Balkrishna Industries Ltd. informed the exchanges today that it's halting plans to set up a new plant in the U.S. on the back of challenging business and economic environments.
India's second-largest tyre company by market value said in September last year it would set up a greenfield project with capacity of 20,000 metric tonnes per annum in U.S. at a cost of Rs 700 crore ($100 million). That gave rise to concerns over capital expenditure, leading to a decline in the company's shares.
The deferment of the U.S. capex is positive, said Ashutosh Tiwari, director of Equirus Securities. โPost Q1 earnings, volume estimates are expected be cut and EPS (earnings per share) as well,โ Tiwari said. โWe expect the stock to trade range bound.โ
ICICI Direct said in a note to its clients that โthe near-term concerns of capital efficiency and leveraged balance sheet at Balkrishna Industries to be put to restโ.
The off-road tyremaker caters to industrial segments, including cranes and mining and container handlers, and agricultural tractors. The company generates 15 percent of its revenue from North America, where its clients are facing challenges. Caterpillar Inc., Balkrishna Industries' largest American client, cut its full-year guidance citing higher tariffs and lower demand for its products in key markets like China.
Balkrishna Industries, according to exchange filings, intends to spend over Rs 1,000 crore in capital expenditure at Waluj and Bhuj in India.
Shares of Balkrishna Industries have declined 16.4 percent so far this year.
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