Over the last half a decade, Apollo Tyres has emerged as India's only global tyre company with prominent presence in at least three continents. In a freewheeling interview to Business Line , Mr Neeraj Kanwar, Vice-Chairman and Managing Director of the company, explains his growth plans in an otherwise difficult year.
There has been a decline in the raw material prices in the global market in the recent past. Did your Indian operation get the benefit net of devaluation of rupee against dollar?
No. Even after the price reduction, the net impact on the balance sheet is going to be Rs 5-7 crore. The benefit is not coming through. We will be a gainer, after the rupee appreciates.
Not substantially because the world markets are down. If the world markets were up then I would have said yes but today the world markets are down. So I can export only to a certain level.
So, should you go slow on your plans to step up activities in South Asian markets like Indonesia in 2012-13?
Everything is on. There is no slowing down.
How is the demand outlook? Will there be growth, especially in replacement sales, for Apollo Tyres in the third quarter?
Demand for passenger car sales have dropped in October. However, that of commercial vehicles is up on a quarter-to-quarter basis so far this quarter.
Our replacement sales should grow in the current quarter. Overall, there will be good growth for Apollo Tyres in the third quarter.
Your European business gained substantially in Q2 due to early bookings for winter tyres. Will there be any slowdown in the current quarter?
No. the trend will continue. Already we are seeing good growth even in Q3. In fact, in Europe, Q3 will be much better than Q2 – both on sales and profitability.
Earlier, we were not so strong in summer tyres. Now our (summer) tyres have been rated number one or number two – technology wise – by the leading German magazines. So, we are very optimistic in selling them in the summer market.
Do you foresee any impact of Euro Zone crisis on your European business?
Not as yet. The tyre market or car market is not doing all that bad. There is repeat demand.
Are you expecting South African operations to break even in 2011-12? When will you fully utilise this capacity?
It (profitability) has started improving. The margin is still negative. But I think we should be able to break even in January-March 2012.
We are also trying to open up new markets – like Nigeria, Ghana, Brazil, Argentina – in Africa and Latin America for Apollo Tyres South Africa. We have already started selling in some of these countries. Our plant is now operating five to six days a week. I think next year (2012-13) onwards we will be able to utilise full capacity.
What is your outlook on the Indian economy?
I am a very positive guy. I think there is a slump that we are just going through.
India has the potential to bounce back. The consumer demand or domestic demand is there. We are all operating at nearly 100 per cent capacity utilisation.
There is demand in the market. So, I guess it is the sentiment that is very negative. Once the sentiment turns positive, there we will be back to healthy numbers.
How soon do you expect the Indian economy to bounce back?
It all depends on Europe and America. If any country – Greece or Italy – goes bust, then we are into a long-term problem. But if they are able to sail through, then India will be able to bounce back. So, it all depends on the international markets.