CEATLTD

Completes Michelin Acquisition, Betting on Long-Term Off-Highway Growth

has completed the acquisition of Michelin's Camso Construction Compact Line Business, a strategic move aimed at expanding its presence in the off-highway tyres (OHT) segment. While the deal holds long-term promise, its initial integration is expected to bring near-term financial challenges. → Acquisition and Strategic Rationale: The acquisition aligns with Ceat's strategy to boost growth through premiumization, globalization, and a stronger foothold in the OHT market. The Camso business has an installed capacity of 250 tonnes/day, but is currently operating at only 50% utilization. The total deal is valued at $225 million, with $138 million already paid. → Near-Term Challenges and Financial Impact: The deal is likely to be earnings per share (EPS) dilutive in the short term. Analysts have already cut their EPS estimates for Ceat for FY26 and FY27 due to delayed revenue and margin recognition. Camso's revenue has been declining, and Ceat expects it to be in the $130-150 million range this year. The acquisition will increase Ceat's net debt from ₹1,900 crore to ₹2,900 crore in FY26. → Long-Term Outlook and Other Business Segments: Despite the immediate headwinds, Ceat expects Camso to achieve an EBITDA margin of around 20% by FY28 after integration is complete. The company plans to invest $30 million in the business over the next two years. In its domestic business, Ceat anticipates that recent GST rate cuts on tyres will boost affordability, although easing domestic natural rubber prices may not translate to significant margin benefits due to other macroeconomic factors. The company has projected a consolidated capital expenditure of ₹1,000 crore for FY26.