CEAT to Invest ₹1,300 Crore, Aims for 60,000 Tyres Daily

Introduction

CEAT Limited, a leading Indian tyre manufacturer, has announced a significant capital expenditure of ₹1,300 crore to expand its production capacity. This strategic investment aims to increase the company's total output to approximately 60,000 tyres per day. The move is driven by strong financial performance and a positive outlook on future demand, particularly in the passenger vehicle and international markets.

Details of the Expansion Plan

The capacity expansion will be executed as a brownfield project at CEAT's existing facility in Chennai. The plan involves adding an annual capacity of 3.5 million (35 lakh) tyres, which is expected to become operational in the first half of the fiscal year 2027-28. This enhancement will cater to rising demand across all key segments, including the replacement market, original equipment manufacturers (OEMs), and the company's independent business channels. By leveraging its current infrastructure in Chennai, CEAT aims for efficient and timely project completion with minimal operational disruptions.

Funding and Financial Prudence

The ₹1,300 crore investment will be financed through a balanced mix of internal accruals and debt. Company management has affirmed that its leverage levels will remain well within internal control limits. CEAT currently maintains a healthy financial position, with a debt-to-equity ratio of 0.6 and a debt-to-EBITDA ratio of approximately 1.5 to 1.6. The company does not anticipate a significant worsening of these ratios, as it has a consistent history of managing capital expenditure. CEAT also indicated that its capex as a percentage of sales is expected to remain at similar levels in the coming years.

Bolstered by Strong Financial Performance

This investment decision follows a period of robust financial results for the company. On January 19, 2026, CEAT reported its third-quarter earnings, revealing a 60.3% year-on-year increase in consolidated net profit, which rose to ₹155.7 crore from ₹97.1 crore in the same period last year. This growth was attributed to strong sales volumes across various segments and improved market sentiment. The company's strong performance has also been reflected in its stock price, which has gained over 28% in the past year, bringing its market capitalisation to ₹15,700.91 crore.

Strategic Growth and Market Focus

According to MD and CEO Arnab Banerjee, CEAT is preparing for sustained double-digit growth in the medium term. The company's strategy involves a multi-pronged approach. A key focus is expanding its footprint in the lucrative US market. Domestically, CEAT is working to secure more OE approvals and broaden its presence in the replacement channel. A particular emphasis is being placed on the premium and sports utility vehicle (SUV) tyre segment, which is experiencing rapid growth. The company also sees secular growth opportunities in the two-wheeler and farming segments, driven by resurgent demand from smaller towns and rural areas.

Key Project and Financial Metrics

Industry Context and Future Outlook

CEAT's expansion aligns with the positive growth trajectory of the Indian tyre market. Industry reports project steady growth driven by rising vehicle production and consistent demand from the replacement market. Mr. Banerjee noted that while the third quarter is typically weaker due to seasonal factors like winter in North and East India, the recent quarter broke this trend, prompting the company to bring forward its investment plans for passenger car tyres. Looking ahead, the company anticipates a seasonal uptick in volumes from March to June, which should support its margins.

Analysis of the Strategic Move

CEAT's decision to invest ₹1,300 crore is a forward-looking move that leverages its current financial strength to secure future market share. By focusing on high-growth areas like SUVs and international markets, the company is positioning itself to capitalize on evolving consumer preferences and global opportunities. The choice of a brownfield expansion in Chennai is a cost-effective strategy that minimizes risk and accelerates the timeline to production. The company's stable debt metrics provide a solid foundation for this expansion without over-leveraging its balance sheet, signaling confidence to investors about its long-term growth prospects.

Conclusion

In summary, CEAT's ₹1,300 crore capacity expansion is a calculated step to bolster its production capabilities and meet anticipated demand. Supported by strong quarterly earnings and a clear strategic focus on premium and international markets, the company is laying the groundwork for sustained, double-digit growth. The project is slated for completion by H1 FY28, positioning CEAT to strengthen its competitive edge in the evolving automotive landscape.