Apollo Tyres Limited

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 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.

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.

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.

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.

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.

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.