Apollo Tyres will invest Rs 1,600-1,700 crore, a bulk of it in its Chennai Plant, and 200 million euros in a green field Plant in Hungary during the year 2016-17. According to its Chief Financial Officer, Gaurav Kumar, the company had spent a quarter of the proposed capital expenditure in the Hungarian plant, which would have a capacity of 5.5 million car and light truck tires and 675,000 heavy truck tires.
The Chennai plant’s capacity will be increased to 12,000 truck-bus radials and 16,000 car tires per day within a couple of years. The company expects the Chennai capacity to start coming on stream towards the end of 2016. The investment will be funded by internal accruals and borrowing.
Apollo Tyres gross debt went up from Rs 690 crore to Rs 970 crore as a result of the loans taken for the expansion of the Chennai plant. The company is expected to start commercial production at the Hungarian Plant towards the first quarter of 2017. Until June this year the company had spent 150 million euro on the Hungarian project. Apollo Tyres had in 2015-16, spent 90 million euros on the Hungarian plant and Rs 400 crore to enhance capacity at its Chennai unit. The company’s capacity utilisation in India has risen to 85 per cent and in Europe to 90 per cent. This will help the company to offer a larger product portfolio to its customers in the highly profitable European markets and increase its market share.
The other major step the company took was its entry into the two-wheeler tires market. The company’s research and development (R&D) team in Chennai worked over the past two years in developing the two-wheeler tires, which were rolled out in March this year. With the offering, Apollo Tyres is a full-range player and the two-wheeler tires will support the company’s vision of creating a stronger and profitable company. With a clear strategy laid out for the next two years, including the necessary marketing, advertising and R&D push, the company will soon become one among the top three players in this segment. Apollo Acti series, for bikes and scooters, would cover nearly 85 per cent of the replacement market for two-wheeler tires in India.
The two-wheeler category, which is growing at a compound annual growth rate of 8.5 per cent in India, has a huge potential for tire manufacturers. According to rough estimates, currently India has 120 million two-wheelers. This is, in addition to the demand from the business partners for the company’s two-wheeler tires. The launch of the high-mileage passenger car tire, Apollo Amazer 4G Life, that can run up to 100,000 Kms, or the foray into the retreading business or the marketing push for the truck-bus radial segment are now bearing fruit as the company continues to gain market share in other segments of the industry.”
The company is doubling its capacity in this key segment to further consolidate its leadership position. If a company focuses only on profits and growth, it is unlikely to create a long lasting institution and leave a legacy for the future. Further to this, sustainability is at the core of the company, because without giving back to society no business can be truly successful and sustainable in the long run. The company’s goals and aspirations, as part of it’s Vision 2020, is to become a premier tire company with a diversified and multinational presence. “The company will continue to invest in the brands, have a sharp focus on technologies and expand into new markets and consolidate and increase existing market shares,” Kanwar added.