Balkrishna Industries Pirelli tie-up supports capital-efficient PCR tyre scale-up

Investment View and Strategic Rationale

In its October 22, 2026 company update, ICICI Securities retained its BUY recommendation on Balkrishna Industries following BKT's partnership with Pirelli Tyres S.p.A. for the offtake of Pirelli-branded premium passenger car radial (PCR) tyres from BKT's Bhuj facility.

ICICI Securities views the agreement as a strategic positive because it gives BKT an accelerated and capital-efficient route to scale its on-road tyre presence using existing capacity. The broker also believes that its association with Pirelli could improve BKT's brand perception, validate its manufacturing and product-quality capabilities, and support quicker dealer-partner acquisition as BKT expands in on-road tyres.

Pirelli Partnership and Capacity Utilisation

Management indicated that Pirelli tyre offtake should begin in 2027 and gradually rise to 800,000 PCR tyres annually by 2030. The focus is on premium, 17-inch-plus tyres, principally for the domestic market and import substitution. Neither party is restricted from selling its own-brand tyres in any geography.

The Pirelli volumes will be accommodated within BKT's existing investment programme, requiring no incremental capital expenditure. They should also support a faster ramp-up at Bhuj, where phase-one PCR capacity is 6,700 TPD. Even after Pirelli volumes reach 800,000 tyres annually, management expects 80 per cent of the capacity to remain available for BKT-branded PCR tyres.

BKT will manufacture using its own technology, while Pirelli will use proprietary technology at the common facility. BKT expects conversion margins from the arrangement, and management reiterated a medium-term EBITDA margin target of 21 to 23 per cent.

Earnings Estimate Revisions

ICICI Securities increased its revenue estimates by 3.1 per cent for FY28E and 5.8 per cent for FY29E. EBITDA estimates were raised by 1.1 per cent and 2.3 per cent, while EPS estimates increased by 1.3 per cent and 2.7 per cent, respectively. The broker left FY27E estimates unchanged.

The higher revenue outlook is accompanied by modestly lower projected EBITDA margins: 21.0 per cent for FY28E versus the earlier 21.4 per cent, and 21.3 per cent for FY29E versus 22.1 per cent previously.

Financial Forecasts

BKT reported FY26 revenue of Rs 1,08,200 million, EBITDA of Rs 22,632 million and PAT of Rs 12,219 million. ICICI Securities' forecasts are summarised below:

Valuation and Target Price

ICICI Securities revised its target price to Rs 2,675 from Rs 2,600, valuing Balkrishna Industries at 24 times September 2028E EPS.

Key Risks

• Stronger-than-expected competition in the domestic truck and bus radial, two-wheeler and PCR tyre segments could slow the ramp-up and cause pricing pressure.
• A further increase in the raw-material basket, without BKT being able to fully pass through commodity inflation, could pose a risk.