Bearish on tyre companies: Rajesh Kothari, AlfAccurate Advisors

Rajesh Kothari, MD, AlfAccurate Advisors, in an interview with ET Now, talks about tyre comapnies


What about rubber related companies like tyre companies in specific? What’s the outlook there?

There is a significant pricing pressure for the tyre companies to pass on the increase in raw material cost, and I do not think it would be very easy for tyre companies to ask for probably 15-20% increase in price over next three to six months given the significant increase in the raw material cost. So for tyre companies to do well, the rubber cost needs to come down significantly from where they are at current levels and mind you that will probably only help tyre companies to restore probably operating profit margins by about 200-300 bps. So at least for some more time till the rubber cost does not come down to the level, which is desired and which is equivalent to FY10 levels. It would be difficult for tyre companies to see a very strong rebound in profitability terms.