Balkrishna Industries Navigates Headwinds with Strategic Vision and Capacity Expansion

Balkrishna Industries Limited (BKT), a prominent player in the off-highway tire segment, has reported its standalone financial performance for Q2 and H1 FY26, showcasing resilience amidst challenging global market conditions. The company's strategic initiatives, particularly in capacity expansion and market diversification, underscore its long-term growth aspirations despite near-term pressures.

For the first half of FY26, BKT recorded a standalone revenue of INR 5,079 crore, with Q2 contributing INR 2,320 crore. While sales volumes experienced a 4% year-on-year degrowth for both the quarter and the half-year, reaching 70,252 MT and 150,916 MT respectively, the company maintained healthy profitability. H1 EBITDA stood at INR 1,155 crore, with a margin of 22.7%, and Q2 EBITDA was INR 500 crore, reflecting a 21.5% margin. Net profit for H1 was INR 552 crore, and for Q2, INR 265 crore. The company also declared a second interim dividend of INR 4 per equity share.

Performance Snapshot

Strategic Diversification and Capacity Building

BKT's performance was significantly impacted by intensified tariff-related headwinds in the US market, where import duties on Indian tires increased to 50%. This led to a severe impact on US sales, which previously constituted approximately 10% of the company's sales volume. In response, BKT has strategically focused on strengthening its market position in India and Europe while driving incremental growth from other global markets. The company's foresight in anticipating geographic and segment concentration risks, coupled with strategic initiatives like enhancing its presence in the Indian market and expanding its carbon black business, has mitigated part of this impact.

The company is actively pursuing a long-term vision of achieving INR 23,000 crore in revenue by 2030. This ambitious target is supported by a new growth capex of INR 3,500 crore over the next three years, allocated for carbon black, rubber tracks, and new tire categories. The ongoing capex and de-bottlenecking efforts are set to increase OHT tire capacity to 425,000 MTPA, aiming for an 8% global market share in the OHT segment.

Expanding Horizons: Carbon Black and New Tire Verticals

A key pillar of BKT's strategy is the expansion of its carbon black capacity. The Board has approved an increase from 200,000 MTPA to 360,000 MTPA, complemented by a 24 MW cogeneration power plant at Bhuj, bringing the total co-gen power capacity to 64 MW. This expansion, expected to be completed by early 2026, aims to capitalize on synergies with tire operations, ensure raw material availability, and support sustainability efforts. The carbon black segment is projected to contribute approximately 10% to the company's revenue by FY30.

Furthermore, BKT is making a modular entry into new tire verticals for the Indian market, focusing on Premium Passenger Car Radial (PCR) Tires and Commercial Vehicles (CV) Radial Tires. The pilot launch for CV Radial tires is slated for Q4 FY26, with PCR tires following in Q3 FY27. This initiative, primarily targeting the Indian Replacement Market, is expected to contribute around 20% to revenue by FY30 and achieve a ~5% market share in these new categories.

Operational Excellence and Sustainability

BKT continues to demonstrate operational excellence, evidenced by receiving Caterpillar's 'Excellence Level' award for the fourth consecutive year for outstanding performance in quality, delivery, and customer support for mining tires. The Bhuj plant also achieved a Five-Star grading and a Sword of Honor Award for 2025 from the British Safety Council, reflecting best-in-class standards in workplace safety and health management.

In terms of sustainability, BKT has made significant progress, with 98.17% of total waste generated being recycled or reused. The company consumed 36,177 GJ of renewable energy and achieved a 21.37% year-on-year reduction in non-renewable grid electricity consumption. These efforts, along with a 14.92% YoY reduction in total waste and 2.03% reduction in water intensity, highlight BKT's commitment to environmental stewardship.

Outlook

Balkrishna Industries Limited is navigating a complex global landscape with a clear strategic vision. Despite short-term challenges from tariffs and macro uncertainties, the company's robust investment in capacity expansion, diversification into new product segments, and commitment to operational excellence position it for sustainable long-term growth. The management remains cautiously optimistic, confident that these strategic foundations will enable BKT to emerge stronger with a higher global market share.