Apollo Tyres Expecting High Returns In FY17 As Market Recovers

With Europe operations signalling a settle down and their manufacturing plant producing extra volumes of radial tyres, Apollo Tyres will probably witness a notable improvement in the ongoing financial year with respect to its revenue growth. Earlier, due to capacity restraints, the Gurgaon-based company’s revenue growth in the FY16 saw a dip of 8 percent. Moreover, in the ongoing financial year, the concern will get resolved as the new Chennai facility goes fully functional. The company, one of the largest tyre makers in India, seems confident to register a double-digit revenue growth as they bank upon the recovery in the domestic as well as European operations.

At a time when the threat of cheaper Chinese tyres is hovering overhead, the tyre magnate’s Truck and Bus Radial (TBR) tyre plant in Chennai is operating to its full capacity, which indicates that the capacity addition will churn-out revenue growth this fiscal. Apollo enjoys 25 percent market share in the TBR category. And with an investment of Rs 2700 crore, the company will increase the TBR capacity to 12000 units/day. Compared to the previous fiscal where it produced 4.3 lakh tonnes, in the coming FY17 and FY18, the firm is projected to manufacture 4.8 lakh tonnes and 5.3 lakh tonnes respectively.

The domestic volume surge will be backed by the tyre maker’s foray into the two-wheeler market. The European operations accounting for 28 percent of the revenue are steadily recovering after a rare issue of SAP enterprise software application implementation that affected the volume growth.

The company suffered a drop of 4.8 percent in the operating margins in March quarter of its European operations. However, the SAP application problem is resolved now and their new plant in Hungary commences early next year. This will aid the company to serve the large Europe-based auto giants like Mercedes Benz, Volkswagen and Audi.