Internal Evaluation-2 Basics of Financial Management

APOLLO TYRES LTD

Introduction-
Apollo Tyres Ltd. came into inception in 1972 and has since been a trusted name in the business of
manufacture and sale of tyres. With our corporate headquarters in Gurgaon, India, we cater to over a
100 countries across the globe.
The company markets its products under our two global brands: Apollo and Vredestein. These
products are available in countries across the globe through a vast network of branded, exclusive and
multi-product outlets. Apollo Tyres has multiple manufacturing units in India, the Netherlands and
Hungary. At the end of the financial year 2020, the company clocked a turnover of US$ 2.27 billion,
backed by a global workforce of approximately 17,200 employees. As of March 31, 2020, the
company traded in India on the Bombay Stock Exchange and National Stock Exchange, with 59.10%
of shares held by the public, government entities, banks and financial institutions.

About the company

Apollo Tyres Limited is an Indian tyre manufacturing company headquartered in Gurugram, Haryana.
It was incorporated in 1972, and its first plant was commissioned in Perambra, Thrissur, and Kerala,
India. The company now has four manufacturing units in India, one in Netherlands and one in
Hungary. It has a network of nearly 5,000 dealerships in India, of which over 2,500 are exclusive
outlets. The company generates 69% of its revenues from India, 26% from Europe and 5% from other
countries. Apollo announced its entry into the two-wheeler tyre segment with contract manufacturing
in March 2016.In November 2016, the company signed a Memorandum of understanding with the
Government of Andhra Pradesh to set up a new factory in Andhra Pradesh to manufacture tyres for
two-wheelers and pick-up trucks. The company's second plant in Europe, was inaugurated by the
Hungarian Prime Minister, Viktor Orban, in April 2017.In May 2019, Apollo Tyres opened its first
Apollo Truck Tyre Zone in Malaysia.

History of the Company

Apollo Tyres Ltd. was incorporated on 28 September 1972 as a Public Limited Company and
obtained certificate of Commencement of Business on 24 October, 1972.The Company was promoted
by Bharat Steel Tubes, Ltd., Raunaq International Pvt. Ltd., Raunaq & Co. Pvt. Ltd., Raunaq Singh,
Mathew T. Marattukalam and Jacob Thomas. In 1975, the company made its Initial public offer of
equity shares and its first manufacturing facility was commissioned in Perambra Plant, Thrissur,
Kerala, India in 1977, followed by its 2nd plant at Limda, Gujarat, India in 1991. The company
acquired Premier Tyres Limited- PTL in 1995, which became its 3rd plant at Kalamassery, Kerala,
India. In 2008, it started a new plant at Chennai, Tamil Nadu, and India. A year later in 2009, the
company acquired the Netherlands-based tyre maker Vredestein Banden B.V. (VBBV) for an
undisclosed sum. The company focused on the production of truck tyres in India and introduced its

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first truck tyre, Rajdhani in India. The company expanded its operation across India and in 1996, it
expanded operations outside India by acquiring Dunlop's Africa operations. In 2013, it disposed of the
Dunlop brand in Africa along with most of the South African operation in a sale to Sumitomo Rubber
Industries of Japan.The very same year, it started its Global R&D Centre, Europe in Enschede, the
Netherlands.
In 2015, Apollo Tyres bought Germany's Reifencom for €45.6 million. It shifted its corporate office
for Europe region to Amsterdam from Enschede, the Netherlands and opened a Global R&D Centre,
Asia in Chennai, India a few months later.
In 2016, the company signed a MoU with the Government of Andhra Pradesh to set up a new factory
in the state. In 2017, it inaugurated its plant in Hungary. On 9 January 2018, the Chief Minister of
Andhra Pradesh, N Chandrababu Naidu laid the foundation stone for Apollo Tyres' ₹1,800-crore tyre
factory in Andhra Pradesh. The plant will come up over a 200-acre site in Chinnapanduru village near
Sri City in Chittoor district and produce passenger car radial (PCR) tyres with an initial capacity of 55
lakh (5.5 million) tyres per year and will serve both domestic and export markets.

Vision and Values

Vision -To be a premier tyre company with a diversified and multinational presence.

Values-It’s about our instincts. It’s about the way we think. It’s the way we interact with the world.

It’s our common culture. It’s a system of values that, like our six senses, defines who we are and how

we work.

Corporate Structure and Leadership

Apollo Tyres is structured in the following units:
Asia Pacific, Middle East and Africa (APMEA)
Satish Sharma, President
Europe
Benoit Rivallant, President
Board of Directors
Onkar Kanwar, Chairman & Managing Director
Neeraj Kanwar, Vice Chairman and Managing Director

Stakeholder pattern
Name of the Shareholder Total Shares held Shares pledged or otherwise encumbered
  Number As a % of Number % of Total As a % of grand total
grand total shares held (A) + (B) + (C)

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(A) + (B) +
(C)
Sunrays Properties & 13,02,93,784 22.78 26495000 20.33 0
Investment Co. Pvt Ltd.
Onkar S Kanwar 1,00,000 0.02 0 0 0

SHALINI KANWAR 19,77,000 0.35 0 0 0

CHAND
Neeraj Kanwar 6,71,380 0.12 0 0 0
Raaja R S Kanwar 2,00,880 0.04 0 0 0
Osiatic Consultants & 3,90,41,880 6.82 0 0 0
Investments Pvt.Ltd.
APOLLO FINANCE LTD. 3,75,28,872 6.56 4200000 11.19 0
Taru Kanwar 12,250 0 0 0 0
Simran Kanwar 18,500 0 0 0 0
Classic Industries & 1,81,83,505 3.18 0 0 0
Exports Ltd.
PTL ENTERPRISES LTD. 82,70,700 1.45 0 0 0
Amit Dyechem Pvt. Ltd. 15,74,595 0.28 1574595 100 0
APOLLO 9,84,485 0.17 984485 100 0
INTERNATIONAL LTD.
GLOBAL CAPITAL LTD. 1,000 0 0 0 0

Source- Annual Report 19-20 Apollo tyres ltd.

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Capital structure-

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RATIOS (Rs in crore)

Per Share Ratios Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
Basic EPS (Rs.) 8.33 11.88 13.43 21.59 22.06
Diluted Eps (Rs.) 8.33 11.88 13.43 21.59 22.06
Book Value [Excl. Reval
Reserve]/Share (Rs.) 173.59 175.51 170.91 143.22 129.69
Dividend/Share (Rs.) 3 3.25 3 3 2
Face Value 1 1 1 1 1
           
Margin Ratios Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
Gross Profit Margin (%) 12.01 11.86 11.91 15.17 17.43
Operating Margin (%) 5.04 7.23 7.91 11.67 13.82
Net Profit Margin (%) 2.91 3.87 4.87 8.34 9.5
           
Return Ratios Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
Return on Networth / Equity
(%) 4.79 6.77 7.4 15.07 17.01
ROCE (%) 4.7 8.01 4.76 10.13 13.68
Return On Assets (%) 2.04 3.36 3.59 7.18 9.63
           
Liquidity Ratios Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
Current Ratio (X) 0.96 1.35 1.39 1.13 1.33
Quick Ratio (X) 0.4 0.55 0.8 0.53 0.77
           
Leverage Ratios Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
Debt to Equity (x) 0.66 0.47 0.45 0.45 0.21
Interest Coverage Ratios (%) 2.94 7.01 7.21 14.96 17.7
           
Turnover Ratios Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
Asset Turnover Ratio (%) 70.22 86.86 73.63 86.16 101.67
Inventory Turnover Ratio (X) 5.09 5.04 5.04 4.98 6.11
           
Valuation Ratios Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
P/E (x) 0 27 18.61 13.59 8.81
P/B (x) 0.46 1.26 1.61 1.46 1.35
EV/EBITDA (x) 5.28 8.09 11.09 6.76 4.7
P/S (x) 0.28 0.72 1.06 0.81 0.75
           
Growth Ratios Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
3 Yr CAGR Sales (%) 7.4 13.99 5.09 -0.58 -2.53
3 Yr CAGR Net Profit (%) -24.33 -15.49 -9.53 3.03 22.42

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INTERPRETATION
Financial outcomes of the company (FY 20)
Consolidated operating profit (EBITDA including other income): Rs.19, 623 million, Cash generated
by operating activities (consolidated): Rs.25, 173.60 million Net debt to EBITDA (ratio)
(consolidated): 3.00 Net debt to Equity (ratio) (consolidated): 0.59 Earnings per share (consolidated):
8.33 Return on equity (consolidated): 4.80% Dividends paid to shareholders: 325% (Dividend for
FY19) 300% (Dividend for FY20)
Debt to Equity Ratio-
The key purpose of the debt-equity ratio is to calculate the relative interest in the company of the
shareholder and creditors. From the creditor’s point of view, it measures the degree to which their
interest is covered by owner funds. High debt-equity ratio indicates the riskier investments because
the business is not able to generate enough money to repay its debts. A uniform debt-equity ratio is
neither desirable nor feasible for all the industries. The debt to equity ratio is generally higher for the
large capital intensive industries. In Apollo Tyres the Debt to Equity ratio is increasing every year and
highest for the FY 20 (0.66) which means company is not making enough Profit to pay its debt.
EPS-
EPS indicates how much money a company makes for each share of its stock, and is widely use to
estimate corporate value. A higher EPS indicates greater value because investors will pay more for a
company's shares if they think the company has higher profits relative to its share price. Apollo tyres
has a decreased EPS of 29.88% compared to last year and 62.23% compared to FY 16. This could
indicate a negative P/E.
P/E ratio-
The P/E ratio helps investors determine the market value of a stock as compared to the company's
earnings. In short, the P/E ratio shows what the market is willing to pay today for a stock based on its
past or future earnings. A high P/E could mean that a stock's price is high relative to earnings and
possibly overvalued. Conversely, a low P/E might indicate that the current stock price is low relative
to earnings. P/E ratio is increasing from FY’16(8.81) to FY’19 (27).
P/B Ratio-
Another method used to analyse a stock is determining a company’s price-to-book ratio. Investors
typically use this method to find high-growth companies that are undervalued. The formula for P/B
ratio equals the market price of a company’s stock divided by its book value of equity. Investors view
a low P/B ratio as a sign that the stock is potentially undervalued. Since the value of P/B ratio is
continuously falling from Fy 18 Therefore, the stock of Apollo is favourable for the investors.
Return on Equity-
Investors use return on equity to determine how well a company produces positive returns for its
shareholders. Analysing ROE can help you find companies that are profit generators. ROE is
calculated by dividing net income by average shareholders’ equity. A continual increase in ROE is a
good sign to investors. ROE of Apollo is continuously decreasing from 17.01 to 4.79 since last 5
years. Thus, Investors won’t favourably buy its shares.
Current ratio:

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The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or
those due within one year. A good current ratio is between 1.2 to 2, which means that the business has
2 times more current assets than liabilities to cover its debts. The current ratio of Apollo is 0.96, it is a
good sign for the company as it is capable to pay any obligations.
Quick Ratio-
The quick ratio indicates a company's capacity to pay its current liabilities without needing to sell its
inventory or get additional financing. The standard quick ratio is 1:1. Here for the past five-year
company’s quick assets is more than that of any quick liabilities. In year 2020 the quick ratio is 1.61
because the asset of the company and increase in cash and bank balance. Thus the company is in a
position to meet its immediate obligation in all the years.
Profit before tax margin
Profit before tax is used to identify how much tax a company owes. Profit before tax can also be a
profitability measure that provides for greater comparability among companies that pay a varying
amount of taxes. The company’s PBT saw a sharp fall this year when compared to the last year data.
Though the company see a continuous growth YoY, but this year due to covid-19 pandemic the
company was unable to generate the sufficient profit.
Net profit margin (%)
Net profit margin is equal to how much net income is generated as a percentage of revenue. Net
profit margin helps investors assess if a company's management is generating enough profit from its
sales and whether operating costs and overhead costs are being contained. The ratio is fluctuating. The
net profit margin has decreased from the last year and lowest compared to last 5 years which not a
good sign for the company.
Assets turnover ratio
Asset turnover is the ratio of total sales or revenue to average assets. This metric helps investors
understand how effectively companies are using their assets to generate sales. The asset turnover ratio
is fluctuating and is lowest for FY 20. This shows improper utilization of assets.
Inventory turnover ratio Inventory turnover shows how many times a company has sold and
replaced inventory during a given period. This helps businesses make better decisions on pricing,
manufacturing, marketing, and purchasing new inventory. As the inventory turnover ratio is
increasing ( 4.98 in Fy 17 to 5.09 Fy 20)it shows that the inventory is efficiently converted into sales.
Thus, the company is managing the stock effectively which is good for the company.

Cash flow and Income statement (in cr)-

Annual Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
Sales 16327 17548 14840 13180 11848
Other Income 46 123 116 151 67
Total Income 16373 17671 14957 13331 11916
Total Expenditure 15549 16602 13781 11793 10230
EBIT 824 1069 1175 1538 1686
Interest 280 181 162 102 92
Tax 67 208 288 336 467
Net Profit 476 679 723 1099 1126

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Stock price analysis

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Source- Moneycontrol.com
Shares of Apollo Tyres NSE 0.40 % over 4 per cent after the company reported a consolidated net
loss of Rs 135 crore for the first quarter ended June 30, hit by lower sales due to coronavirus
pandemic. The stock declined 4.14 per cent to Rs 111 on the BSE. At the NSE, it plunged 4.22 per
cent to Rs 111.Apollo tyres has reported a net profit of Rs 142 crore in the April-June last fiscal.Net
sales during the quarter under review declined to Rs 2,828 crore, from Rs 4,272 crore in the year-ago
period.

Comparison with Competetors

Balance Sheet ------------------- in Rs. Cr. -------------------

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Internal Evaluation-2 Basics of Financial Management

Balkrishna
Apollo Tyres MRF Ceat JK Tyre & Ind
Ind

Mar '20 Mar '20 Mar '20 Mar '20 Mar '20

Sources Of Funds

Total Share Capital 57.21 38.66 4.24 40.45 49.25

Equity Share Capital 57.21 38.66 4.24 40.45 49.25

Share Application
0 0 0 0 0
Money

Preference Share
0 0 0 0 0
Capital

Reserves 7,634.94 4,989.44 12,000.11 2,886.95 2,113.25

Revaluation
0 0 0 0 0
Reserves

Ne tworth 7,692.15 5,028.10 12,004.35 2,927.40 2,162.50

Secured Loans 4,326.39 861.21 1,021.02 1,567.58 2,993.13

Unsecured Loans 0 0 0 0 0

Total Debt 4,326.39 861.21 1,021.02 1,567.58 2,993.13

Total Liabilities 12,018.54 5,889.31 13,025.37 4,494.98 5,155.63

Balkrishna
Apollo Tyres MRF Ceat JK Tyre & Ind
Ind

Mar '20 Mar '20 Mar '20 Mar '20 Mar '20

Application Of Funds

Gross Block 12,989.43 4,865.48 8,849.18 4,573.61 5,829.44

Less: Accum.
3,704.24 1,588.41 0 753.14 2,330.48
Depreciation

Ne t Block 9,285.19 3,277.07 8,849.18 3,820.47 3,498.96

Capital Work in
1,272.07 585.56 1,734.56 933.78 60.88
Progress

Investments 2,409.52 1,063.09 1,540.18 320.22 723.8

Inventories 1,808.25 580.35 2,852.69 879.5 1,095.53

Sundry Debtors 445.08 649.24 2,257.03 704.66 1,436.03

Cash and Bank

236.58 45.5 1,106.85 26.59 46.28
Balance

Total Current Assets 2,489.91 1,275.09 6,216.57 1,610.75 2,577.84

Loans and
1,025.29 530.43 813.62 259.8 627.01
Advances
Fixed Deposits 0 0 0 0 0

Total CA, Loans &

3,515.20 1,805.52 7,030.19 1,870.55 3,204.85
Advances

Deffered Credit 0 0 0 0 0

Current Liabilities 4,232.93 814.18 5,786.50 2,290.20 2,279.74

Provisions 230.52 27.75 342.24 159.84 53.12

Total CL &
4,463.45 841.93 6,128.74 2,450.04 2,332.86
Provisions

Ne t Current Asse ts -948.25 963.59 901.45 -579.49 871.99

Miscellaneous
0 0 0 0 0
Expenses

Total Assets 12,018.53 5,889.31 13,025.37 4,494.98 5,155.63

Contingent Liabilities 2,704.89 1,435.99 0 1,118.98 154.2

Book Value (Rs) 134.47 260.1 28,304.52 723.69 87.82

Source : Dion Global Solutions Limited

Findings-

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1. The Company's operation comprises one business segment - Automobile Tyres, Automobile Tubes
and Automobile Flaps
2. On April 24, 2020 CRISIL had reaffirmed its 'CRISIL AA+/Stable' rating to non-convertible
debentures, long-term bank facilities & debt programmes of Apollo Tyres Ltd (Apollo) and to its
enhanced short-term bank facilities. It had also reaffirmed its rating on commercial paper at 'CRISIL
A1+'. On March 04, 2020 India Ratings too affirmed its NCDs rating as ‘IND AA+’/Stable and
commercial papers rating as ‘IND A1+’
3. The listed non-convertible debentures (NCDs) issued by the Company aggregating to Rs. 20,750
Million as on September 30, 2020, are secured by a pari passu first charge by way of hypothecation
on movable fixed assets of the Company, both present and future (except stocks and book debts).
Except, out of these, Rs. 5,000 Million at 8.75% which are for 10 year bullet payment have also been
given exclusive charge on the immovable property of the Company's Registered office at Kochi. The
asset cover thereof exceeds 100% of the principal amount of the said NCDs.
4. On February 26, 2020, the Company executed an agreement with Emerald Sage Investment Ltd (an
affiliate of Warburg Pincus LLC) to issue 108,000,000 6.34% Compulsorily Convertible Preference
Shares (CCPS) having a face value of Rs. 100 each, at par, for cash, by way of preferential allotment
on a private placement basis. The Members of the Company approved the issue of CCPS (Tranche 1)
through its Extraordinary General Meeting held on March 23, 2020 and issue of CCPS (Tranche 2)
through Postal Ballot held on September 24, 2020. During the quarter ended June 30, 2020, as per the
Amendment Agreement dated April 21, 2020, the Company had allotted 54,000,000 CCPS (Tranche
1), for cash, for an aggregate amount of Rs. 5,400 Million on April 22, 2020 and accounted for as a
compound instrument in the financial results. The balance 54,000,000 CCPS (Tranche 2) have been
allotted on October 7, 2020, for cash, for an aggregate amount of Rs. 5,400 Million.
5. The Company has considered the possible effects that may result from the Covid 19 pandemic on
the carrying amounts of property, plant and equipment, investments, inventories, receivables and
other current assets. In developing the assumptions relating to the possible future uncertainties in the
global economic conditions because of this pandemic, the management, as at the date of approval of
these financial results, has used internal and external sources on the expected future performance of
the Company. The management has performed sensitivity analysis on the assumptions used and based
on current indicators of future economic conditions, expects that the carrying amount of these assets
will be recovered and sufficient liquidity is available to fund the business operations for at least
another 12 months. Given the uncertainties of the pandemic, the final impact on the Company’s assets
in future may differ from that estimated as at the date of approval of these financial results, and the
Company will continue to closely monitor any material changes to future economic conditions.

References-
https://www.moneycontrol.com/india/stockpricequote/tyres/apollotyres/AT14
https://www.moneycontrol.com/download-annual-report/apollotyres/AT14/2019
https://corporate.apollotyres.com/investors/financial-reporting/
https://www.apollotyres.com/en-in/car-suv-van/tyre-finder/
https://economictimes.indiatimes.com/apollo-tyres-ltd/capitalstructure/companyid-63.cms
https://economictimes.indiatimes.com/apollo-tyres-ltd/stocks/companyid-63.cms#compare

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Annexure

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