 to $65 during the quarter and the crude derivatives which go into the manufacture of tires also remained within the same small range while natural rubber prices remained around $1,700 per ton.
However, it has moved up to $1,800 per tonne in the later part of the quarter. Considering our raw material costs are based on a combination of imports and local material prices with linkage to import parity, the depreciation of rupee from around 87 to US dollar in the beginning of the quarter to around 91 to US dollar now would have some impact on our cost going forward. We expect the margin impact to be in the range of about 1 to 1.5% in quarter four and beyond. While the overall cost environment is broadly favorable, we continue to keep a close watch on RM that is raw material situations.
Coming to CapEx during the quarter we spent about 254 crores. Until date we spent about 673 crores. In addition, we have also had an outflow about 236 crores in quarter two towards intangibles at the time of acquisition of Campso. We expect our normal CAPEX outflow excluding the intangible that I just now mentioned for the current year to be in line with our earlier estimate of around 1000 crores. For the current financial year our stand alone working capital continued to remain negative, marginally negative.
Our inventory saw a drop of about 212 crores during the quarter in line with our plan and payables also dropped by a similar amount. Our standalone gross debt stood at Rs 2954 crores against rupees 2944 crores as of end September. During the computer quarter the company raised about 250 crores of NCD that is non convertible debentures from the market and retired about rupees 100 crores. Both are part of the current debt. Our debt to EBITDA on a standalone basis stands at a healthy level of 1.252x which compares favorably with 1.65 that we reported for the previous quarter and our debt equity also improved from about 0.65 to 0.63.
Coming to operational expenses, the standalone employee costs during the quarter moved up from Rs.244 crores in quarter two to rupees 252 crores. The marginal increase is largely on account of higher level of operational activities. We leveraged scale and that helped to manage our other expenses well during the quarter. Overall we kept tight controls on cost which helped in our operating expenses in quarter three to be at the same level as quarter two. However, in absolute terms it remained constant.
In percentage terms it came down from 20.7% to 19.4% translating to margin expansion on our standalone profits and also after absorbing the drop in gross margins. Depreciation during the quarter remained at same level as that of the previous quarter. Interest caught during the quarter increased by about 17.88 crores largely on account of increase in the average debt level. While debt has not moved between quarter two, end of quarter two and end of quarter three. The borrowings in the previous quarter moved up in the month of September however in the same level of debt we maintained during the quarter.
That led to interest cost for the quarter going up by about 18 crores and we would like to bring it to your attention. During the quarter we made a provision of about 57.81 crores arising out of notification of new labor codes by the Central Government. While the changes in rules are still under review, the company made an estimate based on the understanding of new definition of wages applicable for gratuity and leave and catchment entitlements of the employees as on 31st December 2025. This is reported in our financials as an exceptional line item as the cost relates largely to the past period of service of the employees.
Overall, the consolidated profit after tax for the quarter stood at rupees 155.4 crores compares favourably with rupees 97 crores reported during the same period of last year and rupees 185.7 crores reported in the previous quarter. Our standalone profit reported a higher number of about 191.59 crores which compares favorably with 95.97 crores that we reported in the same period of the previous year but marginally lower than rupees 202.23 crores that we reported in quarter two. The profit after tax for the quarter would have been higher but for rupees 57.81 crores of provision that we made towards new labor port that I just now mentioned.
We are also pleased to announce that Board of Directors in the meeting yesterday approved rupees 1314 crores of capex for our Chennai plant which would add additional 35 lakh tires of passenger car tire capacities. We expect this capacity addition to be progressively completed by the second half of financial year 2028. The capex would be funded with a mix of debt and internal accruals as we have been doing in the past. While executing the proposal, we would continue to monitor our leverage levels and ensure that balance sheet continues to remain strong during the quarter.
The credit rating agency CAIR carried out an annual surveillance and reaffirmed credit rating of AA for long term with a positive outlook and a 1 for short term. With this we can end the call and over to 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 the Touchtone telephone If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mumuksh Manlesa from Anandrati Institutional Equities. Please go ahead.
Mumuksh Mandlesha
Yeah, thank you sir for the opportunity and congrats on the good growth during the quarter. So firstly to Kumar sir, so you. You said here going ahead there could be a 100 to 150bps kind of impact on the raw material increase due to natural rubber prices going up and INR deposition. Is it right, sir?
Kumar Subbiah
Is that right?
Mumuksh Mandlesha
Got it. It could come in coming two, three quarters, right?
Kumar Subbiah
Yeah. See look, largely you know we have visibility and cover in advance, okay. But going into the future, considering the rupee has depreciated and little bit of movement in the prices of natural rubber, particularly international rubber, it could come in due course of time.
Mumuksh Mandlesha
Got it, sir. And so on. The labour code in fact. So this 58 crore was mainly for the past period. So anything from the Q3 and going ahead, how much one should factor the impact, sir.
Kumar Subbiah
See this is predominantly on account of change in the definition of wages. And earlier you are aware that gratuity and leave and catchment entitlements were calculated on basic salary. So with the revision in the definition of wages, it’s mostly relating to the past period. But for the future there will be an impact. Our estimate is for a quarter is coming to very small numbers. So it’s not very significant. Going into the future there is an impact. There is an impact in terms of incremental provision.
But an impact is small, say less than 2 crores. Maybe a crore or two per quarter.
Mumuksh Mandlesha
Got it sir. And sir, on the, on the camzo side, can you share how was the Q3 financial performance for the CAMSO in terms of revenue and ebitda, sir.
Arnab Banerjee
So Amit is here with us. Amit is heading the division, specialty division. I think Amit will share a few details. Yeah.
Unidentified Participant
So the operating as expected, the top line is as per expected. What we are trying to do is, what we are doing is we are getting the relationships transitioned from Michelin to seat. And as Arnab informed in his call earlier, that’s trending as per expectations. And the top line for the, for the quarter is, is roughly at. Is roughly at 20 million USD which is 180, 283 crores.
Mumuksh Mandlesha
And sir, I think double a EBITDA margin, sir, operating Profit, right sir?
Unidentified Participant
Yes.
Mumuksh Mandlesha
Got it sir. And on the US market how’s the sales going there? Sir. And has the Michelin or basically they have taken the price to pass on duty? Sir.
Unidentified Participant
Yes. Necessary price increases have been taken in the market. But as. As you’re aware that Sri Lanka has a favorable tariff compared to India. It’s at 20% versus 50%. So right now the necessary tariff increases have been passed on to the consumer.
Mumuksh Mandlesha
And how is the demand side in US market?
Unidentified Participant
Demand remains cyclical. As the industry is progressing. Whatever is the cyclical impact and the tariff impact is seen. But again as I said earlier that it’s tracking as per expectations.
Mumuksh Mandlesha
Got it sir. Thank you for this sir. Kumar. Sir, for this new 13 billion CapEx for the PCR. So how would we split of that CapEx in 27 and 28 and so going in for next year do you see any more CAPEX planned other than for PC as well?
Kumar Subbiah
No. See largely we have factored in whenever we had shared our own outlook for the next two or three years. See look we. Our current annual CAPEX is about thousand 2050 crores rate. That is what it is. As we are scaling up. You’ve seen in the first nine months our volume growth has been over 15%. And year on year the growth was even 20% for the quarter. But full year basis. So from capex capacity creation point of view we need to take into consideration the volume growth on a higher base. So it’s likely that CAPEX estimate from the next year onwards would move from 900 to 1000 crores level.
To maybe thousand to 1100,200 crores level. We are in the process of completing our annual plan. We will make sure that this capacity expansion related capex outflow is within that threshold. Within that overall number. As of now we are in the process of completing passenger car capacity expansion at Chennai. To take the capacity to 30,000 tires which is under progress. This about 30,000 to 40,000 tires capacity expansion will get completed in the second half of FY28. Along with this we are also expanding our Nagpur factory.
Taking the capacity from 80,000 tyres to 100,000 tires per day. So these proposals that have been approved by the board would get implemented. And CAPEX flow would be. Capex would be in line with the number that I indicated to you.
Mumuksh Mandlesha
Great sir. Thanks for this opportunity. Thank you.
Operator
Thank you. The next question is from the line of Rashee Voda from Kotak Securities. Please go ahead.
Rishi Vora
Yeah. Thank you for the opportunity. My first question is on the replacement segment in the domestic market we have seen a very strong growth, you know, and obviously this month this quarter has been even stronger than what we have seen in the in the last few quarters. So is it something to do with general filling or post GST cut? You are seeing, you know, sudden resurgence in the replacement segment demand and how should we think about this category growth going into FY27.
Arnab Banerjee
Overall replacement? Yes, there was some channel filling because the channel downstocked in September, but the growth is much more than channel filling. There is a genuine improvement in sentiment, especially for farm and two wheeler tires. But also witnessed in the other categories which is passenger car tires and in truck bus radials. How long this will last, whether this is just a pent up demand coming through, we will know after a couple of quarters. But my view is that there will be a positive impact on demand overall and replacement.
Rishi Vora
So at least for 27, should we continue expect at least high single digit growth to sustain?
Arnab Banerjee
I think so. We can expect high single digit growth in replacement through FY27.
Rishi Vora
Understood. And my second question is on the CAMSO bit, right? Because last, last to last quarter, you know, when the management had highlighted that the KEMSO annualized revenues is roughly around 140 to 150 million dollars and at least basis this quarter seems like the annualized run rate is around $80 million. So you know, what has happened, you know, why the revenue, you know, has, you know, further collapsed, you know, what are the factors for the same and when should we expect at least the quarterly run rate to reach the, you know, the earlier annualized run rate?
And just second question, on the margins of Chemso, if I heard it correctly, you said this quarter margins were double digitized by Google, but if I just do console minus standalone, then the EBITDA margins is coming out to be around 3%. So what is the discrepancy over there? Can you just explain?
Arnab Banerjee
I’ll explain the top line part first. Yes, we had been saying it is 120, 25 million. Actually it’s slightly down from 140 million. Odd. But that’s the full turnover. When we realize the full turnover in terms of net sales realization from the customer right now in the transition phase, we are selling to Michelin who in turn is incurring the cost of distribution and keeping a small margin transparently with us and selling it to customers. So the markdown realization is around, you know, around 190, 100.
A specific instance last quarter was a cyclone which has resulted in some disruption of Operation which will be made up. It’s a supply chain disruption. So essentially if you calculate then it will Trend to around 99,500 in terms of the reduced offtake price in the transition period. So it is trending as per our expectation. There is no discrepancy there as far as the margins are concerned in the operating part of the margin. Yes, we have recorded double digit and it includes one time transition cost as well as some recurring IT costs which were incurred in quarter three which will stop incurring from quarter four and below operating.
I think Kumar, you can explain the situation in ChemSoft.
Kumar Subbiah
I think your question was on the operating margin side. So from that point of view we have two line items. One is that normal operating margin. That is what Amit mentioned to you on the double digits, which is what we realized. Okay. Because we are in the first initial phase of acquisition and change management. There are some IT costs we incurred in this three or four months time and some other transitionary expenses which are called as which we have booked as normal expenses. Okay? So those costs are more relating to quarter three and maybe in the first month of the operations, okay?
So whenever we do an internal management reporting or performance reporting at that point in time, we remove what is specific to one particular quarter more. A transitionary is removed for the purpose of evaluating an operating performance. So if you remove it as a double digit number and most of those costs have been already incurred and we should be able to sustain a double digit kind of a margin going into quarter four. But when we reported these numbers on a consolidated basis, we have taken them as expenses.
We have not called them out as a separate exceptional line item. And therefore when you read it, it appears as a single digit margin.
Rishi Vora
And so when should we expect a normalization like FY27 hopefully should be then a normalized year. In that sense.
Kumar Subbiah
Some of the one time costs relating to IT transition etc, I think we have done and tested as of 31st December. Okay? And but going into January onwards those expenses will not be incurred.
Rishi Vora
So at least the margins, the reported margin should also trend towards double digit by 27 low double digit.
Kumar Subbiah
I think you will see that from quarter four onwards resultant reported margins will be will be in line. See, I just ignore one more point before you follow up with another question. In the P and L of that particular entity also has two other elements of cost. One is the depreciation cost and another one is interest cost. Interest large part of the interest cost. It is also accrued in our books C8India Books in consolidated it will get netted off. We have given in the current capital structure reasonably large amount is taken as a debt in their books.
Keeping in mind repatriation part of flexibility we will recast it maybe by end of quarter four and depreciation cost is still at an estimated level. I think in the quarter four we are in the process of assessing the life of the assets to ensure that the depreciation that we take into our books is based on real assessment of the life of the assets. Those are below operating line items point of view. But coming back to your question, I think you would be able to see that margin visible in the reported numbers from quarter four onwards.
That double digit kind of a number because we are unlikely likely to incur those costs starting from January.
Rishi Vora
Understood. And when would this complete transfer from Michelin take place? So like today you said that there is a markdown which happened. So when should we expect that business transfer to happen?
Arnab Banerjee
So that transfer is at two ends. One is the customer transfer and one is the raw material purchase that we do. So the raw material purchase that we do will stop when we erect our mixer and calendar which will take another three to five quarters to completely come to us. On the front end customer transfer has started. We have already started looking at a few customers in this quarter. It will accelerate in quarter four and maybe by quarter one, quarter two we should be done with it.
Rishi Vora
So then realization should normalize by second. Quarter next year
Arnab Banerjee
From the front end it will do faster. Yeah, you’re right.
Rishi Vora
Understood. Thank you so much. All the best.
Operator
Thank you. The next question is from the line of Mihir Vora from Aquarius Securities. Please go ahead.
Mihir Vora
Yeah, thank you for taking my question. So sir, my question is a bit clarificatory in nature. So in July we had announced a capex of around 450 crore on the passenger car tires capacity in Chennai itself which was roughly around 35% of the capacity then. So that is roughly 2024 lakh tires. Assuming so now we have announced another 1350 crore on capex. So is this including the 450 crore or. That is a separate one and this is something which is separate
Kumar Subbiah
Now. This is independent of that. Okay, so what we announced in the month of July was taking our capacity to about 30,000 tires per day. Okay so and that is under implementation. We hope to complete that execution in the coming financial year. By quarter three or quarter four of coming financial year this 30,000 tires to 40,000 tires is over and above that. Okay, which will get completed maybe A year later.
Mihir Vora
Right. And sir, so basically when we do the back of the envelope calculation here, the cost, the ton per day cost, the CAPEX cost per TPD comes out to be higher this time. So what has changed in the, you know, in the capex here?
Kumar Subbiah
Okay, see this, this translates to about 140 tons a day. Okay. And passenger car radial tires, average weight is progressively going up. So therefore we expect our incremental requirement to have a higher level of weight of the tires. We will have all the flexibility to produce more number of tires should the upstream capacity being higher and average weight of the tyre being lower. And what we intend to do is that. So this, if you really look at the total capex and divided by the tonnage that I just now mentioned to you, it will be broadly in line, broadly in line with what we have incurred so far.
Mihir Vora
All right. All right. Okay. Okay. And just a follow up on this. Like our capacity expansion in the PCR category has been quite strong compared to our peers. So what steps in terms of even, you know, in terms of market, in terms of pricing would we be taking like to utilize this capacity and you know, basically what growth are we expecting here? Because the industry would be growing at 6 to 7% in terms of OEMs. But our capacity expansion has been in a strong double digit.
Arnab Banerjee
Yes. So we are looking at growth in all three verticals. International is growing strongly as we keep getting consolidating our market share in several countries where we play Latam, Europe and the US is yet to play out. So we are experiencing strong growth in domestic oem. As I mentioned, we had exited several vehicles over the last two, three years, so our base was low last year. We are getting entries in several vehicles, high volume vehicles from across OEMs, including some EVs. So that growth is coming up and most of that growth is coming in the OEMs in the higher rim sizes.
So when that happens, the average tyre weight as Kumar experience plane goes up. And therefore in terms of tonnage, we need higher capacity. In terms of numbers, of course we need higher capacity. We think we have some headroom to grow our share in OEM even now, much as we are growing in this year over a low base of last year coming to replacement, we are at the third rank now behind two more players. And there is a gap of about 3.5 to 4% between us and the market leader. So in the next three to four years we expect to bridge this gap over a period of this time.
And our ambition is to definitely go for market Leadership in this segment we have been doing well. The premiumization journey is going well. In terms of pricing. We are actually introducing many higher technology tires such as the foam tire which is the calm tire, the ZR rated tire, the run flat tire and taking the average, trying to take the average realizations up. In this category, the selling price of the dealer to the consumer is also trending up. And over a period of time with volumes, the margin profile should actually improve.
Mihir Vora
Right? Okay sir. Okay. That answers my question. Thank you.
Operator
Thank you. Participants who wishes to ask a question may press star and 1. The next question is from the line of Vijay Pandey from Nuvama Wells. Please go ahead.
Vijay Pandey
Hi sir. Thank you for taking my question. A couple of questions. So when you say double digit EBITDA margin for cancer, is that like. Should. We expect it to be around 10 12% or is it high teens more than 15%? Because Tamsu in general when we will have the full business that will be at around 20% EBITDA margin, right?
Arnab Banerjee
Yes. So when we said in quarter three, what was it? It was just about teens, low teens without any improvement. Too much improvement in the business traction which is the volume traction after the one time cost etc removed gradually it will trend towards mid teens and we did talk about 20% and above. That will come when we take complete control of customers as well as the material supply at the back end and we start improving the capacity utilization of the factory which is currently standing at at 50% when the volume traction comes.
Yes, it should move up from mid teens to around 20%.
Vijay Pandey
Okay. And now in terms of coming to the domestic market, how do, how are you seeing the growth in the fourth quarter for all the segments especially on the replacement side. If you can just briefly help us map. The
Arnab Banerjee
Fourth quarter seasonally is a mixed quarter. January is usually low because of winter in north and east. I’m talking of replacement. Whereas March is usually high because of the onset of summer. So it’s a mixed quarter. Jan said March usually however we have the positive impetus due to the GST reduction. The growth has been pretty good in the month in. In quarter three. We have to see if it sustains. If it sustains we’ll have a very good quarter again in Q4. Otherwise it may moderate a little. But the net positive impact of GST will remain.
Vijay Pandey
In terms of channel inventory. They are distilled at nominal level.
Arnab Banerjee
Channel inventory has normalized completely.
Vijay Pandey
Okay, okay. And lastly sir, in terms. Just wanted to. Just if you can clarify in terms of the components about the raw Materials. So because international rubber prices has increased. So how is the domestic rubber prices looking? And other components like carbon fiber and other oil derivative products. If you could just clarify those prices.
Kumar Subbiah
Okay. See local prices are in the range of 185 to 190 rupees per kilogram. Okay. So no major change in the last three months. It’s been up and plus or minus in that range only international prices have moved up by about $100 per ton. It’s hovering about 1800, 1800 and $10 per ton. This point in time the impact of currency is there on the imports. So therefore there is a little bit of adverse impact. Carbon black prices are expected to be little lower in the current quarter because the average crude level prices were lower in quarter three.
Generally the previous quarter’s movement of crude and the feedstock that goes into carbon black is called AS CBFS remained little on the lower side. So therefore that is where it is. Generally we have one quarterly price for carbon black synthetic rubber prices beginning to end of the previous quarter, particularly something called as butadiene that determines the synthetic rubber prices remained in a particular range. It started average price towards the end of the quarter or the end of the quarter price was little lower than the the beginning of the quarter and therefore average for quarter four is likely to be little lower than quarter three and steel and other prices.
We don’t expect any major change to happen in quarter four. So considering synthetic rubber also has import parity kind of a pricing, some portion of this imported etc. Currency could have an impact on it. So overall our assessment is one to one and a half percent sequentially the raw material basket cost could move up. Okay. It is subject to, you know, recipe subject to categories and things like that is what our initial estimate is.
Vijay Pandey
This one to one and a half percent headwind is probably because coming from the currency side.
Kumar Subbiah
Yeah, correct. Currency. See currency impact is about average, about 3%. Okay. Some feedstock prices are moved up, some of them down. And considering we have already covered some portion of the raw materials, one to one and a half is, is largely currency and little bit of natural rubber.
Vijay Pandey
Okay, okay, thank you.
Operator
Thank you. The next question is from the line of Nitin from JM Financial. Please go ahead.
Unidentified Participant
Hi, thanks for the opportunity and congratulations on a good set of numbers. So my question is regarding the demand in the international market, especially for OSD and. Agree. So where do you see demand panning out for say next quarter going into FY27?
Unidentified Participant
See, we have a our big markets for agri remain Europe, Canada, South America where we support apply to some OEMs as well as Australia, South Africa. So we continue to trend on these markets from a tariff point of view US we have little exposure in the US not significant. And so apart from us, all these markets that I mentioned are the markets that we shall continue to focus on for the agribusiness.
Unidentified Participant
Okay, so we can see stabilization and going like low single digit growth in those markets, those categories.
Unidentified Participant
We expect
Unidentified Participant
That. Okay. Okay, that’s it from my side. Thank you.
Operator
Thank you. The next question is from the line of Mitosha from pcapl. Please go ahead.
Mitul Shah
Yes sir, thank you for the opportunity and congratulations on all over strong performance. First I’m sorry to interrupt you
Operator
Mr. Shah, but we are unable to hear you that clearly.
Mitul Shah
Hello, am I audible?
Operator
Yes, please go ahead.
Mitul Shah
Thank you for the opportunity and congratulations on a strong performance. So my first question is on the replacement demand for the quarter. If you can help with some ballpark number for industry for various segments for replacement like cv, farm equipment, PCR and related to this want to understand how much would be contribution of the restocking in this as we heard from the channel check that during the GST related challenges initially inventory used to be 15 to 20 days which went down to about 23 days and post GST again restocking started.
So what would be the number in terms of the inventory at the beginning of October and at the end of December approximately. Thanks sir. This is the first question on replacement side.
Arnab Banerjee
As I mentioned the inventories have normalized so if you have picked up 12 to 15 days of inventory in retail that’s the level of inventory roughly at the end of the quarter three. So the downstocking of September was made up in the month of October itself and then we witnessed a good offtake which was replenished. So there is no further delta that we expect in inventory going forward. So I had mentioned during my initial address that replacement demand has been strong for mhcv high single digit and two wheeler has been constantly almost double digit kind of growth in two wheeler especially in scooter tires and passenger had been lukewarm in the first half.
But quarter three has been also mid to high single digit for passenger car tires.
Mitul Shah
And do we expect trend to continue at least for one or two quarter for replacement?
Arnab Banerjee
We have to wait and see. I won’t stick my neck out and say that these trends will continue but there will be a net positive impact. I think overall quarter four will be better than first half.
Mitul Shah
Second question on the KEMSO side that in this quarter how much would be the gross margin benefit? Not asking exit absolute number but directionally and going forward. Also how do you see considering the cross currency impact as well as all other raw material related parameters, Gross margin for Q4 for Kemso.
Arnab Banerjee
Gross margin is again moderated because we are in a transition state. So in the transition state, whatever gross margin we had expected, by and large it is trending barring one adjustment for steel prices where we have taken a hit on gross margin and we are aware of that, but this will be again made up by passing on the prices to the customer customer over quarter four. So we’ll be back to normal kind of gross margins as we expected before the deal closed.
Mitul Shah
So thanks and all the best.
Arnab Banerjee
Thank you.
Operator
Thank you. The next question is from the line of Agnesh Iyer from Sequent Investments. Please go ahead.
Unidentified Participant
Hello. Just one clarification I wanted. I heard you said that there is a one time expense that we incurred in cam. So in this quarter which is not expected to repeat in quarter four, sir, can you quantify the amount of spend that we did?
Kumar Subbiah
Okay, see look overall for the quarter it would have been about 4 to 5% of the revenue was the kind of expenses that we incurred in quarter three that we wouldn’t incur in quarter four onwards.
Unidentified Participant
Okay. Yeah,
Kumar Subbiah
Yeah.
Operator
Thank you. The next question is from the line of Mehrvora from Equator securities. Please go ahead.
Mihir Vora
Yeah, thank you for taking my question again. So sir, just some idea on the truck, bus, radial or the commercial vehicle segment we mentioned that we had grew around mid single digit in the MHCV category. But going into the segment how are we seeing the demand sustaining going ahead and color on the sub segment or how are we seeing the tonnage shifts happening here? Is it moving towards higher tonnage or still we are there into the haulage segment only some color on that as well.
Arnab Banerjee
Are you talking of replacement market?
Mihir Vora
Yes sir.
Arnab Banerjee
Yeah. So replacement both the
Mihir Vora
OEM and replacement both the.
Arnab Banerjee
Yeah, so OEM it has shifted towards 16 wheelers as you know and the demand is concentrated in 16 wheelers in MHCV and there is a good demand from LCVs and small commercial vehicles also because of E commerce and growth in quick commerce. So that segment is witnessing very strong growth as well. High double digit in fact in OEM in replacement as well. The tires for small commercial vehicle, light commercial vehicle as well as the full range of MHCV overall is growing at a high single digit and we expect this growth rate to accelerate because you know the summer season is the big season for this March to June.
This growth should hold at this level, if not more. So we expect this to grow. And MHCV have been very tepid in the first half in OEMs. It has come alive in quarter three, so it may moderate a little, but this cycle should last a few more quarters, maybe two to three quarters up to June definitely, is what I think.
Mihir Vora
Right, sir. And so basically on the replacement front also now that because of GST we may see fleet utilization improving. So are we seeing that traction also on the ground that tucks are coming in for replacing the tyres and going ahead? What do we think there specifically on the mhc?
Arnab Banerjee
Yeah, in replacement also, we have seen some traction in the demand of tyres in quarter three, which is usually a down quarter because of onset of winter, whereas we have seen traction in Q3 to be better than quarter two. So, which is obviously because of the GST rate reduction and how much this will sustain. We’ll have to wait and see. Q3 and Q4, Q4 and Q1. But as I mentioned, we should have a net positive effect vis a vis first half, that is before the GST decrease happened.
Mihir Vora
All right. Okay, sir, thank you. That’s all from my side.
Operator
Thank you. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to management for closing comments.
Arnab Banerjee
Yeah, so thank you. Happy New Year once again. And this is the last quarter, so we hope to see you at the end of the year with a full year performance review and we shall share that with you. Thank you very much.
Operator
Thank you. On behalf of Equivira Securities Private Limited. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.