CEAT Q4 FY25: Revenue crosses INR 13,000 crore, margins recover sequentially as raw material inflation bites year on year

CEAT reported a strong finish to FY25 on the top line, even as profitability remained under pressure compared with last year. In Q4 FY25, consolidated revenue from operations rose to INR 3,420.6 crore, up 14.3% year on year and 3.7% quarter on quarter. EBITDA margin improved sequentially to 11.5% from 10.5% in Q3, while consolidated profit after tax came in at INR 98.7 crore.

For the full year, the company crossed an important scale milestone. FY25 consolidated revenue from operations stood at INR 13,217.9 crore, up 10.7% from INR 11,943.5 crore in FY24. The trade-off was visible in profitability: FY25 EBITDA was INR 1,495.9 crore (11.3% margin) versus INR 1,673.0 crore (14.0% margin) in FY24, and FY25 consolidated PAT declined to INR 471.4 crore from INR 635.3 crore.

Management attributed the quarterly margin improvement to a better revenue mix and tighter cost control. At the same time, the investor presentation was explicit that the year on year margin contraction was driven by a higher raw material basket, a key swing factor for tyre manufacturers.

How CEAT grew: balanced mix and improving realizations

CEAT’s narrative for Q4 was built around broad-based growth and improved realizations. The investor deck highlighted healthy year on year volume growth in the original equipment manufacturer segment followed by replacement, while noting that exports and international business were impacted by global macroeconomic conditions.

The company also provided a clear picture of its market mix for FY25 on a standalone basis. Replacement continued to be the anchor at 53% of revenue, with OEM at 28% and exports at 19%. Within replacement, the split was diversified across categories such as truck and bus (30%), 2/3 wheeler (27%), passenger car and utility vehicle (21%), off-highway (15%), and light commercial vehicle and others (7%).

This balanced portfolio matters because different end markets behave differently through cycles. When OEM demand is strong, it can lift volumes quickly. When replacement demand is strong, it can support steadier throughput and realizations. Exports add diversification, but CEAT itself flagged near-term macro pressure in international markets.

Margins: sequential recovery, but raw material inflation remains the core headwind

The most important takeaway from the quarter is the direction of margins. CEAT’s Q4 EBITDA margin improved by 101 basis points quarter on quarter to 11.5%. The investor presentation tied this to the raw material basket staying flat versus Q3, which helped gross margin expand by 64 basis points sequentially.

But the year on year comparison remains tougher. Gross margin percentage for Q4 declined by 483 basis points compared with Q4 FY24, and FY25 gross margin percentage was down 430 basis points year on year. The deck directly attributed the year on year margin contraction to an increase in the raw material basket. That is consistent with the FY25 profile where revenue grew 10.7% but EBITDA declined 10.6% and PAT declined 25.8%.

Below the operating line, finance costs and depreciation were higher versus last year, reflecting the impact of higher debt and continued investment in capacity. In Q4 FY25, consolidated finance costs were INR 74.4 crore versus INR 61.7 crore in Q4 FY24, while depreciation was INR 152.3 crore versus INR 136.1 crore.

Capital allocation, leverage and liquidity: growth capex with tight working capital

CEAT’s FY25 capex was a defining feature of the year. Management stated the company incurred about INR 946 crore of capex during FY25, largely for capacity additions intended to support growth plans in FY26. For Q4 specifically, the investor deck cited capex of about INR 235 crore, funded through internal accruals.

At the same time, the balance sheet signals that working capital and liquidity need close monitoring. The investor deck said working capital increased sequentially, leading to a debt increase of about INR 95 crore quarter on quarter. Consolidated debt at Q4 FY25 was INR 1,928 crore, with debt to equity at 0.44 times and debt to EBITDA at 1.29 times.

Regulatory disclosures reinforce that current ratios are low. The consolidated current ratio as at March 31, 2025 was 0.66 times and the document explicitly notes that net working capital is negative. Low current ratios are not unusual in manufacturing businesses that use supplier credit, but they do make the funding model more sensitive to shocks in collections or inventory.

On shareholder returns, the board recommended a dividend of INR 30 per equity share (300%), subject to shareholder approval.

Strategy: off-highway expansion through Camso acquisition and ongoing cost actions

Two strategic actions stand out from the disclosures.

First, CEAT signed definitive agreements on December 6, 2024 with associate companies in the Michelin Group to acquire the Camso brand’s off-highway construction equipment tyre and tracks business for a deal value of USD 225 million, through one or more subsidiaries to be incorporated. The company clarified the transaction is subject to regulatory approvals and had not completed by March 31, 2025, so there was no financial impact in FY25. Management added that it looks forward to integrating the Camso compact construction business with CEAT in the current year.

Second, the company continued to pursue cost competitiveness at the plant level. Management stated CEAT incurred about INR 37 crore during the quarter toward voluntary separation of employees at a high-cost factory, and the audited results disclose voluntary retirement scheme costs as an exceptional expense in Q4.

Operationally, CEAT also highlighted product and workplace initiatives, including range expansion with Z-rated 21-inch tyres and recognition for innovation and workplace practices. On the sustainability front, the deck highlighted commitments and certifications such as science-based net-zero alignment and renewable power share at plants.

What to watch next

CEAT ends FY25 with a clear top-line trajectory, but with profitability still linked closely to raw material dynamics and the ability to hold pricing and mix. The key variables for investors to track are the sustainability of the Q4 margin recovery, the working capital trajectory as new capacity ramps, and the timing and integration of the Camso off-highway acquisition.

The company has indicated it is preparing for FY26 growth through capacity investments and expects to integrate the Camso compact construction business in the current year. Execution on these priorities, alongside tighter control of cash conversion, will likely determine whether revenue growth translates into stronger earnings in the next cycle.