apollotyres.txt

8/13/2019 apollotyres.txt

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Technology generation in the Indian tyre industry has witnessed a fair amount of expertise and versatility toabsorb, adapt and modify international technology to suit Indian conditions.This is reflected in the swifttechnology progression from cotton (reinforcement) carcass to high-performance radial tyres in a span of fourDecades. Globalization has led to the linking of the economies of all the nations and therefore major Indian

players in the tyre industry are pursuing global strategies to enhance their competitiveness in world markets. Thepresent section broadly undertakes an overview of the Indian tyre industry through an examination of its growth

trends with respect to production, exports and acquisition of technological capabilities.

Key Features At present there are 40 listed companies in the tyre sector in India. Major players are MRF, JK Tyres, and Apollo Tyres & CEAT, which account for 63 per cent of the

organized tyre market. The other key players include Modi Rubber, Kesoram Industries and GoodyearIndia, with 11 per cent, 7 per cent and 6 per cent share respectively. Dunlop, Falcon, Tyre Corporationof India Limited (TCIL),TVS-Srichakra, Metro Tyres and Balkrishna Tyres are some of the othersignificant players in the industry.

While the tyre industry is largely dominated by the organized sector, the unorganized sector ispredominant with respect to bicycle tyres.The industry is a major consumer of the domestic rubbermarket. Natural rubber constitutes 80% while synthetic rubber constitutes only 20% of the materialcontent in Indian tyres. Interestingly, world-wide, the proportion of natural to synthetic rubber in tyres

is 30:70 The sector is raw-material intensive, raw material accounting for 70% of the total costs of production Total production figures in tonnage: 11.35 lakh MT & total production of tyres in all categories: 811

lakh (2007-08) Current level of radialization includes 95% for all passenger car tyres, 12% for lightcommercial vehicles and 3% for heavy vehicles (truck and bus)

Restrictions were placed on import of used /retreaded tyres since April 2006 . Import of new tyres & tubes is freely allowed, except for radial tyres in the truck/bus segment which

has been placed in the restricted list since November 2008. Total value of tyre exports from India is approximately Rs 3000 crores. The major factors affecting the demand for tyres include the level of industrial activity, availability and

cost of credit, transportation volumes and network of roads, execution of vehicle loading rules,radialization, retreading and exports.

Growth of Tyre Industry

Phase Period Characteristics Policy RegimePhase I 1920-1935 No domestic production. Demand

Met through imports. Key playersincluded Dunlop (U.K), Firestone &Goodyear (USA)

Liberal imports

Phase II 1936-1960 Domestic production begins byerstwhile trading companies:Dunlop, Firestone, Goodyear and India Tyre &Rubber Company

Imposition of tariff & non-tarif barrierson imports

Phase III 1961-1974 Indian companies-MRF, Premier &In check- enter manufacturingsector with foreign technology;licensing of additional production

capacity

Regulation oncapacity expansionand repatriationof profits of foreign

companies; enforcement ofexport obligation onMNC; protectionfrom externalcompetition

Phase IV 1975-1991 Entry of large Indian businesshouses like Singhania & Modi &technical collaborations with MNCs,introduction of radial tyres, verticalintegration and exponential growth in tyreindustry and export

De licensing ofproduction, placing ofimports underOGL with tariff &non-tariff barriers

Phase V 1992 onwards External trade liberalization &reduction in import duty; re-entryof MNCs either independently or incollaboration with Indian capital

Progressivereduction in importduty; liberalizedimports


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Production Of Tyre Industry

The above figure displays production figures for different categories of tyres in the year2011-12 and 2012-13. It shows a relatively significant increase in percentage of production of tyres in thesegment related to trucks, Passenger car, Tractors. On the other hand, production of tyres decreased in segmentof light commercial vehicle, scooter and motor cycle.

Exports of Tyre Industry

The above figure shows the tyre export figures in different categories for the year 2010-11 and 2012-13. Thefigure shows a significant increase in exports in the truck and bus, cars, light commercial vehicle, motorcycles,scooters and OTR. On the other hand, the figure shows a significant decrease in exports in the tyre categories oftractors implement and interiors.

050

100150200250300

350400

I

N

L

A

K

H

S

Category Wise Tyre Production in India for 2011-2012 and 2012-2013

2011-12

2012-13

0200000400000600000800000

100000012000001400000160000018000002000000

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2011-2012

2012-2013


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Segment wise Tyre Supplies 2012-2013

Tyre supplies are broadly to the following segments:

Replacement Market (aftermarket) Original Equipment Manufacturers (OEMs), i.e. vehicle manufacturers Export State Transport Undertakings (STUs) (primarily for Bus tyres) Government Purchases

Tyre supplies are targeted and marketed primarily to the following categories: Replacement market, OriginalEquipment Manufacturers, Export, Government Supplies and State Transport Undertakings. The replacementmarket is significant for manufacturers of tyres in the category of motor cycles, scooters/mopeds and tractors,while the OEM segment is significant for the category of passenger cars and jeeps.

The distribution system consists of distributors, followed by large dealers and also small/sub dealers. Some

tyre companies also follow a system of appointing C&F agents, in place of distributors.

Replacement Market: Tyre companies sell tyres through widespread dealer distribution net-work (over 5000 in the country ), either through exclusive dealer of the companies or through multi-

company dealers.

OEM: Direct supply by tyre companies through negotiations. STU: Direct supply by tyre companies through tender system. Government: Direct supply by tyre companies through tender system. Export: Through dealers in the exporting countries. Import: Some tyre companies also import tyres for the domestic market. Such imports are generally

from the principal company overseas or from technical collaborator or from tyre companies with

which it has an alliance for a particular line of tyres, for example, passenger car tubeless tyres;

The above figure Supply of key tyre categories to various segments like replacement market, original equipmentmarket (vehicle manufacturers) and export market for the year 2012-13

0 20 40 60 80 100 120

Truck/Bus

Passenger Car / Jeep

LCV

Tractor Front

Tractor Rear

Scooter / Moped

Motor Cycle

Replacement

OEM

export


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SWOT analysis of Tyre industry

Strengths

Established brand names (key in the replacement market). Extensive distribution networks - For example, Apollo Tyres has 118 district offices, 12 distribution

centres and 4,250 dealers. Good R&D initiatives by top players.

Weakness

Cost Pressures - The profitability of the industry has high correlation with the prices of key rawmaterials such as rubber and crude oil, as they account for more than 70% of the total costs.

Pricing PressuresThe huge raw material costs have resulted in pressure on the realisations and hence,the players have been vouching to increase the prices, although, due to competitive pressures, theyhave not been able to pass on the entire increase to the customer.

Highly capital intensive - It requires about Rs 4 billion to set up a radial tyre plant with a capacity of1.5 million tyres and around Rs 1.5-2 billion, for a cross-ply tyre plant of a 1.5 million tyre-manufacturing capacity.

Opportunities

Growing Economy, Growing Automobile Industry, Increasing OEM demand, Subsequent rise inreplacement demand

With continued emphasis being placed by the Central Government on development of infrastructure,particularly roads, agricultural and manufacturing sectors, the Indian economy and the automobilesector/ tyre industry are poised for an impressive growth.

Creation of road infrastructure has given, and would increasingly give, a tremendous fillip to roadtransportation, in the coming years. The Tyre industry would play an important role in this changingroad transportation dynamics

Access to global sources for raw materials at competitive prices, due to economies of scale Steady increase in radial Tyres for MHCV, LCV

Threats Continuous increase in prices of natural rubber, which accounts for nearly one third of total raw

material costs Cheaper imports of Tyres, especially from China, selling at very low prices, have been posing a

challenge. The landed price is approximately 25% lower than that of the corresponding Indian Truck/LCV tyres. Imports from China now constitute around 5% of market share

With crude prices scaling upwards, added pressure on raw material prices is expected Ban on Overloading, leading to lesser wear and tear of tyres and subsequent slowdown in demand.

However, this would only be a short-term negative. Cyclical nature of automobile industry.


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Porter five forces with respect to tyre industry


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'Radialisation' in India - Current Status & Future Trends

Radialisation has been a significant dimension in the acquisition of technological capability in the Indian tyreindustry "Rate of radicalisationis actually an index of the status of road development, vehicle engineering andthe economy in general". Notwithstanding the problem areas, constraints and limitations, the tyre companieshave kept pace with the technological improvements that radialisation signifies and offer state-of-the-art product

(tyres), comparable to the best in the world.

Radialisation can be aptly classified as the most important innovation in tyre technology. Despite itsseveral advantages (additional mileage; fuel saving; improved driving) radialisation in India earlier didnot catch on at a pace that was expected, since its introduction way back in 1978. This could beattributed due to several factors, viz. Indian roads generally not being suitable for ideal plying of radialtyres; (older) vehicles produced in India not having suitable geometry for fitment of radial tyres (andhence the general, and wrong, perception that radial tyres are not required for Indian vehicle;unwillingness of consumer to pay higher price for radial tyres etc.

However, the situation has radically changed in recent years, especially for the passenger car tyresegment where radialisation has crossed 98% mark and is expected to reach 100% in two to threeyears. In the Medium and Heavy Commercial vehical segment current level of radialisation is upto18%, and that in the LCV segment is estimated at 20%.

A few years back a beginning was made in Radialisation of truck and bus and LCV tyres and thisprocess is gaining momentum.

Future of Radialisation

The future of radialisation will be governed by the following factors:

Cost - Benefit Ratio Road Development

Overload Control User Education Retreading Infrastructure.

Retreading in tyre Industry

In the manufacture of a new tyre, approximately 75%-80% of the manufacturing cost is incurred in tyre body andremaining 20%-25% in the TREAD, the portion of the tyre which meets the road surface. Hence, by applying anew TREAD over the body of the worn tyre, a fresh lease of life is given to the tyre, at a cost which is less than50% of the price of a new tyre. This process is termed as 'tyre retreading'.

Types of RetreadingRetreading can be done by the following two processes:

Conventional Process (also known as 'mould cure' or 'hot cure' process) - In this process a un-vulcanizedrubber strip is applied on the buffed casing of the tyre. This strip takes the pattern of the mould duringthe process of vulcanization;

Precure Process ( also known as 'cold cure')- in this process a tread strip, where the pattern is alreadypressed and procure is applied to the casing


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Expected Future Trends in Tyre Retreading in India

Tyre retreading in the commercial vehicle segment is poised for growth in the future. This growth will be aidedby the following favourable factors and major developments taking place:

Increased level of Radialization in the commercial vehicle segment (due to reduced incidence ofoverloading of commercial vehicles);

Growth in and increased share of multi-axle trucks (with the catching up of the concept of 'hub & spoke'transportation, long distance movement of road freight will be by multi-axle trucks whereas distanceswithin and around the cities will be catered by smaller commercial vehicales);

National Highway Projects, especially Golden Quadrilateral Project and Highways connecting North-South and East -West corridors (coupled with reduction in overloading and improved condition of roadnetwork, higher level retreading will offer added financial benefits).

Technology generationTechnology generation in the Indian tyre industry is essentially geared to development research, involving thechange of tread design, reinforcement material etc. Most of the major players do not engage in basic researchdue to the high costs involved. The source of technology for the domestic firms has been through reverseengineering, joint ventures and collaborations. The emphasis given by Indian tyre companies to applied researchand the setting up of well-equipped in-house R&D centres by the companies, which are manned by experts andexperienced professionals, have also helped in technology up gradation. Indian tyre technology has exhibitedversatility in maintaining inflow of technology through foreign collaborations and tailoring the same to Indianneeds. R&D is essentially business or market driven. However, raw material suppliers could also help inconceiving new projects. Compound development and in-process problems have been the main thrust of in-house R&D in the Indian tyre industry. Tyre technology up gradation is an extremely difficult process,

particularly in the Indian scenario, due to several factors. First, since tyre technology encompassesVarious disciplines such as polymer, chemical, steel etc. compromises have to be made in the up gradation of

technology because of a) the conflict and complimentarily inherent in these disciplines, b) the usage pattern ofthe tyres and c) the cost factor. Further, a tyres performance could be affected due to factors such as theweather, loading pattern etc. Despite these bottlenecks technology up gradation in Indian tyre industry duringthe last few decades has been significant. This has been possible to some extent due to government approvals ofcollaborations with MNCs in this sector. The emphasis given by Indian tyre companies to applied research, thesetting up of well-equipped in house R&D centres by large tyre companies, manned by experts and experienced

professionals have also helped in technology up gradation. Indian tyre technology has exhibited versatility inmaintaining inflow of technology through foreign collaborations and tailoring the same to Indian needs.


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Company Analysis of Apollo tyres

Apollo Tyres Ltd, with its corporate headquarters in Gurgaon, India, is in the business of manufacture and sale

of tyres since its inception in 1972. Apollo Tyres Ltdis the world's 17th biggest tyre manufacturer, with annualconsolidated revenues of Rs 121.5 billion (US$ 2.5 billion) in 2011. It was founded in 1976. Its first plant was

commissioned inPerambra,Kerala.Over the years, the company has grown manifold, establishing itsfootprint across the globe.The company has manufacturing presence in Asia, Europe and Africa, with 9 moderntyre facilities and exports to over 118 countries. It has a network of over 4,000 dealerships in India, of whichover 2,500 are exclusive outlets. It gets 59% of its revenues from India, 28% from Europe and 13% from Africa.

Powered by its key brandsApollo, Dunlop(brand rights for 32 African countries) andVredestein, thecompany offers a comprehensive product portfolio spread acrosspassenger car, light truck, truck-bus, offhighwayandbicycle tyres, retreading materialandretreaded tyres. Apollo tyres were awarded the FICCI awardamong large industries category for the best Quality systems. It is planning to become the 10th biggest tyremanufacturer in the world with annual revenues of $6 billion by 2016. On 12 June 2013, it is reported that

Apollo Tyres Ltd would buy US-basedCooper Tire & Rubber Company for about $2.5 billion in a dealthat would make it the world's seventh-largest tyre maker. Apollos cash offer of $35 per share represents a

premium of about 43 percent to Cooper's share price on the New York Stock Exchange. Apollo Tyres, whichdoes not currently operate in the United States, gets two-thirds of its revenue from India. The acquisition of

Cooper, the world's 11th biggest tyre company by sales, will give Apollo access to the US market forreplacement tyres for cars and light and medium trucks. The two companies had combined sales of $6.6 billionin 2012.At the end of its financial year on March 31, 2012, Apollo Tyres had clocked a turnover of US$ 2.5

billion, backed by a global workforce of approximately 16000 employees.Apollo Tyres Ltd is traded in India onthe Bombay, National and Kochi Stock Exchanges, with 56.5% of shares held by the public, governmententities, banks and financial institutions as on September 30, 2013.

Apollo Tyres shareholdings

Shareholding pattern for the Quarter Ended September 30, 2013
http://en.wikipedia.org/wiki/Perambra_-Thrissurhttp://en.wikipedia.org/wiki/Perambra_-Thrissurhttp://en.wikipedia.org/wiki/Keralahttp://en.wikipedia.org/wiki/Keralahttp://en.wikipedia.org/wiki/Cooper_Tire_%26_Rubber_Companyhttp://en.wikipedia.org/wiki/Cooper_Tire_%26_Rubber_Companyhttp://en.wikipedia.org/wiki/Keralahttp://en.wikipedia.org/wiki/Perambra_-Thrissur


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Financial Performance

Mar'09 Mar'10 Mar'11 Mar'12 Mar'13

Net sales 4,090.86 5,045.99 5,480.92 8,176.57 8,532.63

Total Income 4,063.09 5,089.45 5,914.35 8,174.91 8,600.58Operating Profit 356.37 817.11 580.49 715.6 898.18

Net profit 108.12 414.99 198.25 181.33 312.53

shares in issue 5040.25 5040.25 5040.25 5040.25 5040.25

Earnings per share(RS) 2.15 8.23 3.93 3.6 6.2

Equity dividend (%) 45 75 50 50 50

Here there is a drastic change in EPS from 2007 to 2oo8 because the company spilt its shares from face valueRs.10 to Re.1

Financial graphs of Apollo tyres

Net Sales increasing throughout the last 5 years.

Earning per share

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

Mar'09

Mar'10

Mar'11

Mar'12

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Net sales

Net sales

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500

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FY09

FY10

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CAPACITY

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Earning per share(RS)

Earning per share(RS)


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Net Profit

Revenue Segmentation

By Geography By Customer

By Product

0

200

400

600


Net profit

Net profit

65%

23%

12% INDIA

EUROP

E

SOUTH

Africa

24%

76%

OEM

Replace

ment

24%

76%

33%

48%

9%9%1%

OEM

Replacement

Passenger vehicle

Truck

off highway

light truck

other


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PRODUCTS

When Apollo Tyres was established in 1972, it was a single brand enterprise. Over the years, as the organisationgrew and expanded its footprint across geographies, several brands either joined or were born into its fold.Today, the company owns 6 key brandsApollo, Dunlop(brand rights for 32Africancountries), Kaizen, Maloya, Regaland Vredestein. While brands Apollo, Dunlop and Vredestein

comprise of tyres across categoriesfrom passengerandcommercial vehiclesto off highway tyres, theremaining 3 brands are more product category specific. Regal and Kaizen focus on the truck-bus tyre segmentwhile Maloya continues to operate within the passenger vehicle tyre category. Each brand from the company isequipped with its own distinctive visual language and targeted at a specific customer need. This approach hasenabled Apollo Tyres to provide a wide range of products for various applications, across geographiesendingwith a delighted customer.

The products of Apollo tyres are as follows:

Apollo : Passenger vehicles, commercial vehicles & off highway Dunlop: Passenger vehicles, commercial vehicles & off highway VREDESTEIN: Passenger vehicles, commercial vehicles & off highway bicycles MALOYA: Passenger vehicles REGAL: Passenger and Commercial vehicles KAIZEN TYRES: Commercial vehicles.

Dunlop: An established name in passenger vehicle segment, Dunlop also manufactures commercial vehicle andoff highway tyres; with 2 facilities in Durban and Lady Smith. A brand centred on attention to detail and qualityin all aspects of its existence suitably reflected in its tagline "Driven By Precision". Apollo Tyres Ltd ownsright to brand Dunlop for 32 African countries. Dunlopshistory is arguably the most impressive in the world oftyres. In 1888, Scottish veterinarian John Boyd Dunlop created the first practical pneumatic tyre for his son'stricycle, to help it go faster and smoother over cobblestones. Just one year after it was patented, John Boyd'styres was fitted to a bicycle and won its first race. Soon J B Dunlop became one of the founders of the DunlopPneumatic Tyre Company; beginning of a revolution in the automobile industry and start of Dunlop Tyres'

journey from strength to strength, with a succession of product innovations achieved over 123 years.

Apollo VredesteinB.V. is part ofApollo Tyres Ltd from India. Apollo Vredestein B.V. has its head office inEnschede, the Netherlands. It designs, manufactures and sells high-qualitytyres under the Apollo andVredestein brand names via offices in Europe and North America.It was founded in the year 1909 at

Netherlands. Vredestein products include car tyres, tyres for agricultural and industrial applications, and bicycletyres. A significant number of the car tyres are designed by the Italian design houseGiugiaro Design.The brandis over 100 years old and is considered to be a premium brand in the automotive industry.
http://en.wikipedia.org/wiki/Apollo_Tyreshttp://en.wikipedia.org/wiki/Tireshttp://en.wikipedia.org/wiki/Italdesign_Giugiarohttp://en.wikipedia.org/wiki/Italdesign_Giugiarohttp://en.wikipedia.org/wiki/Tireshttp://en.wikipedia.org/wiki/Apollo_Tyres


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Product profile of Apollo tyres.

In Apollo tyres product profile the major contributors are truck tyres and car tyres while the balance come fromlight truck, farm and other categories. In year 2013 The truck tyres contribute 47% and car tyres, 34% and the

balance would be light truck, farm and other categories. The demand overall has not de-grown. That is, foroverall truck segment, it is still positive because it is a mix of OE and replacement. The negative growth has

been in the OE segments. As of now, the outlook continues to be that growth would be lower than what has beenthere in the previous years but as an overall segment, we have still not seen negative growth. Levels of car tyresdemand growth are much lower than previous years where the growth rate used to be in double digits overall. Sothe drop in car tyres has been there but we do not see it slipping into the negative territory at least, as of now.

Revenue Segmentation by product category

47%

34%

19%

Product portfolio of apollo tyres

Truck tyres

Car Tyres

light truck,farm and other

24%

76%

33%

48%

9%9%1% OEM

Replacement

Passenger vehicle

Truck

off highway

light truck

other


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Products in 2013

Beides the above regular products Apollo tyres produced three new passenger vehicle tyres this year.Apollo Tyres introduced 3 new passenger vehicle tyres for the Indian market at the picturesque ZaandvoortCircuit in Amsterdam, the Netherlands. These 4th generation (4G) tyres from Apollosstable Aspire 4G, Alnac4G and Amazer 4G are the most advanced range of high technology passenger vehicle tyres across segments for

the new age Indian motorist.In the last one year, the market share for Apollo Tyres in the replacement segmentfor passenger vehicle tyres has gone up from 13.5% to 16%. With the introduction of these new tyres, Apollo plans to increase its market share further.The 4G range from Apollo has a minimalistic design to cater to superior handling in wet and dry conditions;Shorter braking distance and low noise. The wide outer shoulders with narrow intermediate grooves lead toBetter contact for dry handling. These tyres have reduced aquaplaning and enhanced grip in wet conditions.The centre rib which is optimised for stiffness, lends higher steering precision. Apollos4G ranges of tyres easily and precisely respond to any unexpected steering corrections, providing maximum driving safety. The uniquemix of raw materials ensures maximum traction and shorter braking distances on wet and dry surfaces. These tyres have been extensively tested at IDIADA, Spain and ATP Papenburg, Germany, with some excellent results.

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apollotyres.txt