Apollo Tyres Limited — Q4 FY25 earnings call

Call held 21 May 2025

Management summary

Apollo Tyres faced a challenging Q4 FY25, marked by consolidated topline growth of 3% and an EBITDA margin of 13%, primarily impacted by raw material cost pressures and lower revenue growth. While the domestic replacement segment in India performed well, OE and exports underperformed. European operations experienced revenue decline due to capacity constraints and led to an impairment charge for the Enschede plant restructuring. Management expressed confidence in a recovery in operating performance and top-line momentum for FY26, driven by strategic initiatives and new product launches.

Highlights

  • Consolidated topline grew 3% year-on-year, reaching an EBITDA margin of 13% for Q4 FY25.

  • India operations revenue increased 8.4% year-on-year to INR 45.8 billion, with an EBITDA margin of 11.2%.

  • European operations revenue declined 4% year-on-year to EUR 176 million, reporting an EBITDA margin of 14.3%.

  • An exceptional impairment charge of EUR 14 million was recognized due to the intended restructuring of the Enschede plant.

  • Consolidated net debt to EBITDA stood at 0.8x as of March 2025.

  • FY26 Capex plan was revised to INR 1,500 crores, a reduction from the earlier INR 2,000 crores outlook.

  • The company expects a 'much, much better performance' in Q1 FY26 and aims to regain leadership in India in FY26.

Concerns

  • Underperformance relative to expectations and peers

  • European capacity constraints and sacrificed volumes

Key financials

  1. Consolidated Topline Growth 3% +3%YoY
  2. Consolidated EBITDA Margin 13%
  3. Consolidated Net Debt to EBITDA 0.8×
  4. Exceptional Impairment Charge 14 Mn

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 Margin
India Operations₹4,580 Cr11.2%
European Operations₹176 Cr14.3%
Reifen (FY25)₹222 Cr5%

Capital allocation

high confidence
  • Capex ₹1,500 Cr Cut — volatility and uncertainty in markets
    • Growth Capex ₹750 Cr
    • Normal Capex ₹750 Cr
    • PCR expansion in Hungary (4,000 tyres/day)
    • PCR expansion in AP plant (4,000 tyres/day)

    Previously planned ₹2,000 Cr

    We expect our Capex for the fiscal year '26 to be INR 1,500 crores, split almost equally between growth and normal Capex.
  • Debt 0.8× EBITDA
    The net debt to EBITDA for the consolidated operation was 0.8x as of March '25 compared to the end at previous quarter. In India, we witnessed flattish Q4 Y-o-Y volumes, which was led by single-digit growth in replacement volumes, a flattish OE volume and a decline in exports. We registered good growth in TBR replacement segment. The revenue for the quarter was INR 45.8 billion, a growth of 8.4% over the same quarter last year. The EBITDA for the quarter at INR 5.2 billion, a margin of 11.2% was just a little up compared to 11.1% in the last quarter. We have clearly, as Neeraj mentioned, underperformed vis-à-vis our peers in terms of revenue growth and we are taking a hard look at the reasons and the corrective actions to be taken. In terms of demand outlook, we expect the demand momentum to recover in Q1. Coming to the balance sheet, we saw a reduction in the standalone debt as on March '25 compared to the previous quarter of December '24. The net debt to EBITDA for India operations was at 1.2x as of March '25.

Guidance & targets

Performance

  • Overall Performance Performance · Q1 FY26 · Medium confidence much, much better performance
    I'm seeing better results coming out. So hopefully quarter one will be a much, much better performance, even when I compare to our peers.

    — Neeraj Kanwar

  • Overall Performance Performance · FY26 · Medium confidence come back to ourselves as flying colors and being leaders in India
    And now this year, fiscal '26, we hope that we are able to come back to ourselves as flying colors and being leaders in India.

    — Neeraj Kanwar

Demand

  • Demand Momentum (Europe) Demand · going forward · Medium confidence pick up
    In terms of outlook, we expect the demand momentum to pick up going forward and we'll continue to focus on cost optimisation.

    — Gaurav Kumar

Growth Driver

  • India Growth Driver Growth Driver · next year · Medium confidence replacement segment
    Growth in India is expected to be driven by replacement segment.

    — Neeraj Kanwar

Top Line Momentum

  • Europe Top Line Momentum Top Line Momentum · next year · Medium confidence recover driven by market growth and new product launches
    Similarly, in Europe also, we expect top line momentum to recover driven by market growth and new product launches.

    — Neeraj Kanwar

Capacity

  • Hungary Capacity Availability Capacity · end of current year · High confidence available
    So, the Hungary capacity would be available by the end of this current year.

    — Gaurav Kumar

  • Brownfield TBR Requirement Capacity · three years away · Medium confidence three years away
    Unless there is a sudden big boom in OE, I would say the requirement of capacity would be three years away.

    — Gaurav Kumar

Raw Material

  • Raw Material Trend Raw Material · Q1 FY26 · High confidence flattish
    But as of now, for Q1, we see a flattish raw material trend vis-a-vis Q4.

    — Gaurav Kumar

Capex

  • Total Capex Capex · FY26 · High confidence 1,500 crores

    Previously 2,000 crores → 1,500 crores

    We expect our Capex for the fiscal year '26 to be INR 1,500 crores, split almost equally between growth and normal Capex.

    — Gaurav Kumar

What to watch in Q1 FY26

Overall Performance Improvement

next quarter
Current Consolidated 3% YoY revenue growth, 13% EBITDA margin (Q4 FY25)
Target Significantly improved growth and margins

Why it matters

Management has acknowledged underperformance and committed to better results in Q1 FY26.

I can only assure you that Apollo will be back in a full swing in quarter one and FY'26 also.

Risks & concerns

  • Underperformance relative to expectations and peers

    high

    The company had a 'very, very challenging year' and underperformed expectations in both India and Europe.

    Management acknowledged

  • European capacity constraints and sacrificed volumes

    high

    European operations were constrained by capacity, leading to sacrificing volumes in the non-UHP category and underperformance.

    Management acknowledged

  • Raw material cost pressures

    medium

    Margins were impacted by steep raw material cost pressures compared to the previous year.

    Management acknowledged

  • Operating leverage impact from lower revenue growth

    medium

    Lower revenue growth contributed to the decline in margins due to reduced operating leverage.

    Management acknowledged

  • Volatility and erraticness of supply chains

    medium

    Supply chain issues forced businesses to carry higher inventory, impacting working capital.

    Management acknowledged

  • Fundamental increase in operating costs

    medium

    Beyond one-off items, fundamental costs, such as energy prices in Europe, have moved up from historical levels.

    Management acknowledged

Q&A highlights

5 direct
Growth outlook and underperformance compared to peers Direct
Where we have faltered is in OEMs, where we on purpose have come out of some of the sizes that we didn't want to go into. Thereby volume decline has been there. Secondly, OE both in PCR and in truck. ... Exports is also an area which we have faltered in. We have underperformed. And now our focus is there on seeing how we can increase our shares both in OEM and in the export segment.

Management acknowledged underperformance in specific segments (OE, exports) and outlined areas of focus for improvement, providing clarity on the reasons behind the lag.

Asked by Siddhartha Bera

European restructuring, Netherlands plant contribution, and shift to Hungary capacity Direct
currently the Enschede plant was producing 0.5 million PCR tyres when we are selling 6 million plus tyres in Europe. So let's say it's a proportion which is under 10%. That can be absorbed between the existing capacities in India and Hungary. As mentioned, we had to sacrifice the non-UHP category sales in the current year in Europe, which led to both underperformance on revenue and also, to a certain extent, that plays into margins. So, the Hungary capacity would be available by the end of this current year.

Provided specific numbers on the Enschede plant's contribution and explained how its production would be absorbed, linking it to the strategy of sacrificing non-UHP volumes in Europe.

Asked by Siddhartha Bera

European Q4 performance, capacity reduction at Enschede, and operating leverage Direct
No, Amyn, there was no production or capacity reduction at Enschede already in Q4. The decision or the intended decision has just been announced. ... When the operations focused on its demand for the UHP and the UUHP tyres, those tyres take up higher capacity. So to a certain extent, one tyre of UHP or UUHP takes more than the normal non-UHP tyre. And that is what the conscious decision taken was to sacrifice a bit of growth on the summer tyres.

Clarified that Q4 performance issues in Europe were not due to Enschede closure but a strategic choice to prioritize UHP/UUHP tyres over non-UHP, impacting growth in summer tyres.

Asked by Amyn Pirani

Reduction in FY26 Capex plan from INR 2,000 crores to INR 1,500 crores Direct
So given the volatility, Basu, we've sort of gone slow as over the last few years, we continue to be judicious on the Capex. And we had a few months where things were uncertain. And so to a certain extent, we wanted to see how things were panning out before continuing the press button on these Capexes. And that's resulted in a few hundred crores of the growth Capex sort of rolling off into the future years.

Explained the rationale behind the Capex reduction as a cautious response to market volatility and uncertainty, indicating a deferral of some growth Capex.

Asked by Basudeb Banerjee

Increase in standalone working capital over the last three years Direct
So Pramod, one of the results has been that the volatility and the erraticness of the supply chains have forced businesses to sometimes carry high inventory. There has also been times when due to lack of availability we have lost sales, because of taking a little aggressive stance on inventory. We've seen that. So that's been compensated for, which you see in terms of the higher working capital.

Provided a clear explanation for the increase in working capital, linking it to supply chain challenges and the need to maintain higher inventory to prevent lost sales.

Asked by Pramod Amthe

Increase in the Opex line in standalone P&L Partial
So, some of it is, I would say one off and could be curtailed. As a result of the changed structure and that settling in, there was higher travel cost given the initial alignment requirement. That is something that we are looking at and could come under control. There was also higher freight cost, which is directly a result of how the whole supply chain part of the business has worked. And more and more, we are coming to the conclusion that while we will work very hard on efficiencies and all of that, but fundamentally, costs have moved up.

Management identified specific drivers for increased Opex, distinguishing between one-off costs related to restructuring and more fundamental cost increases, indicating some areas for potential control.

Asked by Joseph George

One-time costs associated with the Dutch plant restructuring Partial
Yeah, there is a one-time cost with such decisions. There is an agreed social plan which has been signed with the company. Again, Mumuksh, it is still too early. That involves a fairly detailed calculation involving person-by-person detail to work out the cost. As I mentioned earlier, we should have greater clarity for all of you by the next earnings call.

Confirmed the expectation of one-time costs, including a social plan, but deferred quantification to the next earnings call, highlighting ongoing complexity.

Asked by Mumuksh Mandlesha

FY25 market share for PCR and TBR in India Partial
The market share, Raghu, is now difficult because the industry data is not being published. But I would say, looking at the results of the peers, we would have lost a little bit of a ground in the replacement, not so much. TBR probably matching them, PCR replacement, we would have lost some ground, but we would have lost market share in the OE side of things.

Management provided a qualitative assessment of market share, indicating some loss in PCR replacement and OE, which aligns with their earlier comments on underperformance in these segments.

Asked by Raghunandan N.L.

2 min read 6 chapters

Detailed narrative

Q4 FY25 Consolidated Performance and Challenges

Apollo Tyres reported a consolidated topline growth of 3% year-on-year for Q4 FY25, achieving an EBITDA margin of 13%. This marks a decline from 16.4% in the same quarter last year, primarily due to steep raw material cost pressures and the impact of lower revenue growth on operating leverage. Management acknowledged that FY25 was a 'very, very challenging year' and that the company underperformed its expectations and peers in both India and Europe.

India Operations: Mixed Performance with Focus on Growth

India operations delivered a revenue of INR 45.8 billion in Q4 FY25, representing an 8.4% year-on-year growth, with an EBITDA margin of 11.2%. While the domestic replacement segment, particularly TBR, showed good growth, this was partially negated by a flattish performance in the OE segment and a decline in exports. The company is now intensifying its focus on increasing market shares in both the OEM and export segments to drive future growth.

European Operations: Capacity Constraints and Restructuring Impact

European operations recorded a 4% year-on-year revenue decline, reaching EUR 176 million, with an EBITDA margin of 14.3% in Q4 FY25. The underperformance was largely attributed to capacity constraints, which led to the strategic decision to sacrifice volumes in the non-UHP category to prioritize UHP/UUHP tyres. The company also announced the intended closure of its Enschede plant in 2026, resulting in an exceptional impairment charge of EUR 14 million on fixed assets in the quarter.

Capital Expenditure and Capacity Expansion Plans

The Capex plan for FY26 has been revised to INR 1,500 crores, down from the previously communicated INR 2,000 crores, with funds split equally between growth and normal Capex. This includes a 4,000 tyres per day PCR expansion in both Hungary and the AP plant. The Hungary capacity is expected to become available by the end of the current fiscal year. The reduction in Capex reflects a judicious approach given market volatility and uncertainty.

Raw Material and Margin Outlook

Raw material costs were a significant factor impacting margins in Q4 FY25. For Q1 FY26, the company anticipates a 'flattish raw material trend vis-a-vis Q4'. Current commodity prices were noted as natural rubber at INR 200+ per kg, synthetic rubber at INR 190 per kg, carbon black at INR 115 per kg, and steel cord at INR 160+ per kg, with a blended average of INR 170 per kg. The company continues to focus on sales mix improvement, with premium passenger car business now exceeding mid-40s.

Organizational Stability and Future Outlook

Management acknowledged that an internal reorganization earlier in the year contributed to the underperformance but stated that the organization is now stable. They expressed strong conviction in the team's capabilities and expect 'much, much better performance' in Q1 FY26. The company aims to regain its position as a leader in India in FY26, driven by market growth, new product launches, and continued focus on cost optimization and sustainable growth across key geographies.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Automobile and Auto Components earnings calls