apollo tyres ltd

apollotyres.com

September 2012

Apollo Tyres Ltd.

apollotyres.com 2

36 Years Young Company

• Multi-national, originating in India

– Manufacturing presence in 3 continents – Asia, Europe & Africa

• Publicly listed, promoter family owns ~47%

• 27% CAGR over last 5 years

• A global Top 15 tyre company

• Consistently profitable with an unbroken dividend record since 1989

2006:Acquired Dunlop Tyres in South Africa

2009:Acquired Vredestein Banden BV in Netherlands

1976:Registration of Apollo Tyres Ltd.

1977 : First plant in Perembra Kerela

1991 : Second Plant in Limda, Gujarat

1995 : Third Plant at Kalamassery, Kerela

2010 : Chennai Greenfield for truck & car radials

Key Milestones

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Industry Overview

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7.8 8.7 8.8 9.9 10.7 11.6 11.7 13.6 14.7 14.42.1 2.3 2.9 3.1 3.3 3.7 3.74.3 4.6 5.0

8.4 10.0 11.9 13.614.2

16.8 18.822.5

29.3 30.3

2.3 2.32.7

3.0 3.83.8 3.8

4.9

5.4 5.6

25.625.8

27.930.3

35.2

38.7 40.1

48.4

61.965.2

2.1 2.12.2

2.2

2.4

2.72.4

2.3

2.22.3

-6.0

4.0

14.0

24.0

34.0

44.0

54.0

64.0

74.0

84.0

94.0

104.0

114.0

124.0

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Mn

No

.

Truck/ Bus Light Trucks Passenger Cars Farm Two Wheelers Others

Truck/ B us , 54%

Light Trucks , 9%

P as s e nger C ars ,

14%

Fa rm , 8%

Two Wheele rs ,

13%

Others , 3%

4

Indian Tyre Industry – Strong Volume Growth

CAGRFY 08 - 12

CAGRFY 03 - 12

Two Wheeler

10.9% 13.9%

Farm 10.3% 10.0%

Passenger Cars

15.4% 15.8%

Light Truck 9.9% 7.6%

Truck/ Bus 7.1% 5.7%

Domestic Sales Volume

Strong demand growth across various product segments

Revenue Segmentation – Industry dominated by Commercial Vehicles segment

apollotyres.com

100%

95%

27%

96%

65%

52%

21%

72%

68%

0% 20% 40% 60% 80% 100% 120%

Western Europe

Central Europe

Eastern Europe

North America

South America

Asia

India

Africa / Middle East

World

Radialization Levels

5

Indian Tyre Industry – Low radialisation in truck segment

Opportunity in Truck Radial Segment

Expected to reach 35%+ in the next 3 years owing to infrastructure development and OE thrust

Most of the demand now met by domestic production

Domestic Production, 82%

Imports, 18%

Truck Radial Market Share

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4.7

0.6 0.8

4.5 4.1

- -

7.5

0.8 1.5

6.8 6.8

FY 2013 E Capacity

Imports Exports FY 2013 E Domestic

Availability

FY 2013 E Demand

FY 2015 E Capacity


Availability

FY 2015 E Demand

2.7

0.7

1.2 4.7

0.3

1.3 6.3

1.2 7.5

FY 2012 Apollo Other Players FY 2013 E Apollo Other Players FY 2014 E Other Players FY 2015 E

6

Indian Tyre Industry – Demand Supply situation : Truck Radials Truck Radial Supply – Industry Capacity (Mn Units)

Demand Vs. Supply

Capacity being built up to take care of increase in future demand

Apollo,

35%

Others,

65%

Apollo,

32%

Others,

68%

Apollo,

27%

Others,

73%

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36.2

5.0 4.3

36.8

34.3

39.2

6.0 3.9

41.4 41.6

FY 2013 E Capacity


Availability

FY 2013 E Demand

FY 2015 E Capacity


Availability

FY 2015 E Demand

28.7

1.9

5.6 36.2 0.9

1.6 38.8 0.5 39.2

FY 2012 Apollo Other Players FY 2013 E Apollo Other Players FY 2014 E Other Players FY 2015 E

7

Indian Tyre Industry – Demand Supply situation : Passenger Car Tyres Passenger Car Tyres Supply – Industry Capacity (Mn Units)

Demand Vs. Supply

Further capacity is in line with the future demand

Apollo, 24%

Others, 76%

Apollo, 25%

Others, 75%

Apollo, 24%

Others, 76%

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Michelin, 50%

Other Branded, 14%

Chinese/ Economy brands, 36%

80 97 192

333

560

885

778 864

1,032

604

1%1%

2%3%

5%

8%

7%6%

7%

4%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

-

200

400

600

800

1,000

1,200

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012% of domestic availability

Units '000

Imports - Truck Tyres

211 551

1,004 1,064 930

1,498

3,242 3,300

4,239

4,761

3%

6%

10%9%

7%

9%

17%15% 14%

16%

0%

5%

10%

15%

20%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000


% of domestic availability

Units '000

Imports - Passenger Car Tyres

8

Indian Tyre Industry – Imports vis-a vis domestic availability

Branded tyres sell at a competitive price. The Chinese/ Economy brand sell at a 10 –15% discount

China and Thailand constitute 90% of Economy brands

Imports upto FY 2006 were primarily cross ply. Radials gradually increased with increase in radialisation level and anti dumping duty on cross ply - Cross ply currently is negligible

Michelin, 16%

Hankook, 8%

Yokohama, 6%

Other Branded, 32%

Chinese/ Economy brands, 38%

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27%29% 28%

28%

27% 27%

25% 26%21%

27%21%

25% 31%

28%

27% 28%

28% 27%26%

27%

7% 9% 10% 11%13% 13% 13%

16%19% 17%

0%

5%

10%

15%

20%

25%

30%

35%


Apollo's Market Share

Truck Light Truck PCR

9

Indian Tyre Industry – Market Share

Reduction in truck tyre market share in FY 2011 is on account of lost production due to plant shut down in the first half of the year

Apollo, 27%

MRF, 21%

JK, 19%

CEAT, 11%

Birla, 14%

Good year, 0%

Others, 4% Imports, 4%

Truck

Apollo, 27%

MRF, 26%

JK, 19%

CEAT, 7%

Birla, 6%

Good year, 0%

Others, 14%Imports, 0%

Light Truck

Apollo, 17%

MRF, 21%

JK, 9%

CEAT, 3%Birla, 0%

Good year, 13%

Bridgestone, 18%

Others, 3%

Imports, 16%

Passenger Car

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4.7 3.9

5.5 5.9 5.7

6.2 6.2 6.5 6.6

6.9

21% 22% 22%

19%21%

23%22%

25%

22%

18%

0%

5%

10%

15%

20%

25%

30%

-

2.0

4.0

6.0

8.0

10.0

12.0

CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008 CY 2009 CY 2010 CY 2011

Apollo Market Share

Industry Sales ( Mn No.s)

660

526

759

898

753

957 992

739

969 1,057

21%

28%

24% 23%

28%

22% 22%

25%

18% 18%

0%

5%

10%

15%

20%

25%

30%

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000


Apollo Market Share

Industry Sales ( '000 No.s)

10

South Africa Tyre Industry – Market Share

Loss in market shares in last 2 years due to influx of Chinese imports

Passenger Car

Truck

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Europe Tyre Industry – Market Share

Continued gains in passenger car tyre market shares with capacity ramp up

337 350

363 371

385 391

372

340

374 382

1.2% 1.2%1.3%

1.3% 1.4% 1.4%1.4%

1.6% 1.5%1.7%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

200

250

300

350

400

450

500

550


Apollo Market Share

Industry Sales (Mn. No.s)

Passenger Car

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RM Cost Trend - Annual

100 118 115

195

234

100

146

87

140

237

100 122 125 116 125

100

133 118

138

176

-

40

80

120

160

200

240

280

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Base Price Index

RM Cost Trend

Natural Rubber SBR 1502 Steel Cord Carbon Black

100 125

114

147

190

-

25 50

75

100 125

150

175

200

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Base Price Index

Overall RM Cost Trend

apollotyres.com 13

RM Cost Trend - Quarterly

100 95 91 85 85 100

122 129

102 110

100 107 108 113 115

100 109 112 116

128

-

40

80

120

160

Q1- FY12 Q2- FY12 Q3- FY12 Q4- FY12 Q1- FY13

Base Price Index

RM Cost Trend

Natural Rubber SBR 1502 Steel Cord Carbon Black

100 102 101 95 98

-

25

50

75

100

125

Q1- FY12 Q2- FY12 Q3- FY12 Q4- FY12 Q1- FY13

Base Price Index

Overall RM Cost Trend

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Industry Overview – Previous year highlights….

India

• Softening of demand

• Pressure on the cross ply truck tyre capacities due to increase in radialization & lower demand growth

Europe

• Demand continues to grow with performance positively affected by previous strong winters

South Africa

• Demand recovering though still not back at previous levels

• Imports continue to dominate the market and causing challenges for domestic players

Overall

• Raw material cost push continued adding to pressure on margins

• Raw material prices stabilized in the second half though at high levels

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Industry Overview – Current year highlights….

India

• Recovery in replacement demand even though economy remains sluggish

• Decline in OE demand

Europe

• Significant demand decline due to economic conditions – no growth in volumes

South Africa

• Demand continues to recover

Overall

• Raw material decline leading to improvement in margins

• Raw material prices expected to remain soft

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Company Overview

apollotyres.com

431 496 574 656 680 745 775 8351050

1250

150175 175

325

345

345

-100

100

300

500

700

900

1100

1300

1500

1700


MT

/ D

ay

Consolidated Capacity

16 19 22 26 33 37 41 50 55

82

- - - -

10 10 9

31 34

40

-

20

40

60

80

100

120

140


Rs. Bn

Consolidated Top Line

17

Apollo Tyres – Growth Journey

Healthy top line growth aided by organic investment and strategic acquisitions in FY 2007 & FY 2010

CAGR (5 years) : 27%

CAGR (5 years) : 15%

Overseas

Domestic

Overseas

Domestic

apollotyres.com 18


Current

Brand Positioning

Current

Truck BiasLight Truck Bias & RadialPCR (‘S’ & ‘T’ & ‘H’ rated)Farm Bias

Truck RadialUHP PCR (Upto ‘Z’ rated)OTR BiasFarm Radial

10 Years ago

10 Years ago

Truck BiasLight Truck BiasPCR (‘S’ & ‘T’ rated)Farm Bias

Product Portfolio

Organic growth of revenue & market share in India during FY01 –FY06 has been supplemented with the acquisition of global brands, technologies & markets in the last 5 years

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Truck, 83%

Light Truck, 8%

Passenger Car, 2%

Farms & Others, 7%

Truck, 63%

Light Truck, 12%

Passenger Car, 15%

Farms & Others,

10%

Truck, 47%

Light Truck, 8%

Passenger Car, 33%

Farms & Others,

12%

19


Customer Segments

5 Years ago Current10 Years ago


Product Segments

Even as OEM share continued to increase in India with growth and entry into passenger car tyre segment, replacement continues to enjoy a major portion of the pie - South Africa and Europe operations are primarily present in the replacement market

A well distributed product portfolio compared to dominance of truck tyre segment earlier .

Replacement, 87%

OEM , 13%

Replacement, 82%

OEM , 18%

Replacement, 73%

OEM , 27%

apollotyres.com

India

100%

India79%

South Africa21%

India66%

South Africa11%

Europe23%

20

India


Manufacturing Presence


India

India

South Africa

Netherlands

Revenue


apollotyres.com 21

Apollo Tyres – Raw Materials

Natural Rubber constitutes the largest component of the overall raw material cost

Well distributed sourcing ensuring relationships with all major suppliers

Natural Rubber, 43%

Synthetic Rubber, 20%

Carbon Black , 10%

Steel Cord, 4%

Tyre Cord Fabric, 1%

Others, 22%

Raw Material Composition

Africa / S. Africa, 5%

Asia, 33%

Europe/ CIS, 12%

India, 47%

Rest of World, 3%

Raw Material Sourcing


Asia, 35%India, 58%

Natural Rubber Sourcing


Asia, 46%

Europe/ CIS, 26%

India, 16%

Rest of World, 2%

Synthetic Rubber Sourcing

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0.7

2.7 1.8 1.7 2.1

1.5

3.1

7.9

11.7

8.7 4%

14%

8%

6%

5%3%

6%

10%

13%

7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0


% of Sales

Rs. Bn

Capital Investments

22

Apollo Tyres – Financial Track Record

The Company has consistently invested in growth over the years even in difficult times

Substantial Capital Investment in FY 2010 – 12 in Chennai Greenfield

2.1 1.7 1.8 2.3

4.1

6.1

4.4

12.0

10.2

12.0

13.3%

9.0%8.2% 8.9%

9.5%

13.1%

8.8%

14.7% 11.5%

9.9%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0


EBIDTA Margin

EBIDTA (Rs Bn.)

EBIDTA

apollotyres.com

1.9 2.7

4.1 5.2

6.3

3.6 5.3

13.6

22.9

27.0

0.9

1.7

2.6

2.3

1.6

0.6

1.3

1.2

2.3 2.3

-

0.5

1.0

1.5

2.0

2.5

3.0

-

5.0

10.0

15.0

20.0

25.0

30.0


Net Debt : EBIDTA

Net Debt (Rs. Bn)

Net Debt : EBIDTA

23

Apollo Tyres – Financial Track Record

Proceeds from Equity Issue (Rs Mn)FY 2004 : 1,348FY 2007 : 2,554FY 2008 : 644FY 2009 : 411

1.9 2.7

4.1 5.2

6.3

3.6 5.3

13.6

22.9

27.0

0.4

0.5

0.7

0.8

0.7

0.3

0.4

0.7

0.9

1.0

-

0.2

0.4

0.6

0.8

1.0

1.2

-

5.0

10.0

15.0

20.0

25.0

30.0


Net Debt : Equity

Net Debt (Rs. Bn)

Net Debt : Equity

apollotyres.com

2,445

3,614 8.7%

11.4%

0%

2%

4%

6%

8%

10%

12%

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

3M-FY 2012 3M-FY 2013

EB

IDT

A M

arg

in

Rs

Mn

28.2

31.6

0

5

10

15

20

25

30

35

40

3M-FY 2012 3M-FY 2013

Rs

Bn

.

24

Apollo Tyres – 3M – FY2013 Financials

Net ProfitEBIDTA

Net Sales

771

1,380

2.7%

4.4%

0%

1%

2%

3%

4%

5%

-

500

1,000

1,500

2,000

3M-FY 2012 3M-FY 2013

Net

Pro

fit

Marg

in

Rs M

n

apollotyres.com 25

Apollo Tyres – Stock Performance & Shareholding

• EV/ EBIDTA : 5.6• P/E : 9.1

9%

16%

6% 6% 6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

%

Dividend Payout Ratio

Promoters, 47%

FIs/ Banks/ Mutual

Funds, 11%

Retail

Investors, 18%

FIIs/ NRIs/ Foreign

Bodies Corporate,

23%

Shareholding Pattern

60

70

80

90

100

110

120

130

140

150

Base Price Index

Apollo Price Sensex

apollotyres.com 26

Apollo Tyres – Looking Ahead

• Strengthen leadership position in Commercial Vehicle Segment in India - ramp up of Chennai Greenfield to gain market share in truck radial segment

• Continue journey towards becoming a leader in the passenger car segment in India

• Continue volume gains in Europe through dual brand strategy

• Provide cost competitive production base to Europe operations through initially India and later a dedicated Greenfield

• Return South Africa operations to profitability

And the Journey continues…..

apollotyres.com

On a Journey

To

Move the World

apollo tyres ltd

Documents

rm cost trend

base price index

domestic demand availability

apollo market share

domestic availability

cross ply

passenger car

product segments