CEAT Limited (500878) Earnings Call Transcript & Summary

Good day, everyone, and thanks for joining us today for the call. From the management side, we are represented by Mr. Anant Goenka, Managing Director; and Mr. Kumar Subbiah, Chief Financial Officer. Now I would like to hand over the call to Anant for his initial remarks. Over to you, sir.

Thank you, Nishant. Good afternoon, everyone, and a very welcome to CEAT Quarter 1 '20 Earnings Call, and thank you all for joining us today. [Foreign Language] I'm Anant Goenka, and I have with us on the call our CFO, Kumar Subbiah. We hope that all of you have been safe and healthy during these challenging times. These are completely unchartered territories in which government authorities and companies globally are navigating with utmost caution. With respect to our quarter 1 financial performance, as you know, the entire month of April was a washout as international business comes to a standstill. But as we...

I'm so sorry to interrupt. Sir, your voice is cracking.

Okay.

No, sir. It's still the same. I would request you to disconnect the line. I'll call you back again.

Just a second, I'll let -- hello.

Okay, sir. Sir, so now you can go ahead. If at all there's disturbance, I'll let you know.

Sure. Sure. So yes, as we progressed further into the quarter, we saw replacement demand pick up quite well as the lockdown was removed in a phased manner. On a stand-alone basis, our revenue for the full quarter stood at INR 1,067 crores, a year-on-year decline of 37.4%. The entire decline was on account of volumes as net realization was at similar levels compared to the same period last year. On a quarter-on-quarter basis, we saw a decline of about 30%. And this, too, primarily driven due to volumes. As our OEM and export markets struggled, a strong bounce back in the replacement side helped us arrest this volume decline. Within the replacement market, we saw good traction for our farm and truck radial products, both of which registered a healthy volume growth [Audio Gap] year. Towards the latter half of Q1, we also started to see a pickup in the 2-wheeler and passenger car segments, which also is now showing very strong demand. Our raw material cost on a per kg basis came off by about 6% year-on-year basis. We have been able to control our costs very judiciously that helped deliver an EBITDA margin of 9.3% despite substantial negative operating leverage. We have ended the quarter with a stand-alone loss of [Audio Gap] Over the course of the quarter, we have focused on a few key areas, the first being caring for our people to ensure the safety of everyone around, whether they're our employees, our customers, our suppliers and channel partners. In our factories, we maintain social distancing, sanitization and ensure that our people are safe. For our office space, we continue to work in a work-from-home basis. And to keep people engaged, we focused on various initiatives such as ramping up our [ NNOT ] practices, health counseling, fitness training, yoga and other areas to keep everyone engaged. As a result of our consistent efforts over the last year to focus on our people, we were also recognized as the top 35 best places to work by the Great Place to Work Institute. The other area we worked on was on customer. I'd say that here, we really started providing doorstep fitment of tires and other associated services that our customers would need. Now we made sure [Audio Gap] for us as well as for all customers is available, so our supply chain was extremely agile in making sure availability of material was done as smoothly for our customers. We also relaxed our channel policies that were there to ensure everyone was treated fairly. The impact of the slowdown is not experienced or minimized for our partners as well. Apart from all tires, our outlets now also provide CEAT 6-layered masks and sanitization kits as well. We've also been contributing very actively on the CSR front under the RPG Foundation umbrella. Since the onset of the lockdown, we have distributed more than 5 lakh made from our plant locations. We have sanitized more than 10,000 trucks to ensure driver safety. We've provided corona testing boots to various hospitals and municipalities across the country. We've also co-developed a low-cost ventilator and are now in the process of supplying it to various isolation centers and hospitals. We work with our channel partners to provide them with health counseling, fitness training and helping them in any way that they need. This has held us in good stead during difficult times with our channel partners as well. As replacement demand is picking up, all our plants are now operational and are currently running at pre-COVID levels to meet demand. And our supply chain team has ensured timely availability of our product, as I shared, by adopting dynamic fulfillment models [Audio Gap] to rural demand in the current scenario. To manage the current -- the uncertainty ahead, we will continue to exercise strong cost controls and utilize our costs or expenses very judiciously. We have constituted specific teams tasked with identifying pockets of expenses which can be cut and also come up with new ideas to generate savings. OEM models that were slated for Q1 launch were pushed back to later parts of the year, but our inroads into OEMs continue to see improvements. Last quarter, we've got a number of new RFQs in the 2-wheeler and in PCR areas. While the OE segment has been facing some headwinds, we expect some recovery going forward. We've also started to explore new digital avenues to continue to engage with our customers, stakeholders and many ways in terms of how do we utilize digital to bring down our cost as well. So I think the overall efforts that have been put in by our management in these times have been absolutely incredible. I feel very proud of the efforts and work that have been put in, and I feel we are very confident to bounce back well after this crisis comes to an end. With this, I'll hand over the call to Kumar Subbiah. Kumar?

Thank you, Anant. Good afternoon, ladies and gentlemen, and thank you for joining us on our quarter 1 earnings call. I'll share some further financial data points with you, post which we can have a Q&A. Let me start with the revenue. Our consolidated net revenue for the quarter stood at INR 1,120 crores, a decline of about 36% versus the same quarter of last year and about 28.8% over previous quarter. Our stand-alone revenue for the quarter stood at INR 1,068 crores, and the decline was in line with the consolidated revenues, as explained now. The revenue decline was primarily on account of volume decline arising out of lockdown. Let me give you some flavor of our gross margins. Our consolidated gross margin for the quarter was 40.3%. We have a marginal expansion of about 70 basis points over the same period of last year and a reduction of about 530 basis points. Here, I would like to clarify that the movement in the finished goods and unfinished goods between the 2 given periods would have an impact in the way gross margin is calculated and reported. So during the quarter, our consolidated finished goods inventory came down by INR 212 crores compared to an increase of about INR 43 crores in the previous quarter, which means I've been talking about a difference of about INR 255 crores. As you are all aware, that cost of goods sold shown in our profit and loss account includes the movement in finished goods. As the valuation of finished goods movement include nonmaterial costs like direct manufacturing costs, direct distribution costs, the movement in finished goods shown as cost of goods sold in our profit and loss account also includes the nonmaterial portion. EP excludes the impact of nonmaterial costs. The gross margin for the quarter 1 has been maintained at the same level as the previous quarter. However, any movement in gross margin has no impact on our EBITDA margin or profit as this is more of reporting between one and the other. I'll now briefly explain our progress in cash flow and working capital. During the quarter, there was immense focus on cash flow through -- and we maximized our cash generations through better receivables and also utilized the cash in a very judicious way. We have put in a daily cash flow management process and also planned our cash outflows for the week and for the month with the same amount of rigor. We ensured timely payments to all MSME vendors, our employees, discharged all our statutory liabilities on time, interest costs and all payments to all the critical windows. As the replacement demand picked up during the quarter, our cash collections also improved significantly, thanks to our effort by a sales team that helped in managing our cash flows even better during the quarter. We continue to manage our working capital judiciously and also focused to ensure that there is enough liquidity through working capital and long-term arrangements with banks to be utilized as and when needed. We maintained adequate liquidity throughout the quarter to ensure that all business requirements are fully met. We are happy to inform you that we did not avail any moratorium concession during the quarter, both for our principal portion of the debt as well as interest portion of the debt. And we discharged all the liabilities on time. As regards to our operational expenses and EBITDA, we exercised tight control during the quarter on all our costs. We looked at our costs on 0-based basis. That helped us to contain not only our discretionary costs but also nondiscretionary costs, and we maintained that at absolute minimum. As a result of the above and various initiatives, our consolidated other expenses declined by almost 50% year-on-year. This also helped us in delivering reasonable EBITDA margins in the quarter despite having negative operating leverage. Our consolidated EBITDA for the quarter stood at INR 105 crores, a margin of about 9.4%, a marginal contraction of about 40 basis points over the same quarter of last year. Our -- post commissioning of our Chennai manufacturing facility in the quarter 4 of previous financial year, our consolidated depreciation and interest cost also went up by about INR 5 crores and INR 8 crores to reach INR 79 crores and INR 49 crores, respectively, against these sites. During the quarter -- next, I'm going to talk about some exceptional expenses. During the quarter, our consolidated profit was impacted by exceptional costs of about INR 22 crores. Most of them are relating to COVID-related operations. That includes retention charges that we had incurred at port. Second, the interest cost that we would have capitalized in the normal cost that had not been capitalized because our plant was idle. Third one is also our contract labor costs that we had incurred despite the fact that they were not carrying out any work. After adjusting this exceptional cost of INR 22 crores, our post-tax loss for the quarter on a consolidated basis was about INR 35 crores. And our stand-alone loss for the quarter was INR 14.6 crores. Let me briefly touch upon our capital expenditure and debt for the quarter. As mentioned during the last quarter, we tried to defer our -- all our capital expenditure during the quarter. Our actual capital expenditure for the quarter was about INR 105 crores, largely relating to capital equipment supplied in the previous financial year for which the payments have to be made. Our efforts in rationalizing costs, managing working capital efficiency and deferring CapEx helped us to contain our debt levels. Our gross debt at the end of the quarter was about INR 1,998 crores, an increase of about INR 70 crores versus last -- previous quarter. However, if you adjust for the increase in our bank balances, our net debt actually came down by about INR 70 crores during the quarter 4. This was an account of improved and better cash flow management that we did during the quarter. At the end of the quarter, our consolidated gross debt to equity ratio remained healthy at 0.69, and stand-alone continue to remain healthy at 0.59. For the balance part of the year, we expect our capital expenditure on a stand-alone basis to be in the range of about INR 500 crores to INR 600 crores. And we also expect to spend about INR 100 crore on our CSTL operations and specialty business operations. And the last point, regarding merger of CSTL with CEAT, the NCLT has approved the merger of CEAT with CSTL in the month of May. Now we are awaiting formal receipt of certified copy from the NCLT. On receipt of the same, we will carry out all the formalities to ensure smooth merger. With that, now let's open the floor for Q&A.

[Operator Instructions] The first question is from the line of Ashutosh Tiwari from Equirus.

So you mentioned that your realizations remain flat Y-o-Y. Is it despite the fact that OEM would have declined more sharply, so your -- and your sales mix replacement share would have gone up. Despite that, we have not seen any change in realizations Y-o-Y?

Yes. Kumar, you like to take this? Anything?

See, there has been -- our realization per kg this quarter, there is a marginal improvement. In terms of percentage, our improvement was to the tune of about 3% to 4% in terms of realization, overall realization per kg. So there has been an improvement reflecting the improvement in mix.

So this is Y-o-Y, basically?

Quarter 1 versus quarter 4. Quarter 1 versus last year's quarter 1 also, there is an improvement of about 1.5%.

Okay. Okay. And you -- so demand picked up well after the lockdown got lifted. So how are things now? I mean in terms of retail, sales are still sustaining at the higher levels. Like the pickup that you saw in June and all?

Yes. Currently, things are still positive. I'd say that some amount of inventory and channel filling possibly is happening. Rural economy continues to be very buoyant with a good monsoon, good past crop that has come in. So between farm to -- I think both these segments have particularly been strong during this period. So replacement segment has been strong, better than we expected in the months of June and continuing into July.

Even truck is doing well right now at retail level. Obviously, they're refilling the channel because the stocks would have been lower with dealers at June end. So -- but at retail level also, the truck segment demand is still holding up?

Yes. So across all categories, fortunately, the replacement segment is quite buoyant at this point of time.

And sir, lastly, it's difficult to analyze the numbers because of this big change in the stock that we have from Q4 to Q1. But can we highlight some of the initiatives that you've taken in terms of cutting the other expenses? This quarter, obviously, is understated because of the change in stock, but on an equal vehicle, which is what kind of cut we have taken and what part of that can sustain going ahead?

Yes. So we took -- so immediately, of course, when we found that production and supplies were at 0 levels, we largely froze all costs that were there, except for whatever we really had to make a payment for. So costs came down quite substantially by about 40% to 50% levels. We, of course, continue to incur employee costs and other fixed costs that we incurred. So I'd say that post the lockdown period, maybe around May, June, we really immediately started to work on structural cost reduction initiatives. Now these are initiatives that will start bearing fruit have started in a certain way now, but a lot of it are longer-term initiatives, which will take maybe 3 to 6 months' time further. So I would say what is sustainable, maybe about 15% or so of our cost is what we are aiming to reduce. And for it to take effect, it will slowly come over a period of the next, say, 3 to 6 months, as I say.

And can you share the areas where we have cut this cost basically?

So initially, of course, it was everything. So if you're looking at quarter 1 numbers, we brought advertising levels to near 0 kind of level. Any kind of discretionary costs that we could incur, even though they were good costs, we had to cut it down because we were very uncertain about how the future will hold. Now that things have come back to normal levels, of course, these costs will start going back up to close to normal levels. But as I said, we are working on cost to bring it down. Now what we will bring down will be various kinds of OpEx, any wastages that we are incurring. We are re-questioning ways of doing business fundamentally. And a lot of learnings are coming in, reduction in power costs, utility costs in the factories, consultancy costs, for example. So any kind of cost that we can incur. We are looking at each and every element, supply chain costs, network redesign. I think all of these areas though that we are working on.

The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.

Continuing on the cost side. So the 15% cost savings which you're talking of, this is primarily on the fixed costs, including staff? Or this also includes variable cost as well?

This will be both fixed and variable, primarily as much as possible on the fixed side.

Okay. Okay. And second question pertains to the cost side. You indicated 6% Q-o-Q -- sorry, 6% Y-o-Y decline in RM cost. Given the where crude prices are and natural rubber prices are, do you expect further savings on this in second quarter and second half? Or this is primarily largely a reflection of the cost trends currently?

So crude prices came down largely in the month of April and May. So the purchases that were done around that time -- point of time will start reflecting in quarter 2. So to that extent, there is still an opportunity for reduction in raw material costs. Some of that has been offset by rupee depreciation as well. But if you look at natural rubber, while it did come down from about INR 135 per kg to about INR 115 per kg, it's gone back up to about INR 132 per kg as we speak. So some benefits of the kind of drop and going back up, so the drop we will see. So there will be an overall little bit of reduction we expect in quarter 2. Kumar, anything you would like to add?

No, you've covered it. So quarter 2, we expect RM cost lower than quarter 1 because quarter 1, we also carried some inventory from quarter 4, both in finished goods as well as in raw materials. So we expect the benefit of -- some part we realized in quarter 1. Some additional portion, as Anant mentioned, we'll get it in quarter 2.

Okay. Okay. And Kumar, you mentioned about gross margins were stable on Q-o-Q basis, adjusting for the nonmaterial cost and inventory. Ideally, should not gross margins have improved materially because of the mix change and the RM cost decline? What am I missing over here?

The finished goods movement is substantial in quarter 1. Okay. That's why I mentioned...

Sorry, gross margin on -- if we see on per kg basis, would that have improved the...

Gross margin per kg would have -- in quarter 1 versus quarter 4 of last quarter has improved.

And by how much?

I don't have that information. I'll share. Okay. Largely arising out of better mix, okay, replacement was -- share was more in quarter 1. Second thing, partly on account of lower raw material costs, both helped in terms of improving rupees per kg benefit. I think about a percentage or 2, approximately, would have been the impact of that.

Okay. Okay. Got it. And third question pertains to CSTL merger, considering that it will be happening in FY '21, and so what do you see that impact on the tax rate for FY '21? What should we factor in for FY '21 tax rate at consol level?

See, we need to understand this better. We need a little more time. See, we still applied the higher rate of tax in quarter -- last year. We didn't go for a lower rate of tax option, okay, because we have some mat balance, okay? And so the impact of it we're still ascertaining. The impact also depends on whether we are moving to a lower rate of tax or we continue with the higher rate of tax. We need to complete that exercise. So unable to share the detail on this call, okay? But we are working on that.

Sure. But logically, considering the accumulated losses in CSTL tax rate, even if we continue with the higher tax rate, FY '21 should be a lower tax -- effective tax rate should be lower. Is that directionally correct? Or that would not be the case?

You're directionally right.

The next question is from the line of Chirag Shah from Edelweiss.

Yes. So my first question is on the replacement demand. You indicated that it has been good. So if you can just highlight, what has been the activity in June and July on Y-o-Y basis? Is there a sharp growth because of pent-up demand that you are seeing? Or how do you look at that?

Yes. So replacement demand, as you said, yes, June, it's bounced back quite well. As I said, the rural economy has been very strong. Relative all nearly across categories, we saw a good uptick. If you were to look in the month of May, a lot of urban India had not opened. And therefore, passenger car sales was affected. But even that started to see good demand in the month of June and continued into July. So I'd say, at an overall level, on a year-on-year basis, replacement was at strong positive territory in the month of June as well as July.

And based on the understanding we would be heavy, can it continue for another 2, 3 months at least?

That's a little difficult to predict. To me, I think the macroeconomic fundamentals are not [ supposition ] of a very strong demand in general. Maybe replacement, of course, will be least affected versus the other. But even there's no justification that replacement should show substantial growth for the rest of the year. So I think it will slow down. When that will happen, and so therefore, I feel the demand is primarily rural impact, channel filling is the second part of it. And the third is -- could be that there is a -- it's a supply game with various lockdowns of competitors, who has been able to provide and sell at full capacity -- in the best way possible. That competitive impact will also be there because the entire supply side was very uncertain all through this quarter. I think with these things stabilizing as we speak, I think demand should come down in the replacement segment. Now when it will come down is the big question. We have seen a slight dip towards the latter half of June. Anyways, August -- July, August -- sorry, latter half of July. And if you were to look at July, August, these are the weakest sales months in the year. Monsoon is relatively weak. So I think at an overall basis, I would say a slowdown can come in maybe middle or a slight negative trend in April -- in August also.

And second question was on your capacity. So today, at what level of capacity -- or can you produce to the levels you were earlier? Or there are still any bottlenecks there at your end?

No. In terms of capability to produce, we are nearly there at near COVID level kind of production. Most of our plants are fully operational. And I would say that we would be at a very strong level. I think our ramp-up has been very quick across all our factories.

Is there any labor shortages? Is it still a problem or not from that?

Marginally. So in some cases where in our outsourcing plants, there are some migrant workers that are there. So there, there is a little bit of continuous churn. People come in and people leave. That doesn't let us reach our full capacity, but that's in only one of our factories anyway. Rest of it is largely quite okay.

Just a clarification on taxes. So even in F '22, can we assume [indiscernible], and even in F '22, there could be some benefit available?

Can you repeat the question? Sorry, we couldn't hear your question clearly.

Yes. Am I audible?

Yes. Yes, please. Yes, go ahead. Yes.

I'm saying that in F '22 also, can there be benefit of the [indiscernible] losses of the subsidiary?

'22 also? Can you repeat the last part of the question again?

Will there be benefits of the [indiscernible] losses of the subsidiary that we are merging?

See, under Companies Act, yes. Under Income Tax Act, depends on -- depends. Okay. So income tax depreciation would be higher, okay, in the current year, depending on the overall performance. But Companies Act effective tax rate considers the benefit. Okay. So therefore, under Companies Act, the ETR could come down because of that subsidiary.

Okay. That is helpful. And last question, if I can just squeeze in on the CapEx and the cash flow side. Would it be right statement to make that free cash flow-wise we'll actually be neutral going ahead, at least for next 2 to 3 years? And we can turn actually free cash flow positive if things normalize the large part of CapEx cycle that is largely behind? Would be that be a right statement to make?

Kumar, can you comment?

See, not sure. Not sure. Out of INR 3,500 crores of our planned CapEx, okay, so far, we have spent a bit lower, INR 2,250 crores, okay? So balance money. And plus our CEAT specialty business also needs cash for expansion. And we indicated about INR 100 crores of CapEx we expect for the current year CSTL. So it depends on combination. What we are going to spend this year, next year. But however, the absolute CapEx is likely to come down from here onwards because a large amount of -- if you look at last 2 years, on an average, we spend over INR 1,000 crores, okay? So in the coming years, it may not be of that magnitude, okay? And so therefore, that should benefit. In terms of the incremental that you would see, even if it is not free cash flow, would be lower compared to the previous 2 years. We would still like to wait for a quarter or 2 for the business to stabilize, okay, before we are able to respond to you whether we would be free cash flow positive or not.

The next question is from the line of Hitesh Goel from Kotak Securities.

Sir, my first question is on the specialty business. What is the total CapEx spend up until now? And how much will you spend in -- how much will you actually spend in '22? Basically, I'm looking at cash burn plus the CapEx -- left over CapEx left in the business.

If you have any other questions, can you ask? So I will let you know by the time the next question is answered.

Okay. And also on the profitability, I wanted to understand -- see, I understand the absorption costing, which has happened in this quarter, right? So it's not comparable. But what should be the endeavor to -- from -- either on gross profit per kg or EBITDA per kg? Because you have actually been around INR 20 to INR 22 on gross EBITDA per kg kind of levels, and similar to what you've reported in this quarter. Can we see this going up given raw material cost outlook is lower? How should we look at this trend?

Sorry, which metric is this?

EBITDA per kg. So basically, how we model on a per kg basis, right, on an RM cost base. So I'm just looking at either gross profit per kg. If you can give some guidance around EBITDA per kg. How should we look at that metric?

Yes. So I think one is that we are seeing a favorable category mix in the near term, which may turn back to normal levels towards quarter -- maybe quarter 3, quarter 4. But clearly, replacement sales is higher. On the other hand, we are also seeing strong sales in farm segments. Currently, at least for this quarter, truck has been also quite positive. So some of these areas, on the category mix perspective, it has been a little bit adverse because passenger car and 2-wheeler started to pick up in the latter half. This is for quarter 1, particularly. So net-net, net realization has been just marginally positive in quarter 1. In my view, with OE and exports also picking up a little bit from quarter 2, the replacement mix will become adverse. So net-net, I think net realization should not undergo any major change going forward. I also think that raw material will sharpen a little bit. So I think at the gross margin level, things should get -- could get a little bit better going forward. Going on to, say, a longer-term point of view, I don't see a major change as such happening. We are continuously working towards increasing our 2-wheeler and passenger car sales. So as Chennai, et cetera, ramps up, margins can -- we're focusing on increasing higher in sales, et cetera. But those are larger, longer-term initiatives, which should improve our margins itself. But near term, we are not seeing any major change happening. There will be some mix changes that will happen, which are quite high for the shorter term.

So why I ask this is actually because most of the CapEx is spent. But if I look at the ROE or ROCE trends for next 2, 3 years, will remain quite weak because of the heavy CapEx you have done, right? And the margin improvement is not substantial. When can we see a double-digit kind of ROCE or ROE for the company?

Yes. I think currently, we are in investment phase. But once we see -- the key is I think we need to see growth coming in. And the market has not been -- I mean, unfortunately, with all of this happening, growth has not come in. So I think more than even margins, I think we need to look at high-growth levels, which will come in, in my view, not before quarter 4 because of the current situation. Maybe from quarter 4 and quarter 1 of next year, we should start going back to high-growth levels.

Okay, sir. And if you can answer whenever you can on specialty question.

On specialty, approximately, we would have done about INR 350 crores to INR 400 crores CapEx has been done. We will be doing another INR 100 crores -- a little bit -- up to INR 100 crores in the course of the rest of this year.

And what is the cash burn in this business?

Kumar, do you have cash burn?

Okay. See, for specialty, we planned about 500 -- INR 450 crores to INR 500 crores for the next expansion, okay? And out of that, EP spend is INR 100 crores this year. We would be -- by end of the year, we would have spent about INR 150 crores. Approximately, at PBT level, okay? See, specialty is now EBITDA positive, okay? And the interest cost is still there, which we are not able to fully observe at this point in time. At PBT levels, specialty is about INR 40 crores kind of negative last year, approximately, a little lower INR 40 crores at PBT level. If we -- half of it would have been a cash burn. That's the way I would say. Because we were operating at 25% capacity level, as you know, capacity level has moved up, okay, our cash bond should come down, okay, and we should be breaking even -- cash breaking even soon.

The next question is from the line of Siddhartha Bera from Nomura.

Yes. Sir, first, again, on the demand side, you indicated that July replacement also was growing. So any color on the segment-wise strength? How are they in the 2-wheeler, PV or truck and bus side? That would be really it.

Yes. So if you were to look at, say, post lockdown, the commercial vehicle and farm segments were looking very strong. In part, also, if you look at the lockdown opening, you would have, say, people would not had channel relationships, very often a distributor or a dealer can go in and open a shutter if he knows an existing customer of his needs truck tires. In the case of passenger car tires, very often, if the shutters are closed and the shops are closed, the tire doesn't undergo any change in that sense. So in the month of May, that is what was largely happening. Also, urban India was largely closed. So May was more where we saw high commercial or relatively higher commercial vehicle and farm sales. Going on towards June, we started to see a good increase on the 2-wheeler side, and as I said, passenger car side. And commercial vehicle continued to be strong. On the truck radial side, particularly, we saw good demand. Products that we launched over the course of the last 6, 8 months' time has also yielded good results. The feedback from our customers has been very strong. We've added a number of fleets and new customers and dealers as well. So with all of that, we are seeing -- we are quite optimistic, even on truck radial demand. This trend has largely continued into July as well. But to see this kind of increase in the replacement segment, I think it's not very normal, as I shared. And as I said, replacement will start seeing a relatively -- some amount of relative slowdown as we go forward. On the other hand, I think OEM will start seeing increase all the way until June. There were supply chain issues, demand issues, particularly in the OE commercial vehicle side. We've already seen about 2-wheelers picking up first passenger segment also. The OEMs are quite optimistic about reaching, say, 70%, 80% kind of demand levels, whereas, say, until June, we were at substantially lower level. And the export is also seeing gradual increase on a month-on-month basis. So I think OEM and exports will start seeing some increase in July, August, September, whereas replacement may taper down a little bit towards the latter half of the quarter.

Got it, sir. Second, sir, on the CapEx side. By the last quarter, I think we had indicated that this year, we might see here about INR 550 odd crores of CapEx. So what is the total number for this year? I mean we have done INR 100 crores, and we are saying that we will have around INR 500 crores, INR 600 crores more. So basically, would it be right to say that about INR 800 crores in the standalone and INR 100 crores in the CSTL, so about INR 900-odd crores for this year?

No, we've brought down that number. So in the last quarter, also, we had shared that our CapEx will be about INR 500 to INR 600 per CEAT stand-alone and about INR 100 crores in CSTL -- in CEAT Specialty Tyres. So these are the 2 -- we say approximately INR 550 crores plus INR 100 crores, INR 650 crores is what we expect to do in the year.

So the deferred amount...

One thing I just want to clarify, that INR 100 crores that we have already spent in quarter 1 is part of that INR 500 crores to INR 600 crores.