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Shubh Nivesh – Apollo Tyres

Apollo Tyres (ATL), is a leading tyre manufacturer, having operations in India & Europe. In India, ATL has substantial presence in TBR (~30% market share) and PCR space (~20% market share). India contributes ~67% of sales.

FY25 product mix: Truck/Bus- 41%; PV- 38%; OHT- 9%; Others-12%


Investment Rationale:

· GST Rationalization: Structural boost for Automobile industry: Government has announced GST 2.0 reforms thereby reducing GST rates for the automobile sector across the segments and value chain. Small cars, 2-W’s up to 350cc, and 3-Ws will now attract 18% GST vs. 28% earlier, while buses & trucks also shift to 18% rate. Farm machinery like tractors & their components have also seen a reduction from 12% to 5%. Total tax incidence for larger passenger cars, SUVs is also reduced from 43-50% to 40%. Apollo tyres stand to benefit from GST rate cut, as the move towards a uniform lower tax slab down from 28% to 18% on new tyres and to 5% on tractor tyres and tubes will improve cost competitiveness and demand across both OEM & aftermarket. It will also benefit from pick up in new vehicle sales post GST rate cut. Consequently, as per media sources, ATL has announced price cuts across its product portfolio to the tune of ₹ 300 to ₹2,000/tyre, passing on the benefit of GST rate cut to its customers.

· Raw material price correction to aid margin recovery: Rubber & crude derivatives form bulk of raw material costs at tyre companies. Consequently, domestic tyre industry has largely witnessed volatile margin profile with industry realising healthy margins during periods of benign raw material prices. With blended RM prices at 166/kg (during Q1FY26) & domestic natural rubber prices now trading at ~₹ 190/kg, we believe the worst in terms of gross margin hit for tyre players is behind us. In Q1FY26 it witnessed ~220 bps QoQ improvement on gross margins on standalone basis. We see green shoots of margin recovery for domestic tyre players, which coupled with swift volume recovery, to meaningful aid profit growth going forward. At ATL, we foresee healthy 31% PAT CAGR over FY25-27E

· Debt on B/S substantially reduced, Net Debt: EBITDA ahead of target: Tyre industry is known to have bloated balance sheets owning to high capex intensity. Apollo tyre has done considerable work in this domain with net debt down from ~₹ 6,000 crore in FY20 to ~₹ 2,100 crore as of Q1FY26 end, a reduction of substantial ~₹ 4,000 crore. In this timeframe its EBITDA has improved substantially from ~₹ 1,900 crore in FY20 to ~₹ 3,600 crore in FY25 with consequent Net Debt: EBITDA now placed at 0.7x as of Q1FY26E vs. its slated target of Less Than 2x shared few years back.



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