Balkrishna Industries: Delay in capex predicted but comfortably liquid

Balkrishna Industries Limited (BKT), one of the foremost global off-highway tyre manufacturers, claims to have maintained a comfortable liquidity position during the period of lockdown and anticipates no major risk owing to the extended receivable cycle.

In compliance with SEBI's latest directive, the company disclosed the COVID-19 impact on its business in terms of several parameters including financial stability, operations, capex etc. Its plants were closed from March 22 to April 27, 2020.

Historically, the company has recorded 26 per cent of its annual revenues during the first quarter of the year. Based on this standard, there may have been nearly 5 to 10 per cent loss in annual revenues already. Moreover, factoring in the overall performance of the commercial vehicle industry over the last few years, the expectation of financial stability in the near future may be slightly unconvincing. However, as an established and financially sound company, BKT can be envisioned to show high sustainability during tough times.

According to their last reported status, the company's capex for the Waluj and Bhuj plants is Rs 500 crore each. It can be noted from their statement that their capex is broadly on track but eventual delay in completion is predicted. It has maintained a zero debt status in terms of long term borrowings and this capex is mostly from internal accruals, thereby minimizing leverage.

The company's stock closed on BSE with gains of 2.75 per cent at Rs 1,105, on Thursday.