The quarter's results underscore a challenging operating environment for the company, with sales declining 9.11% sequentially from ₹656.22 crores in Q2 FY26 to ₹596.46 crores in Q3 FY26. The year-on-year comparison is equally concerning, with revenues down 12.57% from ₹682.25 crores in Q3 FY25. This marks a continuation of the pressure witnessed throughout the fiscal year, raising questions about demand dynamics in the Indian tyre industry and Goodyear India's competitive positioning within it.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 | 596.46 | -9.11% | 13.07 | -7.37% | 4.50% |
| Jun'25 | 656.22 | +8.88% | 14.11 | +189.73% | 4.30% |
| Mar'25 | 602.70 | -4.59% | 4.87 | -48.63% | 2.88% |
| Dec'24 | 631.72 | -7.41% | 9.48 | -39.77% | 3.77% |
| Sep'24 | 682.25 | -1.32% | 15.74 | -37.12% | 4.56% |
| Jun'24 | 691.38 | +25.58% | 25.03 | 694.54% | 6.41% |
| Mar'24 | 550.53 | — | -4.21 | — | 0.98% |
Financial Performance: Revenue Decline Squeezes Profitability
The financial performance in Q3 FY26 reveals significant headwinds across key metrics. Net sales of ₹596.46 crores represent a 12.57% year-on-year decline from ₹682.25 crores in Q3 FY25 and a sequential drop of 9.11% from Q2 FY26's ₹656.22 crores. This contraction in top-line growth is particularly concerning given the seasonal nature of tyre demand, which typically strengthens during the festive and winter months.
Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) stood at ₹26.85 crores in Q3 FY26, down from ₹31.09 crores in the corresponding quarter last year. The operating margin (excluding other income) compressed to 4.50% from 4.56% year-on-year, reflecting the company's struggle to maintain pricing power amidst volume pressure. Sequential margin performance showed marginal improvement from 4.30% in Q2 FY26, but remains well below the 6.41% achieved in Q1 FY25.
Net profit of ₹13.07 crores in Q3 FY26 marks a 16.98% year-on-year decline from ₹15.74 crores in Q3 FY25. The profit after tax (PAT) margin stood at 2.19%, down 12 basis points year-on-year from 2.31%. Employee costs increased to ₹51.25 crores from ₹49.63 crores year-on-year, reflecting inflationary pressures on wage bills despite lower production volumes.
Operational Challenges: Declining Returns Signal Efficiency Concerns
The operational metrics paint a picture of a company grappling with efficiency challenges. Return on equity (ROE) has declined sharply to 7.23% in the latest period from an average of 16.15% over recent years, indicating deteriorating profitability relative to shareholder capital. This represents a significant erosion in the company's ability to generate returns for equity investors and stands as a key red flag for potential investors.
Return on capital employed (ROCE) has similarly compressed to 10.34% from a historical average of 36.91%, reflecting the company's struggle to generate adequate returns on the total capital deployed in the business. This dramatic decline suggests that either the business is operating at sub-optimal capacity utilisation or facing structural margin pressures that are eroding profitability.
On a more positive note, the company maintains a debt-free balance sheet with zero long-term debt as of March 2025. Shareholder funds stood at ₹602.95 crores, up marginally from ₹581.45 crores in the previous year. Current assets of ₹791.00 crores comfortably exceed current liabilities of ₹585.23 crores, providing adequate liquidity buffers. The company's net debt to equity ratio of -0.26 indicates it is a net cash company, providing financial flexibility to weather near-term challenges.
⚠️ Key Concern: Deteriorating Return Ratios
Return on equity has plummeted to 7.23% from historical averages of 16.15%, whilst ROCE has declined to 10.34% from 36.91%. These dramatic compressions in return ratios signal significant operational inefficiencies and margin pressures that require urgent management attention. The company's ability to generate adequate returns on invested capital has been severely compromised.
Industry Context: Underperformance Against Sector Peers
Goodyear India's challenges are amplified when viewed against broader industry trends. The stock has delivered a negative return of 17.69% over the past year, significantly underperforming the Tyres & Rubber Products sector, which generated positive returns of 9.72% during the same period. This 27.41 percentage point underperformance highlights company-specific challenges beyond broader industry headwinds.
The tyre industry in India has witnessed mixed demand trends, with replacement demand remaining relatively resilient but original equipment manufacturer (OEM) volumes facing pressure due to slower automobile production growth. Commercial vehicle tyre demand, which forms a significant portion of Goodyear India's revenue mix, has been particularly subdued due to economic uncertainties and freight rate pressures.
Raw material costs, particularly natural rubber and crude oil derivatives, have exhibited volatility throughout FY26. Whilst recent quarters have seen some stabilisation in input costs, the company's inability to pass through these costs effectively to customers has resulted in margin compression. Competitive intensity in the replacement market has limited pricing power, forcing manufacturers to absorb cost increases or sacrifice market share.
Market Positioning Challenge
Goodyear India faces an uphill battle in a highly competitive domestic tyre market dominated by larger players such as Apollo Tyres, CEAT, and MRF. With a relatively modest market capitalisation of ₹1,815 crores, the company lacks the scale advantages enjoyed by larger peers, limiting its ability to negotiate favourable terms with suppliers and distributors. The 74% promoter holding by Goodyear Orient Company provides strategic stability but also limits public float and liquidity.
Peer Comparison: Valuation Premium Difficult to Justify
A comparison with industry peers reveals that Goodyear India trades at a significant valuation premium on certain metrics, which appears difficult to justify given its underperformance. The company's price-to-earnings (P/E) ratio of 44.05x is substantially higher than Apollo Tyres (25.33x), CEAT (25.13x), and JK Tyre (28.31x), despite delivering inferior growth and profitability metrics.
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield (%) | Debt/Equity |
|---|---|---|---|---|---|
| Goodyear India | 44.05 | 3.18 | 16.15 | 3.01 | -0.26 |
| Balkrishna Inds | 39.56 | 4.97 | 17.07 | 0.60 | 0.22 |
| Apollo Tyres | 25.33 | 2.08 | 9.00 | 0.99 | 0.23 |
| CEAT | 25.13 | 3.42 | 10.40 | 0.78 | 0.66 |
| JK Tyre & Indust | 28.31 | 2.95 | 13.52 | 0.53 | 0.82 |
| TVS Srichakra | 115.33 | 2.75 | 7.27 | 0.40 | 0.67 |
Goodyear India's one saving grace is its superior dividend yield of 3.01%, significantly higher than the peer group average of approximately 0.70%. The company paid out a dividend of ₹23.90 per share with an ex-dividend date of July 18, 2025, representing a payout ratio of 100.03%. Whilst this high dividend yield provides some income support to shareholders, the 100% payout ratio leaves little room for reinvestment in growth initiatives or balance sheet strengthening.
The company's ROE of 16.15% (average) compares favourably with Apollo Tyres (9.00%) and CEAT (10.40%), though it trails Balkrishna Industries (17.07%). However, the recent decline in ROE to 7.23% in the latest period significantly undermines this comparative advantage. The debt-free status (net debt to equity of -0.26) is a clear positive, providing financial flexibility that many leveraged peers lack.
Valuation Analysis: Premium Pricing Without Growth Justification
Goodyear India's valuation metrics suggest the stock is trading at stretched levels relative to its fundamentals. The current P/E ratio of 44.05x represents a significant premium to the industry average P/E of 32x, despite the company's declining profitability and negative growth trajectory. This premium appears unjustified given the deteriorating operational performance and weak near-term outlook.
The price-to-book value (P/BV) ratio of 3.18x, whilst lower than Balkrishna Industries (4.97x), still represents a meaningful premium to the company's book value of ₹260.18 per share. Given the declining ROE and compressed ROCE, this premium valuation seems difficult to sustain. The enterprise value to EBITDA (EV/EBITDA) multiple of 17.46x and EV/EBIT multiple of 38.19x further underscore the expensive nature of the stock.
The proprietary valuation assessment categorises Goodyear India as "VERY EXPENSIVE", with the stock having oscillated between "Expensive" and "Very Expensive" grades throughout recent months. The current market price of ₹793.05 is 25.95% below the 52-week high of ₹1,071.00 but only 3.80% above the 52-week low of ₹764.00, suggesting limited downside protection at current levels.
Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest
The shareholding pattern reveals a stable promoter holding of 74.00%, which has remained unchanged over the past five quarters. Goodyear Orient Company (Private) Limited, the promoter entity, maintains this consistent stake, providing strategic stability to the company. The absence of any promoter pledging is a positive, eliminating concerns about financial stress at the promoter level.
| Quarter | Promoter % | FII % | MF % | Insurance % | DII % | Public % |
|---|---|---|---|---|---|---|
| Dec'25 | 74.00 | 0.34 | 6.76 | 1.17 | 0.08 | 17.65 |
| Sep'25 | 74.00 | 0.41 | 6.78 | 1.17 | 0.08 | 17.56 |
| Jun'25 | 74.00 | 0.59 | 6.75 | 1.23 | 0.08 | 17.35 |
| Mar'25 | 74.00 | 0.59 | 6.75 | 1.25 | 0.08 | 17.33 |
| Dec'24 | 74.00 | 0.70 | 6.75 | 1.25 | 0.15 | 17.15 |
Institutional interest in the stock remains tepid, with total institutional holdings at just 8.35%. Foreign institutional investor (FII) holdings have declined sequentially from 0.70% in December 2024 to 0.34% in December 2025, reflecting continued selling pressure from overseas investors. Mutual fund holdings have remained stable at around 6.75-6.78%, whilst insurance company holdings have marginally declined from 1.25% to 1.17% over the past year.
The low institutional participation of 8.35% suggests limited confidence from sophisticated investors in the company's near-term prospects. The gradual increase in non-institutional holdings from 17.15% to 17.65% over the past year indicates some retail investor interest, possibly attracted by the high dividend yield. However, the absence of meaningful institutional buying despite the stock's correction from 52-week highs is a notable concern.
Stock Performance: Severe Underperformance Across All Timeframes
Goodyear India's stock performance has been dismal across virtually all timeframes, with the stock significantly underperforming both the benchmark Sensex and its sectoral peers. Over the past year, the stock has declined 17.69% compared to the Sensex's gain of 6.44%, resulting in negative alpha of 24.13 percentage points. This underperformance has been even more pronounced over longer periods.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +0.34% | +0.91% | -0.57% |
| 1 Month | -5.85% | -2.49% | -3.36% |
| 3 Month | -19.57% | -0.17% | -19.40% |
| 6 Month | -19.09% | +3.23% | -22.32% |
| YTD | -6.55% | -2.24% | -4.31% |
| 1 Year | -17.69% | +6.44% | -24.13% |
| 2 Years | -41.30% | +16.15% | -57.45% |
| 3 Years | -25.17% | +36.94% | -62.11% |
The three-month performance is particularly alarming, with the stock declining 19.57% whilst the Sensex fell only 0.17%, representing a massive 19.40 percentage point underperformance. The six-month return of -19.09% against the Sensex's gain of 3.23% further underscores the stock-specific challenges facing Goodyear India.
Over longer periods, the underperformance becomes even more stark. The two-year return of -41.30% compares dismally with the Sensex's gain of 16.15%, resulting in negative alpha of 57.45 percentage points. The three-year performance shows a loss of 25.17% against the Sensex's gain of 36.94%, representing 62.11 percentage points of underperformance. These figures reflect sustained fundamental deterioration rather than temporary cyclical weakness.
The stock's beta of 1.35 indicates it is more volatile than the broader market, amplifying both gains and losses. Given the current bearish trend and weak fundamentals, this high beta characteristic poses additional downside risk. The stock has been trading below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—signalling strong bearish momentum from a technical perspective.
Investment Thesis: Weak Fundamentals Overshadow Balance Sheet Strength
The investment thesis for Goodyear India is challenged by multiple headwinds that overshadow its few positive attributes. Whilst the company maintains a debt-free balance sheet and offers an attractive dividend yield of 3.01%, these positives are insufficient to offset the deteriorating operational performance, margin compression, and weak growth outlook.
The proprietary Mojo score of 43 out of 100 places the stock firmly in "SELL" territory, reflecting the confluence of negative factors. The valuation grade of "VERY EXPENSIVE" suggests limited upside potential even if operational performance stabilises. The quality grade of "GOOD" acknowledges the company's historical track record and debt-free status, but this is undermined by the "POSITIVE" short-term financial trend assessment, which appears optimistic given the recent quarterly results.
The technical trend remains firmly "BEARISH", having changed to this status on December 16, 2025. All technical indicators—MACD, RSI (on monthly charts), Bollinger Bands, Moving Averages, and KST—point to continued weakness. The stock faces immediate resistance at the 20-day moving average of ₹809.34, with major resistance at the 100-day moving average of ₹902.45. Downside support exists at the 52-week low of ₹764.00, just 3.80% below current levels.
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Debt-Free Balance Sheet: Zero long-term debt provides financial flexibility and eliminates solvency concerns in challenging times.
- Net Cash Position: Net debt to equity of -0.26 indicates the company holds more cash than debt, providing cushion for operations.
- Attractive Dividend Yield: 3.01% dividend yield significantly exceeds peer group average and provides income support to shareholders.
- Stable Promoter Holding: 74% consistent promoter stake with zero pledging demonstrates long-term commitment and eliminates governance concerns.
- Strong Interest Coverage: Average EBIT to interest ratio of 29.80x indicates robust ability to service any debt obligations.
- Established Brand: Association with global Goodyear brand provides credibility and market recognition in the competitive tyre industry.
⚠ KEY CONCERNS
- Deteriorating Profitability: Net profit declined 16.98% YoY in Q3 FY26, reflecting sustained margin pressure and weak operational performance.
- Revenue Contraction: Sales declined 12.57% YoY, indicating loss of market share or weak demand in key segments.
- Collapsing Return Ratios: ROE declined to 7.23% from 16.15% average; ROCE fell to 10.34% from 36.91%, signalling severe efficiency issues.
- Margin Compression: Operating margins declined to 4.50% from historical levels above 6%, limiting profitability despite cost control efforts.
- Premium Valuation: P/E of 44.05x represents unjustified premium to peers given inferior growth and profitability metrics.
- Weak Stock Performance: Consistent underperformance across all timeframes, with 24.13 percentage points negative alpha over one year.
- Low Institutional Interest: Just 8.35% institutional holdings with declining FII participation signals lack of confidence from sophisticated investors.
Outlook: What Lies Ahead for Goodyear India
The outlook for Goodyear India remains challenging in the near to medium term, with limited visibility on a turnaround in operational performance. The company faces structural headwinds including intense competition, limited pricing power, and margin pressures that are unlikely to ease quickly. Whilst the debt-free balance sheet provides some cushion, the declining return ratios and weak growth trajectory suggest the company needs significant operational restructuring to restore profitability.
📈 POSITIVE CATALYSTS
- Stabilisation in raw material costs could support margin recovery
- Potential improvement in replacement demand as economy strengthens
- Cost rationalisation initiatives may improve operational efficiency
- Strong balance sheet provides flexibility for strategic investments
🚩 RED FLAGS TO MONITOR
- Further deterioration in quarterly revenues or market share losses
- Continued compression in operating margins below 4% levels
- Additional decline in return ratios (ROE/ROCE)
- Reduction in dividend payout if cash flows deteriorate
- Increased competitive intensity in replacement market
The Verdict: Avoid Until Operational Turnaround Materialises
Score: 43/100
For Fresh Investors: Avoid initiating positions at current levels. The combination of deteriorating fundamentals, premium valuation, and weak technical setup presents an unfavourable risk-reward profile. Wait for concrete signs of operational improvement and margin stabilisation before considering entry.
For Existing Holders: Consider reducing exposure or exiting positions, particularly if holding at higher cost bases. The 3.01% dividend yield provides some income support, but this is insufficient compensation for the capital erosion risk. Those holding for dividend income may maintain positions but should closely monitor quarterly results for further deterioration.
Fair Value Estimate: ₹650-700 (18-25% downside from current levels of ₹793.05)
Rationale: The SELL rating reflects deteriorating fundamentals with net profit declining 16.98% YoY, collapsing return ratios (ROE at 7.23%, ROCE at 10.34%), and unjustified valuation premium (P/E of 44.05x vs sector average of 32x). Whilst the debt-free balance sheet and 3.01% dividend yield provide some support, these positives are overwhelmed by structural margin pressures, weak growth outlook, and consistent underperformance across all timeframes.
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
