Impact of Raw Material Price Volatility on Cost Structure and Profitability: Evidence from JK Tyre & Industries Ltd., India

¹ Punith Kumar M, ² Dr K G Hemalatha

1Master of Business Administration, Dayananda Sagar College of Engineering, India

E-mail: punithpuni0124@gmail.com

2Head of Department, Dayananda Sagar College of Engineering, India

E-mail: hod-mba-vtu@dayanandasagar.edu

Abstract

The manufacturing sector is highly dependent on the price of raw materials. Accordingly, the current trends of fluctuation in the world market make it one of the main factors influencing the financial performance of enterprises. In the Indian tyre industry Such costs as rubber, carbon black, steel cord, and other materials used for tyre production constitute a significant portion of the cost structure of tyre manufacturers. This study aims to reveal the influence of the volatility of the prices of raw materials on the cost structure and profitability of JK Tyre & Industries Ltd. The research method selected for this study is a quantitative one, using the financial statements of the company for the period from FY2021-22 to FY2025-26. The analysis includes such statistical measures as the calculation of descriptive statistics, the determination of financial ratios, trend analysis, pearson correlation, and simple linear regression. The results of the analysis revealed that the volatility of the prices of raw materials significantly affects the growth of companies’ costs. Thus, in the case of JK Tyre, the changes in the cost of materials used for production lead to changes in gross, operating, and net profit. Moreover, regression analysis revealed that the volatility of the prices of raw materials accounts for a significant portion of the change in the profitability of the company. The theoretical foundation of this study includes the Cost–Volume–Profit theory, Supply Chain Risk Management, and Resource Based understanding of sustainable competitive advantage. Overall, the findings of this research provide insights into cost management and financial performance, contributing to the body of knowledge on this topic.

Keywords: Raw Material Price Volatility; Cost Structure; Profitability; Financial Performance; Manufacturing Industry; JK Tyre; Commodity Risk; Cost Management.