Apollo Tyres prunes FY20 and FY21 capex by Rs 300 cr on auto slowdown

Apollo Tyres has decided to cut back its capex by about Rs 300 crore to Rs 2,400 crore in 2019-20 and by a similar amount in FY21, following the slowdown in auto sector. The proposed capex mainly will be at company's upcoming unit in Andhra Pradesh and at its Hungary facility.

During the recent analyst call, company's management said, “The company had started the year with an estimate of Rs 2,700 crore capex, which has now been scaled back to Rs 2,400 crore. Over the last nine months, the company incurred a capex of about Rs 2,000 crore”.

For the next year, the number should be in the range of Rs 1,400-1,500 crore from Rs 1,700-1,800 crore earlier. The decision is in line with other tyre makers' plans to cut down capex due to the slowdown in the auto sector.

"All the competitors, including us, were surprised at the drop in OEMs and particularly the extent of drop in OE business. Because of that, from the announced plans, the capexes have been slowed down by everybody like we have," Gaurav Kumar, chief financial officer of Apollo Tyres told analysts.

"Based on the market information that we get, all the players have slowed down their capital expenditure. So is there specifically some capacity coming up, which will alter the demand‐supply economics in near term? (The answer is) No," he added.

Speaking about the Andhra Pradesh facility, he said, that the plant ramp up may depend on how the demand situation pans out. The ramping up is scheduled to happen over two years, and the full capacity will be available in Fiscal 2023. When it reaches 100 per cent utilisation, it can genrate over Rs 4,000 crore in revenue.

The plant will start making tyres by the end of this year and then its capacity will be expanded to 15,000 car tyres and 3,000 truck radials over a two-year time frame, that is by FY22-end.

The company expects the fourth quarter raw material prices to be lower than the December quarter. The major rubber manufacturing countries may look at offloading their output, as the Chinese market has been weak in the recent past, said analysts.

While the coronavirus outbreak may impact the supply of Chinese tyres to Europe and offer a widow of opportunity Indian manufacturers including Apollo Tyres, it could also disrupyt the supply chain considering China's presence across different geographies is significant. The firm expects to start realising all the benefits including a fully-scaled up plant in Hungary, Europe by FY22.

PE firm Warburg Pincus planning to invest $150 mn in Apollo Tyres

Private Equity firm Warburg Pincus is planning to invest around $150 million in Apollo Tyres.The investment represents a primary capital infusion into the company and is subject to shareholder and regulatory approvals

The Board of Directors of Apollo Tyres Ltd on Wednesday approved an issuance of compulsorily convertible preference shares in the company worth approximately $150 million to an affiliate of Warburg Pincus, a leading global private equity firm focused on growth investing.

Onkar S Kanwar, Chairman and Managing Director, Apollo Tyres Ltd said, that Warburg Pincus’ investment in Apollo Tyres is a strong vote of confidence in our business, management team and growth prospects.

"I believe the company will benefit from the backing of a large financial investor of their pedigree and our partnership will further strengthen Apollo Tyres’ board and governance,” he said.

Vishal Mahadevia, Managing Director and Head, Warburg Pincus India, said, “We see a compelling growth story in Apollo Tyres and believe the company is well-positioned to build upon the strong leadership position it has carved out within the industry. Warburg Pincus is excited to partner with the management team of Apollo Tyres in this journey and looks forward to supporting them during the next phase of the company’s growth.”

Apollo Tyres' Q1 consolidated net profit dips 44% to Rs 142 crore

Apollo Tyres on Wednesday reported 43.77 per cent dip in consolidated net profit at Rs 141.6 crore for the June quarter of 2019-20.

The company had posted a net profit of Rs 251.84 crore for the same period of previous fiscal.

Total income rose marginally to Rs 4,358.78 crore during April-June 2019 as compared with Rs 4,328.6 crore in the year-ago period, Apollo Tyres said in a statement.

"While the demand from automakers remained subdued, there was growth in the replacement market segment," Apollo Tyres Chairman Onkar S Kanwar said.

"Moving ahead, I am hopeful of the markets recovering and the sales bouncing back around the festive season in India. In Europe, we are performing better than the industry, which is likely to continue going forward as well," he added.

Speaking at the company's annual general meeting (AGM), Kanwar said the company has invested close to Rs 4,000 crore in a new facility in Hungary and has also earmarked Rs 3,800 crore for a greenfield project in Andhra Pradesh.

The company is also committed to upgrading its existing manufacturing plant in Chennai, expanding truck tyre radial production to 12,000 units a day from earlier 6,000 units, he added.

"While in India, we are achieving leadership position in multiple segments, we are confident of gaining traction in Europe in the coming years as we start catering to the original equipment manufacturers (OEMs) from the Hungary plant," Kanwar said.

Apollo is the only Indian company which supplies to various OEMs in Europe like Volkswagen, Ford and Audi, he said adding that the strategy of replicating the company's success with OEMs in India will go hand in hand with increasing its market share in the replacement markets.

Apollo shares were trading 3.74 per cent up at Rs 155.25 apiece on the BSE

Apollo bullish about growth, to invest Rs 3,800 cr in new Andhra project

Despite the economy facing a downturn Apollo Tyres has earmarked around Rs 3,800 crore for a green field project in Andhra Pradesh. The company is also expanding production of radial truck tyres to 12,000 units a day from the current 6,000 units. 

Addressing the shareholders in Kerala, Apollo Tyres' Chairman, Onkar S Kanwar said "India lies on the cusp of a great opportunity. A strong government is in place with a renewed mandate and a commitment to keep India at the top of the global economic order. The environment around us is not easy, with trade wars, protectionism and uncertainty around the world. But India has the potential, the ability and the leadership to break free of these shackles and lead global economic growth".

Apollo's single-minded focus is to realise the Vision 2020 of becoming ‘a premier tyre company with a diversified and multinational presence’, he said. To achieve this vision, the company is focusing on key objectives of ‘building leadership in India’, ‘premiumisation in Europe’, and ‘exploring strategically attractive markets where Apollo is currently not represented’. 

Today, the company has a market share of 30 per cent in the OE( original equipment) segment in India for small- and mid-sized cars and the company’s OE fitted tyres are in eight of the top 10 cars sold in India. 

"There are certainly uncertain times ahead, yet the team continues to be bullish about the growth prospects," said Kanwar.

The company has invested close to Rs 4,000 crore in a new Greenfield facility in Hungary and has also earmarked Rs 3,800 crore for a greenfield project in Andhra Pradesh. 

The facility will cater to both TBR (Truck, Bus Radial) and PCR (Passenger Car Radial) with a capacity of 3,000 TBR tyres per day and 15,000 PCR tyres, respectively.

Apollo is also upgrading its existing manufacturing plant in Chennai, expanding radial truck tyre production to 12,000 units a day from earlier 6,000 units. 

While in India, Apollo is able to achieve its leadership position in multiple segments, the company has started gaining traction in Europe too after it started catering to the original equipment manufacturers (OEMs) of the Hungary plant. 

Apollo is the only Indian company that supplies to various OEMs in Europe like Volkswagen, Ford and Audi. "The strategy of replicating our success with OEMs in India will go hand in hand with increasing our market share in the replacement markets," said Kanwar.