Camso acquisition at $225 mn valuation a long-term positive for Ceat

CEAT has acquired the Camso brand from Michelin for $225 million, strengthening its OHT portfolio, boosting capacity and expanding global presence in key markets

Tyre major CEAT has completed the acquisition of the Camso brand from Michelin at a valuation of $225 million. The acquired business focusses on compact construction tyres and tracks with an estimated revenue run rate of $130-150 million, at 50 per cent utilisation and an addressable market of $2 billion. Camso’s market share in compact construction premium tracks is 20 per cent while it is 10 per cent in the overall segment. The acquisition includes global ownership of the Camso brand along with two manufacturing facilities. Overall, CEAT’s share of the high-margin OHT (off highway tyres) and its international presence shall improve from 15 per cent and 19 per cent to 21 per cent and 25 per cent, respectively.

 

The initial focus is on ramping up capacity. After three years, it shall foray into agriculture tracks, harvester tracks, and power sport tracks. The Camso brand supplies to 40-plus OEMs (original equipment manufacturers), including JCB, CNH, Manitou, and Kubota. It has a robust dealer network of 200-plus in the aftermarket. There is a minimal overlap of dealers between CEAT and Camso, which means access to new dealerships. For the next three years, Michelin will manage product sales, and oversee the supply of certain raw materials until CEAT sets up facilities, which may take about 18 months. 

 

The current Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin is in the low teens, but can increase to 20 per cent over medium term, according to the CEAT management. Out of the acquisition amount of $225 million, $138 million has been paid, $43 million shall be paid in 2026-27 (FY27), and the remaining $44 million in FY29. The net debt would increase from ₹1,900 crore in FY25 to ₹2,900 crore in FY26 in the wake of the takeover, and then moderate to ₹2,400 crore by FY28, given positive free cash flows. Revenue recognition for Camso started in September 1, 2025. The Camso gross block stands at $90-100 million. 

 

Ceat management believes the OHT segment has bottomed out, and demand should improve going forward. North America contributes share of revenue at 50-55 per cent, Europe at 35-37 per cent, and the remaining is South America and the rest of the world. The US tariff on Sri Lanka, where there’s a manufacturing facility, is 20 per cent each for the track and tyre segments. The company will pass on the entire tariff to customers.

 

It’s accepted that margins over the next four-six quarters will be lower due to the setting up of upstream equipment but the management expects margin to normalise by FY28. Over the medium term, the margin is likely to be in high teens-to-20 per cent. The current capacity stands at 250 TPD (tonnes per day), and utilisation is 50 per cent, with capacity evenly split between the track and tyre segments. The plant capex is expected to be $30 million over the next two years, with FY26 capex for Camso estimated at ₹1,000 crore.

 

CEAT currently has 930+ stock-keeping units for OHT tyres, with a stronger presence in agri, mining, and construction tyres. The acquisition of Camso plugs some spaces in its product portfolio by adding compact construction tyres and tracks. It also boosts CEAT’s capacity by 15 per cent, and provides access to 40 global OHT OEMs and 200+ distributors across the US and the EU. Near-term focus is on making it price-competitive and driving cost synergies.

 

Over the medium-term, post-availability of Camso brand exclusively for CEAT after three years, it plans to expand the product portfolio under this brand. US tariff-related uncertainty is a key monitorable in short/medium term, given the high exposure to the US. Sri Lanka has a moderate tariff and is relatively competitive. There are no comparable US manufacturers.

 

Raw material sensitivity for the OHT business is lower while the CEAT domestic business is also expected to gain from goods and services tax (GST) reductions. CEAT could benefit from a demand upturn, and gains in exports and OHT exposure. But the near-term impact could lead to share price corrections.