Improved and expanded product range in key markets for the company has helped the company in reporting incremental revenues for the third quarter. The quarter also witnessed good improvement in margins on a y-o-y basis. Though the increased sales came from India and Europe operations, increase in PBIT came from all regions including South Africa.

Quarterly Performance

For the second quarter ended Dec 2013, the company has reported 11% rise in the total income from operations at Rs 3,559 crore. With decline in the rubber prices, the company has witnessed substantial decline in the raw material cost. OPM would have risen further but for rise in employee and other expenses. The raw material cost as % of sales net of stock adjustments has declined 530 bps to 51.7%.

The employee cost rose 80 bps to 11.9% in Q3 FY 13-14. Other expenses rose by 90 bps to 15.6%. Resultantly, Operating margins improved by just 410 bps 16%. Operating profit rose by 49% to Rs 569 crore on a y-o-y basis.

For Natural rubber which makes up more than 40% of the cost of a tyre, the local rubber price has fallen to Rs 159 per kg, the lowest level in six months. Three months back it was around Rs 195. Just three months back, when tapping was disrupted by heavy rain and farmers were holding back their rubber in hope of a price rise, the tyre makers were struggling to secure supplies. But the switch to aggressive importing by the tyre firms, which take about two-thirds of domestic rubber demand, has pulled local prices down by 20%.

With 85% rise in other income to Rs 49.6 crore, PBIDT increased by 51% to Rs 618.5 crore. Interest cost fell by 8% to Rs 74.2 crore. Depreciation cost increased by 16% at Rs 106.37 crore. Thus, PBT before EO increased by 85% to Rs 438 crore. The company incurred an EO expense of Rs 27.76 crore during the quarter on account of expenses in connection with propped acquisition of Cooper Tire and Rubber which was terminated by the later. PBT after EO thereafter rose by 73% at Rs 410 crore. After considering 600 bps decrease in the effective tax rate at 17.6%, Net Profit rose by 87% to Rs 338 crore.

During the quarter, the company earned 60%, 10% and 29% of its revenues from India, South Africa and Europe respectively. The figures were 62%, 12% and 24% in the corresponding previous quarter. Revenues from India rose by 10%. Revenues from SA decreased by 12%. Europe registered 33% growth in revenues.

But in terms of profitability growth, it was India, Europe and SA operations that contributed. At the segment front, Indian business has reported 68% jump in the PBIT at Rs 284 crore and constituted 55% of the total segment profit. Segment profit of European operations rose 43% to Rs 201 crore. South African business reported profit of Rs 33.7 crore visi a vis a profit of Rs 4.7 crore in the corresponding previous quarter.

Nine Month Performance

For the nine month ended Dec 2013, the company has reported 4% rise in the total income from operations at Rs 10182 crore.

On a nine month basis, the raw material cost as % of sales net of stock adjustments has declined 520 bps to 53.6%. The employee cost rose 100 bps to 12 % in 9m FY 13-14. Other expenses rose by 200 bps to 15.7%. Resultantly, Operating margins improved by 260 bps 13.9%. Operating profit rose by 28% to Rs 1414 crore on a y-o-y basis.

With 57% rise in other income to Rs 79.23 crore, PBIDT increased by 30% to Rs 1493 crore. Interest cost fell by 7% to Rs 222.2 crore. Depreciation cost increased by 12% at Rs 308.8 crore. Thus, PBT before EO increased by 51% to Rs 962.7 crore. The company incurred an EO expense of Rs 57.76 crore during the period on account of expenses in connection with propped acquisition of Cooper Tire and Rubber which was terminated by the later. PBT after EO thereafter rose by 42% at Rs 905 crore. After considering 560 bps decrease in the effective tax rate at 20.3%, Net Profit rose by 53% to Rs 723.5 crore.

During the first nine month period, the company earned 62%, 11% and 27% of its revenues from India, South Africa and Europe respectively. The figures were 64%, 12% and 22% in the corresponding previous period. Revenues from India rose by 1%. Revenues from SA fell by 6%. Europe registered 27% growth in revenues.

But in terms of profitability growth, it was India, Europe and SA operations that contributed. At the segment front, Indian business has reported 37% jump in the PBIT at Rs 715 crore and constituted 55% of the total segment profit. But segment profit of European operations rose 20% to Rs 415 crore. South African reported ten times profit of Rs 60.6 crore visi a vis a profit of Rs 5.93 crore in corresponding previous nine months.

Annual Performance:

For the year ended March 2013, the company has posted 49% rise in the consolidated Net Profit at Rs 612 crore over 5% increase in the total income from operations at Rs 12,794 crore. OPM for the year shot up by 180 bps to 11.4%. Operating profit rose by 25% to Rs 1456.7 crore.

• The promoters' share in the total shareholding stood unchanged at 43.5% in Dec 13. Promoters have pledged 7.41% of total shares of the company as against 6.57% a year ago.

• The company announced its earning on 12 February 2014. The stock is currently trading marginally higher by 0.4% at Rs 118.9 at BSE on 13 Feb 2014 after hitting a high of Rs 121.75 earlier during the day.