After Europe, it is time for Apollo Tyres to enter the US and Chinese markets. Apollo was the first Indian tyre brand to enter the European market, in 2010.
In an interview to Business Line , Apollo Tyres Vice-Chairman and Managing Director Neeraj Kanwar said that “cross-selling” of brands across geographies will be the biggest takeaway from his $2.5-billion leveraged buyout of Cooper Tire and Rubber Co.
The acquisition made the combined entity the seventh largest tyre-maker globally, with a consolidated turnover of $6.6 billion.
Apollo had earlier acquired Dunlop South Africa (2007) and Vredestein Banden BV (2009) in the Netherlands.
“We will definitely take the Indian brands to the US and Chinese markets. Similarly, Cooper will also be introduced in the Indian market,” Kanwar said.
The “integration plan” will be readied once the acquisition is approved by the US regulatory authorities
Headquartered in the US, Cooper is world’s 11th largest tyre company, with eight facilities, including two in China. Sold through multi-brand outlets, Cooper (including a number of sub-brands) primarily dominates the passenger car and sports utility vehicle (SUV) tyres.
Access to technology
While a strong presence in four out of five continents de-risks Apollo from sluggishness in any particular market, Kanwar feels the company particularly benefits by access to first-world radial technology through its acquisitions in Europe and the US.
Though the acquisitions are mostly in the passenger tyre segment, the company expects them to help improve the quality of Apollo’s truck-bus radial offerings.
This should particularly help the company to shore up truck-bus radial sales in the Indian market, where share of radials is expected to improve from 20 per cent to 80 per cent in next five to six years.
Truck-bus tyres are the biggest revenue earners in the Indian tyre market.
Import from China
While Apollo has invested in truck-bus radial manufacturing facilities in India, the latest acquisition has opened up opportunities for import of these tyres from Cooper’s Chinese facilities.
Cooper sources its entire truck-bus radial offerings to the US market from China.
“We are now a global company and are open to (import) opportunities,” Kanwar said.
Apollo’s shares tanked 25 per cent on the BSE on Thursday. Kanwar felt the market acted on “wrong impressions” about the debt-burden on the company.
Apollo less leveraged
He doesn’t deny that ‘Apollo is leveraged’ but says it is restricted to the $450-million loan the company raised from Standard Chartered for equity contribution in Cooper.
This has impacted Apollo’s net debt-equity from 0.8:1 to 1.9:1 on a standalone basis.
Kanwar expects the debt-equity to come down to 1:1 in two years as the company would use its expected rise in earnings to pay back the loans.
The acquisition will be done by primarily leveraging the assets of Cooper. The US company had a mere $100 million loan. It is now leveraged to raise $2.1 billion.
pratim.bose@thehindu.co.in