Nomura has maintained its 'Neutral' rating on Balkrishna Industries (BKT) with a target price of Rs 2,410 after the company announced an agreement with Italy's Pirelli Tyre to manufacture passenger car radial (PCR) tyres.
Under the agreement announced on October 22, BKT will manufacture up to 800,000 Pirelli-branded CR tyres at its Bhuj plant in Gujarat by calendar year 2030. Supply is expected to begin in 2027, with production scaling up gradually to 800,000 tyres by CY30.
The companies have also agreed on a framework for a 50:50 joint venture to manufacture high-value PCR tyres in India under both Pirelli and BKT brands. The joint venture is expected to become operational by CY2030 and will have a five-year lock-in period.
Nomura said the partnership appeared to be a "good strategic fit", noting that around 80% of Pirelli's global revenue comes from tyres measuring above 18 inches. The brokerage said the offtake arrangement and access to Pirelli's testing facilities and technical support should help BKT establish credibility in the passenger car tyre segment.
However, Nomura noted that the replacement market for tyres above 17 inches accounts for a small share of India's tyre industry, increasing competition for domestic players. Exports supported by Pirelli could offer a longer-term opportunity.