To hike prices by more than 2%: Ceat

In an interview with CNBC-TV18, Arnab Banerjee, Vice President of Marketing and Sales at Ceat, spoke about his outlook for the company

Below is a verbatim transcript of an exclusive interview with Arnab Banerjee on CNBC-TV18. Also watch the accompanying video.

Q: What is the kind of price hike that you have undertaken?

A: In March we have not passed on the excise hike to the market because of the prevailing market condition and competitive situation. This is likely to be taken up early April.

Q: What could the quantum be?

A: It would be roughly 2%, which is the quantum of excise hike. It has been absorbed in the month of March. The raw material price especially rubber is moving up. It has crossed about Rs 145 per kg and it constitutes about 40% of our raw material cost. So we see some possibility of further price hikes in April. We have not yet firmed up our decision on that.

Q: 2% to 5% is the kind of price hike band that you would be looking at?

A: The hike will definitely be 2%. Over and above 2% could be the hike. We have not yet decided.

Q: You have been hiking prices ever since the month of October- 5% to 2% on a cumulative basis. Where do the average tyre prices stand as of now? How much have you hiked prices and you have seen a big slippage on your margins as well? Do you think that the next couple of quarters will see further slippage in margins and where do you see them stabilize on account of these high rubber prices?

A: I think the first half margins of about 15% odd were not sustainable. We had been maintaining that all this while. A long term margin of 10-11% is what looks sustainable. The current crunch of margin is finally because as we see most industry there is a sudden hike in raw material prices you cannot pass on entirely at the same time because market cannot accord it so there is a case of margin currently that we are going through. It is more of an aberration in the long term trend and the long term trend looks healthy.

Q: What kind of rubber prices are you comfortable with? Apollo Tyres said that they are comfortable with Rs 80-90 a kilo to hold on to their margins. Where do you see rubber prices stabilize and you think this up trend will continue at about Rs 140-150?

A: There is a substantial shrinkage in the area of cultivation, whereas the demand is robust at least in India. The demand outside the country is yet to move on. So it is a mixed bag in terms of demand where the supply side is tight. In the medium term, the prices are likely to be high, but yes for maintaining healthy margin we are looking at Rs 100.

(moneycontrol.com)