Balkrishna Industries Ltd Management Discussions.

Dear Shareholders,

Your Directors are pleased to present the 58th Annual Report of Balkrishna Industries Limited (the "Company") along with the audited financial statements for the financial year ended 31st March, 2020. The consolidated performance of the Company and its subsidiaries has been referred to wherever required.


(Rs. in Lakhs)



Particulars Current Year ended 31st March, 2020 Previous Year ended 31st March, 2019 Current Year ended 31st March, 2020 Previous Year ended 31st March, 2019
Revenue from Operations 4,78,249 5,24,450 4,81,124 5,20,999
Other Income 24,877 21,421 25,078 21,817
Total Income 5,03,126 5,45,871 5,06,202 5,42,816
Gross Profit 1,49,085 1,51,556 1,51,313 1,50,917
Less: Depreciation 36,801 33,255 37,361 33,261
Profit before tax 1,12,284 1,18,301 1,13,952 1,17,656
Less: Provision for tax
Current Tax 29,230 39,160 29,431 39,350
Deferred Tax (11,444) 941 (11,444) 941
Profit after Tax 94,498 78,200 95,965 77,365


Your Company is primarily engaged into Specialty "Off Highway Tire segment" which is consisting of Agriculture, Industrial, Construction, Earthmoving, Mining, Port, Lawn and Garden and All-Terrain Vehicle (ATVs) Tires, etc.

This segment is highly technical & capital intensive and known as "large varieties low volume segment" where any credible player needs to maintain large number of Stock Keeping Units (SKUs) to meet the diverse requirement of its customers worldwide. While the sub segment (agriculture) is largely known as non-cyclical in nature, the other sub segment (industrial, construction and mining) is generally considered as cyclical and the performance of it is largely linked to overall economic outlook of the world. The market for Companys products is mainly Europe, America, Australasia and India.

The first 8 months of the year under review have been challenging due to various macro factors such as; Trade War, unfavourable climate condition in Europe which impacted the demand of our products adversely in various parts of the globe.

From December 2019, after resolution of trade war between USA and China and favourable winter agricultural season in Europe, the demand scenario turned positive and business continued to improve until middle of March 2020 when we all were caught by the deadly Corona Virus more commonly known as "COVID-19" which led to lockdown of the entire country and as a result, our manufacturing activities as well as dispatches remained suspended from 25th March 2020 to the later part of April 2020 when lockdown was partly lifted by the Government as we were falling into essential services. We have undertaken sufficient safety measures across all our plants and followed increased protocol to ensure safety and well-being of our staff members as well as outsiders interacting with our staff members.

After resumption of manufacturing activities and dispatches, we were gradually able to ramp up our activities and are happy to inform you that we have gained normalcy in our manufacturing activities as well as dispatches to a good extent. However, the year ahead also looks challenging as we are still struggling with COVID-19 issues, the solution of which does not seem to be in sight as of today.


Standalone: During the year under consideration on Standalone basis, your Company achieved a Revenue from Operations of 4,78,249 Lakhs as against 5,24,450 Lakhs during the previous financial year. Earnings before Interest, Depreciation and Tax (EBIDTA) has decreased to Rs.1,49,812 Lakhs from Rs.1,52,535 Lakhs during previous financial year and Net profit has increased to Rs.94,498 Lakhs from Rs.78,200 Lakhs during previous financial year. More than 80% of our revenue is generated through exports.

Consolidated: During the year under consideration on Consolidated basis, your Company achieved Revenue from operations Rs.4,81,124 Lakhs as against Rs.5,20,999 Lakhs during the previous financial year. Earnings before Interest, Depreciation and Tax (EBIDTA) has increased to Rs.1,52,203 Lakhs from Rs.1,52,030 Lakhs during previous financial year and Net profit has increased to Rs.95,965 Lakhs from Rs.77,365 Lakhs during previous financial year.

The decrease in revenue and EBIDTA in standalone and decrease in revenue in consolidated results have happened due to adverse factors explained hereinabove whereas the net profit has increased despite lower revenue due to reduction in rate of tax by the Government of India during the year and consequent adjustments in deferred tax liability.


The outlook for the current year i.e. 2020-21 is full of challenges, mainly due to COVID-19 pandemic. The entire world including India is struggling with it which has severely impacted the economic activities across the globe including India. Since there is no treatment/solution in sight, it is very difficult to say when and how normalcy will be restored.

This pandemic has also triggered a fresh tussle between USA and China which may impact the global business environment adversely. In view of all such factors, the outlook for the current financial year is uncertain. However, the long-term prospects of the company are good and promising as your Company continues to explore all the avenues to ensure growth of its business which includes deeper penetration into its existing market within India as well as outside India including OEMs and continuous expansion of its product range. Your Company is proud to say that it has more than 2700 SKUs.



Your Company operates into a segment predominantly known as "large varieties - low volume segment", which is not only capital intensive but also labour intensive. Your Company is fully geared to take advantage of the peculiarities of the said segment and has developed a large base of SKUs to meet the diverse needs and applications.

Moreover, this segment is neither exposed to any technological obsolescence nor wild fluctuations in demand for its products.

The Company is continuously marching ahead to explore incremental opportunity in the form of developing "Earthmovers & mining tires" markets and taking advantage of the shift from bias to radial tires, which is growing continuously. In order to take advantage of this opportunity, the Company had set up an all-steel OTR Radial tire plant and have further added such capacities by setting up a green field tire plant at Bhuj to produce large size all steel OTR radial tires besides other categories of tires. Your Company is proud to be the first Company in India to set up such a plant. Your Company is continuously expanding its base into various sub-segments like agricultural, industrial, construction, mining, winter and solid tires under both technologies - bias as well as radials.

The COVID-19 issue has led to a situation where most of the countries are thinking to reshuffle their sourcing plan/strategy. It may open up lot of opportunities for India including our Company.


Like any other Company, your Company is also exposed to various threats like competition from small players, retention of employees, labour issues, increase in raw material prices and other input costs, etc.

A new threat has emerged out of COVID-19 which may change the manner and pattern of the business and also may intensify the various threats to which we are already exposed to. It may increase the operating cost of running the business.



As per amendment made under Schedule V read with Regulation 34(3) to the Listing Regulations, details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios and any changes in Return on Net Worth of the Company including explanations thereof are given below:



2019-20 2018-19 2019-20 2018-19
Debtors Turnover ratio (Days) * 50.69 40.92 45.77 37.50
Inventory Turnover ratio (Days) ** 12.27 15.34 14.93 18.76
Interest Coverage Ratio ( ICR) # $ 1 155.45 121.84 129.04 106.71
Current Ratio## $ 2 1.28 1.76 1.23 1.70
Net Debt - Equity Ratio ! $ 3 0.10 0.01 0.11 0.01
Operating Profit Margin !! 23.63 22.74 23.87 22.80
Net Profit Margin ~ $ 4 18.78 15.43 18.96 14.25
Return on Net Worth ~~ 22.48 25.49 22.93 25.52

* Accounts receivables/Sales * 365 days

** Closing stock of finished and traded goods/sales *365 days

# EBIT/finance cost

## Current Assets /Current liabilities

! (Long term borrowings + short term borrowing + current maturities less current investment, cash and Cash Equivalents)/Total equity

!! EBIT/Operating Income ~ PAT/Total Income ~~ EBIT/Net Worth $ Reason for variance (> 25%)

$ 1 The ICR increased due to lower finance cost as company availed foreign currency working capital loan (PCFC in EURO) at lower rate of interest and also due to reduction in borrowings.

$ 2 The Current Ratio reduced due to reduction in current investment.

$ 3 The net debt/equity increased as net debt increased due to reduction in current investment.

$ 4 The Net Profit margin increased due to lower tax rate.


The Company has adequate internal control systems in place, and also has reasonable assurance on authorizing, recording and reporting transactions of its operations. The Company has a well-placed, proper and adequate internal controls environment, commensurate with its size, scale and complexities of its operations. The Company had already developed and implemented a framework for ensuring internal controls over financial reporting. This framework includes entity level policies, processes and operating level standard operating procedures. Internal control systems are an integral part of your Companys Corporate Governance structure. These have been designed to provide reasonable assurance with regard to inter-alia.

a. recording and providing reliable financial and operational information;

b. complying with the applicable statutes;

c. safeguarding assets from unauthorized use;

d. executing transactions with proper authorization, and ensuring compliance with corporate policies

e. Prevention and detection of Frauds/errors;

f. Continuous updating of IT systems. The Companys management has assessed the effectiveness of the Companys internal control over financial reporting as of 31st March, 2020.

Your Company has appointed M/s KPMG to assess the effectiveness of internal financial controls of the Company. Their assessment was based on an internal audit plan, which was reviewed in consultation with the Audit Committee.

The Audit Committee reviewed the reports submitted by the Management and Internal Auditors. Based on their evaluation (as defined in section 177 of the Companies Act, 2013 and Regulation 18 of Listing Regulations, 2015), the Companys Audit Committee has concluded that, as of 31st March, 2020, the Companys internal financial controls were adequate and operating effectively.


Your Company believes in a culture of inclusion, trust, empowerment and development for its employees. Your Company continues to invest significantly in building a culture of coaching and mentoring and further aims to make coaching, mentoring and communication ability the foundation of its leadership style. Your Company considers people as its biggest asset and believes in People at the heart of its Human resource strategy. Your Company has established an organization structure that is agile and focused on delivering business results. With regular communication and sustained efforts, it is ensuring that employees are aligned on common objectives and have the right information on business evolution. Your Company ensures that young talent is nurtured and mentored consistently, that rewards and recognition are commensurate with performance and that employees have the opportunity to develop and grow. Your Company had 2,834 employees as on 31st March, 2020. Your Company strongly believes in fostering a culture of trust and mutual respect in all its employees and seeks to ensure that Companys values and principles are understood by all and are the reference point in all people matters. Employee relations continue to be cordial.

COVID-19 has created lot of challenges on the Human Resources front; both in the staff category as well as in workmen category. In order to address this challenge, the Company has taken medical insurance of all its employees to protect them from COVID-19 and have taken good care of its staff members as well as workers during the period of lockdown and continues to do so on regular basis.


Risk is an integral and unavoidable component of business. In todays challenging and competitive environment, mitigating risks is imperative. Common risks include changing regulations, competition, business risk, technology obsolescence, investments and retention of talent. Business risk, inter alia, further includes financial risk, social risk, political risk, environmental risk and legal risk. For managing risks more efficiently, the Company has undertaken a detailed risk management exercise and has identified key risks that can have a critical impact on the Companys performance. The Company has inter alia identified the following key risks:

Operational Risk:

Operational risks like equipment obsolescence can impact production. To mitigate such risks, the Company continuously monitors equipment obsolescence and upgrades equipment from time to time and undertakes preventive maintenance measures. The Company has also made significant investment in equipment modernization.

Fluctuation in Raw Material prices:

The Companys major raw material is Natural Rubber, which is an agricultural commodity and actively traded on the commodities exchanges. The demand supply situation of Natural Rubber has been favourable to the users which has kept its prices under check. Though we see volatility in its pricing, we do not foresee any major increase in its prices in the near to medium term unless due to unforeseen circumstances. The prices of other raw materials which are crude derivatives have been declining on account of drop in crude prices. Since crude is a very volatile commodity, the prices of crude linked raw materials are likely to fluctuate due to any fluctuation in crude prices.

In order to minimize such risks, the Company not only enters into medium-term contracts but also adopts the policy to "Buy and Stock" large quantities during the lean period. The timely sourcing of various raw materials consumed by the Company is ensured by procuring it from different geographies.

COVID-19 has disrupted the entire supply chain across the globe which has led to higher delivery time coupled with increase in logistic cost. The company is continuously developing alternative sources of raw material as well as their supply chain to ensure timely delivery of goods at a minimal cost.

Market Risk:

More than 80% of the Company revenue is generated through exports which is made to different geographies. Almost 1/3rd of the Companys revenue is generated through a product category which is cyclical in nature and therefore your Company is exposed to market risk.

Your Company manages this risk by expanding its presence in different markets, deeper penetration into existing markets and by launching new products. Furthermore, the Company spends requisite amount on marketing and promotional activities to ensure customer retention and brand-building.

COVID-19 has led to lockdown across the globe which has impacted the demand adversely. The Company believes that the disruption in demand is temporary in nature and do not foresee any long-term challenges on demand front out of COVID-19.

Labour Relations:

Since the manufacturing process of the Company is labour intensive, it requires lot of skilled as well as un-skilled workers. Maintaining a huge work force is a big challenge.

In order to mitigate the said risk, the Company follows good HR practices to promote the welfare and safety of its workmen and maintain a cordial working environment. All workers are paid more than government stipulated remuneration for their work.

COVID-19 led to migration of labour from various industrial zones to their home towns; this may create a situation of shortage of labour which may impact the operations of the Company adversely. Despite this, your Company does not foresee any major challenge as it has taken good care of all its staff members as well as workers during the period of lockdown and continues to do so regularly ensuring smooth and seamless operations of the Company.

Retention of skilled manpower:

Like other players in the industry, the Company is also exposed to this risk, more particularly when there is shortage of skilled manpower in the industry. COVID-19 has further intensified this risk. However, the Company is able to manage the said risk by good HR practices and rewarding its employees handsomely.

Currency Fluctuation:

The Company revenues are mainly generated through exports. Further, since most of the raw materials and capital equipment are imported, the Company is exposed to foreign currency risk. However, it enjoys natural hedge as most of its revenues are in foreign currency.

COVID-19 issue has created imbalance in the economies of various countries including India and therefore we are exposed to wider risk due to currency fluctuation.

However, since, the Company is a net foreign exchange earner and hedges its net exposure well in advance by way of forward contracts, it is immune to a great extent from the fluctuation in currencies.

Risk Management and Mitigation:

Risk Management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor and control the probability and/or impact of uncertain events or to maximize the realization of opportunities. Risk management also provides a system for the setting of priorities when there are competing demands on limited resources. Risk management also attempts to identify and manage threats that could severely impact or bring down the organization.

The Companys Board of Directors has overall responsibility for the establishment and oversight of the Company risk management framework. Pursuant to Regulation 21 of Listing Regulations, the Board of Directors at their meeting held on 8th February, 2019, has constituted Risk Management Committee comprising of Mr. Pannkaj Ghadiali, an Independent Director as Chairman of the Committee, Mr. Arvind Poddar, Mr. Rajiv Poddar, Mr. Vipul Shah, Directors of the Company and Mr. Basant Bansal, KMP are Members

of the Committee. The primary objective of the Committee is to control the various risks that the Company is exposed to, with a view to prevent unacceptable losses, to provide an effective means of identifying, measuring and monitoring credit exposures incurred by Company and to keep such risk at or below pre-determined levels. The Company has framed an Enterprise Risk Management Policy (the "Policy") to realize the following benefits for the Company:

1. Enhanced risk management for the organization including strategy setting.

2. Facilitate risk-based decision making.

3. Improve governance and accountability.

4. Enhance credibility with key stakeholders such as investors, employees, government, regulators, society, etc.

5. Create, Protect and enrich stakeholder value.

The policy contains the objectives of risk management, companys approach to risk management and the risk organization structure for identification, management and reporting of risks. The policy specifies the roles and responsibilities of key stakeholders and other key personnel of the company with regards to risk management. The policy also aims to ensure and identify process of risk identification and management in compliance with the provisions of the Companies Act, 2013.

Following objectives are achieved through the Risk Management program of the Company viz:

1. Enable organizational sustainability taking cognizance of the impact of its products, services & operations on society and the environment.

2. Reduce potential gaps in achieving companys objectives.

3. Align and integrate existing risk management practices in the organization.

4. Build confidence of investment community and stakeholders.

5. Enhance Corporate Governance.

6. Successfully respond to changing business environment.

Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Companys Activities.

The Audit Committee oversees how management monitors compliance with the Companys risk management policy and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit Committee.

There are no risks, which in the opinion of the Board threaten the existence of the Company.


Certain statements in the "Directors Report & Management Discussion and Analysis" describing the Companys views about the Industry, expectations/ predictions, objectives etc., may be forward looking within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed in the Statement. Companys operations may inter-alia affect with the supply and demand stipulations, input prices and their availability, changes in Government regulations, taxes, exchange fluctuations and other factors such as Industrial relations and economic developments etc. Investors should bear the above in mind.

For and on behalf of the Board of Directors
Place : Mumbai, ARVIND PODDAR
Dated: 20th June, 2020 Chairman & Managing Director
DIN: 00089984