Academic Research Project – Not a recommendation

Equity Research Report

Apollo Tyres Ltd.
Establishing itself as a premium tyre brand Recommendation : XXX
CMP : INR 518.25
About the company Target Price : XXX
Apollo Tyre Ltd ( hereinafter referred to as “Apollo Tyres” or “The Stock Data (as on Feb. 27,2024)
company”) is a multinational tyres and tubes manufacturing company Nifty : 22198.35
headquartered in Gurugram. The company was incorporated on
September 28, 1972, and it’s first plant was commissioned in Perembra in 52 Weeks H/L (INR) : 557.90/303.35
Kerela in the year 1991. Markert Cap (INR) : 32907.72
O/S Share (Cr) : 63.51
The company has now five manufacturing units in India, one each in the
Dividend Yield (%) : 0.77
Netherlands and Hungary. It has two R&D facilities in the Netherlands and
Chennai, India where a team of 350+ scientists are innovating and NSE Code : APOLLOTYRE
developing category leading products such as silent tyres and puncture
resistant tyres. Relative stock performance – 1 Year
The company generates 67.7% of total revenue from Asia pacific/Middle Nifty Indexed
East/Africa (APMEA), 28.4% from Europe , and 3.8% from rest of the 1.90 Apollo Indexed
world. 1.80
The company markets its products under its two global brands Apollo 1.70
and Vredestein, and its products are available in over 100 countries
1.60
through a vast network of branded, exclusive and multi-product outlets.
1.50
The product portfolio of the company includes the entire range of
passenger car, SUV, MUV, light truck, truck-bus, two-wheeler, agriculture, 1.40
industrial, specialty, bicycle and off-the-road tyres, and retreading 1.30
material and tyres. 1.20
During 2023, the Company introduced a Moto-Cross Tyre brand, `Tramplr' 1.10
in the two-wheeler segment; launched Quatrac Pro EV specifically 1.00
designed for electric vehicles; launched All-Terrain tyre, the Vredestein 0.90
Pinza in Europe; launched Apollo Apterra AT2 in SUV segment, and Apollo
Endutrax MA in the CV segment.

Absolute Return
Valuation View : 1 year : 64.8%
3 Year : 123.2%
The company posted the topline growth to improve in the second half of
the year, exports are weak but good recovery in replacement segment in 5 Year : 142.25%
domestic market. Share holding pattern (as of Dec 2023)
Despite subdued market conditions in Europe, the company has seen
temporary decline in the volume of passenger cars and trucks by 13% and Promoter : 37.3%
33%. FII : 18%
Implementation of AI and ML will enhance productivity and provide an DII : 23.6%
edge to cost cutting initiatives which will further improved the target
ROCE of 15%. Public : 21.1%
The stock currently trades at P/E of 18.0x with increase in EPS to 26.9 and Others : 0%
P/E to 14.9.
Financial Summary
in INR crs FY 23 FY24E FY25E

Key Highlights: Net Revenue 24568.13 25919 27,993

YOY Growth (%) 17.3% 5.5% 8.0%
• Topline growth of 17.34% on YOY basis was achieved for FY 2023 and
growth of 5.09% on QoQ basis in Q1FY24. EBITDA 3333.04 4360.6 4,549
• Growth margins were expanded 523 bps YoY ( plus 86 bps QoQ ) to EBITDA Margins (%) 13.6% 16.8% 16.25%
16.28% in FY24. PAT 1104.64 1820 1,924
• Despite the challenging market environment company has gained
market share in OHT market. YOY Growth (%) 73% 65% 5.71%
• The company has given the guidance on consolidated capex of INR ROE 8.04% 13.10% 12.30%
1000 crores in FY2024 which includes INR 700cr for India.
EPS( in INR) 17.4 28.6 30.30
• Capacity utilization for India/EU currently stands at 75%/80%.
EV/EBITDA 6.98x 6.60x 6.60x

Prepared by : Chirayu Negi

 Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Global Economy Global GDP Projections (%)

CY23 is still proving to be an unpredictable and turbulent year.
The world struggled with high inflation, the cost-of-living crisis, 0.50% 2.50% 4.50% 6.50% 8.50%
geopolitical tensions and fragmentation, and turbulence in the
banking sector in most of the areas.The continued Israel-Hamas World
conflict and Russia's invasion of Ukraine caused shockwaves in
commodity and energy prices, disrupting global trade. Numerous Advanced Economies
economies have to significantly reorient and modify as a result
of this. Advanced economies (the US, the Euro Area, Japan, etc.) Emerging Economies
grew at a slower rate of 2.6% in CY22 compared to a robust 5%
growth in CY21.Compared to 4.1% growth in CY22, the Euro Area
traditional global growth engines, emerging markets and
developing economies, jointly achieved a growth of 4.5%. US
The world economy expanded by 3.5% in CY22.The historical
average of 3.8% for global growth from 2000 to 2019 is
Japan
significantly higher than the baseline prediction of 2.9% for
CY2024. As policy tightening begins to bite, advanced economies
are predicted to decline to 1.4% in CY2024. The growth of
UK
emerging market and developing economies is expected to
moderately fall to 4.0% in CY2024. The estimate is for a steady China
reduction in global inflation, from 6.9% in CY2023 to 5.8% in
CY2024, as a result of tighter monetary policy supported by India
lower global commodity prices. Core inflation is typically
predicted to decrease more gradually, and in most
circumstances, inflation is not predicted to return to target until 2022A 2023P 2024P
CY2025.
Source: IMF WEO, Company Analysis Source: IMF WEO

India VS Global GDP Growth (%)

Indian Economy
10.00% In FY 23, India saw growth of 7.2%, which is much faster
than the average growth rate for the world. India's
5.00% financial year 2022–2023 (FY23) was historic as it
surpassed the UK to become the world's fifth largest
0.00%
economy.
2018 2019 2020 2021 2022 2023P 2024P
-5.00% The Indian economy has remained a relative "bright spot"
in the global economy despite the continuous headwinds
-10.00% produced by external causes, such as supply chain
bottlenecks resulting from the intensifying Russia-Ukraine
India Global
conflict and probable recessionary pressures facing
Source: IMF WEO, World Bank Western nations. With the support of several government
initiatives, such as PLI programs, national logistics reforms,
Indian GDP Quarterly Growth - Actual VS Projected infrastructure spending increases, strong local demand, a
16.00% supportive domestic policy environment, digitization, etc.,
14.00% the nation has surpassed other economies to become the
fastest-growing emerging market and developing
12.00%
economy (EMDE).
10.00% Due to a rise in vegetable costs, CPI headline inflation
increased by 2.6% to 7.4% in July of FY24 before slightly
15.20%

8.00%
13.50%

decreasing to 6.8% in August. Core inflation in July and

6.00%
August of 2023 decreased to 4.9%.The MPC chose to
8.40%
8.40%

8.40%
7.80%
7.70%

7.60%

maintain the policy repo rate at 6.50 percent at its

6.80%

4.00%
6.60%
6.30%
6.20%

6.10%
5.40%
6%

4.60%

4.60%
4.40%
4.10%

meeting in October of FY24, despite the fact that the

4%

2.00%
cumulative policy repo rate hike of 250 basis points is still
0.00%
making its way through the economy.

Actual Projected
Source: Investing.com Source: IMF WEO, RBI, SBI Research, Company Analysis
Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Global Automotive Industry Global Automotive Sales Forecast (Mn)

120
S&P worldwide Mobility reports that compared to the prior 107
97 100 104
year, worldwide motor vehicle production decreased by 1% in 100 91 91 94
83 84 87
CY'22. Over the following two years, a 3-4% growth is projected. 79 82
Although the industry is still in the process of recovering, 80
uncertainties are being introduced by the Israel-Hamas conflict,
the Russia/Ukraine conflict, and unfavorable macroeconomic 60

conditions. In addition, there are other issues facing the global

40
automotive sector, including the persistent energy crisis, a
slowdown in global demand, and continuous supply-chain issues. 20
The market for electric vehicles, or "EVs," is predicted to rise
steadily. Sales of EVs are predicted to increase by 25% in CY 23, 0
providing a glimmer of hope in an otherwise difficult market. 2019A 2020A 2021A 2022A 2023P 2024P 2025P 2026P 2027P 2028P 2029P 2030P

Between 2023 and 2035, EV sales are predicted to grow at a Global EV Sales Forecast
70.0
compound annual growth rate (CAGR) of 15.9%.
60.0
Although there is a growing consumer interest in electric
50.0
vehicles (EVs), different markets will require different strategies
to sustain this momentum. Cost, range uncertainty, and battery 40.0
safety concerns remain to be the main barriers to adoption
30.0
worldwide. Additionally, a few governments may reorganize
their EV incentive programs, which could affect the market for 20.0
these cars.Strong sector growth is mostly attributable to the 10.0
electrification of the world's transportation system as the world
shifts to low-carbonalternatives to traditional combustion engine 0.0
19A 20A 21A 22A 23P 24P 25P 26P 27P 28P 29P 30P
vehicles
Source: IMF WEO, Company Analysis Source: Multiple Reports.

Indian Automotive Sales Forecast ( Units in Mn) Indian Automobile Industry

60 About 7.1% of India's GDP (gross domestic product) and 49% of
its manufacturing GDP come from the automobile sector. India
50
surpassed Germany and Japan to become the third-largest
40 automotive market globally in December 2022.Automakers sold
37,92,356 passenger cars domestically in 2022—the most ever in
30 a single year—beating the record set in 2021.Due to a lack of
chips and growing semiconductor intensity per vehicle, the
20
passenger vehicle industry was the most severely impacted by
10
semiconductor shortages in the fiscal year of 2022. While
domestic demand and sales in the auto sector have been strong
0 overall in FY23, exports have decreased, especially in the CV
19A 20A 21A 22A 23P 24P 25P 26P 27P 28P 29P 30P category, mostly as a result of a bleak global outlook.
Source: Invest India, PIB, SIAM
India has been steadily increasing the number of Electric
Global EV Sales Forcast ( Units in Lakhs) Vehicles (EVs) it uses in an attempt to lower air pollution and
greenhouse gas emissions. In an effort to lower the cost of EVs
30.0
for consumers, the Union Budget 2023 also announced a number
25.0
of measures to support the nation's electric vehicle (or "EV")
industry. These include lowering the customs duty on lithium
20.0 batteries from 21% to 13% and lowering the Goods and Services
Tax (or "GST") on EV sales from 12% to 5%.
15.0 In addition, the Indian government hopes to allay consumer
concerns about charging stations by constructing 46,397 public
10.0 EV charging stations in nine key cities by 2030. India has also
established a plan to electrify 80% of two-wheelers by 2030,
5.0 which could greatly reduce the country's dependence onfossil
fuels.
0.0
19A 20A 21A 22A 23P 24P 25P 26P 27P 28P 29P 30P

Source: IEA, Economic Survery2023 Source: IBEF, Multiple Reports

Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Global Tyre Industry

China dominates the global tyre market, making up around 50%

of the sector, followed by Europe, US, India and Japan. Due to Global Tyre Market - Volumes (Mn)
the COVID-19 pandemic, the global Automotive Tire market size 2755
is estimated to be worth US$ 134990 million in 2022 and is 2678
forecast to a readjusted size of US$ 167870 million by 2028 with
2602
a CAGR of 3.7% during the review period.
2529
The demand for tires is primarily driven by factors such as the
2458
growth of the automotive industry, increasing vehicle
2388
production, expanding transportation and logistics sectors, and
2321
rising consumer preference for fuel-efficient tires. Additionally,
government regulations related to tire labeling, safety, and fuel
efficiency also influence market demand. Asia Pacific has been
the largest regional market for tires, accounting for a significant
share of the global market. This can be attributed to the
presence of major tire manufacturers in countries like China, 22A 23P 24P 25P 26P 27P 28P
Japan, South Korea, and India. North America and Europe are Source: IMRAC.
also significant markets, driven by the demand for replacement
tires and technological advancements.
Source: IMRAC, Company and Peer Analysis

Indian Tyre Industry

The Indian tyre industry is on course to more than double its

revenue to $22 billion by fiscal 2032 from $9 billion in fiscal 2022
the industry’s turnover will increase a solid 100 basis points to
Indian Tyre Market Size (USD Bn)
3.4% of India’s manufacturing gross domestic product (GDP) by
fiscal 2032 compared with 2.2% in fiscal 2022. Further, its
22
20 contribution to Goods and Services Tax (GST) will rise to $4.1
18 billion from $2.0 billion, number of jobs supported to 3.7 million
17
15 from 1.9 million and share in global trade to 4.5% from 3.1%.
14
13
11 12 Research and development (R&D) expenditure of the industry is
9 10
forecast to more than double to $151 million from $64 million,
after growing threefold in the past five fiscals. Adoption of
emerging technologies and Industry 4.0 concepts such as
artificial intelligence and machine learning to improve
efficiencies, along with technical and safety regulations, has
22A 23P 24P 25P 26P 27P 28P 29P 30P 31P 32P promoted tyre makers to allocate significant expenditure foe
R&D. India tire market is experiencing a significant growth driver
Source: ATMA in the form of rapidly expanding vehicle sales. With a burgeoning
middle class and increased consumer spending power, the
demand for automobiles has skyrocketed, leading to a surge in
Indian Tyre Market Forecast - (Units in Mn) tire requirements. Rising disposable incomes, urbanization, and
improved road infrastructure have contributed to the escalating
247 254 vehicle ownership rates. This surge in vehicle sales has created a
233 240
214 220 226 substantial market for tires, driving tire manufacturers to meet
196 202 208
the growing demand.
Tyre exports, which were strong till Q1 FY2023, contracted
sequentially since June-2022 on account of macro-economic
headwinds impacting demand in the key export destinations.
Export volumes declined by ~7% in FY2023 and are expected to
remain muted in the near term. Tyre imports declined by ~31%
in FY2023 in volume impacted by the Government restrictions.
While ADD on Chinese TBR Tyres has been withdrawn in
23 24P 25P 26P 27P 28P 29P 30P 31P 32P December 2022, tyre imports are expected to remain low till
March; however, the same will be a key monitorable in the
Source: EMR
current fiscal.
Source: CRISIL, ATMA, Company and Peer Analysis.
Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Indian Tyre Industry

Capex

In the last 3 years , Indian tyre industry witnessed capital expenditure of 35,000 crores INR in the new capacity creation & debottlenecking.
The investment made across all the key tyre segment with major focus on cars, trucks, and buses radial tyres. As per ATMA, the new
capacity creation will help the industry to attain sales of 1 Lakh crores from current sales of 75000 crores INR. The new capacity will be able
to fulfil the growing demand due to rising economic activities and push in infrastructure growth by the government. With normal
monsoon, the rural demand is expected to raise to pre covid levels.

The Indian tyre industry has been reinvesting 10% of revenue as capex over past few years and expected to maintain the investment of
around 10%-12% of the revenue in the middle term.

Exports

Indian tyre exports which witnessed a growth of 9% in FY23 despite Challenges to the global economy due to recessionary conditions,
rising interest rates, geopolitical disruptions and slowing of external demand. Indian tyre exports have witnessed growth at an accelerated
pace and have nearly doubled in the last four years. Tyres manufactured in India are being exported to more than 170 countries. Major
global markets such as the EU, US, Brazil, UAE and UK recognise the quality of tyres made in India, with India’s tyre exports currently
standing at $3 billion, which is over 25 per cent of industry turnover, tyre exports from India have gone up from ₹12,844 crore in FY20 to
₹23,125 crore in FY23.
Category Wise Exports & % Share in Quantity Tyre Exports (in INR Crs)

27000 55%
24000 45%
21000
18000 35%
15000 25%
12000
9000 15%
6000 5%
3000
0 -5%
Scooter PCR FY18 FY19 FY20 FY21 FY22 FY23E
Others Motorcycle
TBR TBB
Source: ATMA Report, Peer Analysis
Source: ATMA Report, Peer Analysis
Imports

Tyre Imports in India went up by 15% in value terms in FY 23. The surge in imports was boosted by increase in import of Motorcycle
and Industrial/ OTR tyres during the period. Over H 2100 crore worth of tyres were imported in the country during the period under
review. With 47% share, Passenger Car Radials (PCR) accounted for the largest share in overall tyre import volumes in India. OTR/
Industrial tyres represented the second largest category in number terms.
China, Thailand and Vietnam were the main suppliers of tyre imports to India, with a combined 64% share of total imports. Sri Lanka,
Japan, Germany, Malaysia, Romania, the United States, South Korea, the United Arab Emirates, Indonesia and Taiwan (Chinese) lagged
somewhat behind, together comprising a further 30%.
Category Wise Exports & % Share in Quantity
Tyre Imports (in USD Mn)

600 60%
40%
400 20%
0%
200 -20%
-40%
0 -60% Scooter PCR OTR/Industrial
FY18 FY19 FY20 FY21 FY22 FY23 Motorcycle Others TBR

Source: Statista Source: Peer Analysis

Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Quarterly Result Analysis – Q2FY24 and Q3FY24

❑ Financial Performance:
• Highest ever consolidated EBITDA of more than INR 12 billion in Q3 FY24 and consolidated revenue growth of 5% and EBITDA margin of
18.5% in Q2 FY24 with and a 160% increase in consolidated earnings year-on-year.
• Improvements in consolidated revenues, EBITDA margin, and sales mix
• Expecting muted volume growth in near term with strong operating performance
• Marginal growth expected in passenger car segment with significant improvement in second half of the year
• Maintaining leverage ratios with focus on cash flows and profitability
❑ Recovery in Demand Environment:
• Expect a recovery in demand environment, particularly in domestic markets and Europe.
• Strong growth in replacement volumes for commercial vehicles and signs of pickup in passenger vehicles.
❑ F26 Vision:
• Key pillars of F26 vision: R&D, digitalization, sustainability, brands, and people.
• R&D focus on new product development and launches, including ultra-low rolling resistance tire technology for the Indian market.
• Digitalization efforts include customer experience transformation and Industry 4.0 initiatives.
• Sustainability achievements include energy efficiency awards and CSR recognition.
• Brand investments in India and Europe, with Apollo Tyres brand awareness and preference at an all-time high.
❑ Cost Optimization:
• Cost savings through process improvements, optimization of costs, and well-timed pricing actions to counter increasing raw material
prices.
• Focus on profitable growth and margin improvement rather than market share.
❑ Product and Market Strategy:
• Introduction of new range in domestic commercial vehicle market
• Focus on technology with OEM fitments for global automotive companies
• Recovery in exports showing signs of pickup
• Market share trends stable in passenger car segment, slight loss in truck segment
• No significant pricing actions taken, raw material scenario still benign
❑ Operational Efficiency:
• Emphasis on digitalization for efficiency and process improvement
• Plans for Capex light approach in the next 2 years with digitalization focus for productivity increase
• Capacity enhancement through AI, machine learning, and corporate engineering leading to productivity increase
• No major Capex requirement for Kerala plants in the next few years
• Capacity utilization in India and Europe in mid-70s
❑ Sustainability and Corporate Social Responsibility:
• Sustainability initiatives to lower emissions and increase renewable energy use
• Brand investments in key geographies with successful campaigns and sponsorships
• Revised HR policies supporting diversity and employee engagement
❑ Industry Analysis:
• Cautiously optimistic stance on market demand with expected recovery in mid-long term
• Factors driving industry's improved pricing power include import restrictions, benign raw material scenario, rationality, and maturity in
the market.
❑ Outlook:
• Expectation of a recovery in the export market and a reduction in net debt.
• No major growth CapEx planned for the next two years, focusing on digital transformation and innovation.
• Interest costs expected to come down, and natural rubber prices uncertain but focus on maintaining margins

Source: Company Analysis

Academic Research Project – Not a recommendation
Apollo Tyres Ltd.
Management Analysis
S.No. Name Designation Qualification
1 ONKAR Chairman Chairman-Apollo Tyres Ltd, Chairman-Artemis
KANWAR Health Sciences, Chairman-BRICS Business
Council India, Past President-Federation of
Indian Chamber of Commerce & Industry, Past
Chairman-Automotive Tyre Manufacturers’
Association ,Ex-Member of the Board of
Governors for the Indian Institute of
Management (Kozhikode). A Science and
Administration graduate from the University of
California.
2 NEERAJ Vice Chairman & Vice Chairman & MD-Apollo Tyres Ltd. Past
KANWAR Managing Director Chairman-Automotive Tyre Manufacturers’
Association An engineering graduate from
Lehigh University in Pennsylvania, USA
3 BENOIT President, Europe President, Europe-Apollo Tyres Ltd, CEOApollo
RIVALLANT Vredestein BV, A Mechanical Engineer, Benoit
has also done BA in Business from Montpellier
University, France.
4 GAURAV Chief Financial Officer Chief Financial Officer, A degree in Mechanical
KUMAR Engineering from the Indian Institute of
Technology, Delhi, and a MBA in Finance from
the Faculty of Management Studies.
Source: Company Analysis
Comments
Mr. Onkar is a qualified and
competent individual for the job.
Under his guidance, Apollo Tyres
transformed itself from an Indian
manufacturer of commercial vehicle
tires to a global entity with a full-
fledged product portfolio spanning
three continents. He has been
responsible for the turnaround and
the company has flourished under
him. Moreover, he has been
associated with the company for
more than four decades now. The
only thing you may want to look into
is the feud with his father and then-
chairman of Apollo Tyres in 1993
during AGM.
Mr. Neeraj Kanwar began his career
with Apollo Tyres as Manager -
Product & Strategic Planning, where
he played a crucial role in creating a
bridge between the two key
functions of manufacturing and
marketing. In 1998, he joined the
Board of Directors and was promoted
to Chief -Manufacturing and Strategic
Planning, he led Apollo's acquisitions,
including Dunlop Tyres International
in South Africa and Zimbabwe in
2006, and Vredestein Banden B V in
the Netherlands in 2009.
Has been associated with the company
for nearly a decade and has diverse
experience of over 25 years, in Asia,
Europe and Middle East in the Tyre
Industry. Prior to his assignment at Apollo
Tyres, he has spent most of his work life
with Michelin and has held various roles
in the organisation and hence he is fit for
the job.
He has now been associated with the
company for nearly two decades.
Additionally, I find him answering with
honesty and transparency during
management conference calls.
Academic Research Project – Not a recommendation
Apollo Tyres Ltd.
Management Analysis
S.No. Name Designation Qualification
5 Pallavi S Regional Managing She received a graduate degree
Shroff Partner from Jamnalal Bajaj Institute of
Management Studies, a graduate
degree from Government Law
College, an undergraduate degree
from Lady Shri Ram College for
Women and an undergraduate
degree and a graduate degree
from the University of Mumbai.
6 Dr. Jaimani Former India’s High Bhagwati studied physics at the St. Bhagwati's educational background reflects
Bhagwati Commissioner to UK and Stephen's College and later
Ambassador to the completed a master's degree at the applied aspects of science and
European Union Massachusetts Institute of
Technology.
7 Satish President (APMEA) and A Chemical Engineer from the
Sharma Whole-time Director National Institute of Technology,
Raipur, Madhya Pradesh, Satish
also holds a post - graduate
diploma in Business Management
from Institute of Management
Technology, Ghaziabad.
8 Vinod Rai Ex-Comptroller and He did his schooling from Birla
Auditor General of India Public School in Pilani, Rajasthan.
He graduated from Hindu College,
University of Delhi. He has a
bachelor's and master's degree in
economics from Delhi School of
Economics, University of Delhi and
MPA from Harvard University, USA
in 1988.
9 Vishal Managing Director, Head Vishal received a BS in Economics
Mahadevia of India Warburg Pincus with a concentration in Finance
and a BS in Electrical Engineering
from the University of
Pennsylvania.
Source: Company Analysis
Comments
She has an impressive and diverse
educational background. Moreover, her
membership in the BRICS Women's
Business Alliance signifies engagement in
international business collaborations,
showcasing a broader perspective on global
economic relations.
a strong foundation in both theoretical and
research.Bhagwati's academic journey from
physics to economics, along with his roles as
a professor and a Distinguished Fellow in
public policy, underscores a versatile and
intellectually diverse career.
Satish appears to be a well-qualified and
professionally engaged individual with a
blend of technical and managerial
education. Being a member of the Institute
of Engineers, Indian Rubber Institute, and
the All India Management Association
(AIMA) reflects his commitment to
professional organizations.
This individual has an extensive and diverse
educational background, showcasing a
commitment to academic excellence and
public service.The combination of academic
achievements and real-world experience,
particularly in a leadership role as District
Collector and Magistrate, reflects a well-
rounded and accomplished professional.
Vishal Mahadevia emerges as a highly
qualified and accomplished professional
with a strong educational foundation, a
leadership role in a prominent investment
firm, and a diverse portfolio of directorial
positions. His combination of financial,
technical, and strategic expertise positions
him as a notable figure in the business and
investment landscape
Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Commentary
The executive leadership of the company is characterized by a cadre of highly qualified individuals, boasting diverse backgrounds that
include former members of the Indian Administrative Service (IAS), accomplished engineers, former ambassadors, and professionals with
robust academic pedigrees. These leaders have played a pivotal role in the company's trajectory, contributing their extensive knowledge
and experiences to drive expansion and development. Notably, an analysis reveals a notable absence of political affiliations among the
directors, and any historical conflicts have been effectively managed. It is evident that the management team has been instrumental in
the company's ongoing success, serving as an essential part for its achievements till date.

Under Kanwar's leadership, Apollo Tyres has undergone a remarkable transformation from a modest single-plant Indian company to a
multinational entity boasting seven plants globally and achieving annual revenues exceeding US$2.8 billion. Kanwar's influence extends
beyond the corporate realm, as evidenced by his role as the President of the Federation of Indian Chambers of Commerce & Industry
during the 2004-05 term. Additionally, he serves as the Chairman of the BRICS Business Council, India, further attesting to his significant
contributions in both the domestic and international business arenas.

Shareholding Pattern

The company's share distribution indicates that Foreign Financial Institutions (FFIs), Domestic Institutional Investors (DIIs), and the public
collectively hold the majority at 61.1%, while promoters retain 37.3%. Among these, Foreign Institutional Investors (FIIs) possess 23.4%,
DIIs hold 17.2%, and government holding is at 1.6%. Notably, promoters' pledged shares accounted for 5% of their holdings in the June
2021 quarter, progressively decreasing to stabilize at 1.1% since the December 2022 quarter. Over time, the promoters' shareholding has
diminished from 44.2% in March 2017 to 37.3% in the quarter ending June 2023. Despite this reduction, it is crucial to note that the
decrease in promoter holdings does not necessarily imply a strategic exit from the business.

Yearly and Quarterly shareholding pattern of the company as follows:

Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Dec-23
Promoters 44% 40% 41% 41% 37% 37% 37% 37%
FIIs 31% 24% 19% 23% 24% 19% 22% 18%
DIIs 8% 20% 22% 17% 12% 19% 18% 22%
Government 2% 2% 2% 2% 2% 2% 2% 2%
Public 14% 14% 16% 17% 25% 23% 21% 21%

Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23

Promoters 37% 38% 37% 37% 37% 37% 37% 37% 37% 37% 37% 37%
FIIs 24% 23% 20% 20% 19% 21% 22% 23% 22% 23% 22% 18%
DIIs 12% 16% 18% 18% 19% 17% 18% 17% 18% 17% 18% 22%
Governme
nt 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2%
Public 25% 22% 23% 23% 23% 23% 21% 21% 21% 20% 21% 21%

Quarterly Promopter Holding vs Pledge Quarterly FII Holding Pattern

30%
40.0%
35.0% 25%
30.0% 20%
25.0%
20.0% 15%
15.0% 10%
10.0%
5.0% 5%
0.0% 0%

Promoter Holding % of promoter Holding Pledged

Source: Company Analysis, Trendlyne, BSE. Source: Company Analysis, Trendlyne, BSE.
Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Commentary

Management Remuneration

In FY23, the company recorded a managerial remuneration of INR 654.41 million, reflecting a substantial 85.7% year-on-year increase from
the INR 352.34 million reported in FY22. The details are under:

FY23 FY22
Designation Remuneration Remuneration Growth in Remuneration Growth in Sales Growth in Profit
Mr. Onkar Kanwar Chairman 270.59 140.14 93.1% 17.3% 72.9%
Mr. Neerah Kanwar Vice Chairman 284.12 122.62 131.7% 17.3% 72.9%
Mr. Satish Sharma Director 99.7 89.58 11.3% 17.3% 72.9%
Total 654.41 352.34 85.7% 17.3% 72.9%

Board Efficiency
Based on our research, the Board of Directors (BOD) exhibits sufficient representation of independent directors, industry experts, and
professionals in finance and legal domains, meeting the necessary criteria.
The effectiveness of the BOD can be evaluated through their substantive contributions in key meetings conducted during the fiscal year
2023. The particulars are outlined below:

Name/Designation of Directors Executive/Non Executive/Independent No of Board Meetings Attendance at last AGM

Held Attended
Mr. Onkar Kanwar, Chairman Promoter & Non-Exec 5 5 Yes
Mr. Neeraj Kanwar, vice Chairman Executive 5 5 Yes
Mr. Satish Sharma, whole Time Director Executive 5 5 Yes
Mr. Akshay Chudasma Non-Executive Independent 5 3 Yes
Gen Bikram Singh Non-Executive Independent 5 5 Yes
Mr. Franceso Crispino Non-Executive Independent 5 4 Yes
Ms. Lakshmi Puri Non-Executive Independent 5 5 Yes
Ms. Pallavi Shroff Non-Executive Independent 5 3 Yes
Mr. Bikram S Mehata Non-Executive Independent 5 5 Yes
Mr Vinod Rai Non-Executive Independent 5 5 Yes
Dr. Jaimini Bhagwati Non-Executive Independent 5 2 N/A
Non-Executive Independent Non-
Mr. Franceso Gori Independent 5 5 Yes
Non-Executive Independent Non-
Mr. Robert Steinmetz Independent 5 5 Yes
Non-Executive Independent Non-
Mr. Sunam Sarkar Independent 5 5 Yes
Non-Executive Independent Non-
Mr. vishal Mahadevia Independent 5 5 Yes

During FY23, the company has been supervised by the BOD efficiently as the majority of the members of the board have attended all
the board meetings which shows good participation by the board in key matters discussed during the years and helped the company
in taking effective decisions .
Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Quarterly Snapshot

Particulars ( INR Cr) Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23
Revenue 5,942 5,956 6,423 6,247 6,245 6,280 6,595
Total 5,252 5,244 5,509 5,249 5,193 5,120 5,387
Expenditure
EBITDA 690 712 914 998 1,052 1,160 1,208
EBITDA Margins (%) 11.6% 12.0% 14.2% 16.0% 16.8% 18.5% 18.3%
Depriciation 344 349 354 372 362 360 368
Interest 118 132 142 139 135 133 123
Other Income 11 7 7 40 22 13 3
Profit Before
Tax 239 238 425 527 577 680 720
Tax Rate (%) 20% 25% 31% 19% 31% 30% 31%
Net Profit 191.2 178.5 293.25 426.87 398.13 476 496.8
Net Profit Margin (%)
3.2% 3.0% 4.6% 6.8% 6.4% 7.6% 7.5%

Yearly Snapshot

Perticulars ( INR Cr) 2019 2020 2021 2022 2023 2024E 2025E
Revenue 17549 16350 17397 20948 24568 26044 28172

Total Expenditure 15573 14392 14579 18353 21235 21649 23554

EBITDA 1976 1958 2818 2595 3333 4395 4618

EBITDA Margins (%) 11.3% 12.0% 16.2% 12.4% 13.6% 16.9% 16.4%
Depreciation 813 1138 1315 1400 1419 1519 1585

Interest 199 300 463 465 551 497 412

Other Income -77 24 -478 118 64 87 93

Profit Before Tax 887 544 562 848 1427 2466 2714
Tax Rate (%) 23% 12% 38% 25% 23% 23% 26%
Net Profit 683.0 478.7 348.4 636.0 1098.8 1898.8 2008.4
Net Profit Margin (%) 3.9% 2.9% 2.0% 3.0% 4.5% 7.3% 7.1%

Source: Company Analysis, Consensus.

Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Commentary

Revenue Sales vs Sales Growth

30000 25.0%
company has been performing well in terms of revenue,
consistently showing growth for the past four years. In the third 25000 20.0%
and latest quarter, our India Operations witnessed a 5% YoY 15.0%
20000
revenue growth, reaching INR 43.4 billion. In the second half of 10.0%
FY24, the company expects the topline to improve on account of 15000
5.0%
continued recovery in the domestic market. Meanwhile, the 10000
0.0%
European markets faced challenges, experiencing a decline of 7%
5000 -5.0%
and 9% in volumes for passenger cars and trucks, respectively.
Despite the subdued market conditions, performance in Europe 0 -10.0%
remained resilient, surpassing industry benchmarks. 2020 2021 2022 2023 2024E 2025E

Source: Company Analysis. Sales Sales Growth

Gross Margin

In the latest quarter, the company achieved an impressive

EBITDA and Margin Growth
EBITDA of INR 8.4 billion, boasting a substantial margin increase 1400 20.0%
from 10.3% to over 19% year-over-year and 17.8% sequentially. 1200
The net profit and EBITDA were more than 2.5 times and 1.5 1000 15.0%
times higher, respectively, compared to the same quarter last 800
year. Notably, the net debt to EBITDA for India Operations 10.0%
600
improved from 1.7x in March 2023 to 1.1x. According to Mr. 400
Neeraj Kanwar, the Vice Chairman, Apollo's margins are industry- 5.0%
200
leading and will remain so due to their unwavering focus on
0 0.0%
balance sheet ratios, profitable growth, and margin optimization.
Dec-22 Mar-23 Jun-23 Sep-23 Dec-23
Source: Company Analysis.
Margins EBITDA

Inventory

The inventory situation in the main segment, passenger car tires, Inventory
is quite normal with no significant pile-up. However, there is a
30000 135
slightly elevated inventory level on the agricultural side,
reflecting market conditions. The company's inventory levels 130
25000
align with industry medians. Efforts are underway to enhance
operations and strive to become a benchmark in this aspect as 125
20000
well. The median inventory days among peers in the industry is
120
80 days. The current inventory days have seen a slight decline 15000
compared to the previous fiscal year (FY22), standing at 110 days 115
as opposed to 120. Among peers, the median inventory days 10000
range from a high of 160 days to a low of 48 days. Due to 110
challenging market conditions in Europe there is a certain degree 5000 105
of de-stocking as dealers aim to maintain lean inventory levels.
The overall demand fundamentals are yet to show significant 0 100
improvement. Specifically, the Passenger Car market experienced Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
a 13% decline. It is anticipated that the European market will
likely remain weak for at least one to two quarters before a Sales Inventory Inventory Days
potential recovery takes place

Source: Company Analysis.

Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Commentary

Trade Receivables Debtor

The company has experienced a notable increase in trade 30000 40
receivables, growing at a rate of 46.9%, surpassing the growth
35
rate of revenue. The management attributes these delays in 25000
receiving payments to challenges faced with Original Equipment 30
Manufacturers (OEMs), primarily within the automobile sector, 20000
25
and underscores the impact of the COVID-19 pandemic on their
ability to secure timely payments. Despite the heightened trade 15000 20
receivables growth, the management remains optimistic about 15
10000
the situation. They express confidence in the recovery of 10
payments from customers, especially within the context of 5000
improvements seen in the automobile OEM business. Examining 5
the company's financial performance over the longer term 0 0
reveals a 5-year Compound Annual Growth Rate (CAGR) of 10.6% Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
for revenue and 11.6% for trade receivables. This suggests
historical alignment between the growth of receivables and
overall sales. However, it's important to note that in the fiscal Sales Trade Recievables Debtor days
year 2020, the company boasted its lowest receivable days at 21.
Over time, this metric increased to 37 days in fiscal year 2023,
and the median receivables period stands at 40 days. This
upward trend may warrant attention, but the management's Capex ( INR Cr)
reassurance regarding the recoveries and positive indications in
3500 3148
the automobile OEM sector offer confidence in the company's
ability to navigate these challenges. 3000 2792 2700
2442
Source: Company Analysis. 2500
2000
2000 1834

Capex 1500

The company's CAPEX have exhibited fluctuations to date, 1000

influenced by environmental and business considerations. In the
500
current financial year, FY23-24, the company has adopted a light
CAPEX model which is approximate 680-800Cr. Its primary 0
objective is to enhance financial ratios and improve figures on Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
the financial statements. The company has committed to
achieving a ROCE of at least 15% for the FY25, compared to the
current 10%. Looking ahead to theFY25, the company aims to
attain positive free cash flow while consistently increasing ROCE. Capex vs Sales
The management emphasizes a strategic focus on improving
EBITDA margins, ROCE, and free cash flows. They have 3500 30000
communicated that the ongoing CAPEX investments in 3000
digitalization, artificial intelligence, and machine learning are 25000
geared towards boosting productivity. The company is pursuing a 2500
CAPEX light model to release additional capacity in both PCR and 20000
Truck Bus Radial segments, anticipating growth through these 2000
measures. Currently, the company is not considering brownfield 15000
1500
expansion, as the primary focus remains on productivity
enhancement and debottlenecking existing plants. 10000
1000
Source: Company Analysis. 500 5000

0 0
Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23

CAPEX Sales
Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Dupont Analysis – ROE & ROA

Revenue ( INR Crs) Net Profit ( INR Crs) Average Total Assets ( INR Crs)
24,568 1,105 26,429 27,164
20,948 24,511
21,678
16,350 17,397
639
476
350

2020 2021 2022 2023 2020 2021 2022 2023

2020 2021 2022 2023

Return on Equity (%) Return on Assets ( INR Crs) Financial Leverage

9.0% 4.1% 2.3x
2.3x

5.5% 2.4%
4.8% 2.2% 2.2x
3.3% 1.4% 2.2x

2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023

Return on Equity (ROE)

Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Net Profit 1,099.0 723.9 679.8 476.4 350.2 638.6 1,104.6
Average Shareholder Equity 6,947.3 8,533.3 9,908.3 9,984.9 10,686.6 11,597.6 12,315.0
Return on Equity (ROE) 15.8% 8.5% 6.9% 4.8% 3.3% 5.5% 9.0%

ROE - Dupont Equation

Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Net Profit 1,099.0 723.9 679.8 476.4 350.2 638.6 1,104.6
Revenue 13,180.0 14,842.9 17,548.8 16,350.2 17,397.0 20,947.6 24,568.1
Net Profit Margin (A) 8.3% 4.9% 3.9% 2.9% 2.0% 3.0% 4.5%

Revenue 13,180.0 14,842.9 17,548.8 16,350.2 17,397.0 20,947.6 24,568.1

Average Total Asset 13,413.4 17,645.4 20,104.3 21,678.2 24,511.0 26,428.9 27,164.3
Asset Turnover Ratio (B) 1.0x 0.8x 0.9x 0.8x 0.7x 0.8x 0.9x

Average Total Asset 13,413.4 17,645.4 20,104.3 21,678.2 24,511.0 26,428.9 27,164.3
Average Shareholder Equity 6,947.3 8,533.3 9,908.3 9,984.9 10,686.6 11,597.6 12,315.0
Equity Multiplier (C) 1.9x 2.1x 2.0x 2.2x 2.3x 2.3x 2.2x

Return on Equity (A*B*C) 15.8% 8.5% 6.9% 4.8% 3.3% 5.5% 9.0%

Return on Asset (ROA)

Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Net Profit 1,099.0 723.9 679.8 476.4 350.2 638.6 1,104.6
Average Total Asset 13,413.4 17,645.4 20,104.3 21,678.2 24,511.0 26,428.9 27,164.3
Return on Asset (ROA) 8.2% 4.1% 3.4% 2.2% 1.4% 2.4% 4.1%

ROA - Dupont Equation

Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Net Profit 1,099.0 723.9 679.8 476.4 350.2 638.6 1,104.6
Revenue 13,180.0 14,842.9 17,548.8 16,350.2 17,397.0 20,947.6 24,568.1
Net Profit Margin (A) 8.3% 4.9% 3.9% 2.9% 2.0% 3.0% 4.5%

Revenue 13,180.0 14,842.9 17,548.8 16,350.2 17,397.0 20,947.6 24,568.1

Average Total Asset 13,413.4 17,645.4 20,104.3 21,678.2 24,511.0 26,428.9 27,164.3
Asset Turnover Ratio (B) 1.0x 0.8x 0.9x 0.8x 0.7x 0.8x 0.9x

Return on Asset (A*B) 8.2% 4.1% 3.4% 2.2% 1.4% 2.4% 4.1%
Academic Research Project – Not a recommendation

Apollo Tyres Ltd.

Commentary

• The initial impact of the COVID-19 pandemic, the company observed a decline in ROE. Post-recovery, the latest financial assessment
reveals an ROE of 8%, indicating a commendable 2% increment from the pre-pandemic figure as of March 19th. This improvement
underscores the company's regained financial strength.

• In the DuPont analysis of ROE, it is evident that the company exhibits a robust control over price margins, contributing to an
augmented profitability. Notably, the net profit margin has risen from 3.87% in FY19 to 4.50% in FY23, reflecting a commendable
improvement in the company's financial performance. This positive trend underscores the company's adept management of both
pricing strategies and overall profitability.

• The company's equity multiplier has remained almost steady since FY19 Despite minimal fluctuations, the equity multiplier has
generally exhibited stability. Indicating a consistent reliance on equity rather than debt to fund its assets. This stability reflects
effective management and controlled debt levels, presenting a positive outlook for stakeholders in terms of prudent financial
practices.

• The company's ROA has demonstrated a positive trajectory, advancing from 3.4% in FY19 to 4.1% in FY23, marking a noteworthy
0.69% increase over the past four years. While this increment may appear modest, it reflects a consistent and commendable upward
trend, underscoring the company's effective utilization of assets. This improvement suggests enhanced efficiency and strategic
management, contributing positively to the overall financial performance.

• The company's ROA has demonstrated a positive trajectory, advancing from 3.38% in FY19 to 4.07% in FY23, marking a noteworthy
0.69% increase over the past four years. While this increment may appear modest, it reflects a consistent and commendable upward
trend, underscoring the company's effective utilization of assets. This improvement suggests enhanced efficiency and strategic
management, contributing positively to the overall financial performance.

Source: Company Analysis.

Disclaimer:- : This is an academic project and not meant for commercial usage.

This information/document does not constitute an offer to sell or solicitation for the purchase or sale of any financial
instrument or as an official confirmation of any transaction. The information contained herein is obtained from publicly
available data or other sources believed to be reliable and the Author has not independently verified the accuracy and
completeness of the said data and hence it should not be relied upon as such. Author is not SEBI registered investment
analyst. This document is prepared as part of an academic project. Investment in securities market are subject to market
risks, read all the related documents carefully before investing. These securities quoted are for illustration only and are
not recommendatory