Balkrishna Industries’ Covid-19 Update

Share price of Balkrishna Industries’ are up for seventh straight day, the longest winning streak for the stock since October 2019, on a renewed buying interest following the company’s operations slowly returning to normalcy.It’s share are up 1.3% at Rs 1,099 in today’s trade.
The Mumbai-based tyre maker expects its sales volumes, revenue and profitability to get impacted in the fiscal fiscal first quarter of FY2021 (Q1FY20).

The company finds it difficult to predict the full impact of Covid-19 on full year operations. However, it has achieved substantial normalcy in business operations in international markets.
This should provide some comfort to the company, in terms of the revenue generation, given that 80% of the total sales come from exports while balance from Indian markets.

Balkrishna has resumed dispatches to international markets which have gradually increased in May 2020.
There are no disruptions in manufacturing as sufficient raw material available.
Meanwhile, the company believes that the completion of capex programs (which are broadly on track) will depend on the Covid-19 situation.

Interestingly, it is a net cash company with zero long-term debt. Also, it doesn’t see major risk despite some likely impact on the receivable cycle.
In February, the company said its business may see better growth in financial year 2020-21 (FY21) compared to the last financial year 2019-20 (FY20).

It had expected to end FY20 with minor de-growth on sales volumes. However, the management believes the company will continue to gain market share across segments in the years to come.

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