INDIAN TYRE INDUSTRY FY2018 margins to crimp on high cost inventory

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ICRA RESEARCH SERVICES Contacts: Subrata Ray +91 22 6114 3408 subrata@icraindia.com Pavethra Ponniah +91 44 4596 4314 pavethrap@icraindia.com K Srikumar +91 44 4596 4318 ksrikumar@icraindia.com INDIAN TYRE INDUSTRY FY2018 margins to crimp on high cost inventory ICRA LIMITED August 2017

Contents Summary Tyre demand growth pegged at 7-8% for FY2018 and FY2019 -------------------------------------------------------------------------------------------------------------------- 5 FY2018 Margins to fall due to high cost inventory ---------------------------------------------------------------------------------------------------------------------------------- 6 Indian automotive industry - Demand trends and outlook Strong demand outlook for FY2018 --------------------------------------------------------------------------------------------------------------------------------------------------- 8 M&HCV demand disappointed in FY2017 ------------------------------------------------------------------------------------------------------------------------------------------- 9 Growth expectations for FY2018 positive ------------------------------------------------------------------------------------------------------------------------------------------- 10 Indian tyre industry - Demand trends and outlook Volume demand grew by 9-9.5% during FY2017------------------------------------------------------------------------------------------------------------------------------------ 14 Tonnage demand grew by 5% in FY2017 --------------------------------------------------------------------------------------------------------------------------------------------- 15 Updates on tyre imports and exports Tyre exports (volumes) up by 28% in FY2017; weak realisations drag value growth to 10% ---------------------------------------------------------------------------------- 17 Tyre exports are projected to grow at 6%-8% over the next three years ----------------------------------------------------------------------------------------------------------- 18 Demonetisation impacts tyre imports in FY2017; T&B imports still grew by 9%----------------------------------------------------------------------------------------------- 20 Updates on supply additions Capacity additions: Sizable capacities to be commissioned over the next two years --------------------------------------------------------------------------------------------- 23 Update on raw material price movement NR prices falls in Q1FY2018; output likely to remain strong --------------------------------------------------------------------------------------------------------------------- 26 Prices of crude derivatives-------------------------------------------------------------------------------------------------------------------------------------------------------------- 27 Industry financials and ICRA ratings on the sector FY2017: Muted revenue growth despite stronger than expected volume traction ----------------------------------------------------------------------------------------------- 31 FY2018: Revenue growth expected to pick up --------------------------------------------------------------------------------------------------------------------------------------- 32 Industry-wide comparison of players profile ---------------------------------------------------------------------------------------------------------------------------------------- 34 ICRA credit ratings on tyre players --------------------------------------------------------------------------------------------------------------------------------------------------- 36 Tyre industry median financials ----------------------------------------------------------------------------------------------------------------------------------------------------- 38 Company Section Apollo Tyres Limited --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 39 Balkrishna Industries Limited --------------------------------------------------------------------------------------------------------------------------------------------------------------------- 42 Ceat Limited -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 45 Goodyear India Limited ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 48 JK Tyre And Industries Limited ------------------------------------------------------------------------------------------------------------------------------------------------------------------- 51 MRF Limited ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ 54 TVS Srichakra Limited ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 57 ICRA LIMITED Page 2

List of Tables and Charts Automotive industry demand Exhibit 1: Automotive Industry Production Growth (Volumes) Exhibit 2: Automotive Industry Segment Wise Production Growth Exhibit 3: M&HCV production trend Exhibit 4: LCV production trend Exhibit 5: Tractors production trend Exhibit 6: Two-wheeler production trend Exhibit 7: PV production trend Tyre industry demand Exhibit 8: Tyre Industry Volume Demand Growth Exhibit 9: Tyre Industry Segment Wise Demand Growth Exhibit 10: Tyre Industry Tonnage Demand Growth Exhibit 11: Tyre Industry OEM and Replacement demand (volume) Exhibit 12: Tyre Industry demand estimates Tyre Exports Exhibit 13: Trends in tyre exports from India (values) Exhibit 14: Tyre exports: Composition Exhibit 15: Growth in segment wise tyre exports Exhibit 16: Country wise tyre exports: Top 10 Exhibit 17: Exports to USA - Segment mix (values) and growth Exhibit 18: Exports to Germany - Segment mix (values) and growth Exhibit 19: Exports to UAE- Segment mix (values) and growth Tyre Imports Exhibit 20: Historical trends: Tyre imports (value) Exhibit 21: Tyre Imports : Composition Exhibit 22: Growth in segment wise tyre imports Exhibit 23: Country wise tyre imports: Top 10 Exhibit 24: T&B tyre imports and share of demand Exhibit 25: PV tyre imports and share of demand Exhibit 26: 2w tyre imports and share of demand Exhibit 27: Segment-wise imports from key countries Capacities and Supply Exhibit 28: Capacity, production and utilization in the Indian Tyre industry Exhibit 29: Planned quarterly capacity additions (value and volume) Exhibit 30: Planned capacity additions during FY18 onwards Input Costs Exhibit 31: Trends in NR price movements (annual) Exhibit 32: Trends in domestic and global NR price movements (monthly) Exhibit 33: Trends in NR Supply gap and net imports in India Exhibit 34: Price trends of Crude oil and rubber Exhibit 36: Synthetic rubber - Production, consumption and imports Exhibit 35: Price trends of Carbon black and Caprolactum Industry Financials Exhibit 37: Quarter-wise revenue and revenue growth Exhibit 38: Quarter-wise comparison of NR prices and Operating margins Exhibit 39: ICRA RM price index Outlook Exhibit 40: Trends in Revenues and growth Exhibit 41: Operating and net margins estimates Exhibit 42: Coverage indicators Exhibit 43: Industry wide capex estimates Exhibit 44: Debt metrics Industry wide peer comparison Exhibit 45: Operational and financial comparison across players ICRA ratings in the industry Exhibit 46: ICRA s Ratings in the Tyre industry Industry median Exhibit 47: Profitability ratios Exhibit 48: Capitalisation ratios Exhibit 49: Liquidity ratios Exhibit 50: Coverage ratios ICRA LIMITED Page 3

Please contact ICRA to get a copy of the full report Business Contacts Mr. L. Shivakumar E-mail: shivakumar@icraindia.com Tel: +91 22 6114 3406 / +91 98210 86490 Mr. Jayanta Chatterjee E-mail: jayantac@icraindia.com Tel: +91 80 4332 6401/ +91 98450 22459 Media and Public Relations Ms. Naznin Prodhani E-mail: naznin.prodhani@icraindia.com Tel: +91 124 4545 860 Ms. Malika Munjal E-mail: malika.munjal@icraindia.com Tel: +91 124 4545 840 ICRA LIMITED Page 4

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