Staying the course

Apollo Tyres’ promoter rides the gravy train; ramps up holding

The country’s second-largest tyre maker by sales has been on a roll. The Gurugram-based Apollo Tyres has outperformed the benchmark index in the current fiscal – while the Sensex gained 14%, the tyre major’s return was double of that at 28%. The growth has been largely on the back of a robust performance in the current fiscal. For the second quarter ended, consolidated revenue grew 13% YoY to Rs.3,477 crore, while the India business grew close to 20% to Rs.2,481 crore. Though consolidated profit on a year-on-year basis was down by 46% to Rs.140 crore, it was up 60% on a sequential quarter basis.

If the promoter’s recent dealings on the Street are anything to go by, the company seems to have a bright future ahead. Over the past two months, Onkar Kanwar, chairman and managing director of Apollo Tyres, has bought Rs.275 crore worth of shares in the open market through the promoter entity, PTL Enterprises. Following the share purchase, the entity holds 0.17% stake, while the promoter’s aggregate holding is around 39.28%.

Analysts expect better days for the company as it is expected to be a major beneficiary of anti-dumping duty on Chinese truck and bus radial tyres (TBR). The anti‐dumping duty would lead to better volumes and pricing power in the truck segment. The company is already seeing signs of volumes improving in the truck segment. In Q2FY18, volume growth in the truck tyres segment was 10% YoY on the back of 5% growth in the replacement market and a sharp 40% growth in the OEM market.

For the passenger car market, the company plans to increase its radial tyre capacity through de-bottlenecking. The new passenger car radial capacity expansion is underway and commercial production will begin by FY20. These measures are expected to help the company consolidate its leadership in the passenger car segment. The management has also indicated that the domestic replacement market has recovered from the GST-led disruption.

Laying out the company’s goals for 2020, Neeraj Kanwar, vice-chairman and son of Onkar Kanwar, recently said, “By 2020, we want to be number one in the product categories that we operate in within India. In Europe, we want to be a premium tyre company, be it in terms of products, pricing, our brand or the service levels we offer to customers, everything has to be premium."

Both domestic and global funds have taken bets on the promoters’ vision. Among domestic funds, Franklin Templeton AMC through its various schemes holds 4.84% stake, HDFC’s Mid-Cap Opportunities Fund and ICICI Prudential Balanced Advantage Fund also hold more than 1% stake. Meanwhile, Templeton Emerging Markets Small Cap Fund holds 1.12% stake.