Apollo Tyres

Apollo Tyres reported a consolidated top line growth of 8% quarter-on-quarter and 5% year-on-year, reaching INR 69.3 billion. Despite elevated raw material costs, consolidated EBITDA margins were maintained at 13.7%, amounting to INR 9.5 billion. The company also achieved a significant net debt reduction of INR 4.5 billion during the quarter, bringing the consolidated net debt to EBITDA ratio to 0.7x, which is flat compared to the beginning of the fiscal year.

In India, revenue grew by 5% year-on-year to INR 45.4 billion, with an EBITDA margin of 11.1% (INR 5 billion). The overall volume growth was marginal, as a 5% increase in the replacement segment (TBR and PCR) was largely offset by a 10% decline in the OEM segment. Export volumes remained flattish. Management expects replacement demand momentum to continue to be healthy in Q4 FY25 and beyond, with green shoots visible across segments.

Europe operations demonstrated robust performance, with revenue growing 3% year-on-year and 6% sequentially to EUR 181 million. The EBITDA margin improved significantly to 17.7% (EUR 32 million), up from under 15% in the previous quarter. This growth was supported by a 7% increase in replacement segment revenues and a substantial improvement in product mix, with the Ultra Ultra High Performance (UUHP) segment now contributing 48% of PCLT replacement volumes, up from 43% previously.

Raw material costs for Q3 FY25 were approximately INR 175 per kg, up 15% YoY and 2% QoQ. Natural rubber was around INR 215/kg, synthetic rubber at INR 195/kg, and carbon black at INR 120/kg. For Q4 FY25, RM costs are expected to be range-bound, similar to Q3, indicating a plateauing. Given the current market situation and competitive intensity, the company has no immediate plans for price hikes, despite management acknowledging that current margins are not ideal.

The consolidated Capex for the first nine months of FY25 stood at INR 500 crores, with India's share being INR 350 crores. The full-year FY25 Capex is now expected to be lower than initially planned, estimated at INR 700-800 crores. For FY26, Capex is projected to increase, comprising a normal maintenance Capex of INR 700-750 crores plus an additional INR 800 crores for growth. This growth Capex will add approximately 7-8% to India's PCR capacity and slightly more in Europe, leading to an overall capacity addition of about 10%.

Apollo Tyres continues to focus on premiumization, with the UUHP segment growing faster in Europe. The company is actively pursuing new growth markets, with the US identified as a key focus for PCR Vredestein and Apollo TBR, and the Middle East (specifically Saudi Arabia) for future expansion. R&D efforts are securing model wins from German PV manufacturers, and sustainability initiatives, such as the zero-liquid discharge certification at the AP plant, remain a core pillar.