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Apollo Tyres – The Leader in Commercial Vehicle Segment

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Indian Tyre Industry

Indian Tyre industry is worth around Rs 300 billion for FY11. The industry was mainly dominated by the 5 players namely:

  • MRF
  • Apollo
  • Birla
  • Ceat
  • JK tyres

The 5 account for over 85% of the market share. The 5 companies manufacture tyres for all segments expect for two wheelers. In two wheelers only MRF, Ceat and Birla take the charge. If we compare the Indian industry to its western counter parts we will find our industry and technology lagging behind in radialization trends.

If we talk of global competition Japanese manufacturer Bridgestone is the world’s largest tyre manufacturer followed by Michelin, Goodyear Tire and Rubber Company, Continental AG etc. In India, besides domestic players, several International players like Bridgestone and Goodyear have made their presence felt by catering into higher end of premium category of the tyres. This has resulted in tough competition in the market.

Apollo Tyres

Apollo Tyres Ltd commenced its current 5-year strategic growth plan in FY12, with a clear goal of becoming a global Top 10 tyre manufacturer.

  • Apollo  Tyres has the advantage of a diversified market base across 3 Geographies
  •  The company is not dependent on a single domestic or  export market
  • Leading player in the commercial vehicle  segment – which accounts  for the bulk of the industry’s revenue in India
  • In the Indian passenger car segment, Apollo is the largest producer and exporter.
  • The Company has 3 strong product  brands  in its kitty – Apollo in India, Dunlop in 32 African countries and Vredestein  in Europe.
Valuation Measures
Enterprise Value (Jan 27, 2013) 68.93B
Trailing P/E (ttm, intraday) 7.77
Enterprise Value/Revenue (ttm) 0.53
Enterprise Value/EBITDA (ttm) 5
Profit Margin (ttm) 4.19%
Operating Margin (ttm) 8.21%
Management Effectiveness
Return on Assets (ttm) 7.66%
Return on Equity (ttm) 19.23%
Income Statement
Revenue (ttm) 129.99B
Revenue Per Share (ttm) 258.09
Qtrly Revenue Growth (yoy) 17.50%
Gross Profit (ttm) 31.01B
EBITDA (ttm) 13.78B
Net Income Avl to Common (ttm) 5.45B
Diluted EPS (ttm) 10.82
Qtrly Earnings Growth (yoy) 95.70%
Balance Sheet
Total Cash (mrq) 2.88B
Total Debt (mrq) 29.45B
Total Debt/Equity (mrq) 95.86
Current Ratio (mrq) 1.14
Book Value Per Share (mrq) 60.95


Lower level of profit has been a major concern for the company as it hinders its investment in the future growth. If we see the company’s balance sheet, we find huge debt in its books which is again a matter of concern for the company. The company has maintained a moderate current ratio. As far as the performance is concerned, the company’s Quarterly Revenue and Earnings growth has been tremendous despite rising operating cost. The year closed with a 37% addition to the company’s revenues, with an 18% growth in operating profits and with net profits being maintained at earlier levels, despite a 32% increase in raw material costs over the previous year.

Read about List of Top Car Companies and state of Auto Industry in India.


Slow down in the Indian economy is a concern for the company’s operation. Also the government regulations on the pricing of raw materials used in Tyre manufacture is a hindrance for the growth of the company as it results in rising cost for the company. The fluctuating rupee is again a matter of deep concern as it leads to rising uncertainty and risk in the company’s overseas operation. Further, all the leading players have commenced the capacity additions and are on ramping up capacities which will lead to competition being tougher than it was previously. Globally too, demand for autos and tyres are showing weakness in Europe and US because of their slowing economies and ongoing debt crisis which will adversely affect the companies exports. Also we see India has a large and growing 2-3 wheeler tyre segment wherein the company doesn’t manufacture tyres for this category and thus face a huge opportunity loss due to its non existence in the segment. At last we can see a moderate to positive performance for the company in the coming years.

The Company’s technology is strong indicating an upside which will help the stock reach the level of 90s. Fundamentally the company’s position is good but not strong owing to the fact of the slowdown in the performance. An R&D center has been set up by the company overseas which will help the company expand its product lines. Also the company is looking to raise money through placement route which will dilute its equity and would impact the earnings growth. On the other hand, the sales if improved could outset the dilution. Therefore, it’s a hold to buy for now.


Niraj Satnalika

Niraj is an MBA in International Business (Finance). Prior to this he completed B.Tech in Electronics and Instrumentation. He is currently working with Confederation of Indian Industry (CII), Kolkata in capacity of Consultant. Satnalika is actively involved with an NGO and works towards promoting education among the underprivileged.

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