ByAnkush Roy (13068)Dipankar Patir (13074)Evangeline K. Jyrwa (13076)Saurabh Agarwal (13102)Soupa Soundararajan ( 13109)Gaurav Arora (13118)

The Indian Tyre Industry

The origin of the Indian Tyre Industry dates back to1926 when Dunlop Rubber Limited set up the first tyrecompany in West Bengal.

MRF followed suit in 1946. Since then, the Indian tyreindustry has grown rapidly.

Indian Tyre Industry now provides direct and indirect employment to nearly 1 million persons, including dealers, retraders, growers of Natural Rubber, employment in raw material sector etc.

Contd.

While the tyre industry is largely dominated by the organized sector, the unorganized sector is predominant with respect to bicycle tyres.

The total number of tyre dealers, geographicallyspread all over the country is over 5,000 - servicedthrough over 500 depots of tyre companies.

A vast majority of dealers handle multi-brands oftyres. Tyre companies also have exclusive retaildistribution outlets.

Contd.

Indian tyres are meant, and expected to perform, underdifferent and extreme road conditions, from kutcha villageroads to newly constructed national highways, fromextreme cold to hot and wet conditions prevailing indifferent geographical parts of the country.

Indian Tyre companies also follow a unique warranty system whereby pro-rata adjustment is given for manufacturing defects through the dealers

There is a vast population and production of two-wheelers in India for which different sizes of tyres are required and produced.

Nature of the industry Tyre Industry is highly raw-material intensive. Raw materials cost

accounts for approx. 63% of tyre industry turnover and 72% of production cost.

The industry is a major consumer of the domestic rubber market. Natural rubber constitutes 80% while synthetic rubber constitutes only 20% of the material content in Indian tyres.

62% of total Natural Rubber consumption is by the Tyre Sector, balance by rubber based non-tyre industries.Interestingly, world-wide, the proportion of natural to synthetic rubber in tyres is 30:70

Total weight of raw-materials consumed by tyre industry – 15.50 Lakh M.T.

Total Cost of Raw Materials consumed by tyre industry – Rs.16,000 Crores

Tyre industry in FY 2009-2010

Turnover of Indian Tyre Industry Rs. 25,000Crores

Tyre Production (Tonnage) 13.50 lacs M.T.

Tyre Production – All Categories (Nos.) 971 Lacs

Tyre Export from India (Value) : Rs. 3000 crores

Number of tyre companies: 36

Industry Concentration 10 Large tyre companies account for over 95% of total tyre production.

Recent Observable trends in the Indian Tyre Industry

Robust growth rate in all vehicular segments over last 5 years.

Improved capacity utilization by all major manufacturers (>80%)

Decrease in custom and excise duties to nullify increase in raw material costs and increases OPM

Low labour cost : partially offset by low productivity.

Improved credit profile and loan serviceability.

TYRE EXPORTS BY INDIAN TYRE INDUSTRY Indian tyres have good acceptance in global markets.

Compounded Average Growth Rate (CAGR) of tyre exports in the last one decade has been 8%.

Exports to over 65 countries worldwide. 17% export to highly quality conscious US market. Other major export markets are - (countries in) Latin America; UAE, Bangladesh, Iran, Philippines, Vietnam, etc.

Over 20% of truck and bus tyres (bias) produced domestically are exported. Emphasis now is on export of radial tyres, including Passenger Car radial tyres.

All large tyre companies are exporting as a long term commitment

Pricing Strategy in Tyre industry

Pricing a product is a function of many factors.

The tyre market is not very price sensitive.

Consumers are more concerned about the tyres functionality, than its price.

Besides, being a homogenous product, most tyre companies price their tyres at more or less the same levels. International players such as Bridgestone price their tyres slightly higher than the rest of the market. This is partially to demonstrate its superior quality and pedigree.

Demand drivers of the industry1) Industrial and freight activity

The truck and bus tyre segment accounted for 19% of tyres produced in India in FY2008.

Every truck/bus manufactured generates a demand for seven tyres. In addition, the price of a truck tyre is significantly higher than that of a passenger car tyre (roughly 10 times).

Thus the demand multiple emanating from the commercial vehicle segment is highest in value terms.

Contd.2) Personal purchasing power

As the economy booms and disposable incomes in the hands of the Indian middle- class burgeon, the sale of passenger cars has been witnessing an upward swing over the past decade. Since tyre sales are directly linked to car sales, both through OEMs and the replacement market, the tyre industry has witnessed a corresponding increase in its sales figures.

3) Automobile sales

The demand from the OEM segment is a derived one and directly correlated to the level of automotive production. The recent Slowdown in automotive industry and global economic in general negatively impacted the Indian tyre industry in 2009. The industry growth was only 2.19% during first nine months of FY09, compared to 7.38% growth experienced during the same period last year

Contd.4) Exports

Due to the slowdown in the domestic market brought about by the recession, most India tyre manufacturers have taken to exports to reduce inventory build-ups. Indian companies have currently entered into sourcing agreements (for tyres) with neighbouring countries like Sri Lanka and China.

There is a trend of increasing exports of bus and truck tyres (crossply variety) from India to developing countries. This is because of the fact that developing countries are unable to source them from developed countries as these are no more produced there.

The product focus of tyre exports from India has been Traditional Truck Tyres. Globally this segment of tyre export is shrinking due to greater acceptance of radial tyres. Moving towards radialization will be vital if tyre producers want to protect their share in international markets.

MAJOR CONCERNS OF INDIAN TYRE INDUSTRYRADIALIZATION:

Indian Tyre Industry hitherto is predominantly a cross ply/bias tyre manufacturing industry, particularly in the commercial vehicle segment (truck, bus, LCV) whereas in the developed countries radialization level is much higher.

In comparison to normal (Bias) tyres, Radial tyres offer higher life/mileage, lower fuel consumption, improved safety and ride quality and several other benefits.

However, the initial cost of a radial tyre is approx. 25% higher though on a cost per kilometer (CPK) basis, radial tyre gives higher benefits.

Radialization (contd..) Though radial tyres offer multiple benefits, low level of

radialization in the truck and bus segment is mainly due to higher initial cost (with limited demand pull), low level of fitment by OEs on commercial vehicles and poor road conditions.

With an improvement in road infrastructure, radialization in the commercial vehicle (CV) segment needs an added thrust by way of:

i) increase in fitment by the OEs (as in the case of passenger car tyres)

ii) increased demand for fitment of commercial vehicle radials in the replacement markets.

Road and support infrastructure

While poor road conditions have a positive impact on replacement demand, by reducing the life of the tyre, improved roads can act as a catalyst to increased purchase and use of personal vehicles, thus driving up the demand for tyres.

Also, poor road and support infrastructure act as a barrier to radialisation in the commercial vehicle segment.

TUBELESS TYRES IN INDIA

Good puncture resistance and much better safety

Account for only 10% of passenger car tyre sales

Primarily affected by:a) Poor roads leading to rim damageb) Lack of automatic machines for mounting and un-mountingc) Poor quality service leading to leakages and poor life

OVER DEPENDENCE ON THE COMMERCIAL VEHICLE SEGMENT

Globally-Passenger transport accounts for 33% of product mix

India- 81% of tyre market is for commercial vehicles

EXPORT ISSUES Low radial tyre production capability hampers export

potential

COMPETITION

Indian tyre industry is facing intense competition from China and other South East Asian countries in tyre exports to other countries.

Though the quality of Indian tyres is better and has wider acceptance, due to cheaper pricing, higher volumes and aided by Government support and subsidies, Chinese tyres are cutting into the share of Indian tyre exports.

There is a need to promote India Brand for tyres as one which spells quality and higher standards.

USED TYRES Developed and industrialized countries are facing a

monumental problem in disposal of used tyres. Hence, developing and high tyre consumption countries like India are being looked upon as a dumping ground for used tyres.

Several countries have banned or imposed severe restriction on import of used tyres. In India, Government introduced floor price (for assessment of Customs Duty) in 1997. Till recently, floor price mechanism was effective in restricting imports.

However, of late, the volume of used tyre imports (in circumvention) of the floor price has increased significantly.

Non-Tariff Barriers (NTBs) on Indian Tyres

Several countries have imposed Non-tariff barriers, by way of standards, specifications and quality markings, which Indian tyres have to comply with when exported to those countries.

These stipulations are by way of Non-tariff barriers and are coming in the way of improved export performance.

Since the conditions imposed are in a WTO compatible manner, there is a need to initiate simplification and curb duplication at Government-to-Government level.

BANGKOK AGREEMENT/RTA- INCLUSION OF RAW-MATERIALS OF TYRE INDUSTRY

Under the Bangkok Agreement, tyres can be imported at 5% concession in import duty (i.e. 15% customs duty vs. 20% normal duty rate).

South Korea and China are signatories of the Bangkok Agreement. Tyre imports from these two countries at concessional rate of customs duty are a matter a serious concern for Indian tyre industry.

Preferential tariff treatment has resulted in import of large volume of passenger car radial tyres into India from South Korea and truck/bus tyres from China.

However, since major raw-materials of tyres are not included in the Bangkok Agreement (eligible for concessional rate of customs tariff from signatory countries) tyre industry is at a disadvantage and is faced with inverted duty structure.

Government policies

TAXATION RELATED:

Incidence of excise duty on tyres continues to be high @ 24%, the same as on luxury products like air-conditioners etc.

In addition there are several local taxes and levies imposed on tyres. Ultimate burden of high taxes falls on the consumer.

Apart from high Excise Duty, various embedded taxes (viz. Sales Tax, Octroi, Cess etc.) take the total tax incidence on tyres to an even higher level.

Truck and Bus tyres are used in vehicles for transportation of common man and goods.

Embossing of Maximum Price (MRP) on Truck/Bus Tyres

In February, 1988, as per a directive of the Ministry of Industry, Embossing of MRP on truck and bus tyres was started.

This was based on the recommendations of the Committee on Tyre Industry (1984, known as Satyapal Committee). In the last over 15 years, the economic scenario has undergone a sea change with liberalization, removal of controls and free global trade in most items.

Tyre Industry is also delicensed. Major raw-materials of tyre industry (Natural Rubber and petroleum based materials) undergo wide fluctuations in prices.

In such a dynamic scenario, it is a not practical to emboss the price on tyres due to market dynamics. Submission - Tyre industry feels that there is no need to continue with embossing MRP on truck/ bus tyres.

Automotive Industry Standards

All large tyre companies had voluntarily taken BIS (Bureau of Indian Standards) certification.

In addition, Government has proposed Automotive Industry Standards (AIS) which are essentially safety standards and applicable to tyre industry also.

Tyre Industry is of the view that there should be a unified national standard which can be achieved with a merger of AIS standards with BIS.

New Policy Initiatives

The tyre industry in India has had to grapple with raw material price volatility, rupee appreciation and cheap Chinese imports.

In this connection, some of the recent initiatives by the government to facilitate the growth of the sector include:

No WTO bound rates for Tyres and Tubes

No restrictions on the import of all raw materials required for tyre manufacture except carbon black, which has been placed in the restricted list

Increasing thrust on development of road infrastructure

Segments of Tyre industryMarkets Design

Original Equipment Manufacturers (OEMs)

Replacement Demand

Exports

Flatless Tyres- Drill holes through the tyre and still ride the vehicle

Tubeless Tyres- Airtight seal between the tyre and rim

Radial Tyres- Dual steel belt with stiff treads

Cross Ply- The reinforcement runs criss cross on the sidewall

Tyre Industry

Passenger vehicles

Commercial vehicles

Others

MHCV HCV LCV Farm vehicles

OTRIndustrial vehicles

Cars Motor Cycles

Scooters

Segments according to vehicle categories

Demand for tyres

Type: Bus and Truck; Scooter; Motorcycle; Passenger Car; Tractor

Market: OEM; Replacement; Export

62%

24%

14%

Sales Segments

Replacement OEM's Exports

65%

21%

2%7%

5%

Category Wise

Truck/Bus Passenger Car

Jeep LCV

Tractor

Industry Analysis

Strengths

Established brand names (key in the replacement market)

Extensive distribution networks - For example, Apollo Tyres has 118 district offices, 12 distribution centres and 4,250 dealers

Good R&D initiatives by top players

Weaknesses

Cost Pressures - The profitability of the industry has high correlation with the prices of key raw materials such as rubber and crude oil, as they account for more than 70% of the total costs

Pricing Pressures – The huge raw material costs have resulted in pressure on the realisations and hence, the players have been vouching to increase the prices, although, due to competitive pressures, they have not been able to pass on the entire increase to the customer

Highly capital intensive - It requires about Rs 4 billion to set up a radial tyre plant with a capacity of 1.5 million tyres and around Rs 1.5-2 billion, for a cross-ply tyre plant of a 1.5 million tyre-manufacturing capacity

Opportunities

Growing Economy, Growing Automobile Industry, Increasing OEM demand, Subsequent rise in replacement demand

With continued emphasis being placed by the Central Government on development of infrastructure, particularly roads, agricultural and manufacturing sectors, the Indian economy and the automobile sector/ tyre industry are poised for an impressive growth.

Creation of road infrastructure has given, and would increasingly give, a tremendous fillip to road transportation, in the coming years. The Tyre industry would play an important role in this changing road transportation dynamics

Access to global sources for raw materials at competitive prices, due to economies of scale

Steady increase in radial Tyres for MHCV, LCV

Threats

Continuous increase in prices of natural rubber, which accounts for nearly one third of total raw material costs

Cheaper imports of Tyres, especially from China, selling at very low prices, have been posing a challenge. The landed price is approximately 25% lower than that of the corresponding Indian Truck/ LCV tyres. Imports from China now constitute around 5% of market share

With crude prices scaling upwards, added pressure on raw material prices is expected

Ban on Overloading, leading to lesser wear and tear of tyres and subsequent slowdown in demand. However, this would only be a short-term negative.

Cyclical nature of automobile industry

Basis of competiton Being a homogenous product, there is not much difference

in products offered by competing tyre manufacturers. However, companies do try to differentiate themselves by outdoing one another in some Points of Parity, such as quality, safety, tread design, economy, etc.

1) High performance tyres that are meant for sports and other high endurance activities.

2) Comfort tyres (touring) : Touring tyres offer the twin advantage of endurance with superior ride comfort. These class of tyres are a favorite amongst long distance car drivers such as business travelers.

3) Mileage : One of the biggest value propositions of radial tyres is the improved mileage that it brings with it. Mileage is the top priority for the Indian middle class buyer.

4) Price : Tyre prices play a much smaller role in the passenger car tyre industry, compared to tyre features. Consumers are more concerned about the attributes of the tyre (quality, durability, etc) than its price.

5) Wear life : The wear life of a tyre determines the life if the tyre. The more durable a tyre, the higher will be its wear life.

6) Grip : Given the high seasonal differences in India, consumers typically look for tyres that suit their local climate. Thus, while consumers in Rajasthan look for tyres that can endure high temperatures; consumers down south prefer tyres that can grip the road even in the worst of monsoon seasons.

7) Cornering and braking : Cornering and braking refers to the way a tyre handles the extreme shear and frictional forces it experiences when the vehicle cuts corners or brakes at high speeds. Superior braking and cornering performance is always desired by sports and highway drivers.

Critical success factors

1. Quality: If the quality of tyres is at any point doubted by the consumer it can be devastating for profits as tyres carry such a huge safety element.

2. Pricing: Introduction of cheaper brand tyres has placed greater pressure on prices. There have been continued rises in imports of cheaper tyres from China. If tyres are over the price range, most customers will turn away from leading tyre brands.

Porter’s 5 forces with respect to tyre industry

Key players in the industry

Major players are MRF, JK Tyres, and Apollo tyres & CEAT, which account for 63 per cent of the organized tyre market.

The other key players include Modi Rubbre, KesoramIndustries and Goodyear India, with 11 per cent, 7 per cent and 6 per cent share respectively.

Dunlop, Falcon, Tyre Corporation of India Limited (TCIL), TVS-Srichakra, Metro Tyres and BalkrishnaTyres are some of the other significant players in the industry.

Apollo Tyres

Apollo Tyres Ltd is engaged in manufacturing automobile tyres and tubes.

They are having their manufacturing facilities at Trichur in Kerala and Vadodara in Gujarat.

They are the first Indian tyre company to launch exclusive branded outlets for truck tyres and also the first Indian company to introduce radial tyres for the farm category.

Apollo Tyres was established in 1976 in the natural rubber growing state of Kerala in southern India.

The 1st manufacturing facility in Perambrabegan with a capacity of 40 tonnes a day. Since its early days, Apollo has been driving growth in the Indian and global tyre industry.

A leader across all key tyre segments with eight tyre manufacturing facilities spread across three continents.

Largest CV tyre manufacturer in India.

PRESENT Turnover of US$ 1.74 billion

Over 16,000 employees

Producing around 1200 tonnes of tyres across vehicle categories

Manufactures out of 9 facilities across 3 continents

Operates through 3 Zones with headquarters in India, South Africa & The Netherlands

Apollo tyres share holding

Apollo TyresBSE Sensex

Financial Performance (ATL)Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Net Sales (crRs.)

2,619.76 3,290.94 3,705.93 4,090.86 5,045.99

Operating Profit(cr Rs.)

235.24 331.41 490.21 356.37 817.11

Net Profit(cr. Rs. 78.17 113.42 219.30 108.12 414.99

Shares in issue (lakhs)

383.38 464.02 4,884.45 5,040.25 5,040.25

Earning Per Share (Rs)

20.39 24.44 4.49 2.15 8.23

Equity Dividend (%)

45.00 45.00 50.00 45.00 75.00

Here there is a drastic change in EPS from 2007 to 2oo8 because the company spilt its shares from face value Rs.10 to Re.1.

Topline Growth: CAGR of 32%

26

43 47 50

80

0

10

20

30

40

50

60

70

80

90

FY 06 FY 07 FY 08 FY 09 FY 10

Turnover (Rs. Billion)

Turnover (Rs. Billion)

Apollo tyres in the year 2006 Expansion of passenger car radial capacity to 10,000

tyres/day.

Expansion of passenger car range to include 4x4 and all-terrain tyres.

Acquired Dunlop Tyres International in South Africa and Zimbabwe.

Launch of DuraTread, treading material and solutions.

Launch of India's first range of ultra-high performance V and W-speed rated tyres.

Financial year 2007In 2007 the net sales rose from 2619.79 crores to 3290.94 crores and profit from 78.17 to 113.42 crores. This increase in profit can be attributed to the following factors:

Launch of Regal truck and bus radial tyres

Launch of DuraTyre, retreaded tyres from Apollo.

The Company split its face value from Rs10/- to Rs1/-.

Apollo diversified into transport and logistics.

Financial year 2008 During the financial year ended March 31, 2008, sales

from operations amounted to Rs.42,469.83 million as against Rs.37,743.43 million during the previous year, recording a growth of 12.52%.

Operating profit, before interest and depreciation, amounted to Rs.4,732.98 million, as against Rs.3,122.93 million during the previous year.

Net profit, after providing for interest, depreciation and tax amounted to Rs.2,193.03 million as against Rs.1,134.22 million during the previous year, registering an increase of 93.35%.

Financial year 2008(contd.)

It has achieved all time high profit and robust growth in its operations supported by a motivated management team, aggressive marketing initiatives, better working capital management and overall cost reduction measures adopted by the Company.

The cost management and production efficiencies helped in maintaining a good profitable track record despite increase in input costs.

Financial year 2009

During the financial year ended March 31, 2009, sales from operations amounted to Rs.40,704.41 million as against Rs.36,939.27 million during the previous year, registering a growth of 10.19%.

The growth in revenue was impacted by the slowdown in industry, particularly in the OEM demand.

Operating profit, before interest and depreciation, amounted to Rs.3,360.15 million, as against Rs.4,732.98 million during the previous year.

Financial year 2009(contd.)

Net profit, after providing for interest, depreciation and tax amounted to Rs.1,081.18 million as against Rs.2,193.03 million during the previous year, recording a decline of 50.70%.

The decline in profitability is due to overall slow down in economy which impacted the demand in the automotive sector, coupled with soaring raw material prices for major part of the financial year.

Growth in the FY 2010 ATL registered a top-line growth of 62 % in FY10 over

FY 09 with top-line growing from Rs 50 bn in FY09 to 81 bn in FY 10. The top-line growth was mainly on account of improving demand in commercial vehicle and passenger vehicle segment.

Revenue from South Africa and Europe contributed 14% and 24% respectively to total revenue and the rest was from India.

The operating margin improved from 9 % in FY 09 to 14.6% in FY 10. This was due to lower increase in raw material prices as compared to final product prices.

Key Risks• Cyclicality of its end-user segment.

• Continued volatility in raw material prices such as rubber and crude oil.

• Absence in two and three wheeler tyre segments, especially in India where it is a high growth segment

• Foreign currency fluctuation

Competitor Analysis along with Market Share figures

Sales

MRF

Apollo

JK Tyre

Ceat

Others

22% 21%

18%13%

26%

Ratio AnalysisInvestment Valuation on Shares

Dividend per share

Company Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Apollo Tyres 4.50 4.50 0.50 0.45 0.75

MRF 20.00 20.00 20.00 25.00

CEAT -- 1.80 4.00 -- 4.00

JK Tyres 2.50 2.70 2.70 3.50

Goodyear 5.00 6.00 6.00

Net operating profit per share Company Mar '06 Mar ‘07 Mar '08 Mar '09 Mar ‘10

Apollo Tyres 683.33 709.22 75.87 81.16 100.11

MRF 8,834.15 10,398.66 11,932.66 13,391.60

CEAT 384.07 468.65 682.20 738.67 822.49

JK Tyres 840.98 907.65 1,201.70 895.56

Goodyear 369.05 386.66 399.93

Analysis of Ratios

DPS-MRF pays the highest DPS. Apollo on the other hand pays a much lower DPS.

Net Operating Profit/ Share – Again, MRF has the highest Net Operating Profit / share. Apollo comes third in the list of NOP/share

Return on capital employed

Company Mar ‘06 Mar ‘07 Mar ‘08 Mar ‘09 Mar ‘10

Apollo TYRES

2.97 3.42 5.89 2.63 8.19

MRF 2.13 3.89 2.80 4.50

CEAT 0.02 1.82 6.32 -0.62 5.66

JK TYRES 0.65 2.37 0.38 4.42

Good YEAR 5.24 4.48 3.47

Profitability RatioNet Profit Margin

Company Mar ‘06 Mar ‘07 Mar ‘08 Mar ‘09 Mar ‘10

Apollo TYRES

12.19 17.44 24.60 13.02 24.99

MRF 8.50 18.97 13.11 27.88

CEAT 9.52 17.09 22.20 4.29 30.06

JK TYRES 6.68 13.26 14.94 24.84

Good year 36.96 47.01 30.69

Analysis of Profitability Ratios

As per the data in the previous slide, Net profit Margin has seen the highest growth in Apollo Tyres, followed by JK Tyres.

ROCE (Return On Capital Employed)- Apollo Tyres has seen steady growth in ROCE and almost a 200% growth from March ‘09 to March ‘10

Debt Equity Ratio

Company Mar ‘06 Mar ‘07 Mar ‘08 Mar ‘09 Mar ‘10

Apollo tyres 0.96 0.83 0.99 1.15 0.95

MRF 1.09 1.05 0.90 1.16

CEAT 0.54 0.63 0.78 0.80 0.84

JK TYRES 0.69 0.67 0.60 0.79

Good YEAR 1.28 1.12 1.15

Liquidity and Solvency ratioCurrent Ratio

Company Mar ’06 Mar ’07 Mar ’08 Mar’09 Mar ‘10

Apollo Tyres

1.19 0.64 0.38 0.51 0.66

MRF 0.66 0.62 0.86 0.22

CEAT 1.20 1.00 0.66 0.95 0.68

JK TYRES 1.60 1.71 1.91 1.24

Good Year 0.48 -- --

Analysis of Liquidity Ratios

Apollo tyres has maintained a steady 1:1 Current ratio throughout the past 5 years which means that it has current assets just enough to meet its current liabilities.

Apollo tyres has a comparatively low Debt- Equity ratio which indicates that it is less leveraged and thus less risky.

Debt Coverage RatioInterest Coverage

Company Mar ’06 Mar ’07 Mar ’08 Mar ’09 Mar ‘10

Apollo TYRE

3.20 4.04 7.51 3.67 8.80

MRF 2.36 6.14 4.12 6.69

CEAT 1.15 2.14 3.24 0.62 5.60

JK TYRES 1.30 2.11 1.55 4.17

Good YEAR 7.01 14.83 19.58

Interest Coverage – Good Year has witnessed the highest increase in Interest Cover over the years, whereas Apollo has maintained a steady increase.

Debtors Turnover Ratio

Company Mar ’06 Mar ’07 Mar ’08 Mar ’09 Mar ‘10

Apollo TYRE

15.80 17.40 20.69 33.75 44.89

MRF 7.48 8.08 8.71 9.54

CEAT 7.16 8.29 8.18 8.07 8.10

JK TYRES 4.83 5.82 6.12 11.24 7.91

Good YEAR 8.27 7.53 8.04

I

Management Efficiency RatioInventory Turnover Ratio

I

Company Mar ’06 Mar ’07 Mar ’08 Mar ’09 Mar ‘10

Apollo TYRE

6.26 7.33 8.72 11.77 10.47

MRF 6.63 6.37 6.09 10.17

CEAT 9.62 9.73 8.06 13.74 7.93

JK TYRES 7.07 5.58 14.03 9.11

Good YEAR 18.18 18.23 16.47

Asset Turnover Ratio

Company Mar ’06 Mar ’07 Mar ’08 Mar ’09 Mar ‘10

Apollo TYRE

2.02 2.22 2.38 2.24 2.10

MRF 1.99 2.16 2.10 2.09

CEAT 1.58 1.92 1.93 2.06 2.25

JK TYRES 1.24 1.30 2.18 1.44

Good YEAR 3.51 3.73 3.60

Analysis Of Management Efficiency Ratios

Inventory Turnover Ratio- Though Apollo Tyres has shown a steady increase in its inventory turnover ratio its Goodyear again which has maintained the maximum inventory turnover.

Debt Turnover Ratio- Apollo Tyres has shown the highest increase in debtor turnover indicating rapid conversion of debtors into cash.

Asset Turnover Ratio- Apollo has a high asset turnover indicating that it is efficient in utilising it’s assets.

Dividend Payout RatioNet Profit

Company Mar ’06 Mar ’07 Mar ’08 Mar ’09 Mar ‘10

Apollo Tyre 86.57 87.55 90.48 86.60 91.84

MRF 94.98 96.88 96.77 97.52

CEAT 100.00 85.93 84.31 -- 91.67

JK TYRES 90.81 93.38 90.54 93.41

Good YEAR 64.80 55.89 35.16

Cash Flow Indicators RatiosCash Earning retention Ratio

Company Mar ’06 Mar ’07 Mar ’08 Mar ’09 Mar ‘10

Apollo Tyre 25.16 20.99 13.44 24.54 10.62

MRF 12.10 5.77 6.98 4.83

CEAT -- 24.49 10.78 -- 9.95

JK TYRES 51.49 14.58 68.08 10.25

Good YEAR

Operations:Manufacturing Facilities

India

• Apollo’s largest unit is in Limda, in the western Indian state of Gujarat.

• Two other units are located in the southern Indian rubber-producing state of Kerala. These 3 together have a combined production of around 850 tonnes a day.

• A greenfieldmanufacturing unit in Chennai, Tamil Nadu, with an initial capacity of 213 tonnes is under construction.

South Africa

• The Ladysmith and Durban plants account for a combined capacity of around 180 tonnes.

Netherlands

• The Enschede plant in the Netherlands adds another 150 tonnes a day. Taking current production capacity to around 1350 metric tonnes a day

Global Business Partners For Raw Materials

Steel wire: Bekaert,Belgium

Silica: Degussa A G,Germany

Process Aids: Flexsys,The Netherlands

Carbon Black:Hi‐Tech Carbon, India

Polyester & Rayon:Performance Fibres,USA

Global Business Partners For Product Testing

IDIADA, Spain

Nardo, Italy for 4x4 tyres

NATC, USA for Kinematics Studies

Papenburg, Germany for Ultra High Performance tyres

VRDE, Ahmednagar, India

Automotive manufactures as business partners

HOME MARKETS

Zone I

Zone E

Zone A

•Headquarters in Gurgaon, India•Markets in India, Asia, the Middle East & Turkey, Asian CIS countries, Australia, New Zealand and the Oceania countries

•Headquarters in Enschede,

The Netherlands•The Zone caters to the markets of Europe, European CIS countries, Russia and North America

•Headquarters in Durban, South

Africa•The Zone caters to the markets of Africa and South America

OPERATIONAL SPREADZONE I•Zonal Headquarters in Gurgaon, India

•Manufacturing base in India with 4 manufacturing facilities in Chennai, Kalamassery,Limda and Perambra

•Produces 950 metric tonnes of tyres every day

•Exports to 31 countries in the Zone, with the Middle East & South East Asia being the largest markets

•India is the largest market with 150 Sales Offices

OVERVIEWZONE I

Apollo is the leading brand, supported by Regal and Kaizen

India is the largest market in the Zone

In India, Apollo is a clear leader in the commercial vehicle segment

2nd position in the passenger car segment in India

A chain of branded outlets called Apollo Zones & Apollo Points for passenger cars and

Apollo Trust for commercial vehicles

An OEM partner to all the major commercial and passenger vehicle manufacturers

HIGHLIGHTS FY10ZONE I

First OTR tyre produced in brownfield facility in Limda

Greenfield manufacturing facility at Chennai commenced production

Launch of Amazer 3G and Amazer 3G Maxx for passenger cars

Increasing footprint of the Apollo Zone concept stores

Launch of the environmental initiative HabitAt Apollo

OPERATIONAL SPREADZONE E

•Zonal Headquarters in Enschede, The Netherlands

•Manufacturing facility in Enschede

•Producing 150 tonnes of tyres every day

•The largest share in the product basket are high performance summer and winter passenger car tyres

•Distribution across the European Union and North AmericaSales & Marketing offices in 17 European countries

HIGHLIGHTS FY10ZONE E

1st manufacturer to offer 25” series winter tyres

Launch of Traxion XXL for high end tractors

Snowtrac 3 wins ADAC magazine winter tyre test 2009, for the 2nd year in a row

Compliance with tyre safety and environment regulation for 2012

Plans to increase plant capacity by 20% of present capacity

OPERATIONAL SPREADZONE A

•Zonal Headquarters in Durban, South Africa

•Manufacturing base in South Africa & Zimbabwe with 4 facilities in Durban, Ladysmith, Bulawayo and Harare

•Producing 180 tonnes of tyres every day

•Exports to 32 African countries and to South America,with South Africa being the largest market

•Sales Offices spread across southern Africa

HIGHLIGHTS FY10ZONE A

Launched the next generation of truck‐bus radials

Improved cycle time and energy consumption across manufacturing cycles

Operations made REACH & PAH norm compliant

Opening of an office in Nigeria to cater to larger market needs

Increases exports to the rest of Africa

Segment wise break up (ATL) On a consolidated level, in terms of revenues across customer

segments the break up is as follows: Replacement 83% and Original Equipment Manufacturers 17%

On a consolidated level, in terms of revenue from product segments the break up is as follows: passenger car 33%, truck-bus 47%, light truck 9%, farm & off-the-road 9%, with other segments contributing 2%

In India, the sharpest growth has been in the passenger car segment of 36% over the previous year. This is expected to grow even faster in the current year with the Chennai plant going into full production

While in South Africa, which is climbing out of a very difficult period, Apollo Tyres South Africa (Pty) Ltd grew 18% by volume in the domestic South African market, registering an overall growth of 13%

Apollo tyres sales segment wise

Revenue segmentation

Passenger Car

ApolloDunlop*Vredestein

4x4

ApolloDunlop*Vredestein

Light Truck

ApolloDunlop*

Truck/Bus

ApolloDunlop*

Bicycle Agriculture

Off The Road &Earthmover Specialty

Vredestein ApolloDunlop*Vredestein

ApolloDunlop*

ApolloVredestein

PRODUCT PORTFOLIO

* The Dunlop marks are licensed to Apollo Tyres South Africa which is the wholly‐owned subsidiary of Apollo Tyres Ltd in 32 African countries.

Apollo Tyres-Product Launches Passenger cars : Aspire; Acelere sportz; Acelere; Amazer

3G; Amazer 3G Maxx; Amazer XL

Alloy wheels : S 928; S929

Sports utility : HAWKZ-H/L; HAWKZ-A/T; HAWKZ-H/T ; HAWKZ-R/T

Vans : Quatum; Quantum plus; Amazer XL

Passenger winter vehicles : Acelere winter; Hawkzwinter

Heavy commercial radial: Endurace-MA326; Endurace-MD; Endurace-LD; Endurace-CD; Endurace-RA; Transport-RS

Heavy commercial cross ply : Amar gold; Amar; Amar DLX; Amar AT-RIB: Cargo plus; Cargo Miler

Light commercial radial : Duramile; Rancer

Light commercial cross ply : Loadstar super; XT-9 Plus; Cargo RIB; Champion; amar DLX; Amar gold.

Small commercial radial : Amazer XL LT

Small commercial cross ply : Loadstar; Amar DLX; Cargo SL

Agriculture radial : Farm king

Agriculture cross ply : Krishak premium; Powerhaul; Y-LON; Dhruv

Of the road : XTRAX

Speciality : Mine lug; Y-LON

Retreading dura treads : SR01-RIB; SR02-RIB; SS01-SEMI-LUG; SS02-SEMI-LUG; SL01-LUG; SL02-LUG

Each of these products have different utility; aresuitable for different kinds of terrain; have differentlife spans and different load carrying ability.

Certain types have better fuel efficiency and premiummileage. And certain tyres are meant for specificseasons like the Acelere winter.

ATL is the first Indian Comp. to have anISO 9001 accreditation for entire productrange.

As a strategy to re-enforce the Apollo brand across segments it launched XTRAX, Alloy

Wheels and Loadstar Super XP.XTRAX

Cross ply tyre in sizes 10.00-20-XT- 100K, & 24.00-49 –XTRAX

“S” lug design which provides for superior traction and excellent mileage

Loadstar Super XP

Cross ply tyre in size 10.00-20

Perfect tyre for heavy load applications

Special casing design with dual beads

Optimised shoulder mass ensures cooler running and improved performance

Contd.

Acelere Wheelz

Range of designer alloy wheels

Ultra Large Size OTR segment

Size: 24.00-49

Designed for haulage application

Catering to the present and future needs of the mining industry

Apollo TyresThe Journey so Far..

Apollo TyresThe Journey so Far..

1972 - Apollo Tyres Ltd. (ATL) was incorporated 28th September, 1972 as a Public Limited Company and obtained certificate of Commencement of Business on October 24, 1972.

The Company was promoted by Bharat Steel Tubes, Ltd. Raunaq International Pvt. Ltd., Raunaq & Co. Pvt. Ltd., Raunaq Singh, Mathew T. Marattukalam and Jacob Thomas.

1981 - After the expiry of the original agreement the Company negotiated with General Tire International Co., U.S.A., for the renewal of the technical collaboration agreement for a further period of 5 years. This agreement expired on January 1987.

Contd.

1986 - `General Tire International Corporation', U.S.A. was taken over by `Continental Gummiwerke GmbH', West Germany.

1987 - During the year, the Company acquired interest in Gujarat Tyres Ltd., for implementing an industrial licence to manufacture automobile tyres and tubes in Gujarat State.

1988 - The Company set up a plant with a capacity of 6.75 lakh tyres per annum at Limda, Baroda, Gujarat at an estimated cost of Rs 168.96 crores. –

The Company promoted a new Company under the name of Raunaq Aker Drilling, Ltd. in technical collaboration with Aker Drilling A/s, Norway.

The company was to undertake multifarious onshore and offshore drilling services/related activities in India. –

The Company entered into an agreement with Persterp AB, Sweden for promotion of joint venture company in the name of Gujarat Perstorp Elektronics Ltd. It undertook manufacture of electronic grade copper clad laminates.

Contd.

1989 - Radial tyres for Maruti cars and premium tyre for trucks were launched during the year.

1991 - The Company proposed to undertake exports of LVC and farm tyres in addition to truck tyres.

1993 - The Company undertook modernisation, upgradation of technology installation of line balancing equipments, setting up a state of are R&D centre, and to be financed by way of a Rights issue of non convertible debentures with detachable warrants.

Contd.

1994 - A number of high technology radial products were developed and introduced.

The Company created distribution network of more than 2500 dealers in the country.

1995 - A new plant for manufacturing tubes and flaps at Ranjangaon near Pune was commissioned during the year. –

The Company entered into an agreement with continental AG, Germany, for setting up a passenger car radial tyre factory with and initial production capacity of 4.7 million car radial tyres per annum and with a capital outlay of Rs 400 crores at Pune.

This is a 50:50 joint venture between Apollo and Continental.

Contd.

1997- Apollo Tyres Limited set up shop in the city opening its Apollo Tyre World (ATW) through Vora Tyres. –

Apollo has been setting up ATW's all over the country equipped with state-of-the-art testing equipment. –

ATL signed a letter of intent with the global major Continental AG for a 50:50 joint venture for setting up a 4.7 million passenger car radial facility.

Contd.

1998- Apollo International recently set up a subsidiary firm, Infonet Worldwide, for providing IT solutions to corporate clients. –

The company is setting up a greenfield project at Ropar in Punjab to manufacture 100 tonnes a year of agriculture and off-the-road tyres, that is, mainly tyres for tractors, earthmovers, etc. –

The company has a total installed capacity of 1.5 lakh truck tyres per month. The two plants in Kerala have a capacity of 70,000 tyres per month, the Baroda plant has a installed capacity of 55,000 tyres per month and the conversion arrangement with TCIL contributes another 25,000 tyres per month. Premier Tyres Ltd. became a subsidiary of the company.

Contd.

2000 - The Company is planning to set up a Rs 300-crore radial tyre manufacturing unit either in Tamil Nadu or Andhra Pradesh with a capacity of 100 tonnes per day for radial tyres for trucks and off-the-road vehicles.

In a bid to attract the Net-savvy customers, Apollo Tyres has tied up with indiatimes.com to accentuate brand association with safe and pleasant journeys.

Contd.

2001 - Apollo Tyres Ltd. has zeroed in on Tamil Nadu for setting up its Rs 450-crore greenfieldtruck radial tyre manufacturing plant. –

Apollo Tyres Ltd has posted a 48.48 per cent decline in net profit at Rs 3.22 crore for the quarter ended September 30, 2001.

2003 -Technical & Financial Collaboration with Michelin Group.

Contd.

2004 - Michelin Apollo Tyres Pvt Ltd (MATL), a 51:49 joint venture between Michelin Group and Apollo Tyres Ltd (ATL), has announced the launch of a range of truck and bus radials for the Indian market. –

Apollo Tyres Ltd on August 9, 2004, announced the opening of Apollo Pragati Kendras , exclusive outlets for selling the entire range of its farm tyres to the agricultural community –

Apollo Tyres introduces new range of tubeless car radials on October 27, 2004.

Contd.

2006 -Apollo Tyres rolls out DuraTreads -Apollo Tyres executes MOU with Tamilnadu Government for setting up Tyre Manufacturing Facility -Apollo Tyres to acquire Dunlop South Africa for Rs 290cr.

2007- Apollo diversifies into transport and logistics.

2008 -Apollo Tyres establishing plant in Hungary 2009 -Apollo Tyres - Acquisition of 100% shareholding control of Vredestein Banden B.V., Netherlands.

2009 -Apollo Tyres - Acquisition of 100% shareholding control of Vredestein Banden B.V., Netherlands

Contd.

Strategies followed by Apollo Tyres

After a series of tie-ins with General Tire, Continental A.G. and Michelin- a radial truck tire joint venture that didn't pan out-Apollo management came to a conclusion.

Apollo decided internally that technology was our greatest need, and we had to rely on ourselves. Starting in 2003 they put a lot of investment and resources into technology, especially in radials.

Their strategy was to grow via organic growth and further acquisitions.

Truck tyres lead the way Apollo's great leap forward in the truck tire business came

in 1981, after the company came out of receivership and Onkar Kanwar was given the job of turning around the business. His vision was they needed to be No. 1 in truck, and then they will look at the other avenues.

Apollo, which had made tires under a technology agreement with General Tire, then began to engineer tires specifically for Indian roads.

That meant tires designed to handle overloading common in northern India, and different products for the south where mileage and retreadability were the main issues.

Failure of the planned joint venture

The plan of the joint venture with Michelin to build a radial truck and bus tire plant in Ranjanguaon, with an annual capacity of as much as 350,000 units failed.

Michelin especially liked Apollo's huge network of exclusive dealers in India, besides its presence in multibrand distributorships.

Ultimately, though, the pace of radialization of the market proceeded slower than originally expected. Michelin bought full control of the venture and the companies went their separate ways.

Apollo still has a very good relationship with them. And Michelin has a minority holding of around 12 percent in Apollo.

Passenger radials In 2000 the firm branched into passenger radials, spending as

much as $60 million to install high-tech equipment at its Baroda, India, plant.

Radials today account for 97 percent of the Indian automobile market, and Apollo has about 15 percent of that market.

Passenger radial expansion is in the works at a greenfield plant in the state of Tamil Nadu, a two-phase project with a price tag totaling $112 million.

The facility, which also will make light and medium truck tires, already is producing a small amount of tires, about 5,000 a month.

The passenger radials from the plant are aimed at the European market. Originally it is export driven, but as the Indian market matures, we will shift more to the domestic market.

Contd. To serve the European market properly Apollo

established tie-ins with universities and professors in Europe so the firm's personnel could get exposure and training to develop the high-tech tires it wanted to sell in that region.

About eight months ago Apollo launched two new-generation high performance tires for the European market-a V-rated asymmetric radial, and a W-rated directional model.

The success of those technologies gave Apollo the confidence that they do not need a technical partner.

TECHNOLOGY ABSORPTION R&D has made remarkable contributions which include the

introduction of higher sizes of OTR tyres, one lakh kilometre bias tyre for normal load application, concussion resistant tyres for super load application, truck radial tyres tailor made for over load Indian markets, reduced dependence on natural rubber by developing suitable compounds, and enhanced productivity by optimizing cure cycles based on in-house developed new technology.

Several new designed and products in passenger category of tyres were developed specially winter tyre & run flat tyre, ultra high performance tyre which can give comparable performance in most demanding European markets.

Benefits derived as a result of R&D

R&D efforts had helped to improve the reputation of the company, reduce material cost, minimize the dependence on natural rubber, improve the performance of the existing products, enter into the most demanding European markets.

It also helped them to enhance the ranges of our products such as OTR and TBR for high load application for Indian markets.

Contd. Method developed for understanding the vehicle tyre

interaction as a single entity.

Usage of this advanced multi-body dynamics tools is helpful to predict the behaviour of tyre in combination of vehicles.

It has plans to develop OTR radial tyres, additional sizes in OTR bias tyres, low cost TBR tyres, improvement in ageing resistance of TBR & PCR tyres, wear and failure prediction of tyres through simulation techniques.

Apollo diversified into transport and logistics

Apollo International a sister company of the tyre major, set up a cargo container freight station near Mumbai.

In the first phase of this diversification plan, Apollo International invested Rs 150 crore to set up a Container Freight Station (CFS) spread over 60 acres at Panvel near Mumbai.

The company also offers inventory management, distribution centres, cold storage and other logistics related activities from that location.

The diversification helped Apollo Tyres cut transportation costs by leveraging on the strength of its logistics affiliate.

Other strategies

In 2006 Apollo Tyres, the number one Indian manufacturer of automotive tyres was facing heavy competition, rising costs & high employee Turnover.

While its aim was to be one among the world’s five best tyre companies, they coined the strategy termed ‘Passion in Motion’ which rested on the three pillars of people, technology & Quality.

Contd.

According to the strategic plan, by 2015, Apollo Tyres aims to be among top five tyre manufacturers globally.

It implied placing a high level of focus on:

Employee Performance

Growth through establishing green field plants

International Acquisitions

IT Drive at Apollo Tyres Apollo Tyres evolved into a systems-driven

company.

Apollo, as an IT organization, was scattered over different locations with numerous departments, each of which was an island of excellence.

Each office owned disparate software packages and every plant was an isolated system.

Today, Apollo has over 140 offices across the country.

These include sales, commercial and technical services departments.

Contd.

They own four plants and source from three others.

A 9,000-strong community works for the company besides a network of 4,000 exclusive dealers and 2,000 others who stock their tyres, making Apollo Tyres’ the largest network in India.

In the process of getting to this position, they realized that they needed key decision-makers, across all our offices, to collaborate more.

And so it was important to implement a software package across Apollo.

At that time they looked around the market for someone who could fulfil this function and SAP came the closest to it.

Apollo also formalized on IBM as their implementation partner of choice.

Within the tyre industry here, Apollo is the second to run on a certified ERP, the first being Goodyear.

It was a big move and now they can boast of it as a hard decision and an achievement.

Contd.

Goals the implementation was to achieve:

The first, most tangible, requirement from the system was to generate MIS reports.

Second, to capture data on a real-time basis. This information would greatly aid the decision making process for marketing, technical support and sales.

Last, they wanted to bring transparency across the company.

MySAP.com serves only as a takeoff platform on Apollo’s journey to use IT to drive business.

With unconnected, obsolete data flowing in from 140 offices and 4,000 dealers, they were getting a skewed picture.

This prevented them from performing many critical functions they do today, like demand forecasting and advance planning.

From there, they moved into business intelligence.

It has not only enabled them, as users, to take better decisions but has also helped customers and dealers outside Apollo, to stay in sync with them.

Contd.

IT enabled Apollo to reduce its time-to-market

What MySAP.com allowed ATL to do primarily is to get data right-on.

ATL was then able to take that information to their stores, into their supply chain and production planning.

It helped forecast seasonal trends, like the April-June and November-December farm seasons.

MySAP.com allows it to tell what's gone into the market and, more importantly, what else needs to be introduced.

Armed with this knowledge, they have been able to enhance the way we track products.

As a result, they know when and where to stock products in order to achieve the shortest delivery time.

Contd.

To shorten that cycle further, they also started bar-coding products.

Additionally, we put up a dealer portal to give exclusive Apollo dealers the option of linking up with our systems and locating information instantaneously.

More dealers will figure that the portal offers them the ability to place orders, create invoices, manage stock and do whole bunch of other functions.

The portal also acts as marketing tool and that helps us reach the market faster

Contd.

Other benefits and impact on SCM

Alignment with their OEM (Original Equipment Manufacturer) partners.

SCM (supply chain management) : ATL’s Advance Planning and Optimization (APO) tool, does both demand and production planning.

Before adopting it, ATL could forecast about 20-30 percent of what was being sold. This led to large amounts of hidden costs.

With APO they can now forecast 75 percent, which is incredible. SCM now helps sell the right product, at the right time, to the right person.

There's no dearth of suppliers and getting to know you customer is crucial.

The supply chain has also helped us improve after-sales service.

Contd.

They've put some of Apollo's suppliers on the SCM and they are trying to expand that number.

Today, ATL buys 60 percent of raw material from the domestic market and the rest is imported.

International sellers are not yet talking to ATL’s systems, but the momentum among the domestic players is picking up. Getting them all will add value.

ATL plans to improve SCM to the extent that it gives the ability to track every single product, whether it's in a warehouse, in production or in transition.

Contd.

Brand Portfolio

Global brand catering to vehiclesacross categories

Global niche brand for passenger car& specialty tyres

Marketing strategy of apollo tyres

Product Leadership- a 360 degree product and service offering for the Indian market.

Customer intimacy – Consumer promotions in the truck tyres category helped it establish the company’s proposition in the mileage and radial segments, while in PCR category the aim was to boost sales of tubeless tyres.

Operations excellence – Tiered network with an addition of 47 business partners in the elite Diamond Boys Club significantly enriched the Value edge club.

Market leader in commercial vehicle segment

ATL’s strong position in the domestic tyre industry is based on its leadership in the truck and bus segment (which accounts for 55 per cent of India’s tyre industry) with a market share of 27% and 28% respectively, in volume terms.

The company’s leadership position, coupled with strong operating efficiencies and a wide distribution network, enable it to counter pressures from Chinese imports as well as increasing domestic competition.

Replacement segment accounts for a major portion of its revenues

The replacement market contributed around 71% of Apollo Tyres’ revenue from Indian operations, thereby providing a cushion in the event of a slowdown in the original equipment manufacturer (OEM) segment which contributes 21% and exports 8%.

Marketing and Branding

Apollo will be the group's primary car tyre brand. The company aims to make it a global premium brand. Part of that is to be on OE vehicles.

A presence in original equipment is one of the five key drivers for a brand in the market Apollo tyres wants to do that.

Apollo will continue to make and sell Apollo-brand truck tyres in India and South Africa, but truck tyres will be a lower priority in the rest of the world, at least for the next two to three years.

Vredestein brand will continue along similar lines to the existing market profile as a replacement brand driven primarily by profitability, rather than volume.

In Europe, the market position will be unchanged, with the brand available across most of the range of the replacement sector but the group will position Vredestein in developing markets as a ultra-high-performance tyre, available only for V-rated fitments and higher speed ratings.

It is possible that Vredestein will appear as OE but not on mass-production vehicles.

Contd.

The most likely options here would be only on specialised vehicles, produced by the vehicle tuners or on other low-volume, highly specialised vehicles.

Vredestein is unlikely to appear as a truck brand either now or in the future.

Regal will develop as a secondary brand for passenger car tyres around the world, but Apollo group is placing a lower priority on this mid-range brand than either of its two main brands. Nevertheless, it will also become a global brand.

Contd.

Apollo's main focus is on Europe, at least initially. However currently has a project, due to report early in 2011 to identify the most attractive niches in the top 20 or so countries around the world, to see whether Apollo-branded tyres; Vredestein branded tyres or other Apollo group brands can compete successfully, given the market volumes, market growth and brand structure of those countries.

The mid-term strategy is to promote the Apollo brand strongly in Europe, with a target of achieving 65 to 70 percent spontaneous brand recognition within three to four years.

Contd.

The aim is to present the brand as a global brand, manufactured in Enschede, and South Africa as well as in India.

The company does not want Apollo to be seen as an Indian brand, with the connotations of low-technology and cheap labour which are sometimes associated with Indian-made products.

Apollo tyres is a family of 15 000 people spread over three continents, India, S Africa and Europe as well.

Contd.

During those three to four years, Apollo will work with OE customers to develop tyres suited to European roads and driving conditions.

The aim is that with an OE development cycle lasting around three to four years, brand recognition among the public in Europe will not be a barrier to an OE fitment over the same time scale.

They plan to achieve this by a combination of marketing efforts, including — but not limited to —sports sponsorship, TV slots, and promotion across the tyre trade.

Contd.

In the short term, Apollo has begun selling Apollo-brand tyres into the replacement market from April 2010, using the existing Vredestein distribution chains.

To begin with, the company's efforts will be focussed on replacement sales in Germany, Netherlands, Italy and the UK.

Then from 2011, sales will go European-wide. The company said Europe offers the highest margins of any market in the world.

The next step will be further expansions in Asia, notably in Eastern Asia, though the company is still working on how to address the China market with its different brands.

Contd.

In the OE segment the company is currently supplying BMW with Apollo-brand tyres in India and is in talks to supply the company with Apollo-branded tyres in Europe.

The company is also recognised as a global brand by Volkswagen and is likely to win a European VW fitment in the near future.

The company used the opening of the Reifen show in Essen, Germany to launch its latest winter tyres — the Y-rated Sportrac Nextreme. Rob Oudshoorn, CEO of Vredestein Banden said this is the only Y-rated winter tyre available in the European market.

Contd.

Apollo will display its range of tyre brands-Apollo, Vredestein and Maloya-at its booth in Hall 3 at the Messe Essen.

The company intends to show the passenger car range Apollo is introducing into Europe.

At the same time, Apollo has started shipping radial truck tyres to customers in India, Southeast Asia and the Middle East from its new factory in Chennai, India.

Contd.

Global structures and brands

Apollo group has re-organised itself into three main regions. Zone I (for India) covers India and the Asia-Pacific region.

Zone A covers Africa and Latin America.

Zone EU covers the European union, Russia and the CIS and North America.

Within those structures, Apollo offers car, van and 4x4 tyres in five different brands: Apollo, Dunlop (in 22 countries in Africa), Vredestein, Regal and Maloya.

In truck, the company offers Apollo, Regal and Kaizen brands. In farm tyres, the company has the Apollo and Vredestein brands.

In off-road, the company offers Apollo and Regal.

The company has Vredestein brand in industrial tyre, fork lift trucks and golf carts.

Vredestein bicycle tyres are also used extensively by enthusiasts and the group is likely to take these tyres to other countries as well.

Contd.

Integrating different cultures The main USP in Apollo has been of integrating

ourselves with new cultures and values.

This happened first with the Dunlop operations in South Africa, and more recently also with the Netherlands-based Vredestein as well.

The integration process was a success and is a success. This view was echoed by everyone to whom ERJ spoke at Essen, which included many people from India, Germany, Netherlands and other countries.

It seems to have been one of the most successful international integration's of any tyre industry merger in recent years.

Apollo wants to grow to $5000 million (€3850 million) — from around $2000 million today-in sales by 2015 and that Apollo group can only do that if its people work together to contribute and at the same time, give something back to society.

Contd.

Extensive distribution network Apollo tyres operates through a network of

branded, exclusive or multi-product outletswithin and outside India.

In South Africa the branded outlets are calledDunlop Zones; while in India they are named asApollo Tyre World (for commercial vehicles) andApollo Radial World (for passenger cars).

Exports out of these three key manufacturinglocations reach over 70 destinations across theworld, especially in Europe, Africa, the MiddleEast and South-East Asia.

In each of the domestic markets the companyoperates through a vast network of branded,exclusive and multi-product outlets.

Mergers & Acquisitions

In May 2009, Apollo acquired Apollo Vredestein BV (originally Vredestein

Banden BV) in the Netherlands, producer of niche high end passenger car and

specialty tyres with an extensive network across Europe.

In April 2006, Apollo Tyres acquired Apollo Tyres South Africa (Pty) Ltd (originally Dunlop Tyres International (Pty) Ltd),

manufacturer of tyres across automotive segments, brand rights to 32 African

countries, 3 tyre manufacturing units and a retreading unit in South Africa and

Zimbabwe

Apollo-Dunlop Merger Apollo purchased Dunlop Tyres International.

The company operates plants in Durban and Ladysmith, South Africa, and another in Bulawayo, Zimbabwe.

Dunlop Tyres International shares a lot of similarities with Apollo. For example, the firm is a big player in the truck tire market in South Africa, holding a 23-percent share of truck and bus and 20-percent share of light truck tires in the nation.

The company has reasonably good distribution in Europe, Germany, the United Kingdom and Holland.

The acquisition target should provide one or more of the following attributes: market, production facility, distribution network and technology.

Dunlop SA provided each of the above.

It gave Apollo three production units (total capacity 180 tonnes a day), technology (tyres for specialisedvehicles for mining and off-the-road segment), a strong brand name (Apollo can use the Dunlop brand name in 33 English-speaking African nations) and a distribution network.

Contd.

The firm was a good fit for a couple of other reasons, too:

Apollo tyres could sell tires across Africa, where the operating conditions are not that different from ours.

Additionally, the manufacturer was privately owned by financial investors and management, and amenable to sale.

About 75 percent of Dunlop Tyres' sales are in South Africa and neighbouring countries.

Contd.

The acquisition was the first foreign purchase by any Indian tire maker.

The company, which has the best margins of all the Indian tire makers, expects to meet its ambitious goals via organic growth and further acquisitions with sights set on China, Eastern Europe and Southeast Asia.

We really drive home the total savings for the life of the tire.

Contd.

Acquisition of Vredestein Banden B.V.

India's Apollo Tyres Ltd.'s acquisition of Dutch tire maker Vredestein Banden B.V. added about $450 million to Apollo's annual sales and give the Gujarat, India-based tire maker a key entry to the European marketplace, where it up until now has distributed through independent distributors.

This is a strategic alliance bolstered Apollo's plans for its European customers.

The fit between the two companies spans the entire spectrum of R&D, products and people to manufacturing and markets

Vredestein's sole plant in Enschede has annual capacity for 5.5 million tyres, roughly 70 percent of which are high-performance car tyres.

The majority of Vredestein's business is in Europe with the Vredestein and Maloya brands.

Vredestein will bring to Apollo edge in passenger car tyre technology alongside an understanding of the European market.

At the same time, Apollo can offers Vredestein access to the non-European markets, valuable manufacturing expertise and assistance with bringing down costs by leveraging the purchasing power of a larger entity.

Contd.

Vredestein Banden was bought by Amtel Vredestein in April 2005. It was able to keep itself afloat through Amtel-Vredestein's bankruptcy by obtaining separate financing.

This is Apollo's second major acquisition in the past four years.

Prior to the acquisition, Apollo was primarily a supplier of truck tyres and earthmover tyres to the Indian and South African markets, with a small export volume.

Today, it is a company in transition. In five years time, it aims to be a global supplier driven primarily by market pull in all regions of the world with a range of brands across most product categories.

Contd.

There are a series of steps on the way:

First is to establish Apollo group as a multi-brand supplier of car tyres in Europe, with Apollo as the OE brand and other brands in specific niches.

Second is to implement a global product strategy in car tyres around the world, including key markets and appropriate production capacity.

Meanwhile, a number of equally significant projects will be going forward. First in agricultural and implement tyres in India, South Africa and other regions.

Contd.

Second, the growth of radial truck tyres in India and the neighbouring regions and third, developing strategies for two-wheelers, earthmover tyres and other products in strategically important regions.

Longer term, Apollo group will develop its truck tyre activities beyond its base in India.

The transformation can be summed up in one sentence: "We are moving from a production-driven company to a market-driven company.”

Contd.

SWOT analysis of Apollo TyresStrengths

While taking fresh strides, Apollo Tyres has continued to maintain its lead in the market within the dominant segment of truck and bus tyres within the Indian tyre industry.

The Company has established a state-of-the-art plant in Baroda. Quick response to changes in market conditions and product profiles has resulted in superior product innovation and technical expertise.

The Company's marketing initiatives have resulted in a strong brand recall, even in the price sensitive tyre market. Aiding these efforts is an extensive distribution network.

A progressive leadership has given direction to all the different aspects of the establishment, from the sourcing of raw materials to a global presence through the acquisition of Dunlop Tyres International (Pty) Ltd in South Africa.

Economies of transportation cost are a constant benefit to the company on account of proximity to the natural rubber growing belt. With a move into the international arena, Apollo Tyres not only has access to global sources of raw materials, but can also follow and maintain global quality standards and international process and system certifications.

Within its physical boundaries, the Company propagates extensive use of information technology systems, so as to hasten the flow of information and leverage opportunities across its multiple locations in India and South Africa.

Contd.

Weakness

Apollo Tyres has no presence in the two and three wheeler segments. The capital intensive nature of the business in this segment, also has its drawbacks.

Opportunities

The national thrust in road infrastructure and construction of expressways and national highways presents a range of opportunities for the tyre industry and Apollo Tyres aims to make the most of these.

Creation of road infrastructure has given, and will increasingly give, a tremendous fillip to surface transportation in the coming years.

The tyre industry will continue to play an important role in this dynamic and evolving situation.

Contd.

Apollo's leadership position in the commercial vehicle segment will enable the company to leverage new and related business opportunities.

We have already started leveraging these opportunities to our benefit with our new product segments like Truck/Bus Radial (TBR), Off-The-Road (OTR) tyres, retreading and allied automotive services.

Growth within India also supports the Company's aim to be a leader in the global industry and partake in overseas markets like Europe.

Threats

There is a need to prepare for imports from neighbouring countries at competitive prices, which have been rising in the recent past.

As well the ever present challenge of raw material price volatility.

MRF Limted.

MRF Limited (MRF) was incorporated on 5th November 1960.

The Company manufactures the largest range of tyres in India and is the market leader with the largest market share in almost every segment of the tyre industry, product portfolio of the company includes Tyres, Pretreads and Conveyor Belts.

MRF has six manufacturing plants in India. It has a distribution network of over 2,500 outlets in India and also has overseas offices in United Arab Emirates, Bangladesh and Vietnam.

Apart from the domestic, the company exports its products to over 75 countries worldwide.

Brand Strategy Analysis of MRF

Established in 1946 as a small toy balloon manufacturing unit in a shed at Tiruvottiyur, Madras (now Chennai), MRF ventured into the manufacture of tread rubber in the year 1952.

The quality of the product was so high that by close 1956 MRF had become the market leader with 50% share of the tread-rubber market in India.

In 1961, MRF entered into tyre manufacturing in collaboration with the Mansfield Tire & Rubber Company of USA. Since then MRF has come a long way towards achieving greater heights in the automotive tyre industry, with 6 manufacturing units in India.

It has a huge distribution network of 2,500 outlets within India and exports to over 65 countries worldwide.

Today, MRF is the market leader among tyre manufacturers in India, with a 24% share terms of revenues.

Its leadership position, coupled with its strong brand recall and high quality, MRF commands the price-maker status.

MRF has a strong presence in the T&B segment, the largest segment of the tyre industry, and commands around 19% market share in the segment. It is the leader in the two/ three-wheeler segment (including motorcycles) and tractor front tyres, and holds second place in the passenger cars and tractor - rear tyres.

Exports account for around 12% of the gross sales in MRF.

Contd.

MRF Products

MRF is the leading manufacturer of tyres for almost all segments. Being driven by technology and product innovation, every tyre that comes out is of the highest standards and tested to weather the toughest conditions on any road.

With more than 85 tyre variants, MRF holds the highest market share of 22% in terms of sales volume in the tyre industry.

Apart from tyre manufacturing tyres, MRF also manufactures its MUSCLEFLEX brand of Conveyor Belting at one of the most advanced, 'State of the Art', Facilities in India.

Contd. Incorporating the latest manufacturing techniques,

MUSCLEFLEX-Conveyor Belting has gained rapid acceptance in markets worldwide.

MRF PRETREADS is yet another innovation from MRF Industries which is the most advanced precuredretreading system in India. MRF forayed into retreading as far back as 1970.

Today, MRF has perfected the art of recured retreading with its extensive knowledge in tyres and rubber. MRF’s diverse business interests also include Paint and Coats, and Toys.

Analysis of MRF’s strategies MRF has been immensely successful in creating a

brand that has become a household name today.

Its marketing campaign has been one of the most innovative ever in the history of Indian advertising, thus wooing the customer completely.

However, MRF Achilles heel seems to be its dealer relations. MRF so heavily concentrates on its customer promotion activities, that it hardly pays any attention to incentivizing the dealers.

Contd. This is reflected in the very low margins it offers its

dealers and the almost complete absence of promotional activates such as: discounts, gifts, compliments, etc for the dealers (called Sell in schemes).

Dealers stock MRF tyres simply because customers demand them. They do not seem to be very keen on promoting the product, since the company does not incentivize them to do so.

A better incentive scheme for the dealers could change this situation in MRF’s favor.

Complete market coverage by MRF Over the years, MRF has created a formidable product

line, length and breadth to serve every segment of the industry. Its complete market coverage is one of the reasons why it is the undisputed market leader today.

ATL offers tyres for the following vehicle segments in the tyre industry:

1) Passenger Cars

2) Two wheelers

3) Heavy Commercial Vehicles (HCV)4) Light Commercial Vehicles (LCV)5) Of the Road Vehicles (OTR)6) Farm Vehicles (FV)

Recent Forays of MRF Became the first domestic company to venture into the

niche area of developing and manufacturing of aviation tyres branded ''Aero Muscle'' for helicopters and aircrafts which targeted the defence sector.

The critical raw materials were sourced from overseas suppliers.

It is estimated that the company invested more than Rs 150 crore to set up the new production facility at its existing plant in Medak district of Andhra Pradesh.

Contd.

Funskool Indis, a Joint venture between Hasbro and MRF, is a major toy manufacturing company in the country. MRF Pretreads offers world class precured tyre retreading service, and MRF Muscleflex is involved in making conveyor belts.

MRF has been involved in the development of cricket through its sponsorship of many cricketers and MRF Pace Foundation. At one point of time, MRF was the bat sponsor of world-class batsmen including Brian Lara, Sachin Tendulkar, and former Australian captain Steve Waugh.

The Goodyear Tire & Rubber Company

Founded in 1898 by Frank Seilberling.

Goodyear manufactures tires for automobiles, commercial trucks, light trucks, SUVs, race cars, airplanes, and heavy earth-mover machinery.

Goodyear showcases innovative ‘Space Tire’ at Geneva Motor Show

Goodyear concept tire with BioIsoprene™ technology wins ‘Environmental Achievement of the Year’ award.

Renault chooses EfficientGrip for electric sedan Fluence Z.E.

Goodyear Launches UltraGrip Ice+: “Best Tire for Nordic Winter Conditions”

Past Strategies

Goodyear rolls out premium tyres(2006)-Goodyear India launched its `Excellence series' of tyres in India targeting the high-end car segment.

These tyres sport the unique `3-Zone Technology', which provides higher security, performance and comfort.

Goodyear plans to import these tyres from China and will manufacture them in India depending on commercial viability.

2006

Goodyear expands retail network:

Tyre maker Goodyear will add more branded outlets and exclusive shops this year to improve its share in the country's growing tyre market.

The branded outlets are planned as `shops within a shop' — an area earmarked for Goodyear tyres within a large shop — while the exclusive shops will sell the company's tyres.

Goodyear’s rationale behind the new retail format

Goodyear India was convinced that consumers were moving away from the concept of ‘exclusive stores’ and hence came up with the concept of “shop-in-shops”.

The management felt that through this strategy the company would be able to provide customers with a wider range of value added services and brand themselves more prominently.

2007Goodyear India embarks on new

Marketing campaign:

Goodyear India has embarked on a new marketing campaign that will focus primarily on the customer. To start with, the company plans to set up 250 international format shop-in-shop outlets by the end of 2008 across the country.

The company is also ready to set up a Goodyear online club named ‘Goodyear My Turf’ that will cater to the elite Goodyear customers. There will be blogs and interactive content that will build the Goodyear brand.

2007 contd. All these initiatives are part of the ‘Take the winning

turn’ marketing campaign that was initiated by the company.

Goodyear outlets in Kerala

Goodyear India Ltd has launched two branded retail outlets in Kerala as part of expanding the company's presence in South India.

This is part of the company's strategic initiative in organised tyre retailing aimed at strengthening its presence in the large tyre replacement market in the country.

2008Goodyear expanding retail presence in India

Goodyear would be expanding its retail presence in India by setting up 4,000 retail outlets in 2008, up from the current 3,100.

This would be mainly driven by the robust sales in the passenger car segment and the replacement market in India.

2010

Goodyear India accepts delisting proposal of parent

Goodyear India Ltd (GIL) announced on Tuesday that its board has approved the proposal received from the parent company, Goodyear Tire & Rubber Company (GTRC) to buy out the remaining stake in the company and delist it from the stock market.

Overall Analysis of Goodyear’s Strategies

As we track the company’s progress for the last 5 years we find that Goodyear has followed a strategy of continuously expanding its resource capabilities and pre-empting customer requirements and needs.

Through introduction of new products and successful marketing campaigns the company has been able to compete effectively in the highly competitive Indian tyre industry.

JK Tyres

The company was incorporated as a private limited company in West Bengal in 14th February, 1951.

Until 31st March 1970, the company was engaged in the managing agency business.

Thereafter, the company decided to undertake manufacturing activities and obtained a letter of intent in February 1972 for the manufacture of automobile tyres and tubes.

Strategies adopted By JK Tyres Strategic thinking is key to the evolution of successful marketing strategies of JK tyres

This involves the following:

Understanding markets:

Strategic perspective of the market requires skillful analysis of the trend and how they affect the market size and demand for the firm’s product

Finding market niches:

Price, service, convenience and technology are some of the niches in Indian market.

Contd.

Product and service planning:Analysis of the customer’s perception of the brand, both of the firm and competitors, besides an analysis of the situation in which the customer uses the product.

Distribution:Structural changes in inventory management, mobile distribution are some of the key factors that are going to affect the distribution process in the Indian market.

Managing for result: With pressure on costs, prices, and margins, marketers will have to make effective utilization of every rupee spent in marketing.

Contd.

JK Tyres, the flagship division of JK Industries Ltd, is opting for an all-new ``360 degree communication strategy'' based on the objective of achieving ‘customer delight’.

The `customer delight' proposition will also take forward JK Tyre's concept of exclusive `Steel Wheels' retail outlets and its dial-a-tyre service.

The number of Steel Wheels, for example, will be increased from the current 75 to 130.

Contd. The advertising strategy comes in the wake of the company

terminating its association with its ad agency of five years, Interact Vision, and signing up Ogilvy & Mather (O&M) instead.

Though the advertising campaign created by O&M is yet to break, officials at JK Tyres have said the switchover will result in a `marked change' in the overall advertising strategy.

An increasingly competitive market, the need to heighten the brand's presence and personality and stay ahead in the race were among the reasons the that necessitated the shift.

Contd.

In 2008, JK Tyre had acquired Mexican tyre major Tornelfor Rs 270 crore. Currently, about 75 percent of Tornel'sannual production of 66 lakh units is sold in the Mexican domestic market.

JK Tyres is also planning to re-enter the fast-growing two-wheeler market after stopping manufacturing 2-wheeler tyres more than 20 years ago.

As part of company’s growth strategy, JK Tyre will invest in Karnataka to manufacture truck, bus and car radials to cater to both domestic and international markets and has earmarked an investment of Rs 800 crore

SWOT analysis of JK TyresSTRENGTHS

Very large distribution channel

Reasonable price

Being quality oriented rather than quantity oriented

Effective employee in JK

Economies of scale due to optimum capacity utilization

Collaboration with Vikrant, know for their technological superiority bringing together performance, economy, durability and comfort.

Strong financial positions

Contd.WEAKNESSES Less Brand Awareness Less concern about small car segment

OPPORTUNITIES A burgeoning work force and growing middle class population High growth potential for its exports as demand for JK tyre in

Europe increasing. Strong brand image Indian customers are mainly value buyers demanding a better

overall package. JK is poised in a better position than other players in the market to capitalise on this opportunity

THREATS Entry of new players with newer and better technologies in the

small car tyre segment So many close competitors like Appolo, Birla, Ceat, Modi, Kaizen

etc

JK Tyres(recent developments)

Raghupati Singhania Centre of Excellence for Tyre and Vehicle Mechanics is a joint venture between JK Tyres with IIT Madras and is a true example of ‘Academia Industry Collaboration’.

It is equipped with advanced computational facilities for carrying out research in the area of Tyre/Vehicle Dynamics, Tyre/Road Noise, Foot Print Mechanics and Non-Destructive Test Development using Simulation & Predictive Techniques.

Contd. JK Tyre & Industries is doubling its radial tyre

manufacturing capacity for both commercial vehicles and passenger cars by 2012 in order to meet the growing domestic demand.

The company currently manufactures 8 lakh commercial vehicle radial tyres, which will be doubled to 16 lakh tyres. Out of the total production post expansion, 4 lakh commercial vehicle radial tyres will be manufactured at its Mysore plant, while remaining will be made at a new plant in Chennai.

The company has similar plans for increasing the production of passenger car radial tyres. It currently produces 45 lakh radial tyres in the passenger car segment and plans to add 55 lakh tyres.

Contd. Out of this, 5 lakh tyres will be produced at the company’s

Gwalior plant and 50 lakh tyres at the Chennai plant.

This is a good strategy considering the huge demand for radial tyres in the coming years. The market for radial tyres within the commercial vehicles segment is around 18-20% and is expected to reach to 35-40% within a couple of years. The demand in the passenger car segment is already robust.

The expansion is a part of company’s already announced Rs1,500 crores investment plan till 2012 and majority of it will be made in setting up a new plant in Chennai, which would be its ninth.

JK Tyre currently produces 16.3 million tyres per annum, 9.7 million units in India and the remaining in Mexico.

Overall Analysis of Strategies followed by JK Tyres

The growth of JK Tyres can be attributed to the company’s constant endeavor towards differentiating itself from the rest of the competition.

Through the tie up with IIT Madras, JK Tyres has displayed its constant efforts towards investing in Research and Development.

Customer Focus and building a strong brand image is also reflected in the different initiatives taken up by JK Tyres.

JK can improve upon: JK Tyre is doing well in rib segment but they are based

in only on one brand “Vikrant”. So JK should try to aware to increase the awareness of other brands.

“Price-Quality relationship” needs to improve in premium rib and lug tyre segment.

Keep eye to reduce the cost of manufacturing. So price will further reduced and competition will increased.

The company should look after its tread erosion/breaking problem

Ceat Ltd. Ceat Ltd. is a part of the RPG conglomerate.

The company offers the widest range of tyres to leading Original Equipment Manufacturers across the world.

They manufacture a range of tyres catering to various segments. The company operates two plants in Maharashtra.

The company has a robust national network consisting of 34 regional offices and over 3,500 dealers.

The company has their presence in 110 countries.

CEAT to exploit 3-Wheeler Segment

To increase its presence in this segment.

India is among the largest manufacturers of three-wheeled vehicles and there is a heavy demand for the same.

The Southern States are the major markets as they account for about 60 per cent of the three-wheeler demand.

2007

Ceat Tyres is set to outsource tyres from China and Vietnam for sales in India. Ceat has tied up with two companies in China to outsource truck and bus radials.

The company has been importing truck and bus radials from Pirelli's facilities in Egypt and Turkey.

With import of tyres from China, the company created two distinct brands in the commercial vehicle tyre segment to avoid cannibalisation of the brands.

Contd.

The Chinese tyres will be branded as the `Economy' range while the Pirelli tyres would be branded as `Premium' range.

The company has started importing OTR tyres (specific range) from Vietnam.

Ceat successfully ramped up the OTR capacity at both the Bhandup and Nasik factories from 30 tonnes to 45 tonnes.

The company announced that it would be setting up a greenfield project for manufacturing truck and bus radials.

2008

Ceat Ltd shut down its Bhandup, Mumbai, plant from December 26 to December 28 and Satpur, Nashik, plant from December 25 to December 31 due to excess inventory.

Ceat Ltd decided to set up its proposed Rs 500-600 crore greenfield radial facility in Gujarat. Ceat sold seven acres of its vacant land in Bhanduparea in Mumbai for Rs 130 crore to Ashford InfoTech Ltd.

Contd.

The proceeds of the sale were utilised to partly finance its Rs 800-crore expansion plan that involves setting up of a Rs 500-crore greenfield radial tyre manufacturing facility and a Rs 300-crore tyre making unit either at Patalganga or Ambernath area near Mumbai.

2009 CEAT Ltd, in partnership with Total Lubricants, organised

an interactive platform – ‘CEAT PRO’ for the fleet owners of Chennai.

A company release said the objective of conducting the programme was to give fleet owners access to best practices and ideas across diverse fields enabling them to improve their businesses and reduce operation costs.

It posted record net profits of Rs 61.5 crore for the three months ended September 30, against a net loss of Rs 28.8 crore last year making this its best-ever quarter.

The good showing was a result of low raw material costs, better sales mix with higher demand vis-À-vis last year, better working capital management and lower interest payments

Contd. The company plans to add radial capacity by setting up a Rs

500-crore plant in Vadadora to meet increasing demand from domestic markets.

The facility is scheduled to kick off production in September 2010 and will have a capacity of 92 tonnes of radial tyres daily.

The project will produce both tyre and car radials on a 50:50 basis and will be funded by Rs 300 crore in loans and Rs 200 crore in internal accruals.

The first phase of the greenfield plant at Halol in the Panchmahals district, near Vadodara, would involve an investment of Rs 700 crore.

2010 Ceat Ltd plans to enter into off-the-road (OTR) tyre

maintenance business in the next fiscal. While the project details are yet to be finalised, company officials indicate that it could be a separate business vertical offering end-to-end maintenance solutions for a wide variety of tyres.

Ceat's Sri Lankan investment arm Associated Ceat Holding Company Pvt Ltd (ACHL) has become a fully-owned subsidiary of the company. Ceat, which used to hold 54.84 per cent stake in ACHL, acquired the remaining stake.

Ceat is ramping up production at its newly set up radial tyre plant at Halol, Gujarat, and expects to achieve full capacity realisation by mid-2011.

Contd. The company has invested about Rs 600 crore in the new

facility, which has the capacity to make 300,000 passenger car radial tyres (PCRs) and 40,000 truck and bus radial tyres (TBRs) a month. This is keeping in line with the rapid shift to these tyres in the two-wheeler segments.

Ceat is betting big on the Halol plant for growth. Currently, it has limited capacity for PCRs and practically none for TBRs. The plants at Bhandup (near Mumbai) and Nashiklargely cater to cross-ply tyres for buses and trucks.

Tyre maker Ceat targets export revenue of Rs 1,000 croresby financial year 2013.

Overall Analysis Of CEAT’s Strategy CEAT has focused on building a strong sales and

distribution network and this has formed the crux of the company becoming profitable over the years.

The company has also entered into strategic alliances with international tyre manufactures in order to expand its businesses.

CEAT’s growth can also be attributed to its constant endeavor to lower operational costs and achieve efficiency.

Investments in Greenfield projects and continuous capacity expansion has also been a cornerstone in CEAT’s success over the years.

Early entrant in the T&B radials segment

ATL is one of the few players to set up a dedicated facility for Truck & bus radials with an installed capacity of 100 TPD (Tones per day). The total cost of the project is Rs 2.5 Bn.

At present, there are very few players who have the technical know-how to manufacture T&B radials. ATL with the expertise of Dunlop Tyres (DTL), South Africa would be one of the early entrants in the T&B radials space.

Contd. We feel that the company has timed its foray into T&B

radials perfectly considering on our estimated sales from T&B radial sales to reach Rs 17.91 bn which is an increase of 55% CAGR.

Apollo having a dominant market share in T&B tyres segment, we expect the company to leverage the same to capture a sizable share from the T&B radial segment.

Fast paced improvement in road infrastructure, coupled with institutionalization of fleet operators could drive faster than expected radial penetration.

Focus on the high growing exports segment

ATL would continue to leverage on well established exports markets. Thrust on exports over the last five years has resulted in an increase of 37% CAGR for the period.

Apollo’s share of exports stands at 18% of the total industry exports, which is driven by the passenger car tyre exports(53% share based on volume) and the Truck & Bus tyre exports(19% share based on volume).

Apollo currently exports to Asia-Pacific, Middle-East, South America & European countries & is constantly focusing on new markets.

Contd. The passenger car segment has been the growth driver for

Apollo tyres in the export market with a volume based share of 53%.

To cater to the higher end exports market, ATL has launched the W-speed rated high performance tubeless tyre aimed at enhancing the share in the passenger car tyre segment.

Hence, new product launches in the high growing passenger car segment & Truck & Bus segment, will help Apollo to further increase its offering in the export markets.

ATL’s continued focus on exports has enabled certain amount of de-risking against domestic demand slowdown.

Dunlop Tyres Ltd (DTL) South Africa acquisition:

ATL acquired Dunlop Tyres Ltd (DTL), South Africa, in April 2006.

Aligned with the goal of being a USD 2 Bn Company by FY 2010, based on expansion through the organic and inorganic route, ATL acquired Dunlop tyres, South Africa in April 2006 in an all cash deal amounting to Rs 2.90 Bn.

The acquisition yielded several synergies, which include, product rationalization, joint sourcing of raw material for better bargaining power, joint research and development for product upgrades and introduction of new products and most important of all is sharing of technical know-how and best practices.

Entry OTR segment Apollo tyres have entered in the high growth OTR (Off

the road) tyre segment through a tri-party agreement with Bharat Earth Movers Ltd. & J K tyres.

The OTR segment yields a higher margins as greater level of customization is required to be done. As per the agreement BEML would source its requirement of earthmoving tyres from Apollo.

The OTR facility would entail an outlay of Rs 100 Mnwith an installed capacity of 10 TPD. The massive infrastructure investment to be made in the next 3-4 years would call for increased demand for OTR tyres.

Retreading ATL is the only player in the organized sector to

set up a dedicated facility for Retreading of tyres. The facility operates with an installed capacity of 10TPD.

ATL plans to set up three new Retreading facilities, which will be located near transport hubs to capture the Retreading opportunities.

Apollo Tyres is the only player in the organized market to set up a dedicated facility for re-treading of tyres. Apollo has a re-treading facility with an installed capacity of 10 TPD located at Haryana.

ATL plans to set up three new retreading facilities, located close to the transport hubs so as to cater to the fleet owners requirement.

Re-treading market consists of just four players in the organized sector who supply retreading material, while the unorganized sector consists of approx. 10,000 players.

The organized sector players supply the tread material to the unorganized sector players, who in turn re-tread the tyres.

Contd.

Superior margins and capital efficiency ratios

From 2005 onwards, ATL has shown a consistent rise in its operating margins despite an unfavorable raw material pricing scenario.

The premium pricing on some of its established products coupled with tight control on operating expenses, has enabled the company to steadily increase its margins.

ROCE for 2007 at 17.1% is one of the best in the industry despite continious expansions undertaken.

The Road Ahead Achieving a target of $2 billion sales in the next four years.

To put that in perspective, the company would have to treble its revenues over the next five years, meaning a compounded annual growth rate of 25%.

The Rs 3,000-crore company can't achieve that kind of topline from simple domestic operations, only through tyres, or only through organic growth.

So, on the cards are ambitious plans involving exploring newer export markets, acquisitions, penetrating the passenger car tyres and venturing beyond tyres.

By the end of 2011, Dunlop SA's revenues would fully accrue to Apollo, which would take the parent company past the billion dollar mark, making it the largest Indian tyre company

At present the company is evaluating "more than one" acquisition proposals across boundaries.

Contd.

Thrust on exports would be another focus area, since in spite of the booming domestic auto market, it would still not provide the required topline growth.

The company is developing passenger car radial products - it has over 120 people at its R&D centre in Baroda — for the highly competitive European market.

This move is significant, since most tyre exports out of India, including Apollo's, are bias tyres, which bring lower realisation. Developed markets have moved entirely to new generation radials, which offer better margins

Contd.

On offer for the domestic markets are tyres for OTR (off-the-road) vehicles, technology for which will come from Dunlop SA. The OTR market is still small, about Rs 200 crore annually.

That covers inorganic, export growth, and product expansion. But these still can't take the company past the magic $2-billion mark.

Apollo has entered the tyre re-treading business by launching re-treading material for commercial vehicles (CV).

Contd.

Another new source of revenue would be from ‘tyre-plus' sources. The company is exploring a retail strategy where it can claim a larger share of the customer's wallet.

It has already launched alloy wheels for passenger cars. Some more product launches are expected in the near future.

Entering into the booming two- or three-wheeler tyresegment, which is low-value, but high-volume is also an area which the company is intensely looking at.

Contd.

Apollo Tyres wants to focus on strengthening its presence in the commercial vehicles segment. It also expects to improve market share through strategic alliances.

Apollo Tyres SA (previously Dunlop Tyres International), today announced an investment of R300m in new equipment and technology for the company’s Durban and Ladysmith manufacturing facilities over the next three years.

Apollo Tyres SA (ATSA) is the local subsidiary of the Apollo Tyres Group, based in India.

Contd.

This investment will make it possible for the company to remain globally competitive and reduce production costs.

Further the company has an aggressive future growth plan for the African and Latin American markets, and this investment will ensure that there is additional capacity available ahead of demand.

Contd.

As per reports, Apollo Tyres (South Africa) is planning to create more than 100 new jobs, and is aggressively implementing a Learnership Strategy to up-skill Apollo Tyres South African workforce for the future.

Apollo Tyres plans to reach 1450 tonne capacity in 2011.

The company has revealed its plans for expansions, under which it will make net investments worth Rs.1100 crore in the current fiscal.

Contd.

Under its future expansion plans, 200 tonnes each would be added to the South African and European plants, while Rs.900 crores would be invested for the company’s five domestic plants.

The company will invest Rs.300 crore in its Green field Chennai plant this year to make it the most efficient, modern and productive tyre plant across Asia.

The company would be investing 30 million dollars at its South Africa plant and 6 million euros for Europe plant.

Contd.

Overall Analysis of Apollo Tyres

To become what it has today, Apollo tyres followed an organic growth strategy that was cautious yet aggressive.

Through timely acquisitions and expansion Apollo tyres has been able to establish itself as the No. 1 company in the Indian Tyre industry.

Apollo’s success owes largely to the fact that through constant innovation it has pre empted the customer s needs thereby creating a strong brand image for itself.

Apollo’s strategy is a wonderful example of how to function in an industry heading towards maturity and where competition is high.

Inspite of the constantly changing dynamics in the industry Apollo has succeeded in not only maintaining but constantly improving its market share. ATL has also shown steady increase in its profitability whish shows the success of its strategies.

Contd.