Arnab Banerjee, MD & CEO, Ceat, says price hikes will continue because the pass-through to the tyres per se is inadequate if cumulative price hikes from April to August are taken. Ceat has been able to pass on maybe 4%, in barely a couple of categories, but in a large number of categories, they have been able to pass on even less. The ability to pass on to OEMs is also restricted. Banerjee says price hikes will continue in September.
Just wanted to begin by discussing the raw material setup. I know this is something that we have talked about earlier as well. But at the end of Q1, you were talking about how the raw material prices could increase by 5% to 6% in Q2. Now, on one hand, while the rubber prices have gone up, crude prices have come off, would you still stick with the view that the total raw material cost will be up 5% to 6% or do you think an offset is likely to happen?
Arnab Banerjee: In the first quarter (Q1) raw material prices were about 5% higher than Q4 and Q2 raw material prices will indeed be higher by 4% to 5% than Q1.
This is because the crude set off has happened towards the end of the quarter in the month of September. Right now, as we speak, it is down to 70-ish, low 70s. So, the benefit of the crude and the crude derivatives and raw material basket that impacts us will happen through Q3 and Q4, and not in Q2.
The natural rubber prices, especially domestic, have been very high in Q2. In fact, they have been at a 15-year high. It has tapered off a little bit but is still very high at Rs 230 per kg.