Apollo Tyres Limited — Q1 FY26 earnings call

Call held 8 Aug 2025

Management summary

Apollo Tyres reported a modest 3.6% Y-o-Y consolidated topline growth in Q1 FY26, reaching INR 65.6 billion, with an EBITDA margin of 13.2%. The company significantly reduced its consolidated net debt by over 15%, bringing the net debt to EBITDA ratio to 0.7x. While India operations showed solid growth and margin improvement, Europe faced challenging demand conditions and inflationary pressures. The company remains focused on profitable growth, cost optimization, and sustainability initiatives, anticipating stronger growth in the second half of the fiscal year.

Highlights

  • Consolidated topline grew 3.6% Y-o-Y to INR 65.6 billion.

  • Consolidated EBITDA margin stood at 13.2%.

  • Consolidated net debt reduced by over 15% in Q1 compared to Q4 FY25.

  • Consolidated net debt to EBITDA was 0.7x at the end of June 2025.

  • India revenue grew 3% Y-o-Y to INR 47.3 billion, with an EBITDA margin of 13.6%.

  • Europe revenue was EUR 146 million, flattish Y-o-Y, with an EBITDA margin of 10.8%.

  • An exceptional item of INR 3.7 billion was recorded for restructuring costs related to the Enschede plant.

  • Achieved 35% reduction in Scope 1 and 39% reduction in Scope 2 emissions intensity, surpassing FY26 targets.

Key financials

  1. Consolidated Revenue ₹6,560 Cr +3.6%YoY
  2. Consolidated EBITDA ₹870 Cr
  3. Consolidated EBITDA Margin 13.2% +0.2%QoQ
  4. Consolidated Net Debt ₹2,100 Cr -15%QoQ
  5. Consolidated Net Debt to EBITDA 0.7×
  6. Exceptional Item (Restructuring) ₹370 Cr
  7. Raw Material Basket (Blended Index) 166 index -2%QoQ

What they filed

Q1 FY27: revenue up 15.6%, net profit up 36.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,462 4,540 4,581 4,725 4,715 +6%5,139 +13%5,237 +14%5,462 +16%
EBITDA539 504 515 645 721 +34%747 +48%764 +48%655 +2%
Net profit165 124 149 222 277 +68%449 +262%903 +506%304 +37%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenueEBITDA MarginEBITDA
India Operations₹4,730 Cr13.6%₹640 Cr
Europe Operations₹146 Cr10.8%₹16 Cr
Reifencom₹53 Cr4%—

Capital allocation

high confidence
  • Capex Capex disclosed
    We continue to closely watch our capex outflow. There is no change in our capex guidance for FY'26.
  • Debt Net ₹2,100 Cr · 0.7× EBITDA
    • Repayment Reduced consolidated net debt by INR 3.9 billion in Q1. ₹390 Cr
    Compared to the previous quarter end, we reduced our consolidated net debt by INR 3.9 billion in the Q1, bringing it to a level of INR 21 billion. The net debt to EBITDA for the consolidated operations stood at 0.7x at the end of June'25.

Guidance & targets

Revenue

  • India Topline Growth Revenue · Full year FY26 · Medium confidence High single-digit

    Previously double-digit → High single-digit

    I would say the topline growth, while we would still be pushing for a double-digit, but maybe a high single-digit would be a more realistic estimate.

    — Gaurav Kumar

Performance

  • Europe Performance Performance · Q2 FY26 · Medium confidence Much better
    Plus, I think in Q2, Amyn, you will see a much better performance on Europe side. Things are looking better than before, unless there's a geopolitical issue with the US. But things are looking better. And I can see Q2 results on revenue side being much better.

    — Neeraj Kanwar

Demand

  • Europe Demand Momentum Demand · Ahead · Medium confidence Improvement
    Looking ahead, we expect an improvement in the demand momentum, but we will continue our focus on cost optimization.

    — Gaurav Kumar

  • India Demand Momentum Demand · Second half of the fiscal · Medium confidence Improve
    Regarding the demand outlook, we expect the demand momentum to improve in the second half of the fiscal and the rebound in infrastructure and mining segments post-monsoon.

    — Gaurav Kumar

Raw Material Cost

  • Raw Material Cost Raw Material Cost · Q2 FY26 · Medium confidence Slightly lower
    Moving on to raw material outlook, we expect the raw material cost to be slightly lower in Q2 vis-a-vis the current levels, however, with a bit of uncertainty given on the exchange rates that is currently prevailing.

    — Gaurav Kumar

Profitability

  • ROCE Profitability · Medium-term · Medium confidence 15%
    So, I would say while we are not there in near-term, but medium-term, definitely return to that 15% is possible.

    — Gaurav Kumar

Operations

  • Enschede Plant Production Cessation Operations · Summer of 2026 · High confidence Summer of 2026
    the intention was to close production there at that plant in the summer of 2026. So, at a bare minimum, we are talking about continuing the plant operations till June of 2026.

    — Gaurav Kumar

Restructuring Benefits

  • Benefits from restructuring Restructuring Benefits · From FY27 · High confidence Start flowing in
    The expected benefits, etc. still too early to quantify, but yes, they will start flowing in from FY’27. Nothing in FY'26.

    — Gaurav Kumar

Market context

  • India Truck and PCR Volume Growth Volume · Q2 FY26 · Medium confidence Double-digit
    But as far as truck and PCR is concerned, we are putting in all efforts to try and see that we achieve a double-digit growth. And you'll see that in Q2.

    — Neeraj Kanwar

What to watch in Q2 FY26

Europe Revenue Growth

Q2 FY26
Current Flattish Y-o-Y, sequential decline in Q1 FY26
Target Much better performance, positive growth

Why it matters

Europe is a key market, and management expects significant improvement, which will be crucial for overall performance.

Plus, I think in Q2, Amyn, you will see a much better performance on Europe side. Things are looking better than before, unless there's a geopolitical issue with the US. But things are looking better. And I can see Q2 results on revenue side being much better.

Risks & concerns

  • Challenging Europe Demand Environment

    medium

    Decline in industry volumes in key categories and weak market led to sequential revenue decline in Europe.

    Management acknowledged

  • Inflationary Pressures in Europe

    medium

    Higher than normal inflationary pressure on energy and salary prices, with raw materials up 3% Y-o-Y, impacting Europe margins.

    Management acknowledged

  • New Competition in India

    medium

    New players entering TBR and PCR segments in India will increase competitive intensity and the fight for talent.

    Both acknowledged

  • Potential for Additional Asset Impairment Costs

    medium

    Further thorough assessment on the asset side of the Enschede plant is pending, which might lead to more asset impairment costs.

    Management acknowledged

  • Raw Material Price Volatility due to Exchange Rates

    low

    Uncertainty in exchange rates could impact raw material costs, though Q2 is expected to see a slight decline.

    Management acknowledged

  • Softness from AC Cabin Pre-buying in CV Segment

    low

    Pre-buying in the heavy commercial segment for AC cabin regulation in Q1 could lead to some near-term softness.

    Analyst acknowledged

Q&A highlights

7 direct
India business replacement segment growth outlook and segment-wise breakup Partial
I would say the topline growth, while we would still be pushing for a double-digit, but maybe a high single-digit would be a more realistic estimate.

Provides revised growth expectations for India, a key market, indicating a more conservative outlook than previously expected.

Asked by Siddhartha Bera

Commodity price sustainability and impact on margins Direct
As I mentioned, we expect Q2 raw material unless we get significantly surprised on the USD rupee exchange rate, we expect Q2 raw material to come a little further down.

Offers insight into the cost outlook and potential margin drivers for the next quarter, suggesting continued relief from raw material prices.

Asked by Siddhartha Bera

Europe margins decline despite flat revenue Direct
See there have been inflationary pressures and as we've mentioned in the last few calls that in the last couple of years, the inflationary pressure in Europe has been higher than normal, whether it's the energy prices, salary prices, etc.

Explains the margin pressure in Europe, attributing it to persistent inflationary pressures on various cost components, which is a key challenge for the region.

Asked by Siddhartha Bera

Impact of Netherlands vs. Hungary on European inflationary pressure and production costs Direct
It is, it is mostly similar, Amyn. The big pressure, Y-o-Y to again touch on the point Siddhartha asked and you've said, on a Y-o-Y basis, the raw materials were up 3% in Europe.

Clarifies that inflationary pressures are broadly similar across European geographies, with raw material costs being a significant factor, relevant for the ongoing restructuring.

Asked by Amyn Pirani

Long-term ROCE target of 15% in the current market context Direct
So, I would say while we are not there in near-term, but medium-term, definitely return to that 15% is possible.

Reaffirms a key financial target and provides a timeline, indicating management's confidence in achieving it despite current market challenges.

Asked by Amyn Pirani

Europe restructuring costs and potential for further costs Direct
Now, if an employee leaves in between, then that cost will not be incurred. We will still have to do a more thorough assessment on the asset side of things. We will send in our team to go through the entire asset list in detail, including a physical examination. So, there might be something more on the asset impairment side.

Clarifies the nature of the exceptional item and indicates potential for additional asset impairment costs, which could impact future financial results.

Asked by Mumuksh

Impact of new competition in India on talent and dealer network Direct
We will have more competition. The competition will take time to make not just an entry, but establish themselves. Both TBR and PCR are technology products, and apart from technology, establishing a vast distribution network. But yes, it will add to the competitive intensity and it will add to the fight for talent.

Addresses a key competitive risk in the domestic market, outlining management's view on the competitive landscape and their strategy to maintain market position.

Asked by Mumuksh

Sustainability of current opex levels in India Direct
Currently, we would say Joseph, these levels are sustainable. We did, apart from the cut on travel and various other costs, the only one which was cut also very sharply was the advertisement and promotion spend. At some stage that will have to be released back for the sales growth. Other than that, the other costs are very much which should continue at the current levels.

Provides clarity on cost control efforts and their sustainability, highlighting that while most cost reductions are sustainable, advertising and promotion spend may increase in the future to drive sales growth.

Asked by Joseph George

3 min read 7 chapters

Detailed narrative

Q1 FY26 Consolidated Performance Overview

Apollo Tyres reported a consolidated topline growth of 3.6% Y-o-Y, reaching INR 65.6 billion in Q1 FY26. The consolidated EBITDA margin stood at 13.2%, a slight improvement from 13.0% in the previous quarter but lower than 14.4% in Q1 FY25. The company successfully reduced its consolidated net debt by over 15% compared to Q4 FY25, resulting in a net debt to EBITDA ratio of 0.7x at the end of June 2025, indicating a strengthened balance sheet.

India Operations Show Resilience

India operations delivered a revenue of INR 47.3 billion, growing 3% Y-o-Y, with a robust EBITDA margin of 13.6%. This margin represents a substantial improvement from 11.2% in the last quarter. Volume growth in India was flattish Y-o-Y, driven by low single-digit growth in the replacement segment and mid-single-digit growth in OEM volumes, partially offset by a significant decline in exports. OEM growth was notably boosted by pre-buying ahead of mandatory AC cabin regulations in the heavy commercial segment.

Europe Operations Face Headwinds

The European market presented challenges, leading to flattish Y-o-Y revenue of EUR 146 million, with a sequential decline due to seasonality and weak demand. The EBITDA margin for Europe was 10.8%, down from 13.7% in the same quarter last year. This margin compression was primarily attributed to persistent inflationary pressures, with raw material costs increasing 3% Y-o-Y, and negative market growth across product segments. The company is focusing on cost optimization and new product launches to navigate these challenges.

Restructuring and Exceptional Costs

Apollo Tyres announced its intention to close production at its Enschede plant by the summer of 2026, with the Works Council consultation process ongoing. An exceptional item of INR 3.7 billion was recognized below EBITDA, covering the estimated cost of the social plan for employee payouts, which will be disbursed in FY27. Management indicated that further assessment on asset impairment is still required, suggesting potential for additional costs in future quarters.

Product Innovation and Sustainability Achievements

The company secured approvals to supply to a prominent German passenger vehicle manufacturer in both India and Europe, enhancing its OE portfolio. The new Apollo Aspire 5 ultra-high performance tyre was launched, and the Vredestein brand achieved its highest-ever volumes. In sustainability, Apollo Tyres surpassed its FY26 emission reduction targets with a 35% reduction in Scope 1 and 39% reduction in Scope 2 emissions intensity. Its Hungary facility also obtained its first ISCC certification, and the company earned a Gold Rating from EcoVadis.

Outlook and Strategic Focus

Looking ahead, management anticipates stronger topline growth in both India and Europe, with India's growth expected to be led by the replacement segment and Europe's performance improving in Q2 due to seasonality. The company reiterated its commitment to free cash flow generation, improved return ratios, and aims to achieve a 15% ROCE in the medium-term. They will continue to monitor market trends and focus on profitable growth through product mix premiumization and cost optimization.

Raw Material and Pricing Dynamics

The blended raw material basket saw a sequential decline of approximately 2% in Q1, settling around an index of 166. Management expects raw material costs to be slightly lower in Q2 FY26, though with some uncertainty from exchange rate fluctuations. No pricing changes were implemented in Q1, following some price cuts in Q4 FY25 in response to falling raw material costs.

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