Apollo Tyres, India’s second largest tyre manufacturer, has worked on a roadmap to reach $ 5 billion revenue by FY26 without compromising on return on capital employed (ROCE), which it expects to be in the range of 12-15 percent, earnings before interests taxes, depreciation and amortization (EBITDA) of around 15 percent and net debt-to-EBITDA ratio to be less than 2x.
The company's current revenues stand at about $ 2.8 billion. The growth, the top leadership says, is expected to be achieved at minimal capex as the company has already made huge investments over the past more than a decade.
Neeraj Kanwar, Vice Chairman & MD, Apollo Tyres in an interaction with Autocar Professional said that the target is devised to be achieved on the back of five key enablers – technology, digitalisation, branding, sustainability and people growth. Also, Apollo Tyres aims to become carbon-neutral by 2050.
"In the past 11 years, Apollo had a very heavy capital-intensive cycle with the setting up of huge plants in Chennai, then in Hungary and now in Andhra Pradesh," said Kanwar, emphasising that its now the correct time to synergise it all with help from machine learning and artificial intelligence in order to optimally increase productivity.
"There is enhanced capacity and in the next two years, it is going to be a capex light for us," he continued.
Talking about the integration of the company's supply chains Kanwar highlighted that it has been facing several headwinds, leading to a high inflation in commodity prices which affects not only Apollo but the entire auto industry. "The supply chain today is very cumbersome. So, we have taken digitalization of our supply chain. That means from factory to the customer and even further to vendors," he further adds, explaining that his company has already started a digital innovation centre in London with the best minds working in it.
He explained that the current inflation remains very high and even if it comes down, there remains a lag period of almost three months to get reflected in the company's balance sheets. When asked to comment on commodity price index projections, Kanwar offering a mixed reaction, added that it may remain high during Q2FY23 before moderating down in Q3FY23, though a lot may depend upon uncertainties surround geopolitical situations including Russian-Ukraine war which has been dragging since past several months.
In terms of branding, Kanwar indicated that Apollo's inclination has always been towards football rather than cricket despite it having a cult following in the Indian sporting arena. Nine long years of association with Manchester United remains a case in point.
The Gurugram-based tyre major boasts of a diversified product portfolio with presence in India, which contributes nearly 70 percent of its revenues while rest comes from international markets. The company works on a dual brand strategy — Apollo and Vredestein tyres — with the latter, a relatively premium product having been acquired in 2009. Vredestein was launched in India late last year, with Kanwar claiming it to have received a "Much more than our expectations " response.
With its European DNA, Vredestein competes with the likes of Michelin, Bridgestone, Continental and Pirelli in the Indian car and motorcycle space.
Apollo Tyres launches all-terrain Vredestein Pinza in Europe