APOLLO-ECONOMICS PROJECT

8/7/2019 APOLLO-ECONOMICS PROJECT

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APOLLO TYRES LTD.

Apollo Tyres Ltd is a high-performance company and the leading Indian tyre

manufacturer. Head quartered in Gurgaon, a corporate -hub in the National

Capital Region of India, Apollo is a young, ambitious and dynamic

organisation, which takes pride in its unique identity. Registered as a companyin 1976, Apollo is built around the core principles of creating stakeholder value

through reliability in its products and dependability in its relationships.

Apollos present strength and market dynamism steps from its early years of

strife in establishing itself as a tyre manufacturer within the closed Indian

economy. Over two decades, Apollo worked on a portfolio of products, tuned to

customer needs and an array of innovativ e marketing initiatives to establish

itself as a leader in its home market. Some of these include segmenting

customers by their load and mileage requirements, running tyre loyalty

programmes, establishing customer contact programmes which resulted in

better health and driving habits, introducing Indias first farm radials and Indias

first range of high-speed tubeless passenger car tyres.

For the first time, in 2006 Apollo ventured outside India in its quest to test itself

outside its home comforts. Apollo acquired Dunlop Tyres International Pty Ltd

in South Africa (since renamed as Apollo Tyres South Africa Pty Ltd) and

Zimbabwe, taking on southern Africa as the second domestic market. Thecompany holds brand rights for the Dunlop brand across 30 African c ountries.

In 2009, Apollo acquired Vredestein Banden B V in the Netherlands, and

thereby adding Europe as its third crucial market.

The company currently produces the entire range of automotive tyres for ultra

and high speed passenger cars, truck and bu s, farm, Off-The-Road, industrial

and specialty applications like mining, retreaded tyres and retreading material.

These are produced across Apollos eight manufacturing locations in India,Netherlands and Southern Africa. A ninth facility is currently und er

construction in southern India, and is expected to commence production

towards the end of 2009. The major brands produced across these locations are:

Apollo, Dunlop, Kaizen, Maloya, Regal and Vredestein.


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In the three domestic markets of India, Southern Africa and Europe, Apollo

operates through a network of branded, exclusive or multi -product outlets. In

South Africa the branded outlets are called Dunlop Zones, while in India they

are variously named Apollo Tyre World (for commercial vehicles) and Apollo

Radial World (for passenger cars). Exports out of these three key manufacturinglocations reach over 70 destinations across the world, with key comprising

Europe, Africa, the Middle East and South-East Asia.

For Apollo Tyres, offering the right product to the right customer is essential.

Special efforts are made to understand customer needs and segment the market

accordingly. After which, products are developed for niche applications within a

larger category to enable the company to provide efficient, fu el and cost-saving

products to each customer segment. Innovation has always been an integral part

of the Apollo way of doing business, this applies as much to productdevelopment and marketing as to how the company as a whole is focused on

challenging existing boundaries.

An integral part of the Apollo Tyres world is its community involvement and

giving programmes directly related to its business. In India, the focus has

always been on finding ways to ensure a direct benefits to customer groups. For

the commercial vehicle community the company runs extensive HIV -AIDS

awareness and prevention programmes and has established Health Care Clinics

across the country to cater to the communitys health needs. For passenger carcustomers the focus is on cultivating Safe Driving habits. Across its

manufacturing locations, the key initiatives revolve around health and

education programmes.


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Vision

A significant player in the global tyre industry and a brand of choice, providing

customer delight and continuously enhancing stakeholder value.

Values

C - Care for customer

R - Respect for associates

E - Excellence through teamwork

A - Always learning

T - Trust mutually

E- Ethical practices

Guiding PhilosophyOne of the vital facets of Apollos vision is the companys endeavour to createlasting value for its stakeholders. True to its vision, Apollo Tyres believes inmaking investments in people, productivity, process and of course the planet. Itscommunity programmes are all targeted towards benefitting specific customergroups associated with the companys business. This linkage ensures a targetedintervention which have the ability to show results over time. A connection withbetter business practices also makes each of its community programmes

sustainable over time.

The attempt towards creating a greener world is ever -evolving in theprocesses it adopts in its manufacturing units, the raw materials used, who theyare sourced from and the tyres that are ev entually sent to customers.

The key areas of work relate to health, education, nurturing young sportingtalent and road safety and encompass customers, business partners andemployees.


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FACTSHEET

Apollo Tyres Ltd

About the Company as of August 31, 2010

Business:Manufacture and sale of automotive tyres

Background:Established in 1976, Apollo Tyres Ltd is Indias leading tyremanufacturer, with headquarters in Gurgaon, outside Indias capital city of NewDelhi and operations in 3 continents

Shareholding:Traded in India on the Bombay, National and Kochi StockExchanges, with 30.97% of shares held by the public, government entities,banks and financial institutions.

Financial year:April 1 to March 31

Turnover:FY10 Rs 81.2 billion/ USD 1.74 billion/ Euro 1.4 billion (March 31,2010, exchange rates)

Topline trend:CAGR of 33%

Acquiredentities: In May 2009, Apollo acquired ApolloVredesteinBV(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 tyresacross automotive segments, brand rights to 32 African countries, 3 tyremanufacturing units and a retreading unit in South Africa and Zimbabwe

Manpower:Approximately 16,000 employeesbased across India, SouthernAfrica and Europe

Manufacturing facilities:Apollos largest unit is in Limda, in the western

Indian state of Gujarat. Two other units are located in the southern Indianrubber-producing state of Kerala. These 3 together have a combined productionof around 850 tonnes a day. A greenfield manufacturing unit in Chennai, TamilNadu, with an initial capacity of 213 tonnes is under construction. In SouthAfrica, the Ladysmith and Durban plants account for a combined capacity ofaround 180 tonnes, and the Enschede plant in the Netherlands adds another 150tonnes a day. Taking current production capacity to around 1350metric tonnesaday


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Product portfolio:The entire range of passenger car, SUV, MUV, light truck,truck-bus, agriculture, industrial, specialty, bicycle and off-the-road tyres;retreading material and tyres, and alloy wheels

Brands:Apollo, Dunlop (32 countries in Africa) and Vredestein are the threekey brands. Others are Regal and Kaizen (truck-bus tyres), Maloya (passenger

car) DuraTyres (retreaded tyres), DuraTread (retreading material) and AcelereWheelz (alloy wheels for passenger cars)

Key marketsofoperation:India is the largest market accounting for 62% ofrevenues, Europe 24% and South Africa 14%, exporting to 70+ countriesfromIndia, Europe and South Africa

Saleschannels:In each of the domestic markets the company operates through

a vast network of branded, exclusive and multi-product outlets

Key management:

Onkar S Kanwar, Chairman and Managing DirectorNeeraj Kanwar, Vice Chairman and Managing DirectorSunam Sarkar, Chief Financial OfficerSatish Sharma, Chief, India OperationsRob Oudshoorn, CEO, Apollo Vredestein BVLuis C Ceneviz, CEO, Apollo Tyres South Africa (Pty) LtdMarc Luyten, Chief Marketing Officer

Peter Becker, Chief, Research & Technology


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MILESTONES

1976:Registration ofApolloTyres

1977:First plant at Perambra, Kerala

1991:Second Plant at Limda, Gujarat

1995:Third Plant Kalmassery, Kerala

1996:Tubes plant at Ranjangaon, Maharashtra

2004:Indias first H-Rated tubeless passenger car tyre range Acelere

2005:Passenger car tyre capacity expanded to 10,000 per dayMore than 7.5 million XT-7 tyres sold - single largest brand in India

2006:April - Acquired Dunlop Tyres Intl. In South AfricaMay - DuraTreads retreading material launchedNov - Indias first V-Rated tubeless passenger car tyre range Acelere SportzNov - Indias first W-Rated tubeless UHP passenger car tyre Aspire

2007:Jan - Launch of Regal truck & bus radial tyresMay - Launch of Indias first branded retreaded tyre DuraTyre

2008:Announced greenfield plant in Chennai [Tamil Nadu], IndiaOct - Introduced new corporate identity.

2009:May - Acquired Vredestein Banden BV in the Netherlands


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PERFORMANCE DURING RECESSION

The entire automotive and associate industries had a bumpy ride in 2008 -09 on

account mainly of the fast spreading recession and the attendant industrial

slowdown. But, for the Delhi-based Apollo Tyres it was an year of milestones

and achievements, with the company attaining the leadership position in theIndian tyre industry. In fact, the company emerged a clear market leader by

virtue of its outstanding performance and recording the cumulative annual

revenue of Rs. 4,984 crores during the year, taking into account Indian and

South African operations. Among the various contributory factors for the

company emergence as the market leader is its extra focus on product quality. In

fact, Apollos net sales continues to grow in double digits despite the demand

slowdown.

According to sources in the engineering division, the company is aimi ng to

double the turnover within the next two years to touch the Rs. 10,000 -crore

mark. The company is also increasing its investment in the new plant coming up

at Oragadam in Chennai for production of truck radial tyres, which is expected

to commence operation by November next. This is Apollos fifth unit in India,

the other four being the two units located in Kerala and one each at Baroda and

Pune.

Apollo is now reckoned the 11th largest tyre company in the world and hasbecome truly global with the acquistion of three plants in South Africa and one

in the Netherlands.

Despite the trying times, the company recorded a net profit after tax of Rs. 1.3

billion (Rs. 139.1 crores), making it the only top Indian tyre manufacturer to

have remained profitable throughout each quarter of 2008-09.

While the first six months of the year witnessed skyrocketing raw material

prices, the next six months faced a severe demand slowdown across the board,in both domestic and export markets, along with currency volatility.


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Many firsts

Apollo Tyres has the distinction of having a number of firsts to its credit. It was

the first Indian tyre company to launch exclusive branded outlets -- Apollo Tyre

World -- for truck tyres, segment the market on the basis of load and mileage

requirements, introduce packaging for car and two -wheeler tyres and tubes, runa customer loyalty programme, introduce radial tyres for the farm category,

obtain ISO Certification for all its operations, produce H, V and W -speed rated

tubeless tyres, run HIV-AIDS awareness and prevention clinics for the trucking

community, support the creation of an Emergency Medical Service in an Indian

city, execute an overseas acquisition, and, finally, the first tyre company to

reach a revenue of over $1 billion .


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Balancesheet

....................

(in crores)....................

Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Sourcesof funds

Owner's fund

Equity share capital 50.41 50.41 48.85 46.41

Share application money - - 4.57 11.72

Preference share capital - - - -

Reserves & surplus 1,673.07 1,302.18 1,176.84 917.56

Loan funds

Secured loans 875.95 462.39 223.15 473.76

Unsecured loans 257.02 233.13 237.51 144.94

Total 2,856.44 2,048.11 1,690.91 1,594.39

Usesof funds

Fixed assets

Gross block 2,414.17 1,838.00 1,569.66 1,492.51

Less : revaluation reserve 3.12 3.12 3.16 3.16

Less : accumulated depreciation 803.95 694.66 598.66 541.66

Net block 1,607.10 1,140.22 967.84 947.70

Capital work-in-progress 536.04 281.41 94.41 80.46

Investments 559.38 297.45 302.71 258.11

Net current assets

Current assets, loans & advances 1,751.35 1,435.58 1,472.83 1,278.76

Less : current liabilities & provisions 1,597.44 1,106.70 1,147.14 970.76

Total net current assets 153.91 328.88 325.69 308.00

Miscellaneous expenses not written - 0.15 0.26 0.12

Total 2,856.44 2,048.11 1,690.91 1,594.39

Notes:

Book value of unquoted investments 559.18 297.26 302.53 257.97

Market value of quoted investments 0.09 0.03 0.07 0.11

Contingent liabilities 921.46 682.36 444.96 119.29

Number of equity shares outstanding (Lacs) 5040.25 5040.25 4884.45 464.02


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Profit & lossaccount

....................(in crores)....................Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Income

Operating income 5,046.00 4,090.86 3,705.94 3,290.95

Expenses

Material consumed 3,217.78 2,985.05 2,472.28 2,336.40

Manufacturing expenses 241.89 209.15 186.33 145.45

Personnel expenses 289.31 207.55 226.83 199.22

Selling expenses 270.67 184.31 185.42 150.62

Adminstrative expenses 209.24 148.43 144.84 127.82

Expenses capitalised - - - -

Cost of sales 4,228.88 3,734.48 3,215.71 2,959.51

Operating profit 817.12 356.38 490.23 331.44

Other recurring income 19.67 8.42 13.69 20.91

Adjusted PBDIT 836.79 364.81 503.91 352.35

Financial expenses 113.54 103.83 80.26 89.23

Depreciation 122.78 98.01 87.81 74.23

Other write offs - - - -

Adjusted PBT 600.47 162.97 335.85 188.90Tax charges 183.21 63.05 114.14 72.00

Adjusted PAT 417.26 99.92 221.70 116.90

Non recurring items -2.38 1.22 -2.40 -3.48

Other non cash adjustments 0.11 6.98 - -

Reported net profit 414.99 108.12 219.30 113.42

Earnigs before appropriation 739.52 407.32 386.52 239.35

Equity dividend 37.80 22.68 25.20 20.88

Preference dividend - - - -

Dividend tax 6.28 3.85 4.28 2.93

Retained earnings 695.44 380.78 357.03 215.54


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Annual resultsin brief

Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Sales 5,036.80 4,071.55 3,693.93 3,774.34

Operating profit 783.98 325.88 464.08 309.32

Interest 73.95 66.84 52.04 52.65

Gross profit 720.98 269.17 421.26 259.65

EPS (Rs) 8.23 2.14 4.49 2.44

Annual resultsindetails

Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Other income 10.94 10.14 9.22 2.97

Stock adjustment -22.68 26.59 -55.27 -31.36

Raw material 3,044.97 2,794.66 2,384.96 2,258.03

Power and fuel - - - -

Employee expenses 289.48 207.55 227.06 199.41

Excise - - - 482.02

Admin and selling expenses - - - -

Research and development expenses - - - -

Expenses capitalised - - - -

Other expenses 941.06 716.88 673.11 556.93

Provisions made - - - -

Depreciation 122.78 98.01 87.81 74.23

Taxation 183.21 63.05 114.14 72.00

Net profit / loss 414.99 108.12 219.30 113.42

Extra ordinary item - - - -

Prior year adjustments - - - -

Equity capital 50.41 50.41 48.85 46.41

Equity dividend rate - - - -

Agg.of non-prom. shares (Lacs) 3057.14 3057.16 3135.43 -

Agg.of non promotoHolding (%) 60.65 60.65 64.19 -

OPM (%) 15.57 8.00 12.56 8.20

GPM (%) 14.28 6.59 11.38 6.87NPM (%) 8.22 2.65 5.92 3.00


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Cash flow

Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Profit before tax 414.99 171.17 333.45 185.42

Net cashflow-operating activity 702.66 324.58 427.77 357.47Net cash used in investing activity -1,053.12 -482.59 -168.70 -399.87

Netcash used in fin. Activity 326.45 180.46 -165.22 -16.96

Net inc/dec in cash and equivlnt -24.01 22.45 93.85 -59.36

Cash and equivalnt begin of year 272.62 250.18 172.00 231.36

Cash and equivalnt end of year 248.62 272.62 265.85 172.00


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FINANACIAL FILE -

PER RM CE SNAPSHOT

Acqui iti of Vredestei B den B V in M 2009 Commissioning oft e C ennai greenfield manufacturing facilit A CAGRof 33% and a turnover ofRs 81.2 billion or US$ 1.74 billion Integration into Apollo Tyres and renamed Apollo Vredestein B V

FINANACIAL E FORMANCE


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REVENUE PERFORMANCE


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SUMMING UP

Poised for high growth and expansionAiming for a turnover of US$ 2 billion by March 2011

Taking brand Apollo to customers across the world

Committed investments of over Rs 11 billion for the current fiscal.

Documents

APOLLO-ECONOMICS PROJECT