Apollo Tyres Ltd (NSE: APOLLOTYRE) Q3 2025 Earnings Call dated Feb. 07, 2025
Corporate Participants:
Neeraj Kanwar — Vice-Chairman and Managing Director
Gaurav Kumar — Chief Financial Officer & Whole-time Director
Analysts:
Mihir Vora — Analyst
Amyn Pirani — Analyst
Siddhartha Bera — Analyst
Mumuksh Mandlesha — Analyst
Jinesh Gandhi — Analyst
Amar Kant Gaur — Analyst
Mukesh Saraf — Analyst
Basudeb Banerjee — Analyst
Rohit Jain — Analyst
Presentation:
Mihir Vora — Analyst
Yeah. Hi. Good afternoon, everyone. So, this is me. On behalf of equivalent securities, I welcome you all to the. Three q Fy 25. Earnings call of Apollo tires. We have with us today Mr. Nigraj. Khanwar, managing director and vice chairman of Apollo Tires. Mr. Golo Kumar, Chief Financial Officer and the IRT. So, as always, we’ll start the call with brief opening remarks from the management, followed by a Q and a session. With that over. To you, Mr. Conver. Thank you.
Neeraj Kanwar — Vice-Chairman and Managing Director
Good afternoon and a very warm welcome to all of you to join the Apollo Q three fy. 25 post result. Results conference call. As normal practice. I’ll say my opening remarks. And then pass it on to Korov. First of all, despite growing growth challenges and elevated level of raw material cost, we close q three FY 25 with consolidated top line growth of 8% quarter on quarter and 5% y on y. Held by cost control. Consolidated margins stood at 13.7%, broadly similar to last quarter. Despite raw material cost pressure. On the positive side, we are seeing green shoots as we go ahead. We expect our operating performance to improve moving forward on the back of a recovery in the overall demand momentum. Secondly. Initiatives being taken internally to significantly uplift profitability. And lastly, Due to reduced RM inflation. Coming to regional performance. I am happy to share that despite challenging environments. We outgrow the industry in domestic PCR and agri replacement segments, resulting in. Market share gains in the quarter. However, the domestic growth was partially negated by marginal decline in OEM segment coming to Europe. I’m happy to share that we registered a positive growth. In top line held by a 7% growth and replacement segment revenues. More importantly, we registered more than 400. Basis points.
Improvement in our product mix, with UUHP segment accounting for 48 of PCLT replacement volumes in the quarter earlier, it was 43%. In terms of outlook, we expect recovery in operating. Performance held by higher top line momentum across both India and Europe. Growth in India is expected to be driven by replacement segments where we are seeing further demand momentum. In the current quarter. Similarly in Europe also, we expect healthy top line momentum driven by market growth. And new. Product launches. Let me now talk about our key pillars for our fy 26 vision, starting with RND. We continue to secure additional model wins from marquee german pv manufacturers, thereby revalidating our product capabilities coming to brands, the teams are working to further strengthen and reinforce our premiumization. In India. Current quarter marked our entry into the Asia Book of Records and India Book of Records. For the longest road journey. Biopicup truck on a single set of tires of Ndumax LTHD.
We also launched Freddestein’s lease sponsorship with AC Monaco in Europe. Alopenus, a very well known french retail online retailer, awarded the Freddie sign Wintrack tire. At the most recommended winter. Tie in their portfolio. Finally, sustainability has always been a key pillar for us. During the quarter, our AP plant received a zero liquid discharge certification, highlighting our commitment to recycling water. Waste and reducing. Reliance on freshwater. Also during. The quarter. We were recognized across several forums for our continued work in the area of sustainability. I would encourage you all to get in touch with the IR teams for more details on sustainability. With this I conclude my opening remarks. Let me reiterate that always we are keeping a close watch on the markets and our cost. At the polo tires. We are working relentlessly to prepare for what lies ahead, and I believe that we are extremely well placed to leverage long term opportunity across our key markets. Thank you. Once again. And I ask. God out now to say his remarks. Thank you.
Gaurav Kumar — Chief Financial Officer & Whole-time Director
Thank you, Nirach. And good afternoon, ladies and gentlemen. Continuing from where Neraj left. Let me share some further details of the operations for the last quarter. The consolidated revenue for the qu. Quarter stood at r 69.3 billion. A growth of 5% over the same quarter last year, but 8% sequentially, which indicates a certain pickup in momentum. The consolidated EBITDA for the quarter stood at rupees 9.5 billion. A margin of 13.7%, compared to 13.6% in the last quarter. We maintained the margins in spite of the cost pressures. Though nowhere near the levels of previous year. Given the steep raw material cost pressure coming to the balance sheet, we saw about rupees 4.5 billion reduction in net debt as of December 2020. Four compared to end of previous quarter. The net debt EBITdA for the consolidated operations. Is at zero seven x at the end of this quarter. Pretty much flattish compared to where we started the year. In India, we witnessed that the overall volume growth was. Marginal. Where the good growth in the replacement volumes was negated by the decline in the OE. Volumes. We registered strong growth in both TBR and PCR replacement segment. The. Two core segments. However, the other areas sort of pulled it down to.
This marginal growth. The revenue for the quarter was rupees 45.4 billion. A growth of 5% over the same quarter last year. And EBITDA for the quarter stood at rupees 5 billion, a margin of 11.1% compared to. 12.1% in the last quarter. In terms of the demand outlook. We expect the replacement demand momentum to continue to be healthy in Q four. And, in fact, we are seeing signs of a further strong pickup even beyond the current levels. Moving to the RM outlook. We expect the RM cost. To be range bound in q four almost around similar levels as q three, which indicates a certain plateauing out. The net debt to ebitda for india operations stood at 1.4 x. Without. One x in the previous quarter. Moving on to the Europe operations. The revenue for the quarter was euro 181 million. A growth of 3% over the same period last year. And up 6% sequentially, which is seasonally a good portal for the european operations. The EBITdA for the quarter stood at euro 32 million with an EBITDA margin of 17.7%, compared to under 15% for the last quarter. In terms of outlook, we expect the demand to continue to recover going forward. We are seeing good market growth trends, especially for the passenger car tire segment. And we’ll continue to focus, to outgrow the market. We continue to keenly monitor our capex outflow and focus on profitability. Free cash flow generation. An improvement in our return ratios.
With this, I would conclude my opening remarks. Thank you. And we would be happy to take your questions.
Questions and Answers:
Mihir Vora
Thanks, Doroth. We’ll now open the floor for q and a session. Anyone who wish to ask a question, can please use the raise hand option once you are done asking your question. Please lower your hand. We’ll wait for a couple of seconds. The question give to ass. Assemble. Yeah. First question is from the line. Of Amin Pirani. Amin. I’ve unmuted. You can go ahead.
Amyn Pirani
Yes. Hi. Am I audible?
Gaurav Kumar
Yes.
Amyn Pirani
Thanks for the opportunity. Actually, my first question was on. The interest cost we have seen. Balance sheet deleveraging for a while now. And especially in this quarter. But on a consolidated basis, interest cost. Is still remaining. In that stable range. In fact, in the standalone, the interest cost has actually moved up quarter and quarter. So is there anything that we should be mindful of? And when do we see. The interest cost number actually trending down.
Gaurav Kumar
You’re right. The India interest cost has gone up mainly on account of working capital borrowings. Which is largely a combination of the profitability challenges and. A slightly weaker market. And the Europe interest cost has come down. Moving up on the working capital. Borrowing the spectra is fairly a temporary measure.
Amyn Pirani
Okay. So this reduction in debt should start reflecting in the interest. Cost number in the coming quarters.
Gaurav Kumar
Yes.
Amyn Pirani
Okay. And secondly, you also mentioned that. Rnu should be range bound in Cq versus two. Q. So how should we interpret it? Because I’m guessing that some price hikes have happened. And maybe more. Are planned or not. Would love to hear from you. So if RM is flattish. Then should gross margin actually improve quarter and quarter because of the impact of price, size or how should we think about that?
Gaurav Kumar
Just one correction. The RM q three versus q two still went up slightly.
Amyn Pirani
Sorry.
Gaurav Kumar
To q three. We expect it to be flattish. And to that extent, some rollover impact of price increases should play a little bit into the gross margins.
Amyn Pirani
Okay. And anything on price hikes recently done or planned that you would want to call out?
Gaurav Kumar
Currently given the. Market situation, et cetera, and the overall scenario. Absolute near term no price increases plan. We’ll continue to assess that situation and then take a call.
Amyn Pirani
Okay. Thank you. I’ll come back in a.
Mihir Vora
Reminder to the participants, anyone who wish to. Ask a question, please use a raise your hand option. And the next question is from the line of Siddhartha Vera. Siddhartha, you may now ask.
Siddhartha Bera
Yeah. Thanks for the opportunity, sir. First question on. The India business possible to highlight at an overall level what is the volume. Growth across replacement Oe and exports.
Gaurav Kumar
Yes. So the volume growth for overall for replacement this quarter was 5%. And. Oe. Was almost. -10%.
Siddhartha Bera
Exports.
Gaurav Kumar
Exports was flattish.
Siddhartha Bera
Okay, so on replacement, we do expect further improvement in the momentum. Like you initially commented in your opening remarks. Is that the right understanding?
Gaurav Kumar
Yes, that’s correct. What we have seen in the first month of the current quarter, we are seeing stronger signs. And even through the last few quarters, the TBR replacement passenger car and even farm has been showing good signs. We expect this growth to further improve as we go forward.
Siddhartha Bera
Got it. So on the export side. We had been seeing very strong numbers in the first half, but suddenly we have seen a very soft growth, while if I look at other peers data, generally I see that the growth has been good. So anything here why the growth has been suddenly slowing down for us, and any initiatives we are taking to sort of improve. That in. The coming years.
Gaurav Kumar
So Siddharth, one is the particular segments or the markets where we were addressing in product. Categories there. The demand has been weak in some cases. It’s also been impacted by. The strong fluctuations. In the logistics cost or the freight cost, in which some cases. It did not make sense to push business aggressively. But you are correct. Some of our peers have done better than us. In their exports. Visa v us on our growth, and we are looking into that.
Siddhartha Bera
Going ahead for any new market. Like us or any new markets we are thinking of adding or growing. Our network and volumes there.
Neeraj Kanwar
Yes. So, clearly. Saddar. We are looking at us as a next growth market. And you’ll see, we will be growing slow and steady, as I mentioned. PCR, Freddy. Sign is doing good in the us market. Apollo TBR has also started growing. So us is a clear growth market. The next market that we’re also looking at is Middle east. In Middle east, specifically in Saudi Arabia. Like, you know, India and Europe continue to be our domestic markets. So these are the two key areas that we are looking at.
Siddhartha Bera
Got it. On the financials are some housekeeping questions. Can you share for the last nine? Months, what would have been the capex? And FCF because I see that it’s only mentioned for the first half in the presentation. So if you can share that number as well as the gross debt, also at a standalone and console level.
Gaurav Kumar
The capex number for India for the first. Nine months is 350 crores. The gross debt number is 3200 crores for India. On the. At a console level, the total. Capex for the nine months is about 500 crores. And the gross debt number is about 3500 crores.
Siddhartha Bera
Okay, so does that mean that. We still hold on to our 1000 crore capex for this year or. Given. The spent. There can be some moderation there. How to think about that?
Gaurav Kumar
There would probably be some moderation. It is highly unlikely that we’ll spend 500 crores in the last quarter.
Siddhartha Bera
Okay, so maybe close to 700 or 800 crores for the full year might. Be. The right assumption?
Gaurav Kumar
Should be a probably more reasonable assumption.
Siddhartha Bera
Okay. And next year we should again continue. To expect similar 1000 crores of capex or how should we look at the coming years?
Gaurav Kumar
Next year the capex number will increase. We are extremely tight on. Passenger car tire capacity. As we have been talking to you people. And we have initiated small capexes. The exact numbers will get frozen. In terms of cash outflow in the next month or so, but the capex number for the next year would have certain amount of growth. Capex. Over and above the maintenance cap.
Siddhartha Bera
Understood. So lastly, I think if I look at. The riflecom numbers if you can share those for the quarter.
Gaurav Kumar
For the quarter. The Riflecom operations did 88 million euro in. Revenue. With a 7% plus in ebitda margin.
Siddhartha Bera
Okay, understood. Thanks a lot, sir. I’ll come back with you.
Gaurav Kumar
Thank you.
Mihir Vora
Next question is from the line of momokshman Leisha. You have been unmuted and can go.
Mumuksh Mandlesha
Yes. Sorry. Thanks for the opportunity, sir. Firstly. On the India standalone numbers. Q and Q gross margin have contracted in q three quarter, almost like a 300 bips just can you explain what has happened to the gross margin year?
Gaurav Kumar
Bookshelf. Some part of it is due to the inventory. Getting consumed. And that’s how it gets treated from an accounting perspective. And the IR team can walk. You through in detail. Because what happens is that if the previous quarter of raw material consumption goes into inventory, There is a higher than just the raw material cost reduction on the raw material charge that is. Taken, which reduces the gross margin in the previous quarter. And results in a slight increase in the following quarter.
Mumuksh Mandlesha
Okay. So for next quarter, once it normalizes, that number can change, right? The 300 pips itself.
Gaurav Kumar
I would not have a normalized number immediately at hand, but yes. There is some impact of the inventory consumption in that.
Mumuksh Mandlesha
Secondly, on the Europe demand outlook for next year. How do you see there’s a good pickup happening last few quarters. Do you see the momentum to continue? And just on the outlook for Europe?
Gaurav Kumar
Europe, in fact, for the last quarter or so, and even going into the current quarter. The demand on both the passenger car and truck tires replacement is very strong. As of now, no signs as to why that growth should taper off. And. The good thing for generally tire makers, even for us, is that within that, the UHP and the UUHP segment is growing even faster. So the market continues to improve.
Mumuksh Mandlesha
Got it, sir. Just lastly. Can you help us? The rm basket for the Q three quarter screen.
Gaurav Kumar
Sure. So for the current year Q three, the RM was roughly about rs175 a kg up 15%. Visa V the same quarter last year, but sequentially up 2%.
Mumuksh Mandlesha
And I can give the natural rumber and other subcompany prices.
Gaurav Kumar
Natural rubber was around rs215 a kg. Synthetic rubber at 195 and carbon black at rs125 occasion.
Mumuksh Mandlesha
Got it, sir. Thank you so much. For this opportunity.
Gaurav Kumar
Thank you.
Mihir Vora
A reminder to the participants, please use your area or hand function for the questions. We have our next question from Janesh Zandi. Janesh. Your line has been. Muted. You can go.
Jinesh Gandhi
Hi. Am audible.
Gaurav Kumar
Yes. Finish?
Jinesh Gandhi
Yeah. Hi. Just one question from my side on the India business. We have been relooking at our strategy of margin over market share. We still continue to underperform. Some of our peers who have reported so far. On the revenue side. Any update on. That side about how are we thinking about our market share versus margins now?
Gaurav Kumar
It’s not just a clear black and white and white. In terms of. Either or must to be chosen as a prudent strategy. Of market share or growth. Visa v. Margins. The priority to profitability margins will continue to be there. And, yes, A couple of our peers. Have definitely done better than us. But if you see sequentially. With a vq two to q three. Our numbers are coming in line with some of our peers and ahead of some of our peers. So we are addressing that issue in terms of not lagging behind on growth either.
Jinesh Gandhi
Okay, got it. So, incrementally, clearly, there is. A tilt towards growth as well. That would be fair way to look at it. Great. Thanks. And all the best.
Gaurav Kumar
Thank you.
Mihir Vora
We have a next question from the line of amarkam gor amar. You can go.
Amar Kant Gaur
Hi. Thanks for taking my questions. Good afternoon. To be both. My question was similar to what Janesh was talking about in the last couple of calls. You had at least talked about. The peers having a higher growth than us and going back to the drawing board and figuring out what? The reason for those have been. If there’s something that probably you could highlight in terms of. Where that work needs to be done and where you guys are working upon. If you could shed some light on that.
Neeraj Kanwar
Looking at both the product categories, primarily truck, bus, radial and PCR. Primarily in India. To give you an example, we are trying to. Vacate the twelve inch, 13 inch market. Especially with the Oems. Okay. And then going upsizing of 1415, 1617, which. Is. Where more profitability. Is concerned, volume is less, but profitability is there. So it’s a journey it takes. Time, because. The whole idea is to go more premium, and therefore, you’ve seen our balance sheet ratios. Become much better. And partly it was because of all this exercise that we are. Doing. So now we just have to wait and see. The volume will start coming as Godav has already mentioned to you. If you see quarter on quarter, then already we are above the growth. Curve of our competitive peers. At the same time, we are keeping at the Ebitda margin. That we have kept for the past two to three quarters. So. It will take time, but you will see again signs of growth in Q four. And then next. Year will be much better than this year.
Amar Kant Gaur
Understood. And my second question was. On the other expenses. Which have taken. Which have declined quite a bit sequentially, I’m sure. There’s a component of certain costs that you have rationalized. If you could identify some of them. And how should we think about. These other expenses going ahead.
Gaurav Kumar
So some bit of Amar. Is immediately cutting down on A and P and some of the easy administrative expenses which was coming. Down hard given the overall cost pressures. I would say. The prior levels are more normalized levels, and one would tend towards that.
Amar Kant Gaur
Understood. Understood. Maybe around rate of about 800 odd crores that you were doing as. A percentage of revenue would be similar going ahead.
Gaurav Kumar
Yeah. And we expect it to come down with growth in revenue. It’s not in the same proportion.
Amar Kant Gaur
Understood. And just a clarification. So you had talked about. The r and costs remaining around a similar level to Q four. You were talking about the procurement cost, right? Because of the higher inventory level, the absolute gross margin could still trend lower in the next quarter. Is that understanding correct?
Gaurav Kumar
Yeah. So the inventory part would play into effect, but, yes, the procurement cost. Cost is beginning to plateau out.
Amar Kant Gaur
Understood. Thank you so much. All the best.
Gaurav Kumar
Thank you.
Mihir Vora
Question is from the line of Mukesh Sara Mokesha, you have been. And you can go ahead.
Mukesh Saraf
Yeah. Hi. Thanks. I hope I’m audible.
Gaurav Kumar
Yes.
Mukesh Saraf
So my question is on the demand environment. Like you have mentioned that. You expect volume to kind of improve a bit on the domestic business? So this is particularly looking at the commercial vehicle space, given we have seen some kind of weakness. On the OEM demand in cvs. In your experience? Do you also kind of see? This percolating to the aftermarket because obviously fleet operators aren’t buying new trucks. So they’re seeing probably lack of visibility on freight demand, and that would eventually probably trickle down to the aftermarket as well for you. So in your experience, how have you seen this? Lead lag between aftermarket OEM. And is also especially the question is because I’ve seen some of the fleet operators. The listed ones as well. The transportation companies, they’re talking about not being able to kind of increase rate rates. So all of this put together, how do you see the scenario?
Neeraj Kanwar
Well, I think quarter four we see CV coming back. Specifically for us. Even that we are leaders. There we see the TBR C. Going up this quarter. And primarily now, this year has been a little bit volatile in terms of elections and when elections are there. People are back. Cash purchases. Now all of that is put aside, I hope. And so. We see the economy coming back, and we see once the economy. Comes back, the first thing that goes is CV. CV will start going up. And now we are getting into season generally.
Mukesh Saraf
Right. So expecting oems as well to improve.
Neeraj Kanwar
Yeah. Oe. Is also showing signs of recovery. Passenger car is also showing signs of recovery. Now you’re getting into a season of February. March, April, May, June. So hopefully the season will pick up and both the product categories and vehicles will start picking up.
Mihir Vora
So I’ll take the next question. Next question is from the line of. You can go ahead.
Mumuksh Mandlesha
Yeah. Hi sir. Just a follow up. Since RM basket prices are around rs215 per kg. Now natural rubber, and the current price is around 190. In the natural rubber prices. Just want to understand, will there any benefit seen, say, in the cuban quarter. With the lower natural rubber prices?
Gaurav Kumar
Marginal. Only moocs. Because what you are saying on the natural rubber. Then the entire freight cost, et cetera, gets added. So the prices that I gave is our consumption price. Not the basic price, what you would be seeing. So natural rubber has only slightly tapered off.
Mumuksh Mandlesha
Okay,
Gaurav Kumar
Not much. So that’s why the. Q four outlook is flattish, with a Bq three on the raw material front.
Mumuksh Mandlesha
Understood, sir. Thank you so much for this.
Gaurav Kumar
Thank you.
Mihir Vora
So I guess. We have a question from Bas. Bernerji and bastard. You can go ahead.
Basudeb Banerjee
Hi, goro.
Mihir Vora
Is dropped.
Basudeb Banerjee
Am I audible?
Mihir Vora
Yeah.
Basudeb Banerjee
So PCR, as you said, high utilization. So Capex will be for that next year, so. What’s the utilization level of TBR now on an annualized basis, not just quarterly.
Gaurav Kumar
TBR is around 80% busadage so we have sufficient headroom but PCR currently in India. We are high eighty s and in fact, in Europe in the 90s.
Basudeb Banerjee
So still, I’ll say a consolidated capex of twelve 1300 crore for 27 would be. Fine. Or it can overshoot that.
Gaurav Kumar
For 26, I would say
Basudeb Banerjee
You are 26. Sorry? Yeah, 26.
Gaurav Kumar
So if we take. A normal maintenance cap. Around the 700. 750 mark that we talked about earlier. On top of that. Very much at top of the numbers. Maybe. Add around 800 crores more. I still don’t have the firm figures, but ballpark and we will come back to all of. You with a more firm guidance.
Basudeb Banerjee
And that would add to the PCR overall capacity by how much India capacity.
Gaurav Kumar
India, it would add about seven, 8% Europe, slightly more. So overall, we are looking at. Capacity addition. Just about 10% or a little. Less.
Basudeb Banerjee
And Europe? It will be through Hungary.
Gaurav Kumar
That’s correct. We don’t need any. Greenfield we have enough brown field.
Basudeb Banerjee
And any update on the Netherland gross block? What’s happening? What’s the plan down the line.
Gaurav Kumar
Right now that continues at its current capacity level. Large parts of the passenger. Car to attire sourcing is from Hungary and small bits from India and small from the Dutch. Plant.
Basudeb Banerjee
And. Yeah, last question. Like, what part of natural rubber now? Is currently. Imported as such.
Gaurav Kumar
Let me see if I have. The. Immediate figure. Broadly, it used to be about 50 50. I don’t have an immediate figure. Bassetted. We can get back to you.
Basudeb Banerjee
Sure. Basically, rupee weakening plus logistics cost, so all those things combinedly. Might be impacting in that way.
Gaurav Kumar
That’s correct.
Basudeb Banerjee
Okay, thanks.
Gaurav Kumar
Thank you. Bastard.
Mihir Vora
We have a next question from Rohit. Jen. Roy, you may go ahead.
Rohit Jain
Hello. Can you hear me, sir?
Gaurav Kumar
Yes, Roy.
Rohit Jain
Yeah. So just to confirm on the gross margin piece of. Bit. So the high cost inventories that quotient has been consumed, or we expect it. To be consumed by the end of Q four.
Gaurav Kumar
Some bit of it has been consumed. There is still some inventory, but not at unusual levels. Currently in India,
Rohit Jain
Thank you.
Gaurav Kumar
Thank you.
Mihir Vora
So I have one question, sir. So basically you mentioned that. There would be no minimal price acts going ahead in fourth quarter. So are we doing this because of a competitive, competitive intensity? Or is it that RM costs are covered to an extent? So what? Is your lookout on the price act?
Gaurav Kumar
It is largely because of the overall industry scenario, competitive intensity. Otherwise. These are not the margins that we are happy with. We would definitely want to up the margins. And we would keep looking at. Avenues to do that. As we go forward.
Mihir Vora
Then secondly, on the crude derivatives part, do we expect fourth quarter to be sort of softening? For crude derivatives.
Gaurav Kumar
I don’t have an outlook for each raw material. But overall, as I said, flattish. So some bit. Of it coming down on natural rubber would then be negated by some bit of it upon the crude side. Also the rupee devaluation. Doesn’t really work in our favor on the raw material basket.
Mihir Vora
All right, so that’s all from my side. There are no further questions. Would now like to hand it over back to Nirathzer for closing comments.
Neeraj Kanwar
Like to thank each one of you to come and attend our conference and look forward seeing you. Next quarter. Thank you.
Gaurav Kumar
Thank you.