CEAT Ltd, the flagship company of RPG Enterprises, has approved an investment of ₹1,205 crore to significantly expand its two-wheeler tyre manufacturing capacity, betting on sustained demand growth despite near-term pressure on margins from rising raw material costs.
The company’s Board has cleared the investment to add around 53,000 tyres per day over the next five years. The capacity expansion is expected to be completed in phases by FY2031 and will be funded through a mix of internal accruals and debt.
Capacity expansion to meet rising demand
CEAT currently has an installed production capacity of around 80,000 two-wheeler tyres per day, excluding capacity already under implementation. With utilisation levels touching 95%, the company said the expansion is aimed at ensuring adequate capacity to support future growth.
The additional production will be created through greenfield and/or brownfield projects, based on internal assessments.
The company said its existing manufacturing facility at Nagpur is nearing full utilisation, making capacity augmentation a strategic priority.
Revenue grows 22%, margins under pressure
For the first quarter of FY27, CEAT reported consolidated revenue of ₹4,318 crore, registering a 22% year-on-year growth from ₹3,529 crore in the corresponding quarter last year.
However, profitability came under pressure as higher raw material costs weighed on margins. The company’s EBITDA margin stood at 8.56%, while net profit declined sharply to ₹4 crore from ₹112 crore a year earlier.
West Asia crisis impacts costs
CEAT Ltd Managing Director & CEO Arnab Banerjee said the ongoing geopolitical tensions in West Asia significantly inflated raw material costs during the quarter.
“Q1 was a challenging quarter for the industry. The continuing West Asia crisis led to significant raw material cost inflation, which weighed on our gross and operating margins. We responded with calibrated price increases to partly offset the impact while staying focused on demand and market share.”
He said the company continued to deliver robust revenue growth, supported by healthy demand across business segments and high capacity utilisation, adding that CEAT would maintain a disciplined pricing strategy while pursuing profitable growth.
Price hikes to offset inflation
CEAT Chief Financial Officer Kumar Subbiah said commodity inflation linked to the West Asia conflict had significantly impacted input costs.
“We have taken cumulative price increases of 5%. We expect raw material costs to remain elevated in Q2 and will continue to balance pricing actions with cost prudence to progressively mitigate the impact on our margins.”
Subbiah added that the company invested ₹300 crore in capital expenditure during the quarter, largely to enhance manufacturing capacity while maintaining strict control over discretionary spending to conserve cash.
The latest investment underscores CEAT’s confidence in the long-term growth potential of India’s two-wheeler market, even as the company navigates near-term cost pressures through capacity expansion, pricing discipline and operational efficiency.