JK Tyre & Industries Limited (NSE:JKTYRE) Q4 FY23 Earnings Concall dated May. 19, 2023.
Corporate Participants:
Anshuman Singhania — Managing Director
Arun Kumar Bajoria — Director & President (International)
Sanjeev Aggarwal — Chief Financial Officer
Anuj Kathuria — President (India)
Analysts:
Basudeb Banerjee — ICICI Securities Limited — Analyst
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Ashutosh Tiwari — Equirus Securities — Analyst
Mitul Shah — Reliance Securities — Analyst
Amyn Pirani — JPMorgan — Analyst
Bharat Bhagnani — Living Root Capital — Analyst
Deepak Jain — ENAM AMC — Analyst
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Amit Aggarwal — Leeway Investments — Analyst
Nirav Seksaria — Living Root Capital — Analyst
Raghvendra Goyal — ICICI Securities — Analyst
Naitik Mohata — Sequent Investments — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the JK Tyre Industries Limited Q4 FY ’22-’23 Results Conference Call, hosted by ICICI Securities. [Operator Instructions]
I now hand the conference over to Mr. Basudeb Banerjee, Vice President at ICICI Securities Limited. Thank you, and over to you, sir.
Basudeb Banerjee — ICICI Securities Limited — Analyst
Hi. Thanks. Good morning to all participants. And thanks to the management for giving us the opportunity to host the call. I’d like to introduce the management, represented by Mr. Anshuman Singhania, Managing Director; Mr. Arun Bajoria, Director and President, International Business; Mr. Anuj Kathuria, President, India business; Mr. Sanjeev Aggarwal, CFO; and Mr. A K. Kinra, Financial Advisor.
So, without wasting any time, I would like to hand over the call to Mr. Anshuman Singhania for his initial comments. Over to you, sir.
Anshuman Singhania — Managing Director
Yeah. Thank you. A very good morning to everyone. It is with great pleasure that I welcome you all for the Q4 FY ’23 earnings call. I am Anshuman Singhania, Managing Director. I have with me Mr. Arun K Bajoria, Director, President, International; Mr. Anuj Kathuria, President, India; Mr. A K Kinra, Financial Advisor; and Mr. Sanjeev Aggarwal, CFO of the Company.
At the outset, let me thank all our customers, channel partners, bankers and stakeholders for continued partnering and trust reimposed in JK’s growth journey. We are delighted to share the performance highlights for Q4 FY ’23 and FY ’23.
We ended on a very positive note. [Technical Issues] record high revenues of INR14,681 crores, registering an increase of 22% on year-on-year basis. Operating margins recovered to double-digit level in Q4 FY ’23. Subsidiary company, namely Cavendish Industries Limited and Tornel Mexico continued to perform well and continued significantly to the revenues and profitability on the consolidated basis.
Talking about the performance, Q4 was another strong quarter as far as the domestic business is concerned, which witnessed a healthy growth in the key product segments like commercial passenger vehicle tires led by strong replacement and OE demand. However, the growth in the domestic business was offset by export sluggishness witnessed during the quarter, owing to economic and geopolitical conditions globally. Export sales was subdued at INR331 crores in quarter four FY ’23, resulting in lower exports of the year FY ’23 at INR1,787 crores. We expect normalization of export in H2 FY ’24 onwards.
Operating margins improved sequentially in the quarter four of FY ’23, aided by softening of the input costs and commodity prices. We expect the margins to improve further in the coming quarters on account of stable raw material prices scenario.
Automobile industry continues to witness buoyant demand in the CV and PV segment, leading to further strengthening in FY ’24 on the back of continued thrust of government on infrastructure development and easing in the chip shortage and rising disposable income.
On the overall outlook, we remain optimistic on the tire industry growth path in the coming years on the back of uptick in the economic activity and sustained momentum in development of urban infrastructure and road construction projects. And we are progressing on our growth journey. We are focusing on better product mix, enhanced market presence, including geographical diversity, continued thrust on operational excellence and digitalization. This will lead to improved operational and financial performance.
Product development, our product strategy is to further align with the trends witnessed in terms of higher performance SKUs in the CV segment and bigger rim size tires to cater to the growing SUV segment. We have been frequently introducing new SKUs in these major product categories, including the EV vehicles, which are also now on the cusp of demand growth. We have recently launched the ultrahigh performance tires, Levitas Ultra, range to strengthen our product portfolio and focus on premiumization in the marketplace for high-end luxury cars.
Channel development, we are aggressively expanding our market reach through additional brand shops, onboarding new fleet customers and have also been conducting customer interaction programs, Jaisa Vyapaar Waisa Tyre, for better connect and spreading awareness of our products.
In digitalization, we have undertaken projects for digital transformation across functions, including tech-enabled manufacturing at our plants and we have started to accrue benefits. Such digitally supported efficiency and productivity initiatives will continue to be our utmost priority.
Sustainability, implementing sustainable practices, developing sustainable products and setting global benchmarks in resource conservation is the key to our core values. In this direction, we have developed an all-new sustainable tire, UX Green, in the passenger segment. The Green tire delivers high performance with low carbon footprint compared to standard radial tires. The tire has been designed and developed using 80% sustainable materials. This development is not only a reflection of our highly confident R&D team, but also reinforces our serious commitment to advancing sustainable growth and boosting societal value creation, moving towards carbon neutrality by 2050.
New vision and mission, we have adopted the new vision of becoming a green and trusted mobility partner with mission set in line with our commitments towards focus on sustainable development, reducing carbon emission intensity, continuous process and product innovation, and customer centricity, which we believe will add significant value to all our stakeholders.
As you are already aware, IFC, a member of the World Bank Group, has invested INR240 crores, $30 million, in the Company by way of CCDs on preferential basis, which reflects its confidence in the future of the Company and the tire industry at large.
Now, I would request Mr. Bajoria ji to take us through the performance of Tornel Mexico.
Arun Kumar Bajoria — Director & President (International)
Thank you very much, MD sir. Regarding Tornel, JK Tornel continued to perform well in terms of overall revenue and profitability in financial year ’23. JK Tornel achieved a turnover of INR2,673 crores as compared to INR2,120 crores in financial year ’22, registering a growth of 26%. Operating profit, EBITDA, stood at INR215 crores vis-a-vis INR187 crores in the financial year ’22, despite headwinds in US and Latin American markets.
Quarter four witnessed a revenue growth of 14% on year-on-year basis and 10% on quarter-on-quarter basis. Revenues for quarter four financial year ’23 stood at INR671 crores. US and LatAm markets continue to face challenges of high inventory levels and destocking at distributors and due to reduced ocean freight rates from Asian countries, which resulted in pressures in terms of selling prices, thereby impacting operating margins in Q4 financial year ’23. Going forward, the global demand is expected to improve.
JK Tornel continues to enjoy a healthy demand for PCR and LTR in the Mexican replacement and export markets. Going forward, our focus would be to improve volumes in these categories for overall improvement in business operations. JK Tornel organized eight dealer conference and customer interaction program, CIP, several new products were launched and showcased, which were very well received by the dealers and the distributors. JK Tornel has secured a 4-Star rating in British Safety Council Audit.
Now, I would request Mr. Sanjeev Aggarwal, the CFO, to brief about the financial performance of this quarter.
Sanjeev Aggarwal — Chief Financial Officer
Thank you, sir; and good morning to you all. Let me briefly highlight the financial performance for Q4 FY ’23 and financial year ’23. For Q4, consolidated sales were recorded at INR3,645 crore vis-a-vis INR3,320 crore in Q4 of last year, registering an increase of 10% on year-on-year basis. Profitability at EBITDA level in quarter four of FY ’23 was recorded at INR389 crore as against INR236 crore in Q4 FY ’22, an increase of 65% on year-on-year basis. Operating profit margins were recorded at 10.7%, an increase by about 110 basis points over the previous quarter. Cash profit for the quarter was recorded at INR263 crores, and profit after tax was INR112 crores, a threefold increase on Y-o-Y basis.
On full-year FY ’23, consolidated sales were up by 22%, which stood at INR14,681 crore, contributed almost equally by volume growth and price increase. Operating profitability, EBITDA, stood at INR1,334 crore, registering an increase of 20% over last year. Overall margins were flat as compared to the corresponding year in FY ’22. However, there has been a steady recovery since third quarter beginning and in fourth quarter margins recovered by 360 basis points on Y-o-Y basis, taking it to a level of 10.7%. Though the interest cost has gone up by 9% over the last financial year, however efforts have been made to contain the impact of high interest rate scenario.
Profit after tax stood at INR264 crore, up by 31% over the corresponding period. All plants were running at higher capacity utilization level of about 90%. Export sales from India stood at INR1,787 crore and earnings per share improved to INR10.64 per share as against INR8.53 per share last year. The Board has recommended a dividend of 100%, which is INR2 per share, having a face value of INR2 per share.
Net debt stood at INR4,518 crore as on 31st of March, ’23, a reduction of INR422 crore over the previous year, led by improved working capital levels and scheduled debt repayment.
Leverage ratios have improved significantly. Net debt to equity improved to 1.3x multiple in FY ’23 as against 1.7 times in FY ’22 and net debt to EBITDA improved to 3.4 times in FY ’23 as against 4.5 times in FY ’22.
The balance sheet of the Company is healthy with improved financial ratios, and we remain committed to deleverage our balance sheet through reduction in long-term borrowings and working capital management going forward as well.
We already announced capacity expansion projects in PCR and TBR, are under implementation stage and are progressing well. We have already circulated our earnings presentation, which is available on our website, as well as on the website of stock exchanges.
Now, we open the forum for question-and-answers. Thank you.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Hi, sir. A couple of questions from my side. One is, can you talk about the volume growth, which we saw in fourth quarter FY ’23 both in India and Mexico?
Anshuman Singhania — Managing Director
Well, the volume growth for the quarter from the corresponding quarter, we saw — in the domestic market, we saw a 14% growth, all the categories put together.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
14% in India, that’s what you’re indicating. Okay. And for Mexico?
Anshuman Singhania — Managing Director
So, 14% growth in Mexico in terms of value.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Thank you. Okay. And when we are saying 14% growth in domestic on the volume side, it does mean that exports would have declined quite substantially given that our revenue growth in India operations have been above 9%, so would that be a fair assessment?
Anshuman Singhania — Managing Director
Yes. Quarter four, the exports were down.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay. And down and quite substantially down, because overall revenue growth was just 9% and price increases on Y-o-Y basis would have been good double-digit, so —
Anshuman Singhania — Managing Director
That’s correct, Jinesh ji. I think your understanding is correct.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay. Secondly, in this quarter, we again saw quite healthy gross margin expansion, so do we expect further benefits of RM cost savings coming in fourth quarter, or we have broadly — fourth quarter captures for the savings on the — on natural rubber and synthetic rubber and other commodities?
Anshuman Singhania — Managing Director
The RM cost has gone down, and we see that, at least for the first-half, the RM cost would be subdued. But we are keeping a close monitor on the movement of the RM and commodity prices, but we feel that, going forward, it will be in that range bound and our margin expansion would happen.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay. So, on — at least, on a sequential basis, margins — gross margins would be more or less stable and operating leverage will drive a better margin expansion, that’s the way one should look at it, right?
Sanjeev Aggarwal — Chief Financial Officer
So, actually, the margin expansion has happened on sequential basis also in Q4 as you would have noticed.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Yes, sir. I’m referring for the first-half, FY ’24?
Sanjeev Aggarwal — Chief Financial Officer
Yeah. So, in FY ’24 first-half, I think, further margin expansion definitely can happen, provided the raw material price scenario remains in a stable mode, so that is more likely.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Got it. Got it. And, lastly, can you talk about the capex, which we plan to incur in FY ’24 both in India and Mexico?
Anshuman Singhania — Managing Director
We have already announced our capex plan, which is already underway. In the passenger, we have announced INR530 crores, which has expected to start by quarter four FY ’24 and truck radial expansion in the tune of INR260 crores, which we are looking at the FY ’24 quarter two to start. So, totaling of INR790 crores expansion is already underway right now. So, this is our plan right now.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Right. So — but how much of this will be in cash flow basis, invested in FY ’24?
Sanjeev Aggarwal — Chief Financial Officer
So, basically, these projects — as just our MD sir said, these projects will get completed in this financial year and because this was spreaded — the cash flow was spreaded over the last financial year, as well as this financial year, and a part of the funds will be spent in next financial year, although the projects would get completed in this financial year. So, this will be approximately INR500 crore of the total capex outlay would be there in this financial year.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Got it. Got it. Great. Thanks. This is very helpful. I’ll come back in queue.
Sanjeev Aggarwal — Chief Financial Officer
Thank you.
Anshuman Singhania — Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Ashutosh Tiwari from Equirus Securities. Please go ahead.
Ashutosh Tiwari — Equirus Securities — Analyst
Yeah, hi. Firstly, on this volume growth side, you mentioned 14% growth in domestic sales in this quarter Y-o-Y, so this is the tonnage growth or this is — what is that? This is tonnage growth or overall volume of tires only?
Anshuman Singhania — Managing Director
Volume. Volume. Numbers. Domestic numbers.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay. But, I think, overall, the sales has grown by, like, say, 9% Y-o-Y, even if the fourth could have gone half, then also this number appears very high, so there is some price increase as well Y-o-Y, so can you give the splitting how much decline happened in exports side?
Anshuman Singhania — Managing Director
No. This number of which you are asking, it is actually — this 14% is the number growth from quarter four to corresponding quarter four of last year.
Ashutosh Tiwari — Equirus Securities — Analyst
Yeah. I mentioned same only, because the revenue growth was 9% and how much decline happened in exports side and if you can provide maybe overall volume growth at Company level in this quarter, including the exports?
Sanjeev Aggarwal — Chief Financial Officer
So, that is broadly flat — no, no, in terms of value — he’s asking for in terms of volume.
Anshuman Singhania — Managing Director
Volume. Volume.
Ashutosh Tiwari — Equirus Securities — Analyst
Yeah. Volume Y-o-Y at Company level and overall standalone level.
Sanjeev Aggarwal — Chief Financial Officer
Yeah. Overall, at the company level, this is flat.
Ashutosh Tiwari — Equirus Securities — Analyst
So 14% growth — export is around 16% of our sales, right, at the India level? And if so, I mean, let’s say, if exports were bigger, you will then — probably then take 14% growth in domestic. It doesn’t match — basically the numbers — the numbers are not matching up.
Sanjeev Aggarwal — Chief Financial Officer
So, we will clarify to you if you can please send us a specific question, because I think there’s no doubt about what we have just stated on that.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay. And, secondly, on the margin side, if you look at other players, generally they have reported around 3% minimum increase quarter-on-quarter EBITDA margin level, but we have only reported 1% improvement in margin quarter-on-quarter. So, what is the reason why our margin expansion is lesser than the other players in the market?
Anshuman Singhania — Managing Director
So, quarter four FY ’23 witnessed a margin recovery by almost 110 basis points over the previous quarter. There was some usage of high raw material inventory during the quarter. And during the quarter as well, there was a change in the market mix where contributions from export sales were lower, so that did impact on the margin.
Ashutosh Tiwari — Equirus Securities — Analyst
So, how much export sales in this quarter versus — let’s say, in Q3, it was around 16%, this quarter is how much in the mix?
Anshuman Singhania — Managing Director
Could you repeat the question, please?
Ashutosh Tiwari — Equirus Securities — Analyst
Exports contributed how much of sales in this quarter? It was around 16% in the third quarter.
Anshuman Singhania — Managing Director
Sir, the quarter-on-quarter in the — from the consolidated basis —
Sanjeev Aggarwal — Chief Financial Officer
13%. 13% is the sales.
Anshuman Singhania — Managing Director
13%.
Sanjeev Aggarwal — Chief Financial Officer
Exports sales in this quarter.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay. 13% versus 16% in the previous quarter?
Sanjeev Aggarwal — Chief Financial Officer
Yeah.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay. And this — so you mentioned that you consumed high-cost inventory in this quarter, so how do you look out? Let’s say, what kind of target margin we have? Let’s say, as a management, what we are looking at, at Company level, over the medium term?
Sanjeev Aggarwal — Chief Financial Officer
So, I think we should get back to the normal long-term average, which is about 12%. So, I think, which will improve the margin for the — subject to, of course, as I said earlier, the stability of the raw material at the level that where we are today, so we can get back to the normal level of about 12%.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay. With the RM at current levels, you can get back to that margin?
Sanjeev Aggarwal — Chief Financial Officer
Yes.
Ashutosh Tiwari — Equirus Securities — Analyst
And, lastly, can you provide a mix that India operations, you are not worried this time, in the PPT, for the quarter and the year, but it was in the — only Indian operations’ sales mix?
Sanjeev Aggarwal — Chief Financial Officer
The sales mix for the quarter four in the replacement market is roughly around 60%, which is the same as we have seen even last quarter also and the — OEM has gone up. OEM has gone up to about one-third of the product sales and the balance is export.
Ashutosh Tiwari — Equirus Securities — Analyst
And in the product side, let’s say trucks, truck and bus PCR and all?
Sanjeev Aggarwal — Chief Financial Officer
So, truck and bus is — again, this is our major revenue contributor, which is at about 60%.
Ashutosh Tiwari — Equirus Securities — Analyst
60%?
Sanjeev Aggarwal — Chief Financial Officer
Including bus and PCR.
Ashutosh Tiwari — Equirus Securities — Analyst
PCR and two-wheeler, three-wheeler?
Sanjeev Aggarwal — Chief Financial Officer
PCR would be approximately 25% and the balance is small truck and the two-wheeler.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay. Got it. Thank you.
Sanjeev Aggarwal — Chief Financial Officer
Thank you.
Operator
Thank you. The next question is from the line of Mitul Shah from Reliance Securities. Please go ahead.
Mitul Shah — Reliance Securities — Analyst
Thank you for the opportunity, sir. First question is on the Mexico operation. There is a revenue growth seems to be close to 30% and just now in initial remarks you highlighted somewhere around 14% for Tornel. And on the same Mexico operation, our margins are roughly 4.2%, which is almost like an eight-quarter low despite your commodity being much lower and revenue-wise it’s growing so fast, so any clarification, sir, here?
Arun Kumar Bajoria — Director & President (International)
Yes. As I had said in my opening remarks that there has been resistance from particularly the US market and there has been some stocking of inventory levels with the distributors and this is mainly because, as you may have heard from some other tire manufacturers also, that the freight rates have come down drastically and that has put these stockists, dealers and distributors into a bit of a disturbance on a short-term basis and these are getting cleared. So, going forward, we are expecting that now things will normalize.
Mitul Shah — Reliance Securities — Analyst
We’ve seen improvement in April and May already or still more or less situation is slowly improving?
Arun Kumar Bajoria — Director & President (International)
No. We are seeing some turnaround and better sales beginning from April ’23. So, there is amount of some improvement. Prices are, of course, still, in the export market, little under pressure. But I think, going forward, that’ll also ease.
Mitul Shah — Reliance Securities — Analyst
Okay. Sir, in replacement, based on the numbers just highlighted, it seems to be there is a 23% kind of a growth happened in the quarter, so what is the outlook here and which segment you think will have a double-digit growth in the replacement side in FY ’24?
Anshuman Singhania — Managing Director
Yeah. So, we see that the automotive industry is very buoyant, particularly in the CV and passenger segment, which is leading the industry. We are seeing that this strengthening in FY 2024 with back of infrastructure push by the government and the core industry picking up, so we see the commercial vehicles coming in back very strongly. And, also, with the chip shortage, we also see that the car, passenger car segment is also coming off place and even rising disposable incomes and we are hoping that good monsoon will come. So, we are seeing an overall rural growth also picking up. So, we are very optimistic about the growth story in the coming years, backed up with uptick in the economic activities. So, here, urban infrastructure and road construction projects picking up.
Anuj Kathuria — President (India)
We remain very optimistic.
Mitul Shah — Reliance Securities — Analyst
Okay, sir. Lastly, then one clarification, that in capex, we have indicated that INR550 crore for PCR and around INR200 crore for additional capex. So out of INR750 crore, we are going to spend INR500 crore in FY ’24, so next year it would be just INR200 crore or INR250 crore kind of a capex, is it right understanding?
Sanjeev Aggarwal — Chief Financial Officer
No, I think, I have said earlier that there is a total capex of INR790 crore, INR530 crores for the PCR and INR260 crore for TBR projects. And this was spreaded over two years’ period of implementation in FY ’23 and in FY ’24. So INR500 crore of the outlay on account of capex will be for this financial year, some part of the total capex is going in this financial year, and some will go in the next financial year as well.
Mitul Shah — Reliance Securities — Analyst
So, next year it would be much lower, right?
Arun Kumar Bajoria — Director & President (International)
Yes.
Mitul Shah — Reliance Securities — Analyst
Point is it will be like INR100 crore, INR200 crore kind —
Sanjeev Aggarwal — Chief Financial Officer
[Speech Overlap] Because the projects will get completed in FY ’23 — sorry FY ’24.
Mitul Shah — Reliance Securities — Analyst
Yes, sir. Thanks, and all the best.
Anshuman Singhania — Managing Director
Thank you.
Sanjeev Aggarwal — Chief Financial Officer
Thank you.
Operator
Thank you. The next question is from the line of Amyn Pirani from JPMorgan. Please go ahead.
Amyn Pirani — JPMorgan — Analyst
Yes. Hi, sir. Thanks for the opportunity. Just a clarification on the capex thing. So, for this year, in terms of cash outflow you are saying around INR500 crores that you will be doing, in FY ’24.
Sanjeev Aggarwal — Chief Financial Officer
Right.
Amyn Pirani — JPMorgan — Analyst
And does this include any maintenance capex that you normally do?
Sanjeev Aggarwal — Chief Financial Officer
No. So, I have told you for the expansion projects only. So — but in addition to that, there will be some capex on account of the normal maintenance capex.
Amyn Pirani — JPMorgan — Analyst
Okay. Can you give a range? Like, will it be in the range of INR100 crores to INR150 crores, or could it be higher than that?
Sanjeev Aggarwal — Chief Financial Officer
That is normally the case for the year. So that should be broadly the number.
Amyn Pirani — JPMorgan — Analyst
Okay. And given that you said that you are already running at 90% capacity utilization, so can you give us a sense that at least for PCR and TBR after this expansion, how much capacity would increase broadly? And what is the scenario for the other categories? Because if the growth continues, then, again, your utilization levels will again remain high, so just trying to get some sense here?
Anshuman Singhania — Managing Director
So, here with the capacity coming on board, for the PCR, we are looking at 35% increase from our existing capacity and here — and in the TBR, we are looking at close to around 12% — 10% to 12% increase in our capacity in the TBR. So that should be good to cater to the demand as well and, further, we will — when we solidify our position, then we will further talk about the announcement further going.
Amyn Pirani — JPMorgan — Analyst
Okay. So, sir, looking at this, would it be fair to say that the deleveraging you did around, I think, INR400 crores of deleveraging last year, would it be fair to say that this year the deleveraging could be — maybe in line or slightly lower, but a larger deleveraging may happen in FY ’25, is that a correct way to look at it?
Sanjeev Aggarwal — Chief Financial Officer
So, as we have said, that the deleveraging is going to continue even in FY ’24 and down the line. So, this will be there and, in fact, we are going to pay about INR450 crores is towards the scheduled repayments during this financial year. And, of course, the new loans will come in to support the expansion plans, which we have taken up, right. So, to that extent, the loan amount will go up. But as far as the existing loans are concerned, those will get reduced over the next two years by almost about 30%.
Amyn Pirani — JPMorgan — Analyst
Okay.
Sanjeev Aggarwal — Chief Financial Officer
So, it will be very small amount compared to what we are going to pay over the next few years. There will be some addition of new loans and that is for the expansion projects.
Amyn Pirani — JPMorgan — Analyst
Okay.
Anuj Kathuria — President (India)
And in any case the — as the volumes go up, the working capital requirement also goes up. But as Sanjeev has already clarified, that the strict control on the working capital is being maintained. And as a result of that, we have been able to reduce on the both, terminals are being paid on the due dates and strict control on the working capital, so that the overall — there was a reduction of about INR400 crore plus in ’22-’23 and we expect decent numbers for ’23-’24.
Sanjeev Aggarwal — Chief Financial Officer
And just to further add to this point, in fact, in the last couple of years, because the input costs have gone up by almost about 30% and the volumes have also gone up, so the operational levels, which was there about a year ago, in FY ’22, which were there at about INR12,000 crore and in FY ’23 it was about INR15,000 crores, we have been able to control the working capital levels at what it was in the previous year. So, there is a very tight control over that. And we have to hope that this is a part of being the deleveraging — the — strategy which we have adopted. We will continue to be focusing on that and we will maintain the levels where we are today in terms of the working capital. And that is why I said at the beginning that the net debt to EBITDA and net debt to equity ratios, the leverage ratios, have improved significantly during this financial year and we are seeing that this should improve further going down the line.
Amyn Pirani — JPMorgan — Analyst
Thank you. Thanks for the color, sir. I’ll come back in the queue.
Sanjeev Aggarwal — Chief Financial Officer
Thank you.
Anshuman Singhania — Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Bharat Bhagnani from Living Root Capital. Please go ahead.
Bharat Bhagnani — Living Root Capital — Analyst
Yeah. Hi. Good afternoon, team. My question is on the margins, the operating margins that we are at. We finished the year at about 9%. Now, given the raw material scenario in the second half of this financial year, which has just gone by, as investors, we were expecting some better operating margins compared to even some of your closest competitors within India looking at their only-India business. They have also got, like, better operating margins, so which brings me to the question that are we trying to chase sales at any cost? Are we not focused on maintaining margins, while growing?
Anuj Kathuria — President (India)
This question was also answered sometime back that we had an improvement of around 110 basis points as compared to the previous quarter, and we actually had some high-cost raw material that had flowed from the previous quarter. But, now, that is behind us, that is well consumed. And, also, another aspect was, for us, especially, the export sales were down as compared to our quarter three.
Bharat Bhagnani — Living Root Capital — Analyst
Yes. I heard the question, sir. Just to interrupt you, I heard the question and I’ve been there on the call. Now my question is, if we are having some high-cost raw materials, are we pre-buying a lot of raw materials at that point? Because how are the other companies able to secure a better margin than us then, when they are operating in the same field?
Anshuman Singhania — Managing Director
So, I think —
Bharat Bhagnani — Living Root Capital — Analyst
And there is almost a 20% difference in absolute values.
Sanjeev Aggarwal — Chief Financial Officer
This is also a function as Mr. Kathuria was explaining of the product mix and also the market segments. So, we are not for that matter chasing only to volumes, but, of course, that we are focusing on the improvement of margins and that is how, in the last quarter, on a sequential basis, there has been some increase in margin and there are reasons for not so much of increase as you might have compared with maybe some other companies. But the fact is that, we are focusing on the margin side as well.
Bharat Bhagnani — Living Root Capital — Analyst
Right.
Anshuman Singhania — Managing Director
And there we are focusing also on our product mix in terms of premiumization.
Anuj Kathuria — President (India)
Premiumization.
Anshuman Singhania — Managing Director
Premiumization of our products in different categories, be it in the truck radial, be it in the passenger radial and others. And as you heard in my speech, that we have also launched our ultrahigh performance tire, Levitas Ultra. So that is also our journey towards that premiumization.
Bharat Bhagnani — Living Root Capital — Analyst
So, Mr. Singhania, then I know we had been working on improving our product mix ratio for a while now, right, because of our Mysore facility where we do the R&D and we have introduced some good products like the JU and JUH5, etc in the past also, so it was expected that, because of introduction of those products, we will be able to sort of capitalize right now when the CV cycle is on an uptrend and 60% of our volumes coming from — sales coming from the CV sales, there was an expectation that we will be able to capitalize more, but that’s somewhere is not happening. We are not able to charge a premium for our products, which we have introduced, which have been well accepted by the market. So, is it that we are selling a lot of B2B to transport companies directly for attaining the volumes, that’s my primary — that’s what — just what I’m trying to understand on the sales mix that’s happening?
Anuj Kathuria — President (India)
See, one thing which we need to also understand is that the — our total revenues that comes on the truck and bus side is higher than the others.
Bharat Bhagnani — Living Root Capital — Analyst
Right.
Anuj Kathuria — President (India)
So, there the segment-wise play out is definitely going to be different, and we are — that is why our MD also emphasized that we are working on increasing the revenues from the segment, which — where the margins are traditionally higher. So, we are working on that, and we have made good progress on that. In fact, if I were to just give you one number is that, in our passenger car, while the overall growth we talked about, 14%, but in passenger car, if you look at passenger car separately, the growth was almost at a level of 17% to 18%. So that indicates that we are trying to kind of increase the overall revenue mix. And as an overall category also, the revenue mix in passenger car has gone up by a couple of percentages. So, this effort will continue and thereby I think so we will be able to get a richer product mix, which will help the margins to get better.
Bharat Bhagnani — Living Root Capital — Analyst
So, this is a concern for you also that you want to get the margins that are going ahead?
Anuj Kathuria — President (India)
Yes.
Bharat Bhagnani — Living Root Capital — Analyst
Right. One more question for Sanjeev ji. Sanjeev ji, your tax rate on an overall basis continues to be around 35%, 36%, are we not migrating to the new tax offered by the government of 25%, 26%? We are not able to do that?
Sanjeev Aggarwal — Chief Financial Officer
No. So, there actually because — last time also I clarified, there is some outstanding credit to our account, on account of MAT, Minimum Alternate Tax. So once that is absorbed, then of course we will move into the new regime.
Bharat Bhagnani — Living Root Capital — Analyst
That should be absorbed by what?
Sanjeev Aggarwal — Chief Financial Officer
We have evaluated — this we have evaluated, which one is better for us and we are waiting for that to be absorbed first or, let’s say, utilized first and then we will move to the new regime.
Bharat Bhagnani — Living Root Capital — Analyst
Is there any sort of timeline or — you can share that [Speech Overlap]
Sanjeev Aggarwal — Chief Financial Officer
I think, it’s a matter of only about a year or so.
Bharat Bhagnani — Living Root Capital — Analyst
One year?
Sanjeev Aggarwal — Chief Financial Officer
Yeah.
Bharat Bhagnani — Living Root Capital — Analyst
Okay. That’s all from my side. Thank you.
Sanjeev Aggarwal — Chief Financial Officer
Thank you.
Anshuman Singhania — Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Deepak Jain from ENAM AMC. Please go ahead.
Deepak Jain — ENAM AMC — Analyst
Hello, sir. Sir, again, I have a question on the margin. You said that you are focusing on premiumization and earlier there was a comment that probably the product mix may have deteriorated, so can you just clarify that aspect?
Anuj Kathuria — President (India)
No. First of all, we would like to clarify that there has been no deterioration.
Deepak Jain — ENAM AMC — Analyst
Okay.
Anuj Kathuria — President (India)
In fact, there has been a sequential improvement and what we said is that we will further try to make it superior in terms of the product mix and that is where our efforts on the passenger car radial premiumization going for the higher rim sizes, including the launch off Levitas Ultra, which is in the premium segment for luxury cars. And not only Levitas, but also generally looking at the 16-inch and above sizes in the passenger car, both with the OEMs as well as in the replacement market. So that is our effort towards getting the product mix even better. So, there is no deterioration, just to clarify.
Deepak Jain — ENAM AMC — Analyst
Sir, you talked about margins getting improved to 11%, 12%, from which quarter can we expect that? When the [Speech Overlap]
Sanjeev Aggarwal — Chief Financial Officer
That’s a continuous process. So, we said that for the entire financial year, we are expecting this to improve. The way we are seeing actually the margins in the fourth quarter, it should further improve and the reasons were stated earlier also, the high-cost raw material inventory was there earlier, which is now behind us, we have consumed that. And if the raw material scenario continues to remain in a stable range, then of course we will see the benefits starting from Q1 onwards.
Deepak Jain — ENAM AMC — Analyst
Sir, one last question, given the moderation in the costs, do we see some price reduction, particularly in the OEM category, which you may have to pass on?
Anuj Kathuria — President (India)
See, this is something which we will have to see how it plays out. The only thing which I can comment right now is that wherever there is an indexation, that definitely will have to be responded accordingly. But other than that, we’ll have to see how it plays out, because we also need to keep in mind that when the raw material costs are going up, the complete recovery had not happened.
Deepak Jain — ENAM AMC — Analyst
Okay. Okay, sir. Thank you.
Anshuman Singhania — Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Shubham Agarwal from Aequitas Investment Consultancy Private Limited. Please go ahead.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Yeah. Good afternoon, everyone, and thank you for the opportunity. So, my questions are around the P&L. So, if we see the employee expenses, since June, it has been increasing drastically and almost at a similar level of gross sales we have seen decent increase in employee expenses, so I wanted to understand if there is any specific reason why this has happened, and how do we see this going forward?
Anuj Kathuria — President (India)
See, overall, this year was the year where we had some long-term agreements in few of our plants, so that is valid for more than — once an agreement happens, it goes on for three to four years. So, definitely it is — it will get averaged out over the next three years’ time. And, overall, yes, the — overall topline will also get robust in FY ’24 with the growth that we’re seeing. So, this should help us do that. Plus, we are also working on a lot of digitalization measures, which should also help us in this regard.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Okay. So, we can consider a low single digit kind of growth for FY ’24 in employee cost?
Anuj Kathuria — President (India)
Yes.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Okay. And then coming to the interest expenses, given that we are almost at the fag end of the rising interest rate scenario, and also our overall debt level is going down, do we expect this to peak out at INR125 crores?
Sanjeev Aggarwal — Chief Financial Officer
Can you repeat your question, sorry? We couldn’t hear you properly.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Can you hear me now?
Sanjeev Aggarwal — Chief Financial Officer
Yes.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Yeah. So, my question was on the interest expense. Given that we are almost at the fag end of rising interest rate and also our overall debt levels are going down, do we expect this INR125 crores to kind of — has peaked out for us in terms of interest expense?
Sanjeev Aggarwal — Chief Financial Officer
That is on quarterly basis you’re talking about?
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Yeah.
Sanjeev Aggarwal — Chief Financial Officer
No. I think this — to my mind, this has peaked out. You are right. And, going forward, as we expect that after some time there is a chance of even reduction probably.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Okay.
Sanjeev Aggarwal — Chief Financial Officer
So, if that happens, then definitely we will be able to get the interest cost reduced.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Got it. And on the Cavendish side, so we hold almost 80% of the company. Do we have any plans of acquiring it 100%? And if so, by when? Hello?
Sanjeev Aggarwal — Chief Financial Officer
So, we — I think, we are likely to remain at the same level for the time being. This is also because 100% of the Company is in the group only.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Okay.
Sanjeev Aggarwal — Chief Financial Officer
And 80% roughly is held by JK Tyre.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Okay. So, no plans of increasing. Got it. And, lastly, I wanted to understand what will be our strategy beyond FY ’24? Because in terms of expansion, I think the volume growth is only around 10% to 15%, so how do we — do we have any scope of brownfield expansion beyond FY ’24? And how are we planning to grow?
Sanjeev Aggarwal — Chief Financial Officer
So —
Anshuman Singhania — Managing Director
Yeah. We are — as I said that — with — our capacities will come in place of the truck and passenger around quarter four of FY ’24 and then we will start utilizing that capacity and then we’ll assess based on the demand in terms of whichever plant has got the scope of a brownfielding. We will come back when we decide on the capex cycle.
Deepak Jain — ENAM AMC — Analyst
So, just a clarification on this. So, earlier in the call you mentioned that PCR would increase by 35%, right, after this expansion. But my earlier understanding was that this 35% increase also includes the debottlenecking, which was done last year.
Anshuman Singhania — Managing Director
That’s correct.
Anuj Kathuria — President (India)
That’s correct.
Sanjeev Aggarwal — Chief Financial Officer
That’s correct. You are right. So, in fact, I wanted to clarify that 35% includes partly — which is almost about 50% has already been completed through debottlenecking and 50% of that, which is about 17%, that is under implementation.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Okay. Got it. So, 10% to 12% in TBR and almost 17% in PCR is what we are expecting.
Sanjeev Aggarwal — Chief Financial Officer
That’s correct. Absolutely.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Okay. And in one of the news articles, it was mentioned that in FY ’25, JK Tyre may see a INR900 crore expansion in PCR. So is there any validity to this news?
Sanjeev Aggarwal — Chief Financial Officer
No. So, this INR900 crore, I think there was earlier — I will clarify the point. INR1,100 crore of total expansion we had talked about at some point in time in FY ’22 and then because the debottlenecking project of INR305 crore to INR310 crore got completed already and the balance INR790 crore is undergoing, so this totaled up to INR1,100 crores. So — but, I don’t know, this INR900 crore figure, so maybe wrongly published or something.
Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst
Got it. Got it. No. Thank you. That is very helpful. Thank you for answering it.
Operator
Thank you. The next question is from the line of Amit Aggarwal from Leeway Investments. Please go ahead.
Amit Aggarwal — Leeway Investments — Analyst
Good morning, sir. Congratulations for a good set of numbers. My question is regarding the money yielded through IFC. Sir, [Technical Issues] INR240 crores at such a low valuation, what is your thought process of the management regarding the same?
Anshuman Singhania — Managing Director
Did, sort of — please, could you repeat? Didn’t get the question quite right.
Amit Aggarwal — Leeway Investments — Analyst
Sir, for a company size like ours, risen INR240 crores at such a low valuation that [Technical Issues] after 18 months. Sir, don’t you think it’s a very low valuation for the issue? What is the thought process of the management? INR240 crores, the amount is a very big amount.
Sanjeev Aggarwal — Chief Financial Officer
So, this is based on the negotiation one and then this fair value arrived at through a valuation report. So, this is all these details. And I think the negotiation happened at the time when the share price was hovering at around the same level. So, I do not know what is your way of calculation of low or high. So that is difficult to comment.
Amit Aggarwal — Leeway Investments — Analyst
Growth compared to peers our valuation otherwise is also very low. I don’t think, with this brand like ours we should remain at this level for too long?
Sanjeev Aggarwal — Chief Financial Officer
I don’t think there will be any possible comment on this. That the negotiated price, the deal price, which has already happened, so was at what valuation what should have been done. So, it’s very difficult to comment at this point in time.
Amit Aggarwal — Leeway Investments — Analyst
And do we expect any further debt issue on the equity in future, in the near future?
Sanjeev Aggarwal — Chief Financial Officer
So, again, we keep exploring the possibilities, but as of now we can’t comment.
Amit Aggarwal — Leeway Investments — Analyst
Okay. Thank you.
Sanjeev Aggarwal — Chief Financial Officer
Thank you.
Operator
Thank you. The next question is from the line of Nirav Seksaria from Living Root Capital. Please go ahead.
Nirav Seksaria — Living Root Capital — Analyst
Yeah. Sure. What is the holding period of raw material? Hello?
Sanjeev Aggarwal — Chief Financial Officer
So, for imports, normally it takes like, from the date of order, it takes about two months to raise and consume the material. And in the case of local, it is about 25 days to three weeks basically, three weeks of the holding.
Nirav Seksaria — Living Root Capital — Analyst
Just on the margin side, we expect the margin (Technical Issues) around 11% to 12% if I’m not wrong.
Sanjeev Aggarwal — Chief Financial Officer
Your voice is not very clear. If you can — it’s breaking.
Nirav Seksaria — Living Root Capital — Analyst
Sorry. Is it clear now?
Sanjeev Aggarwal — Chief Financial Officer
You can try it out again, please.
Nirav Seksaria — Living Root Capital — Analyst
Yeah. I am saying, if I’m not wrong, the margin should peak at around 11% to [Technical Issues]
Sanjeev Aggarwal — Chief Financial Officer
So, we have clarified this already. So, considering the stable raw material prices, I think we should improve upon the margins. But at what level it will peak is, again, difficult to say, because we have the precedence of increasing the margins to a level of even 15% to 17% if you can refer back to even FY ’21. So, this is all because of the raw material price scenario, we can improve upon. But we have seen already a high raw material price scenario, so I think it has bottomed out probably.
Nirav Seksaria — Living Root Capital — Analyst
Okay. And you also mentioned the input prices that [Technical Issues]
Sanjeev Aggarwal — Chief Financial Officer
Not clear. Sorry, your voice is breaking too much.
Nirav Seksaria — Living Root Capital — Analyst
Yeah. I am saying, sir, could you mention the input prices that you saw in the Q4 for synthetic rubber [Technical Issues]
Sanjeev Aggarwal — Chief Financial Officer
So, you are asking for breaking up the prices, you’re saying, if I’m not wrong?
Nirav Seksaria — Living Root Capital — Analyst
Yes, sir.
Sanjeev Aggarwal — Chief Financial Officer
Not readily available. But, yes, we can discuss maybe in the next conference call.
Nirav Seksaria — Living Root Capital — Analyst
So, Q4 data isn’t available?
Sanjeev Aggarwal — Chief Financial Officer
No. Q4 data is not readily available with me. Breakup.
Nirav Seksaria — Living Root Capital — Analyst
Okay. Sure, sir. Thank you, sir.
Operator
Thank you. The next question is from the line of Raghvendra Goyal from ICICI Securities. Please go ahead. Mr. Raghvendra Goyal, your line has been unmuted. Please go ahead with your question.
Raghvendra Goyal — ICICI Securities — Analyst
Am I audible now?
Operator
Could you please move little closer to the microphone or use your handset while asking the question as your voice was very low audible?
Raghvendra Goyal — ICICI Securities — Analyst
Sure. Can you, sir, please provide any revenue numbers for the Cavendish for the current quarter and corresponding margins?
Sanjeev Aggarwal — Chief Financial Officer
So, for Cavendish, for Q4, the turnover was about INR670 crores and the EBITDA margins were at about 11%.
Raghvendra Goyal — ICICI Securities — Analyst
And what would be your utilization level at Cavendish for the Q4?
Sanjeev Aggarwal — Chief Financial Officer
85%.
Raghvendra Goyal — ICICI Securities — Analyst
85%, okay.
Operator
Thank you. The next question is from the line of Naitik Mohata from Sequent Investments. Please go ahead.
Naitik Mohata — Sequent Investments — Analyst
Thank you for the opportunity. Sir, if you could just clear the picture around debt or rather our deleveraging plans? Because, yesterday, Anuj sir in a CNBC interview said that we plan to bring the debt down from INR4,500 crores level to INR3,500 crore levels, and now you are saying that we pay off some small debt, but take on new ones seeing our capex plan. So, what is the deleveraging policy? And how the picture can be painted for ’24? And, secondly, will this debt reduction will be facilitated all from our cash flows, or do we plan to raise some kind of funds going forward?
Sanjeev Aggarwal — Chief Financial Officer
No. So, for today, as I said earlier, the total [Technical Issues] at company level, at consolidated level is INR4,500 crores and we have the scheduled repayments in the next two financial years for almost about INR900 crores, INR850 crore to INR900 crore, so the total long-term debt will go down by about 30%, okay. So — and assuming that we will be able to maintain the working capital at the same level and even if there is some addition of new loans for the expansion project, there will be a complete reduction of the long-term or the net debt from INR4,500 crores level to INR3,500 crore level. So that is what Mr. Kathuria said. And that is [Speech Overlap]
Naitik Mohata — Sequent Investments — Analyst
Okay, sir.
Sanjeev Aggarwal — Chief Financial Officer
Yeah.
Naitik Mohata — Sequent Investments — Analyst
And, secondly, this will all be from our cash flows, or do we plan to raise some funds?
Sanjeev Aggarwal — Chief Financial Officer
No, this will be from the internal accruals and our own cash flows.
Naitik Mohata — Sequent Investments — Analyst
Okay. Thank you, sir.
Sanjeev Aggarwal — Chief Financial Officer
Thank you.
Operator
Thank you. The next question is from the line of Mitul Shah from Reliance Securities. Please go ahead.
Mitul Shah — Reliance Securities — Analyst
Sir, thank you for a follow-up opportunity. Sir, again, question on Mexico side, as we are hinting on the tough situation in America, so do we expect double-digit growth in volume or value terms? So, what is the outlook here for next one to two years?
Arun Kumar Bajoria — Director & President (International)
There the outlook is definitely better as I said that we are expecting that the US market is definitely going to revive and, therefore, we are targeting double-digit growth for financial year 2024.
Mitul Shah — Reliance Securities — Analyst
What is the industry situation, sir? As you highlighted, there is already, like, destocking and overstocking already and the system inventory is high, so what are those challenges?
Arun Kumar Bajoria — Director & President (International)
So, as I said that that process has certainly affected performance to an extent. So, whatever we have said would have been still better, but the performance of JK Tornel in the last two years has been very, very good and, hopefully, now this process of destocking should be over, somewhere in the middle of Q1 of financial year ’24.
Mitul Shah — Reliance Securities — Analyst
Okay, sir. Thanks.
Operator
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Singhania from JK Tyre for closing comments.
Anshuman Singhania — Managing Director
Thank you. Thank you very much for being with us today for the call for FY ’23 for the quarter and FY ’23. I hope we’ve answered your question to whatever your satisfaction. And on behalf of JK Tyre, I’d like to again thank you.
Operator
[Operator Closing Remarks]