Apollo Tyres lines up capital expenditure of Rs 2,600 cr for FY21, FY22
Apollo Tyres is planning for a capex of around Rs 2,600 crore for the current and the next fiscal. The company said demand continues to be positive abetween nd with its factories running at between 85% and 90% utilisation, it was bullish about the third and fourth quarters.
During the investors call, the management said that during the first half of 2020-21 the company had invested around Rs 600 crore.
European capex should be between 25 million to 30 million euros a year, the management said.
Neeraj Kanwar, vice chairman and managing director, said, We are approaching the end of our current capex cycle. Going forward, the focus would be on sweating the assets and de‐leveraging the balance sheet. We expect the capex intensity to come down in the next few years, which coupled with recovery in demand should help us generate positive free cash flows and further de‐leverage our balance sheet. We are cognisant of the fact that capex in the last few years has been high and that coupled with the current demand softness has impacted our return ratios. We are focused on getting the return ratios back to a healthy level and expect this to happen over the next few years”.
Speaking on demand recovery, he said that it continues to be positive. Both, the replacement and the OE market segments have seen a growth. Reduction in raw material costs and reduction in fixed costs (by around 15 per cent) and overall manufacturing costs have further helped the company.
“We have reported our best ever volumes in the truck bus replacement and passenger car radial segment in September 2020. In October, we saw a very strong demand momentum and expect the top line growth to continue in the near‐to‐medium term,” said Kanwar, adding that he is also bullish on the fourth quarter.
Gaurav Kumar, chief financial officer, Apollo Tyres, added that the sales for the quarter were Rs 2,900 crore, a growth of 5% over the same period last year and a significant 66% growth on a sequential basis.
“The top line for the quarter was driven by volume growth in the replacement segment, but we also saw recovery in OEM demand towards the end of the quarter,” he said. “In September, the sales for this year were higher than the month of September last year. Almost all product categories posted a double‐digit growth on a year‐on‐year basis in the replacement segment and even in the OEM segment, as I mentioned, we saw growth in September 2020,” he said.
Kanwar claims Apollo gained about 500 basis points in market share in the passenger car radial and the agri segments, and more than 350 basis points in TBR and this was in line with the company’s internal estimates.
On network expansion, Kanwar said, “During the first half, Apollo added more than 350 dealers. Rural touchpoints increased to around 4,000 touchpoints. Most dealers are multi‐product dealers in these rural markets, where there is a demand for the entire product category, including two‐wheelers, cars, light trucks and trucks.
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