Leading tyre-maker Apollo Tyres is planning a capex of ₹1,800 crore and prioritising a few key areas for future growth amid uncertainty over short-term demand due to the impact of Covid-19 second wave.
The March 2021 quarter was one of the strongest in terms of revenue for the company due to positive demand momentum in India and demand recovery in Europe.
“In both geographies, we gained market share in key product categories. Despite second wave hitting us hard, we remained focussed on converting the current crisis into an opportunity and emerge as a leaner and much-more efficient and effective company, while ensuring safety and well-being of employees and other stakeholders,” Neeraj Kanwar, Vice-Chairman & Managing Director, Apollo Tyres, told the company’s Q4FY21 conference call.
Market share gains
As per its estimates, the company gained a market share by about 400 bps in passenger car radials and agriculture segments and its share is estimated at about 21 per cent, while in the truck segment it gained 100 bps and its market share is estimated at about 30 per cent.
“It is difficult to give forecasts for near term demand. But, going forward, the focus will be on control of capital allocation, keeping the balance sheet leveraged at a reasonable level and sweating of assets. We continue to see huge opportunities in our key markets over the medium and long term. We are well placed to leverage the same given our investments in R&D, capacity, brand building, distribution and cost optimisation,” he added.
Andhra Pradesh factory
Though the short-term demand outlook is challenging, the company is spent slightly higher than the indicated capex for this fiscal. “The expected capex outflow for the Indian operations this year will be ₹1,800 crore, this is higher than ₹1,600 crore that we indicated earlier. While a large part of capex will go for completing the expansion of Andhra Pradesh factory, we have upped the spend on maintenance of our plants and digitisation initiatives and infrastructure to make sure that we are able to take advantage of the situation once demand comes back,” said Gaura Kumar, Chief Financial Officer of the company.
Under the proposed expansion, the AP factory is expected to reach its capacity of 15,000 passenger car tyres and 3000 truck-bus radials per day by March 2022.
Kanwar said the company was doing a lot of things on cutting costs while laying a stronger focus on the digital side, which was also providing not only savings on costs but also better reach and other benefits. “Covid has really taught us new ways of doing business. Digital launches have reduced our costs, while our fixed costs have also come down,” he added.
Amid the immediate impact of the second wave, demand outlook is healthy across segments on a medium-term basis.