CEAT Ltd is set to implement price increases of about 5 per cent across categories by early May and indicated that further hikes may be required, as rising raw material costs begin to weigh on margins.
Tyre makers are facing a sharp rise in input costs, with natural rubber prices up about 30 per cent and crude-linked inputs also moving higher following the West Asia crisis. Industry players have already taken price hikes of 2–3 per cent, with further increases expected.
“No tyre company can absorb this kind of cost increase. Every tyre company will have to take price increases,” said Kumar Subbiah, Chief Financial Officer, CEAT Ltd.
Industry observers expect overall tyre price increases to be in the range of 10–15 per cent by FY27 if current cost pressures persist.
“There is always a lag when raw material costs rise sharply and price increases take time to flow through. By early May, we would have taken about a 5 per cent increase, but that is still not adequate,” Subbiah said. “There will be some absorption initially, and a lag of about three months before we fully recover margins.”
Raw material costs remained stable through most of the fourth quarter, with the increase beginning only in March, delaying the full impact to the current quarter. The company indicated that rising input costs, particularly in natural rubber and crude-linked materials, will begin to reflect in margins in Q1.
Raw material expenses rose to ₹9,197 crore in FY26, while finance costs increased to ₹359 crore.
Profit rebounds, capex cycle continues
The tyre maker reported a sharp rebound in FY26, with consolidated net profit rising nearly 70 per cent to ₹813 crore from ₹482 crore a year earlier, while turnover grew 15 per cent to ₹15,215 crore, supported by pricing actions and an improved product mix.
CEAT spent around ₹1,070 crore in capital expenditure in FY26, focused on building capacity ahead of demand. The company said capacity utilisation remains high across segments, prompting further expansion.
“Under normal conditions, we would look at about 25 per cent higher capex this year, and if conditions improve, we could go even higher,” Subbiah said, adding that spending will be calibrated in the near term given margin pressures.
Operating cash flow stood at around ₹1,840 crore but was exceeded by investments of about ₹2,318 crore. Total debt has risen to around ₹3,000 crore, although leverage remains moderate with a debt-equity ratio of 0.59.
Strong growth across segments
Ceat reported strong growth across replacement, OEM and international segments. “International business grew in excess of 25 per cent, led by strong demand from Europe, Latin America and the Americas,” Subbiah said, adding that shipments to West Asia were impacted toward the end of the quarter due to geopolitical disruptions. “We see momentum across all three segments — replacement, OEM and international — and expect to deliver double-digit growth going ahead,” he said.
The board has recommended a ₹35 per share dividend. While FY26 marks a recovery year, rising input costs and execution challenges could weigh on margins in the near term as the company works to pass on cost increases.