CEAT Limited (CEATLTD) Q4 FY22 Earnings Concall Transcript

CEAT Limited (NSE: CEATLTD) Q4 FY22 Earnings Concall dated May. 05, 2022

Corporate Participants:

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Kumar Subbiah — Executive Director, Finance

Analysts:

Basudeb Banerjee — ICICI Securities — Analyst

Ashutosh Tiwari — Equirus Securities — Analyst

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Disha Seth — Anvil Capital LLC. — Analyst

Nishit Jalan — Axis Capital Ltd. — Analyst

Siddhartha Bera — Nomura — Analyst

Amyn Pirani — J. P. Morgan — Analyst

Sachin Kasera — Svan Investment Managers LLP — Analyst

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Sonal Gupta — L&T Mutual Fund — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 FY22 Post Results Conference Call of CEAT Limited hosted by ICICI Securities. [Operator Instructions]

I now hand the conference over to Mr. Basudeb from ICICI Securities. Thank you, and over to you, sir.

Basudeb Banerjee — ICICI Securities — Analyst

Thanks. And very good morning to all the participants. We are thankful to CEAT Management for allowing us to host the Q4 FY22 Post Result Con Call. We have with us the Management represented by Mr. Anant Goenka, Managing Director; and Mr. Kumar Subbiah, Chief Financial Officer of CEAT.

So over to you, Anant sir, for your initial comments.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Thank you, Basudeb. Good morning, everyone. A very warm welcome to CEAT’s Quarter 4 Conference Call. And thank you all for your time. I am Anant Goenka, and we have with us our CFO, Subbiah Kumar on the call with us. I hope all of you are all well and it’s good to see that things are finally getting better from the virus perspective. As usual we will start with some brief remarks from me and Kumar, after which, we’ll be happy to take some questions.

With respect to our Quarter 4 financial FY22 financial performance, on the demand side, the quarter started on a weak note in the midst of COVID Wave 3. However, the waves have subsided without a major setback on the health or economic front and normalcy started to return from February onwards. With the replacement market, Truck radial and Utility Vehicle segments starting to see good traction while volumes in two-wheelers continue to remain soft, largely because of weakness in the rural market and impact of COVID Wave 3 that we experienced in January. Overall, replacement volumes were flattish on a quarter-on-quarter basis and declined at about 10% levels over last year, which was on a very high base.

We saw good momentum in OEM, driven by Truck and Bus and PCUV, registering a growth of about 12% in Quarter 3 and about the moderate 3% decline over last year. Exports have been doing well for us and continue to show robust growth. Volumes increased by approximately 8% over Quarter 3, and about 30% on a year-on-year basis. In terms of total volumes, we saw a growth of about 4% over Quarter 3 and a minor drop of about 1.5% versus Quarter 4 last year. While overall, the demand scenario looks stable now, raw material inflation has continued to hurt the bottom line.

Rubber stabilized during the quarter. However, crude prices shot up and have remained at elevated levels of $100 per barrel plus due to the ongoing geopolitical situation. Crude derivatives are a significant portion of our raw material basket. RM basket cost increased over about 3% versus the guidance of about 1.5% to 2% as a result of these unexpected changes. The impact of crude prices may be more pronounced in the next quarter. As things stand today, we expect the raw material basket to inflate further by about 3% to 4% over Quarter 4 level.

Due to higher inflation and relatively lower price increase, our gross margin contracted by about 0.6% over Quarter 3 levels. We exercised strict cost control measures and continue to reduce our operating expenses. Further, aided by higher volume, our EBITDA margin for the quarter stood by about 7.2%, an increase of 1.7% versus Quarter 3. We ended the quarter with a standalone PAT of about INR13 crores versus a loss in the previous quarter.

For the entire year FY22, we saw a healthy volume growth of about 9% despite a volatile and challenging macro economic environment. Replacement volumes declined by about 5% on account of COVID Waves 2 and 3 and week rural sentiments. At an annual level, Farm and Commercial categories were weak on a high base, while PCUV saw a good momentum. OEM volumes grew by about 18% on a year-on-year basis due to strong recovery in Truck and Bus. OEM demand in Passenger segments also was healthy. Exports showed a stellar performance with about 50% volume growth increase versus last year.

Exports will remain a key growth pillar for us in the medium-term. We have been working on channel expansion in Europe over the last few years, which has started to yield good results. We have presence in the PCR and OHT segments and are shortly launching our Truck radial tires followed by two-wheeler tires. Europe has contributed a significant share in our export growth this year and we expect the momentum to continue. We are also gearing up for introducing TBR and PCR in North America market in the coming quarter.

With respect to our capex plans, we continue to rationalize, as we had highlighted in the Quarter 3 call. For FY22, the project capex stood at INR690 crores approximately, versus an initial guidance of INR800 crores to INR1,000 crores. We are looking at the capex of about INR750 crores for FY23. Priority will be in the off-highway tyre capacity addition and other debottlenecking and process improvement projects. OHT for us is doing well and we are confident of utilizing additional capacity coming up in Quarter 2 FY23.

Our association with OEMs continue to improve. Recently, Yezdi Adventure by Jawa and Volkswagen Virtus were launched on CEAT tyres. We are working with all the major two-wheeler EV OEMs and keep a close watch on various EV developments.

In line with our vision for safer and smarter mobility, we launched tyres with color tread-wear indicator. This is the first of its kind product in India, wherein customers will easily be able to identify when is the right time to change their tyres. We have also enhanced our four-wheeler range, our PCR four-wheeler range in the India market and have launched sports drive and sports drive SUV tyres for premium sedans and SUV like BMW, Audi, Mercedes, et cetera.

On the marketing side, we roped in Karthik Sivakumar for the SecuraDrive campaign in Tamil Nadu market. We remain — continue to be remaining strategic timeout partners for the current IPL season. Our Puncture Safe digital campaign continues to win accolades. This quarter, the campaign won ETBrandequity Brand Disruption Awards.

Moving on to ESG, we are happy to highlight CEAT has been ranked Number 1 in industry in India in terms of EFG Risk Framework by ESG Risk AI. We continue to make progress in this journey. It is very, very important for us, and we’ve achieved about a 29% reduction in water consumption on a per metric tonne basis during FY22, versus the previous year. We are taking up more renewable power projects, which will increase renewable power as a power source for plants to about 40% level. Our diversity hirings have also increased significantly to about 33% of new hirings for FY22.

Going forward, we expect the demand environment for the auto and tyre industry to continue to improve as the economy recovers from the impact of the pandemic and with normalcy getting restored back. Meanwhile, we remain focused on navigating the cost headwinds, while ensuring to capture the growth momentum and emerging opportunities. Besides, we will continue to stagger price increase depending on the market conditions with the aim to return to optimal margins over the next few quarters. As we overcome these short term challenges, we are committed to remain nimble footed to capitalize on the opportunity to grow profitably as the demand improves.

The organization has invested consistently in brand, in capacities, in markets and product development to create a path to secure leadership positions in PCR and two-wheeler while tapping into the high margin global OHT demand and strengthening our international footprint. We remain focused on managing costs, maintaining liquidity and containing debt levels efficiently with an endeavor to consistently improve our return ratios to optimal level.

With this, I would like to now hand over the call to Kumar.

Kumar Subbiah — Executive Director, Finance

Thank you, Anant. Good morning, ladies and gentlemen. Thank you for joining us Q4 FY22 earnings call. I’ll share some further financial data points with you all, post which we can enter Q&A session.

First, revenue. Our consolidated net revenue for the quarter stood at INR2,592 crores, a sequential growth of about 7%. It was largely driven by volume and year-on-year growth of about 13%, which was driven by price realization improvement. Our full year consolidated revenue stood at INR9,636 crores, a growth about 23% over the previous financial year.

Coming to gross margins, raw material costs continue to raise and impact our gross margins, which stood at 33.8% a sequential decline of about 46 basis points. Our blended RM cost went by about 3% versus Quarter 3. We managed to take about 2% price increase during the quarter at different points in times in the replacement market. The increases were largely in Commercial and Farm categories. We also took price increases in exports and in OEM segments. However, the increases that we took during the quarter was not sufficient to cover our RM inflation, so our gross margins declined by about 46 basis points as I mentioned.

RMs — raw material scenario looked like stabilizing in January, however, with the geography — geopolitical developments, we are once again seeing increases across inputs, especially those linked with crude and steel. As per our current situation, we expect our blended raw material cost to go up by about 3% to 4% in Quarter 1 versus Quarter 4, which means that we still need to take more price increases in the coming quarters, and hope that the market situation is conducive for at the same.

Coming to debt, capex and working capital, despite cost challenges, we are able to bring down consolidated debt by about INR164 crores in Quarter 4 versus Quarter 3. On account of improvement in our working capital management, our consolidated debt as of 31st March, stood at INR2,097 crores and our debt-EBITDA stood healthy at 2.83 and debt equity at 0.64. Our project capex about INR133 crores in Quarter 4, and about INR694 crores for the full year. And the total capex, including our maintenance capex for the quarter was about INR209 crores and on full-year basis about INR953 crores. Our project capex spend outlook, as Anant mentioned, for the next year, is approximately about INR750 crores. Plus, we will also spend maintenance capex of about INR150 crores to INR175 crores. And that includes some investments to increase our renewable power too. We are keeping a close watch on our debt levels. We are still within our internal threshold. We’ll try to further optimize on working capital in the coming quarters and prioritize our capex in the areas of profit improvement and growth.

Coming to operational expenses, we exercise tight control in our operating cost during the quarter, leading to reduction in our operating expenses by about INR10 crores over the previous quarter despite higher revenue and volumes, and we also maintained our employee cost in Quarter 4 at Quarter 3 levels. Our consolidated EBITDA stood at INR195 crores with a margin of 7.5%, an improvement of 160 basis points for the previous quarter. Our depreciation in Quarter 4 was at similar levels as that of Quarter 3. Impact, in case of increase in rates of 40 basis points, will flow in the coming quarters and we expect the increase in repo rate impact to be lower-end to quarter.

Now, we can open the floor for Q&A. Over to you.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Ashutosh Tiwari from Equirus Securities. Please go ahead.

Ashutosh Tiwari — Equirus Securities — Analyst

Yeah, hi, sir. Can you please repeat the volume growth numbers in the replacement volume in total in the quarter?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

The volume growth numbers — overall, was it about negative 1% on a year-on-year basis. Just a second. Category-wise, we saw positive growth in replacement. Can I just get back to you on that?

Ashutosh Tiwari — Equirus Securities — Analyst

Yeah, I think the 10% decline in replacement was mentioned. And…

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Just the second. I’m just opening the –yeah, so we had a growth of about 12 — you want year-on year or Quarter 3?

Ashutosh Tiwari — Equirus Securities — Analyst

Y-o-Y.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Y-o-Y is 12% growth, exports — one minute, this is over Quarter 3. Kumar, would you have the numbers at all?

Kumar Subbiah — Executive Director, Finance

So Anant on year-on-year basis okay, as Anant mentioned, volume growth was flat. And replacement and decline — and OEM marginally declined, exports grew by about 29%. On value terms, replacement was flat, OEM was about 16.5% and exports were about 54%

Ashutosh Tiwari — Equirus Securities — Analyst

I think you mentioned that replacement declined by 10% y-o-y and there was strong growth in OEM and exports. Was this correct?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yes.

Ashutosh Tiwari — Equirus Securities — Analyst

So in the decline of 10% y-o-y, in the replacement, can you provide some color on segment-wise and again quarter-on-quarter segment-wise, how things are panning out?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah, we will not be able to provide segment-wise data. But overall, as we shared that last year base effect was very high, we had a very strong end — last two quarters or three quarters of the last year, and whereas this year we had COVID Wave 3 in a way coming in, which resulted in a relatively weak January and then March onwards things started picking up.

Ashutosh Tiwari — Equirus Securities — Analyst

So I mean, are we seeing growth y-o-y, say, from March, April, any color on that, in replacement, in different segments, two-wheelers, CVs and all, March-April, particularly?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah. So March-April of course things are — April-May-June onwards, things will be very strong because of low base effect. We had COVID Wave 2 impact. So year-on-year growth for this quarter will be very, very strong, maybe 30% 40% plus kind of growth levels, in part mix of inflation and low base effect. But markets are looking quite relatively better. I’d say that CV clearly is picking up. Farm also is looking positive, which has had a very difficult, I’d say, year in the last year in terms of domestic farm demand, chip shortage issues seem to be reducing over the months for the passenger vehicle segment. And two-wheeler, I mean with wedding season coming in, colleges opening up a little bit, some amount of low base effect, we expect it to come up. We are not seeing that yet in the market. But I think CV and Farm are the leaders for growth, followed by PCUV and then two-wheeler. OEM and International business continues to do well going forward into the, say, Quarter 1, Quarter 2.

Ashutosh Tiwari — Equirus Securities — Analyst

And lastly, you mentioned 3% to 4% increase in RM expected in 1Q, what kind of price increase we’ve taken in this quarter so far as still — or maybe if you’ve taking something in March month?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah. So, say, for the total of Quarter 4, we took about a couple of percentage points in the commercial vehicle segment, and the balance was just under 1 kind of percentage point in the rest of the quarter, but in April, we’ve taken about over 2, 2.5 percentage points in the commercial vehicle, about a couple of percentage points in passenger car and some more in some of the small commercial vehicle, another couple of percentage points. And going onto May also, we are looking at about 2% price increase in certain categories, possibly commercial vehicle and two-wheeler segments.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. But we are not…

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

It has not happened yet, but May — we are looking at this for, say, the next — in the next couple of weeks.

Ashutosh Tiwari — Equirus Securities — Analyst

But nothing so far in two-wheeler over March, April…

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

No. no. Two-wheeler has not seen any price increase.

Ashutosh Tiwari — Equirus Securities — Analyst

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

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Yeah, hi. Continuing on the question of price hikes, so what was the blended price hike taken in the fourth quarter and was it –shared in price hike in two-wheeler in fourth quarter?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Blended price hike in Quarter 4, it was — so between price and mix, we saw realization growing by about 3-ish percentage point.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay. But any price hikes in two-wheeler category?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

No, nothing on two-wheeler.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay. Okay. And any reason why we are quite conservatively taking price hikes in two-wheelers just because of demand in the — or you’re seeing competitive pressure?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

I think competitive pressure as well. So we feel that our price gap with competition is quite high. We are the highest priced in the market. We are nearly 3 to 4 percentage points higher. Single handedly taking such a — beyond this, we feel that it can impact volume. So we’ve tried to take, and now maybe in the month of May again, we will look at taking some price increase. As I said, we are looking at about 2 percentage points, and then we’ll see what happens to demand after that.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Sure. And with respect to — if I look at the broader P&L and the concentration which we are seeing, so what kind of price increases we need to take on fourth quarter base to cover entire cost inflation?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Right. So as I — we said that we are looking at about a 3 to 4 percentage price increase in — raw material price increase in Quarter 1 over Quarter 4 and I said about — we are looking at a couple of percentage points price increase in the month of May. I think maybe another percentage would certainly help, I think, to maintain similar margins between now and June. See May price increase means it’s not for it fully take into effect. April, as I said about, we took about 2% price increase, 2 to 2.5% price increase in about, say, half our segments, which is Commercial Vehicle, a little bit in PCR, and two-wheeler, we have not taken anything. OEM and replacement, there have been continuous price increases that — sorry, OEM and exports, there have been continuous price increases. So I’d say maybe about a couple of percentage points further from what we are planning in the month of May to maintain margin.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

So that’s the maintenance of margins over fourth quarter, which itself is quite subdued vis-a-vis our long-term target.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

That’s right, that’s right, because if you look at the way crude has went up in Quarter 4, it was quite high. In Quarter 3, we were looking at crude at about $85, $90, $95, now, it went up to over $100, $110 and all that is now going to take — I mean all the purchases that we did, say, in February, March, will start coming in. May, June, July kind of period. So we are expecting a relatively higher raw material forecast. Hopefully, after this, it will stabilize.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it, got it. Secondly, a question on the Sri Lanka, given that we have reasonable operation there and we being the only manufacturer there, what are the impacts we’re seeing of the ongoing economic crises to our business there?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah, it’s very unfortunate, what is happening in Sri Lanka. There are challenges to the business. We’ve had enough raw material, say, inventory in Sri Lanka to help us tide through, say, until April things have continued to be okay. Whether it is from a margin front or whether it is from running our factories and so on. But going on into May, June, certainly there can be an impact because there is no fuel in the country, or literally very little fuel. Our people are not able to even come to office on a regular basis because of no fuel in their tank. Distribution is becoming a challenge, running our factories can become a challenge if there is no fuel to power up the boilers and so on. So those are the kinds of challenges we see, and there can be a demand impact of about 20%, 25% in the near-term, at least, I’d say, maybe from May, June onwards.

But more than anything, it is more of a human crisis where there is a huge inflation, people’s costs have gone up by 50%, 60%, and they are having various personal challenges, protest, thefts have gone up. So it’s a difficult situation in Sri Lanka.

In terms of direct impact to us, as a share of our business is nearly about 10% or less than, maybe, 7%, 8% of our revenues, so to that extent, it is not a major impact that will come in.

Kumar, anything you’d like to add?

Kumar Subbiah — Executive Director, Finance

Yeah, currency — I think importing raw materials for them and making payments to them is still a challenge. So, and therefore supply security of raw material is paramount for them. Other than that, Anant, everything else is covered.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Sure. And one last question to Kumar on other expenses in this quarter. So we have a seen reasonable moderation in absolute other expenses despite increase in revenues. So any one-offs there or what is driving this sharp control on other expenses?

Kumar Subbiah — Executive Director, Finance

See, in case of other expenses, it’s largely through controls — cost control. There’s no specific one-off in other expenses as far as Quarter 4 is concerned. In the previous quarter versus last — Quarter 4, because we had IPL in Quarter 3, which was not there in Quarter 4, so there is some impact — favorable impact in Quarter 4 versus Quarter 3. Other than that there is no major one-off. Some of the initiatives that we took to bring down our — bring efficiencies and energy cost, bring improvements in restages et cetera, I think the performance was better in Quarter 4. But no major one-offs in Quarter 4. It’s a IPL-related advertisement expense.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it, got it. Great. Thanks, and all the best.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of the Disha from Anvil Capital. Please go ahead.

Disha Seth — Anvil Capital LLC. — Analyst

Sir, good morning. I wanted to check…

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Good morning.

Disha Seth — Anvil Capital LLC. — Analyst

That in terms of PCR, what is the outlook? And one more thing, you mentioned that replacement market is down 10% year-on-year.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah.

Disha Seth — Anvil Capital LLC. — Analyst

But the volumes are up 13%. So it is — the values is up 13%. So it is all led by price, is that right? Hello?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah, yeah. No, I think it’s the other way around, right? Volumes are down, but revenues that are up, relatively.

Disha Seth — Anvil Capital LLC. — Analyst

So it’s all led by price, no?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

That’s right, that’s right.

Disha Seth — Anvil Capital LLC. — Analyst

Right. And quarter-on-quarter, can you throw some light on OEM replacement?

Kumar Subbiah — Executive Director, Finance

Anant, I just want to clarify a question. See, 9. — little less than 10% decline was in replacement, but at overall level, year-on-year and Quarter 4, volume was flat. So it is not minus 10% in volume and plus 10% in revenue at the total level.

Disha Seth — Anvil Capital LLC. — Analyst

I’m a little confused.

Kumar Subbiah — Executive Director, Finance

So I’ll — let me clarify. At the total level, volume was minor 1% decline, at the total level. It’s only in replacement where there was a decline. And minus 1% in volume, but plus 12% in revenue growth. That’s the way you were to read it.

Disha Seth — Anvil Capital LLC. — Analyst

Okay, okay. So the OEM and exports did better year-on-year. And…

Kumar Subbiah — Executive Director, Finance

Yes.

Disha Seth — Anvil Capital LLC. — Analyst

Okay. And the same thing on a quarter-on-quarter?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

So quarter-on-quarter, our replacement was flattish, maybe just down by 1% because of COVID Wave 1, but, and whereas OEM and export saw relatively better growth, 10% plus. And overall, we were about 4% higher.

Disha Seth — Anvil Capital LLC. — Analyst

Okay. And sir, going forward since we are investing so much in capex, so at the end of ’23, our gross block would be how much, and how much sales and we achieved on the investments we are putting in when it is using full capacity?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah, Kumar, would you like to share the gross block? Do you have that?

Kumar Subbiah — Executive Director, Finance

Yeah. Yeah, see, approximately, our total assets in our book is about — as of 31st March, 2022, it’s about INR6,500 crores, approximately. This includes capital work in progress assets. So that is the level at which the total fixed assets are. Okay. And as we had indicated, we will have a capex of about INR750 crores on projects and another INR150 crores, INR190 crores. So therefore, gross block will go up to that extent.

Disha Seth — Anvil Capital LLC. — Analyst

So, sir, it’s around INR7,400 crores of gross block.

Kumar Subbiah — Executive Director, Finance

Correct.

Disha Seth — Anvil Capital LLC. — Analyst

When the demand — since the demand is picking up, so what can we — what sales can we achieved on the current gross block? Sir, I want to know that when it is initially there. That’s it.

Kumar Subbiah — Executive Director, Finance

Yeah, no, broadly, I’ll tell you what happened in last year, then maybe Anant would be able to respond to other one. See, gross block moved up by about INR900 crores in the current — the year that went by, which is nothing but the total capex that we incurred in FY22. Our revenue moved up by about a little over INR1,800 crores in the current year, FY22.

Disha Seth — Anvil Capital LLC. — Analyst

So, two times.

Kumar Subbiah — Executive Director, Finance

Yeah. Approximately in the year that went by. Next year, as we indicated, the gross block would go up by INR900 crores. And revenue, would you like to respond, Anant, or shall I respond?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah, sure. So approximately on the revenue front, we are — today our run rate is at about INR10,000 crores. We are doing about INR2,500 crores per quarter or INR2,400 crores per quarter. Clearly, we can see an increased potential of about 20% beyond where we are at an approximate level. We are adding OHT capacities, PCR and TBR, we’ll have additional capacity. If you include TBB, which is unlikely to see much growth, then there is further potential even beyond that, but I would less assume TBB will continue to decline or stay at same — I mean, at the similar level.

Disha Seth — Anvil Capital LLC. — Analyst

Okay. And sir, on the additional capex, the incremental RCs would be accretive, right? Like, since we are investing in OHT more with a high margin, and we are investing in PCR?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Absolutely.

Disha Seth — Anvil Capital LLC. — Analyst

The incremental ROCs would be better, then.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yes, yes, of course.

Disha Seth — Anvil Capital LLC. — Analyst

Okay. So, our fixed asset turnover ratio is around 2 times overall SEC?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

So incremental will be a little bit on the lower side but we have some amounts that goes through outsourcing. So at an overall level, therefore, it is higher, if you look at the base.

Disha Seth — Anvil Capital LLC. — Analyst

Okay. Thank you, sir. That was helpful.

Operator

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

Nishit Jalan — Axis Capital Ltd. — Analyst

Yeah, hi, sir. I have two questions. Firstly, on exports, we are seeing very, very good traction, and similar feedback we’re getting from some of your peers also. So just wanted to understand, as China used to be really big in terms of exports to global markets, U.S. and Europe, are we gaining share from China or what is happening? Because global demand is not growing at this pace that everybody can grow at such kind of a percentage numbers. Obviously, we are very small in the overall context, but just wanted to understand where is the gain coming for us in the global markets?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah. No, absolutely, you’re right. So people are looking for a China Plus One strategy. There have been duties that have been imposed on Chinese tyres. I mean as early as three, four years ago by the U.S., and that has some impact, the strong demand for TBR in the U.S. Even though we don’t supply TBR yet to the U.S., a very small quantity. And and in the EU, we have been strategically looking at that market over the last, say, four or five years. So we’ve developed the entire range of tyres. So there, say, for example in the passenger car segment, you need to have an entire range of van tyres, all-season tyres, winter tyres, SUV, premium SUV, so there is a very large range of tyres that we’ve been developing over the time and that presents us with a very good opportunity for growth there.

Also historically for CEAT, it is well known, or relatively a known brand in Europe because of our past history of the Italian origin. Between Spain, Italy, it is well known. So we’ve also entered Germany, Poland and other markets over the course of the last, say six months. So with that, EU has been strong. In the next two, three months, we expect to launch our truck radial tyres in Europe. That can present a good opportunity. And over the next year, we are developing tyres for the U.S., which is passenger car and truck radial. That will again be a very large market, which has huge growth potential. But that will come on stream say at least 10 to 12 months after from now. And on the OHT side, there surprisingly has been a shortage of OHT tyres, say, in the last year, year and a half’s time. And as a result, we’ve been able to capitalize on that too quite well with our Ambernath plant coming up, of doing some debottlenecking in our Bhandup factory for bias farm tyres. So these are the few actions that we’ve taken on exports.

Nishit Jalan — Axis Capital Ltd. — Analyst

So just a follow-up, the anti-dumping duty you talked about, is only for the truck tyres, right? Even Europe and U.S. have imposed anti-dumping duty on passenger vehicles, and our exports like you also highlighted is mostly passenger vehicles. So are we actually gaining — or basically what is the reason why China exports are kind of coming down and we are going up? Because on the pricing front, nothing has changed. And a related question is, how we are producing ourselves or what is our pricing in markets such as Europe? Are we pricing — are we benchmarking to the Chinese imports which are coming in Europe or we are — our pricing compared to the other Indian brands or other maybe Tier 2 brands which are there?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah, so in terms of product quality, we are benchmarking with the best. So we are benchmarking with the leading MNCs. In terms of pricing, we are certainly — there are various levels of pricing where you talk about, you know the ultra premium, and then you have the premium and budget brands, et cetera. So within this, we are pricing at a much more premium level then Chinese tyres. But I think it is more a strategic entry, and I’d say Europe and U.S., looking at the China Plus One strategy, as relationships have been souring over time — again, anti-dumping duty has been imposed. I believe it is across all tyres but I can get back to you on that too. Always PCR and TBR tyres, but let me just validate that once again. So people are moving away from China, there is a shortage of truck radial tires clearly, in the U.S., and Europe as I said, it is our strategic entry that we are looking at, and we positioned it very well that we offer great value to the customer because pricing, which is I’d say at kind of budget level, but offering a great value product.

Nishit Jalan — Axis Capital Ltd. — Analyst

Yeah. Okay. Thank you for that. My second question is on off-highway. You highlight also, part of it. Just wanted to understand now we have started to see a reward for the effort that we have put in, in the last many years. So just wanted to understand what is our capacity now, how much as we are taking it ahead and where are we in terms of number of SKUs? Because I think that is very important over here. And are we reasonably well present in both Europe and U.S. now, or it’s largely again in Europe as of now, and U.S. is something which will play out over the next few years?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Right. So we are looking at — we’ve expanded our radial capacity in Ambernath to — for this is farm radial capacity to from 50 tonnes to [Technical Issues] that 80 tonnes will come on stream sometime by July, August. After which we will be taking it up to about 100, 105 tonnes per day for agricultural radial tires. In addition to that we have bias capacity of about 50, 60 tons, which includes OTR tyres as well as farm bias tires. So that has always been there and then we are looking at another about 20 tonnes of debottlenecking in our bias factory. So with that, our approximate capacity can go up to close to about 200 tons per day between bias and radial tires in the course of about, say, a year’s time, year and a quarter from now.

In terms of range, we have been continuously adding to our range of tyres. We cater to maybe about 80%, 85% of the total demand on the Agri side that is there.

On number of SKUs, I can get back to you on the Agri side. I’m not very sure of the number of SKUs that we have. But product development, and as you said, you are absolutely right, in terms of range that we are looking at. I think overall, we’ll be having about 50 plus SKUs in off-highway tyre.

Nishit Jalan — Axis Capital Ltd. — Analyst

And regarding our presence in Europe and U.S. We are largely in Europe or…

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

We are looking at both markets in terms of equal importance. Internally — so we started in EU about five years ago or four years ago, and that’s been growing very well. In U.S., we had an exclusive arrangement with one of our distributors there, which is what hampered our growth, say, in the first two, three years time. That came to an end about a year and a half ago and now we can look at strong growth in the U.S. going forward as we increase our distribution network.

Nishit Jalan — Axis Capital Ltd. — Analyst

Sure. Just one small follow-up here, again we have a couple of examples from India, who have established very strong presence in off-highway, right? Balkrishna and Alliance tyres. So just wanted to understand how is our pricing compared to the brands of these two companies. Alliance has obviously Yokohama now. But let’s say with BKT, just wanted to understand, because this business could be very, very profitable if you are able to scale it up and if you are able to get the right pricing. So just wanted to understand where are we in that journey of moving up in terms of pricing.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Right. What I understand is our pricing is about maybe 3%, 4% or at most about 5% below BKT. I think Alliance is also at similar price levels.

Nishit Jalan — Axis Capital Ltd. — Analyst

Okay, got it. Thank you so much.

Operator

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

Siddhartha Bera — Nomura — Analyst

Yeah, hi, sir. Thanks for the opportunity. On the export side, is it possible to highlight what will be the shares for you that will be highlight for the year. It was about 20%. So for the quarter, will it be similar in terms of mix? And any targets that you have how much you want to achieve probably in the next one to two years?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Sorry, your voice is not clear. Could you repeat once again?

Siddhartha Bera — Nomura — Analyst

Okay, sorry. So what I was saying is that our export mix was above 20% for the year. So first is, for the quarter will it be a similar number? And they do you have any targets of about how much you want to take it in the next couple of years?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yes. So export side, I think as a percentage would be about similar levels. It would have gone up from about 18%, 19% to now 20%, 21% kind of levels. So it has gone up in — during the year. Overall, I’d say a year ago, it was at about closer to 15% kind of level. So there has been a clear shift in export as a percentage. Going forward, we think that with replacement and OEM markets also looking a little bit more optimistic, and this year was also a year where replacement was impacted with the various COVID waves. We think at least in the next year maybe export will remain at similar kind of levels. We see similar growth levels in — across categories.

Siddhartha Bera — Nomura — Analyst

Okay. Because sir, replacement. I think, you indicated that it has not picked up yet meaningfully. If you leave apart the current quarter which has a base impact, after that, I think that maybe a single-digit growth you can look at replacement side, but — so you’re that exports will also have a similar growth trajectory.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

No, no. What I’m saying is that in last year our export was about 15%, 16%. That has moved to about 20%, 21%. And as a result of base effect of this year, replacement has had a relatively weaker year which will see high growth going forward, high growth relatively because of a low base effect that we had Wave 2, we had Wave 3 which was affected, and exports relatively did not get affected. So replacement, on a relatively lower base, should see higher growth in the coming year. As I said, in Quarter 1 itself, we are looking at nearly 20%, 25% type of growth levels could happen. So overall, we are looking at good growth on the replacement side. And I would guess that at a percentage level, exports would be maybe 22%, 23% kind of percentage of sales.

Nishit Jalan — Axis Capital Ltd. — Analyst

Okay. Okay.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah.

Siddhartha Bera — Nomura — Analyst

And on this prices, sort of clarification. So you said that about 2% price hike you are looking in May and even after that you will raise a 2% in price hike to maintain the margins at the 4k levels? Is it correct?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah, about 1% to 2%.

Siddhartha Bera — Nomura — Analyst

Okay. And lastly, sir, on the exports margin side, how to understand this business? Will it be sort of meaningfully higher than what you have for the overall margins or if you can help us understand how to understand this part?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yes, export margins has become higher than replacement margin. I’d say, historically, they have been at similar levels. But now they have increased because the competitiveness in the domestic market has been higher than the international markets. And so we’ve been able to take pricing more easily in the international markets than domestic. So it would be export followed by replacement followed by OEM in terms of, say, the three markets we serve.

Siddhartha Bera — Nomura — Analyst

Okay. So fair to say it will be double-digit range?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

I won’t have that detail. It could be varying as well. So at an EBITDA level, yes, double-digit.

Siddhartha Bera — Nomura — Analyst

Okay. Got it. And lastly, sir, on the standalone gross debt, sir, if you can highlight the number?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Sorry, standalone…?

Siddhartha Bera — Nomura — Analyst

Standalone gross and net debt. Kumar, would you like to take that? Gross and net debt standalone?

Kumar Subbiah — Executive Director, Finance

Yeah. See, gross debt was INR2,097 crores, and — gross debt would be INR30 crores more than — so about INR2,127 crores. And the net is about INR2,097 crores at consolidated level.

Siddhartha Bera — Nomura — Analyst

And sir, the standalone level, if you have it?

Kumar Subbiah — Executive Director, Finance

Standalone another INR20 crores difference both sites, not much of a difference between the two.

Siddhartha Bera — Nomura — Analyst

Okay. Okay, sir. Thanks a lot.

Operator

Thank you. The next question is from the line of Amyn Pirani from J. P. Morgan. Please go ahead.

Amyn Pirani — J. P. Morgan — Analyst

Yes, hi, sir. Thanks for the opportunity. Most of my questions have been answered, but just wanted to go back on your revenue mix. So if I look on a full-year basis, obviously replacement has come down substantially and Truck and Bus has also come down. Given that Truck and Bus had a very strong OEM year, so on a full-year basis you’re suggesting that replacement came down quite sharply and would that be disproportionate on the bias side, if you can help give some color on that?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah. So replacement come down sharply on the bias side, but OEM, just to clarify, OEM saw a sharp increase only in the last quarter, particularly. So OEM, if you look at commercial vehicles, even in Quarter 3 was relatively weak. And we expect CV growth to be strong going forward. So OEM, we have — I’d say relatively to all the markets we are quite optimistic about revival of CV segment in OEM, which we have seen in Quarter 4 and going forward. On the replacement side also, there is a relatively better revival on the CV side. International, I’d say, largely across the board there is, I’d say, equal kind of performance across categories with PCUV doing a little bit better for us. In terms of the mix going forward, I would say, I don’t see a major shift in the mix versus Quarter 4. It could be a couple of percentage points here and there, but as I said, I think it would be not a major shift in terms of revenue mix.

Kumar anything here you would like to add also, here?

Kumar Subbiah — Executive Director, Finance

No, Anant. You’ve covered it well. Yeah, obviously our traction on OEM truck and bus actually started only late in the year. So therefore, growth in the OEM side, plus the nine months didn’t have any impact on us, but otherwise it’s covered volume.

Amyn Pirani — J. P. Morgan — Analyst

Okay. But it will be fair, given the activity levels and are improving the truck and bus replacement should hopefully have a much better quarter and much better year going forward?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yes, yes.

Amyn Pirani — J. P. Morgan — Analyst

And secondly, obviously you have talked at length about some of the inflation that you’re seeing on the raw material side. And obviously that is a concern, but just wanted your thoughts on the inflation on other costs and how we should think about it, and particularly, are you seeing any impact from the current ongoing commentary around power shortage, power crisis in terms of both availability as well as in terms of pricing going forward?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

We — on the — I’ll take the power front, first. The power, we are not facing any serious — any issue in terms of availability of power at this point. As I said, we moved a lot of our power to even renewable power. That is helping us bring down our power cost. So nothing to add here. I’ll let Kumar take this if he has any other points.

Your second question was on inflation, is it, outside of raw material?

Amyn Pirani — J. P. Morgan — Analyst

Yes, yes.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Inflationary impact, power — I mean as I said, power prices have gone up a little bit for — I mean, sorry, not power but fuel prices have gone up. That is the indirect impact that is happening on, say, supply chain costs and running of factory cost with it. But besides that, no other inflation. I mean, for us it is manpower cost which is relatively inflating at a similar rate as the past, and the balance is electricity, power, fuel related costs. So those that are crude impacted is getting affected. And then of course, as I said, distribution, supply chain.

Amyn Pirani — J. P. Morgan — Analyst

Understood.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Kumar, would like to say anything on the power front?

Kumar Subbiah — Executive Director, Finance

Yeah, no, on the power side, as of now, we have not witnessed any increase in the tariff by the Electricity Boards. So therefore, availability of power is an issue at the country level but we have not yet witnessed anything, any impact on availability of power. But as Anant mentioned that we are moving very quickly in terms of looking at alternative sources of power for our plants. And almost all our plants now have reasonable percentage of power source through solar or wind at this point in time. So that is — that will bring down the impact of any inflation that may come. Obviously, as Anant also mentioned, our distribution cost will — is moving up because the diesel prices have shot up since the beginning of April by about more than INR10 per liter, which is about 10% kind of an impact. So that will have some impact. And some boiler or other alternate fuel, so coal prices have moved up so therefore, utility costs are going up. So that impact would be there on the cost of manufacturing, the cost of distribution.

Amyn Pirani — J. P. Morgan — Analyst

Okay. Okay. That’s quite helpful. Thank you.

Operator

Thank you. The next question is from the line of Sachin Kasera from Svan Investment. Please go ahead.

Sachin Kasera — Svan Investment Managers LLP — Analyst

Yeah, good morning, everyone.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Good morning.

Sachin Kasera — Svan Investment Managers LLP — Analyst

Can you highlight how do we see the net debt at the end of FY23? Because you mentioned that this year also the capex, including maintenance would be roughly around INR850 crores to INR900 crores. So the way we have elevated the capex for the outlook, will we need to calibrate the capex if things don’t improve and the margins remain pressure, or we’d be comfortable in terms of further increase in debt-to-EBITDA level?

And secondly, from a ’24 and ’25, so from a three-year perspective, what type of capex and debt reduction we are looking at?

And finally, Anant, you mentioned that the focus now is on return on capital and improvement return ratios. So from a little medium-term, so again three-year perspective, can you tell us what your aspirations are on that front? Thank you.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Okay. So your first question on end-of-year debt, I would say that we are hoping — so most of our capex that we are planning is balance capex of our plans that we had already set up. So this is for our passenger car, nearly INR250 crores, some debottlenecking is about INR50 crores, INR60 crores, OHT is the new plant that we are really — I mean, new brownfield expansion that we are looking, that’s about INR200 crores. So it is largely balanced capex and not much new capex that is happening out of the INR750 crores that we are doing. We do expect a challenging, say, another, say, three, four months, but we hope that things get better in terms of our ability to take prices up. We continue to work on our cost measures. And as you can see, debt levels have come down even in a challenging environment of the last few months that we’ve seen. So this focus will largely continue, and we are very conscious of trying to maintain our debt-to-EBITDA levels under 3 times. So endeavors will be completely on that front.

With respect to three-year debt, again, our metrics will be to continuously keep it below, and we are very conscious of ROCE. So to that extent, we will only invest in plants and investments that are strong, maybe over 15% kind of levels of ROCE. And based on that, we will be taking any further capex decision. At this point, we have sufficient headroom across the board in terms of capacity. So we will take a call for further capex only once we have enough demand coming in and returns considerably improve.

Sachin Kasera — Svan Investment Managers LLP — Analyst

Can you comment a little bit on your 2 to 3 year aspiration or return capital and return ratios?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yes, as I said, around 15% range is what we would like to have.

Sachin Kasera — Svan Investment Managers LLP — Analyst

Sure. Just one thing on this exports, is this like a one-off opportunity, which will last for three, four, five quarters or you think this is a more structural opportunity and for more like a three to five years perspective?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

No, this is a long-term opportunity that is there, because we are doing very — it’s not a sudden demand that we have seen in the international business. I think this is something that we have been building also for some time. And the sudden — I mean one of the structural shift is the China Plus One. And our assumption is that, say, U.S.-China relations are not going to get mended. It is more of a technology war that we are seeing rather than any other kind of sparring of relations that are happening. And as a result, U.S. is imposing these kind of challenges, these kinds of restrictions with respect to trade with China. And as a result, India is emerging as a potential opportunity for supplies into the developing country — developed countries. So I think it’s a longish term opportunity that is clearly there. And the way we are working with distributors, developing an entire range of tyres, It is not excess tyres that are getting supply to an opportunistic market, but the way we are looking at it is developing tyres. Once you are there with the channel, with distributors, with final retailers, it is very — generally, you are quite well embedded and it’s difficult to kind of get displaced unless there are major external structural shifts.

Sachin Kasera — Svan Investment Managers LLP — Analyst

Okay. So 20%,, 21% share of exports in next two to three years would be much higher?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

I think you over the next two to three years, exports will be fast growing. We are putting in that focus, and I think it is — it can go up to 25% levels also, over time.

Sachin Kasera — Svan Investment Managers LLP — Analyst

Sure. And one thing on this CV radial. Everybody invests in a lot of capacity and the margins that segment has come down, but now what has happened is that you also mentioned that we are looking at calibrating the capex on the radial side in the CV, even the industry players are talking of that, plus the need of all these statements from the CV OEMs, the financials, they are hinting at a very strong growth. So is it fair to say that maybe the margins in the CV radials are more or less struck out, and with no major new capacity coming in as the demand continues to grow next, four to right quarters, the margins in CV raidal should see an improvement?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yes, I think so. I think things should certainly get better on the CV radial side. And there has been a strong demand uptick with OEMs. And I think with various elements from the government side in terms of looking at introducing scrappage policy, ensuring old vehicles also don’t run on the road, with all of that, I think CV demand will be good. And I’d shared in the last call as well, there have been various initiatives taken in the past which has caused demand to be down, whether it is increasing safety norms, whether it is increasing efficiency because of GST or increasing loading norms. The CV industry has seen a much slower growth in the last, say, seven, eight years’ time. And as a result, I think it is now time that the CV cycle has bottomed out and things will get better going forward.

Sachin Kasera — Svan Investment Managers LLP — Analyst

Thank you very much.

Operator

Thank you. The next question is from the line of the Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Sir. I had three questions. I’ll just quickly read them off. Is the two-wheeler segment the segment under pressure in terms of overall margins. And is it because of extra surplus capacity that needs to be absorbed or is it just demand, and when demand will bounce back, it will return to normal. That’s question number 1.

The second part is in terms of — Mr. Kumar had said that because of IPL related, in Q3 there was higher expenses. So would it mean that this quarter, you would have higher expenses because of IPL?

The third question, I missed I thing about the capex. So to be clear, you are going to INR900 crores of capex this year. And after that you will wait and watch and see how the plans go. And given that your operational cash flows have been the in the INR700 crores to INR800 crores a year, broadly, we would say that much of this capex will be financed by internal accruals. So that be true? Thank you.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Okay. So on the first question on two-wheelers, I would say it’s a mix of demand-supply — I’d say a mix of everything to a certain extent that two-wheelers has been — demand has been low. As a result, there is excess capacity in the market and that has put pressure on margins. It’s largely the competitive pressures that have had — caused margins in two-wheelers to come down because that’s the segment, there has been lowest price increases.

On the IPL, yes, we do expect to incur additional costs in this current quarter. And to that extent, expenses can go up. We are putting efforts to make sure that expenses in other areas are brought down. But yes, you would see higher expenses in this quarter as a result of IPL.

And capex, you share, yes, we are looking at about INR900 crores of capex on funding. Kumar, would you like to elaborate that how much will it be from debt and how much internal accruals?

Kumar Subbiah — Executive Director, Finance

Okay. See, it depends on the total cash profit that we make. Our overall threshold in which we try to operate is, debt-to-EBITDA is 3. So that’s the overall guidelines. So based on which we try to manage our capex and other aspects also. So assuming that there is no working capital incremental impact in going into the next year, and if you have big extrapolate what happened last year, last year our EBITDA was about INR730 crores, and if we net off the interest portion, just about close to INR200 crores, and then adjust for dividend, that is the net cash profit that we have made in the last year and balance amount was kind of a debt. So it depends on what is going to be our cash profit, but we can only confirm to you that we expect the margins, hopefully, should improve in the latter part of the year if commodity costs or raw material cost stop going up from a point in time. So — and the balance would be debt. The total debt would most likely be in line with about our norm of 3. So that’s the way we would like to — we don’t want to give a number as far as what the debt would be and how much would be the accruals, how much would be internal accruals and how much would be our debt. In general, whenever we raise a new proposal, capex proposal, we assume two-thirds of it would be debt, and one-third would be accrual. But going into this next year, maybe the share of internal accruals will be at least half of it and balance of it could be debt. That’s a broad high-level estimate.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Fair enough, sir. Sir, my last question was on the capex itself. So after this year’s major capex, then you’re going to pause, see what the growth situation is, like [Indecipherable] capex, right?

Kumar Subbiah — Executive Director, Finance

No, in the current year, it’s more — lot of the capex, we have already incurred. It’s more a cash flow that is going to happen, particularly the downstream equipment — where the equipment, we have already received it, but we have to make that payment, except in case of specialty where it’s going to be additional capacity that we are creating. Beyond that, any additional capex would entirely depend on our medium-term and long-term view on the demand and supply.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Perfect. Wishing you all good luck.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Sonal Gupta from L&T Mutual Fund. Please go ahead.

Sonal Gupta — L&T Mutual Fund — Analyst

Yeah, hi, good morning and thanks for taking my question. Sir, could you just, one, talk about on a full-year basis, what was the share of TBR revenues for you?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Approximately — one minute. Approximately 15%, 17%, but just let me — Kumar, if you have it, you can please share as well. I’m just trying to…

Kumar Subbiah — Executive Director, Finance

Yes, it’s approximately about 18%.

Sonal Gupta — L&T Mutual Fund — Analyst

And like you mentioned in one of the — answered one of the questions the TBB volumes on a full-year basis would have decreased year-on-year.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yes, yes.

Sonal Gupta — L&T Mutual Fund — Analyst

Yes, yes. Okay. And just last question, I mean like just from a strategic standpoint, right, like you were mentioning that you’re developing products for the U.S. market and your plan to enter the U.S. market. But I mean, given the scale that we have in exports and like you are already making a foray into European market, I mean don’t you see that — I mean that’s anyway a very large opportunity. So I’m just trying to understand why get into U.S. and especially, — I mean, it is a competitive market, as well as the freight cost of supplying to U.S. from India would be much higher than going to Europe. So just trying to understand the rationale here and what sort of model do you plan to follow? I mean, it’s primarily distributor driven how do you want to do it.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yes, it will be largely distributor driven, but we are finding that the margins in both Europe and U.S. markets are strong. As I said international market margins are now better in replacement and we expect that to continue to be strong as people sell — people look at a China Plus One kind of model. And with margins being strong out there, we feel that it’s an attractive market despite the freight costs that are there. Our cost of manufacturing is much lower than international players. [Indecipherable] in the U.S. and we are finding that it’s an attractive new market for us to enter.

Sonal Gupta — L&T Mutual Fund — Analyst

Right. No, I was basically coming from the fact that I mean, I understand that — I mean, agreed, the U.S. is also an attractive market. But given that — aren’t you’re spreading yourself too thin by trying to get into both Europe and U.S.? No, I think the main thing is that, for us it is — it adds to our margins. It is margin accretive in a way. And therefore for truck radial segment, we feel that it clearly makes sense. The additional cost of supplying into the U.S. is relatively low. It is mainly product development costs that are there, testing costs that are there and if we are able to utilize our capacities better on higher margin, we think that this is a good opportunity to look at for selling into. Got it. Great. Thank you so much for answering my questions.

Operator

Thank you. The next question is from the line of Ashutosh Tiwari from Equirus Securities. Please go ahead.

Ashutosh Tiwari — Equirus Securities — Analyst

Sir, I think earlier we used to talk about marketing expenses and selling maybe around, say 2% to 3% range, but compared to pre-COVID then we probably should do INR1,800 crores sales so anywhere per quarter. Now we are at INR2,500 crores. Is there any rating in terms of cutting down that expense in terms of percentage? Or we still maintain that percentage range?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Mo, we would like to continue to maintain that percentage in the longer term. In the short-term here and there, we may take call to cut it if there is some margin. But that would be very little shift that we would be doing. If you look, even media prices have inflated to a certain extent. So we feel that we will continue to invest in marketing strategically. As a percentage of change, long-term — percentage of sales, long-term, there has been no change.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. And we mentioned that obviously OHT tyres, global, there were some shortage in the last one to one and a half years. Has that still continued in the, say, recent months or recent quarters?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yes.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. Okay. And lastly, on the capacity side, on TBR, where we are currently and how it will go to by end of ’23? PCR, TBR both.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

So on both, we are at about 75% to 80% utilized today. We expect to be nearly fully utilized by the end of this year. So, say, in about 12 to 14 months time from now, we should be fully utilized.

Ashutosh Tiwari — Equirus Securities — Analyst

That would be on the current capacity, whatever is going to come by March, that is extra.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

No, there is hardly any new capacity that will be coming in. Maybe marginal on the TBR side, but on PCR, we’ve set up whatever we had to. It’s only the payments that are due. So we are not — I mean, very little — a few places here and there may be coming. But I’m talking about 20,000 tyres of Chennai, additional per day, PCR that’s what I’m talking about as the basis. We do about 20,000 tyres in our Baroda capacity and about 20,000 in Chennai, so that’s out of 40,000 tyres. We should be quite well utilized going forward in about 12-months’ time.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. And TBR, where we are currently?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

TBR, we will be manufacturing about 140,000 tyres. We will be utilized at about 100 — over 100,000 tyres already, maybe about 110,000, 115,000 today. So if CV market picks up, and as we enter some of these new countries, we would be at about maybe about 130,000, 140,000 tyres per month at the end of the year.

Ashutosh Tiwari — Equirus Securities — Analyst

That gives you — incur some capex on TBR?

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

So we will take a call at that point of time on how — we had earlier planned some capital investments in TBR which we have delayed, but as the time comes, we will take a call whether we need to further new investments, because of the last year itself has been challenging, whether it is from a demand perspective as well as cash flow perspective. So let’s wait and watch. Things are so volatile. Now the decision making time itself has come down. We can’t plan two years in.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. Got it. Okay. Thank you. That’s all from my side.

Operator

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the Management for closing comments.

Anant Vardhan Goenka — Managing Director & Chief Executive Officer

Yeah, thank you for organizing this call, and thank you, everyone, for your time and interest in CEAT. Look forward to catching up with you next quarter. Thank you.

Operator

[Operator Closing Remarks]