FORE SCHOOL OF MANAGEMENT

Project Report on the Financial Analysis of Apollo Tyres Ltd.

Submitted to: Professor Vandana Gupta

FORE School of Management

Submitted by: Group 4

Kritika Mehra (221066) Maansi Gupta (221067) Pankaj Bansal (221084)

Piyush Jain (221089) R.N.V.S.S. Sri Krishna (221104)

Rahul Verma (221111) FMG 22, Section B

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CONTENTS

1. Introduction

1.1 Overview

1.2 Vision and values

1.3 Board of directors

1.4 Shareholding pattern

3

3

4

4

7

2. Operating performance

2.1 Sales mix

2.2 Segment wise distribution

2.3 Raw materials

2.4 Peer comparison

8

8

9

9

10

3. Financial analysis

3.1 Goals

3.2 Financial statements

3.3 Cash flow statement analysis

3.4 Financial ratio analysis

12

12

12

16

18

4. SWOT analysis 32

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CHAPTER 1: INTRODUCTION

1.1 Overview

Apollo Tyres Ltd has been in the business of manufacture and sale of tyres since its inception in

1972. Its corporate headquarters are in Gurgaon, India. Over the years, the company has grown

manifold, establishing its footprint across the globe. The company has manufacturing presence in

Asia, Europe and Africa, with 9 modern tyre facilities and exports to over 118 countries.

Powered by its key brands — Apollo, Dunlop (brand rights for 32 African countries) and

Vredestein, the company offers a comprehensive product portfolio spread across passenger car,

light truck, truck-bus, off highway and bicycle tyres, retreading material and retreaded tyres.

Apollo Tyres Ltd is the world's 17th biggest tyre manufacturer, with annual consolidated

revenues of Rs 121.5 billion (US$ 2.5 billion) in 2011. Its first plant was commissioned in

Perambra, Kerala. The company now has four manufacturing units in India, one in South Africa,

two in Zimbabwe and 1 in Netherlands. It has a network of over 4,000 dealerships in India, of

which over 2,500 are exclusive outlets. It is currently the second largest player in the domestic

tyre sector with a market share of 18%.

It gets 59% of its revenues from India, 28% from Europe and 13% from Africa. Apollo Tyres

was awarded the FICCI award among large industries category for the best Quality systems. It is

planning to become the 10th biggest tyre manufacturer in the world with annual revenues of $6

billion by 2016.

On 12 June 2013, it was reported that Apollo Tyres Ltd would buy US-based Cooper Tire &

Rubber Company for about $2.5 billion in a deal that would make it the world's seventh-largest

tyre maker. The acquisition of Cooper -- the second biggest U.S. tire maker and No. 11 globally

with annual sales of $4.2 billion -- will give Apollo access to the U.S. market for replacement

tires for cars and light and medium trucks, Cooper's main business. The deal values Cooper at

4.4 times its EBITDA. The two companies had combined sales of $6.6 billion in 2012.Apollo's

cash offer of $35 per share represents a premium of about 43 percent to Cooper's share price on

the New York Stock Exchange. Apollo Tyres, which does not currently operate in the United

States, gets two-thirds of its revenue from India.

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Apollo Tyres Ltd is traded in India on the Bombay, National and Kochi Stock Exchanges, with

53.06% of shares held by the public, government entities, banks and financial institutions as on

June 30, 2012.

1.2 Vision and values

Vision

To be a significant player in the global tyre industry and a brand of choice, providing customer

delight and continuously enhancing stakeholder value.

Values

Customer First

Business Ethics

Care for Society

Empowerment

Communicate Openly

One Family

1.3 Board of directors

The Company’s Board of Directors consist of 14 Executive and Non Executive Directors,

including leading professionals in their respective fields.

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The following is the percentage of Executive and Non Executive Directors of the Company:

Category of Directors Number of Directors % of Total number of

Directors

Executive 4 29

Non Executive 10 71

Total 14 100

Management board is as follows:

Onkar S Kanwar (CMD)

Satish Sharma

Dr. Luis C Ceneviz

RiazHaffejee

Sunamsarkar

Marco Paracciani

Robert Stelnmetx

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NeerajKanwar (Vice Chairman & MD)

P.K Mohamed

TapanMitra

Gaurav Kumar

Peter Snel

PN Wahal

Profile of the Chairman & Managing Director:

As the Chairman & Managing Director of Apollo Tyres Ltd, MrOnkar S Kanwar is the chief

architect of the Company’s vision and value-driven business strategy. Under his able leadership

Apollo became a professionally managed and a globally recognisedtyre manufacturer. As a

visionary entrepreneur, he plays a critical role in the articulation of Company’s business

philosophy.

He is the Past President of the Federation of Indian Chambers of Commerce and Industry

(FICCI) and a former Chairman of the Automotive Tyre Manufacturers’ Association. Currently,

apart from being a member of the Trade Advisory Committee to the Government of India and the

President of Indian Rubber Manufacturers Research Association (IRMRA), he is also a Member

of the Board of Governors for the Indian Institute of Management (Kozhikode) and the Indian

Institute of Information Technology Design & Manufacturing (IIITDM).

Profile of the Vice-Chairman & Managing Director:

As the Vice Chairman & Managing Director of Apollo Tyres, Mr. Neeraj Kanwar plays a pivotal

role in Apollo’s journey towards becoming one of the most admired automotive tyre brands. Mr.

Neeraj Kanwar has pioneered key initiatives in enhancing the competitiveness of the Company’s

operations and products across the board. He is responsible for crafting Apollo’s growth story -

taking the Company from USD 450 million to USD 2.5 billion within a 5 year time span. Under

his able leadership, Apollo acquired Dunlop Tyres International in South Africa and Zimbabwe

in 2006 and Vredestein Banden B V in the Netherlands in 2009 – thereby transforming itself into

a multi-geography Company with operations in 3 continents. As a business leader, Mr. Neeraj

Kanwar is associated with leading industry associations and has served as the Chairman of the

Automotive Tyre Manufacturer’s Association, India.

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1.4 Shareholding pattern

Shareholding Pattern for the Quarter Ended March 31, 2013

Promoters

43%

FII/NRIs/Foreign

body corporate

29%

Public

21%

Financial

institutions/Banks

/Mutual funds

5%

Government of

Kerela/KSIDC

2%

Shareholding pattern

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CHAPTER 2: OPERATING PERFORMANCE

2.1 Sales mix

It is the second largest player in the domestic tyre sector.

It is currently a market leader in the truck and bus category with a market share of 27.5%.

Category Brands Revenue percentage

Commercial vehicles Amar

Amar AT-Rib

Cargo Miler

Cargo Plus

Lug Miler

57%

Passenger vehicles Acelere

Acelere Maxx

Amazer 3G

Amazer 3G Maxx

33%

Truck-Bus

48%

Passenger

vehicle

33%

Off highway

9%

Light truck

9%

Others

1%

Revenue segmentation by product

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Off highway Krishak Super

Powerhaul

9%

2.2 Segment wise distribution

It has a strong focus on the replacement market. It got 66% of standalone revenues and

80% of consolidated revenues from the replacement market.

Exports contributed about 10% to the standalone sales.

Original Equipment market contributed 24% to its standalone revenues.

2.3 Raw materials

The following table shows the raw materials consumed in FY13.

Raw material Rs. (Million)

Fabric 7014.85

Rubber 35353.73

Chemicals 4031.94

Carbon black 7385.22

Others 5171.39

Total 58957.13

From the above table it can be concluded that rubber (natural and synthetic) is the major raw

material used.

The following table shows the breakup of the raw materials depicting how much of the raw

material was imported.

Source of raw materials Percentage (%) Rs. (Million)

Imported 44.51 26243.84

Indigenous 55.49 32713.29

Total 100 58957.13

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Natural rubber, the prime raw material was imported from Thailand, Malaysia and Indonesia

along with the domestic supply to bridge the demand-supply gap and meet the quality

requirements for truck and bus radial tyres.

2.4 Peer comparison

Apollo Tyres is currently second in the Indian tyre industry with a market share of 21%.

The table given below gives the list of the top 3 players (considering their market share as per

volumes) in these 3 major segments.

Truck and Bus Passenger Car Motorcycle

Company Market Share Company Market Share Company Market Share

Apollo Tyres 28 MRF Ltd. 24.8 MRF Ltd. 29.4

MRF Ltd. 22.3 Bridgestone 21.1 TVS Srichakra 25

JK Industries 20 Apollo Tyres 20.3 Falcon Tyres 16.2

As seen in the above table, the Truck & Bus segment is highly competitive with the top 3 players

having market share very close to each other. Apollo Tyres is the market leader in Truck and Bus

MRF Ltd.

24%

Apollo Tyres

21%

JK Industries

14%

Ceat Ltd.

9%

Birla Tyres

9%

Others

23%

% Market share

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segment with a market share of 28%. MRF has a good presence in all the segments and is the

leader in Passenger Car and Motor Cycle with a 25% and 29% share respectively.

The following table shows the comparison of Apollo Tyres with other players in the tyre

industry.

Apollo Tyres

JK Tyres

CEAT

0

5

10

15

20

25

30

35

EPSROCE

RONWPBIDTM

Apollo Tyres

JK Tyres

CEAT

Name Sales

Turnover

(Rs. Cr)

Net Profit

(Rs. Cr)

Market Cap.

(Rs. Cr)

Total Assets

(Rs. Cr)

Apollo Tyres 8,507.49 312.67 3172.68 4,219.22

MRF 11,870.18 572.11 5464.87 4,489.23

Balkrishna Ind. 3173.08 355.84 2148.98 3482.50

Ceat 4,881.45 120.35 374.7 1,550.49

JK Tyre&Ind 5,430.83 121.06 344.7 2,962.10

TVS Srichakra 1463.27 7.8 124.63 444.61

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CHAPTER 3: FINANCIAL ANALYSIS

Financial analysis refers to an assessment of the viability, stability and profitability of a business,

sub-business or project. It is performed by professionals that make use of information taken from

financial statements and other reports. These reports are usually presented to top management as

one of their bases in making business decisions. Based on these reports management may:

Continue or discontinue its main operations or part of its business.

Make or purchase certain products in the manufacture of its products.

Acquire or rent/lease certain machines and equipments in the production of its goods.

Issue stock or negotiate for a bank loan to increase its working capital.

Making decisions regarding investing or lending capital.

Other decisions that allow management to make an informed selection on various

alternatives in the conduct of its business.

3.1 Goals

Financial analysis often assesses the firm’s;

Liquidity: ability to maintain positive cash flow, satisfying short term obligations.

Solvency: ability to pay its obligation to creditors and other third parties in the long-term;

Profitability: ability to earn income and sustain growth in both short-term and long-term.

A company’s degree of profitability is usually based on the income statement, which

reports the company’s results of operations.

Stability: ability to remain in business in the long run, without having tosustain

significant losses in the conduct of its business. Assessing a company’s stability requires

the use of the income statement and the balance sheet, as well as financial and non-

financial indicators.

3.2 Financial statements

The financial statements for the year 2012-13 are as follows:

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Financial performance for the year 2013-13

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Highlights

Apollo Tyres Ltd witnessed revenue growth to the tune of 5.28% during FY13, despite

pressures on the bottom line due to an industry-wide slowdown.

It achieved a net turnover of Rs 85,075 million as against Rs 81,579 million during the

previous financial year. EBIDTA was at Rs 9,555 million as compared to Rs 6,845

million during the previous financial year.

The net profit for the year under review was Rs 3,125 million, as against Rs 1,813 million

in the previous fiscal, a growth of almost 72.4%.

In the year under consideration, Apollo Tyres entered new markets, launched high

performing products for both the passenger and commercial vehicle categories and

redesigned its R&D structure, with a focus on profitability, internal efficiencies and

customer delight.

3.3 Cash flow statement analysis

The Consolidated Statements of Cash Flows are prepared using the indirect method, which

reconciles net earnings to cash flow from operating activities. The reconciliation adjustments

include the removal of timing differences between the occurrence of operating receipts and

payments and their recognition in net earnings. The adjustments also remove cash flows arising

from investing and financing activities, which are presented separately from operating activities.

Cash payments related to income taxes are classified as operating activities.

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3.3.1 Operating activities

The net cash from operations for the year 2012-13 was Rs 7,700 million, an increase of 42.83%

from last year. Operating cash flow resulted primarily from net earnings adjusted for non-cash

items (depreciation and amortization, finance charges, interest income, forex fluctuations,

provisions, etc.), partially offset by changes in working capital.

Working capital changes show an increase in the inventories prior to last year. The trade

receivables have decreased as compared to last year, which reflects efficient working capital

management.

Cash flows from operations are healthy enough to finance regular investments in fixed assets and

other investments and also finance repayment of debt.

3.3.2 Investing activities

Net investing activities consumed Rs. 4054 million of cash in 2012-13 mainly due to capital

spending and acquisitions of fixed assets to the tune of Rs.3693 million, and investments made in

subsidiary companies. This outflow was partially offset by proceeds from asset sales and interest

income from investments.

The cash used in investing activities saw a decrease of 25% from last year. However a negative

figure in investing activities shows that the company consistently makes huge investments in

fixed assets to maintain capacity and overall operations.

3.3.3 Financing activities

The net cash used in financing activities increased significantly from Rs.206 million in 2011-12

to Rs.3210 million in 2012-13. This increase is mainly attributable to the fact that significant

amounts of short term and long term borrowings have been repaid in FY13, and partially due to

the increase in finance charges over the year. The debt repayments have been mainly funded

from surpluses generated from operating activities.

Dividends (net of dividend tax) paid have been consistent over the two financial years at Rs. 292

million.

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3.3.4 Overall outlook

Net increase in cash and cash equivalents is Rs. 435 million as opposed to a negative figure of

Rs.287 million in the previous year. This improvement in the cash position is accountable mainly

to the significant increase in the cash from operations.

Cash used in investing activities did not change very significantly. A noticeable change, though,

is observed in the cash used in financing activities. However, this increase in the cash used in

financing activities was set off by the increase in the cash flows from operating activities,

resulting in positive net cash flows. The company enjoys a healthy flow of cash from operating

activities and the cash position is stable.

In a comparison with the previous year, the cash performance was better for the current year.

3.4 Financial ratios analysis

The term ―financial or accounting ratios‖ is used to describe significant relationship between

figures shown on a balance sheet, in a profit and loss account, in budgetary control system or in

any other part of accounting. Accounting ratios thus show the relationship between accounting

data.

Ratios show how one number is related to another. It may be expressed in the form of co-

efficient, percentage, proportion, or rate. For example the current asset and current liabilities of a

business on particular date are$200,000 and $100,000 respectively. The current ratio would be

expressed as C.A/C.L (i.e. 200,000/100,000) i.e. C.A is two times the C.L. ratio sometimes is

expressed in the form of rate. For instance ratio between two numeric facts, usually over a period

of time, e.g. stock turnover is three times a year.

Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios

can be calculated from information provided by the financial statements. Financial ratios can be

used to analyze trends and to compare the firm's financials to those of other firms. They can also

be used to compare the firm’s financials with the industry average. In some cases, ratio analysis

can predict future bankruptcy.

3.4.1 Liquidity ratios

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Liquidity ratios provide information about a firm's ability to meet its short-term financial

obligations. They are of particular interest to those extending short-term credit to the firm. Two

frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick ratio.

Current Ratio: The current ratio is the ratio of current assets to current liabilities:

Current Ratio =Current Assets / Current Liabilities

Year 2009-10 2010-11 2011-12 2012-13

Current Ratio 0.99 0.76 0.72 0.78

One drawback of the current ratio is that inventory may include many items that are difficult to

liquidate quickly and that have uncertain liquidation values.

Quick ratio: The quick ratio is an alternative measure of liquidity that does not include

inventory in the current assets.

The quick ratio is defined as follows:

Quick Ratio = (Current Assets – Inventory)/Current Liabilities

0

0.2

0.4

0.6

0.8

1

1.2

2009-10 2010-11 2011-12 2012-13

Current Ratio

Current Ratio

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The current assets used in the quick ratio are cash, accounts receivable, and notes receivable.

These assets essentially are current assets less inventory. The quick ratio often is referred to as

the acid test and a ratio of 1:1 is considered satisfactory.

Year 2009-10 2010-11 2011-12 2012-13

Quick Ratio 0.74 0.61 0.54 0.48

Liquidity position of Apollo Tyres:

Current ratio of Apollo Tyres is more or less the same in each year, and is not very high. The

company’s current ratio is less than 1 which shows that the availability of current assets in rupees

is less than current claims against them. The ratio falls below the ideal ratio of 2:1 but the typical

values for the current ratio vary across firms in different industries. In this case, the industry

norm for current ratio is 1.63 and Apollo Tyre’s ratio falls short of this norm.

Quick Ratio of Apollo Tyres is also not very high compared to the ideal ratio of 1:1.

However this may not necessarily mean that the company is facing a liquidity crunch. As we can

see from the statements that the company enjoys a positive cash flow from operations and has

adequate cash and bank balances. Therefore, we can conclude that the liquidity position of

Apollo Tyres, though, may not be great but is stable.

3.4.2 Solvency ratios

The term solvency of a company can be defined as the ability of a firm to meet its long term

obligations.

Debt to equity ratio: The Debt-To-Equity ratio is total debt divided by total equity.

Debt-to-Equity Ratio = Total Debt/Total Equity

Debt ratios depend on the classification of long-term leases and on the classification of some

items as long-term debt or equity.

Interest coverage ratio: The interest coverage ratio indicates how well the firm's earnings can

cover the interest payments on its debt. It is calculated as follows:

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Interest Coverage = EBIT/Interest Charges

Where, EBIT = Earnings before Interest and Taxes

Year 2009-10 2010-11 2011-12 2012-13

Debt-equity

ratio

0.59 0.84 1.03 0.97

Interest

coverage ratio

7.76 2.62 2.04 2.78

0

0.2

0.4

0.6

0.8

1

1.2

2009-10 2010-11 2011-12 2012-13

Debt-Equity Ratio

Debt-Equity Ratio

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Solvency position of Apollo Tyres:

Debt equity ratio of Apollo Tyres has increased over a period of three years and has decreased

for the year 2012-13. Overall this ratio has been below 1, which is neither very low nor too high

for the tyre industry. The ideal debt to equity ratio is 2:1 but it may vary across different

industries. In case of the tyre industry, the industry norm is 1.44. So, if we compare Apollo

Tyre’s ratio with the industry norm, we can say that it is below the industry norm in all the four

years. This means that the company largely depends on internal sources for its financing

requirements and has low debt in its capital structure.

Looking from a long-term prospective, a low debt to equity ratio is always good for a company

because it indicates that the company will have enough room to raise funds from external sources

if it may have the need to do so in future.

The interest coverage ratio indicates the number of times interest charges are covered by funds

that are ordinarily available for their payment. Ideally, the higher this ratio the better it is for any

company. Then again, it may not be very high in all the industries. The ratio for Apollo Tyres,

although not very high, has come down from 7.76 in 2009-10 to 2.78 in 2012-13. This may be a

cause for concern. But since the industry average is at 2.15 for the year 2012-13, we can say that

Apollo Tyre’s solvency position is better than the industry average.

0

1

2

3

4

5

6

7

8

9

2009-10 2010-11 2011-12 2012-13

Interest Coverage Ratio

Interest Coverage Ratio

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3.4.3 Profitability ratios

Gross profit margin: Gross profit margin may be indicative of to what extent the selling prices

of goods per unit may be reduced without incurring losses on operations. It reflects efficiency

with which a firm produces its products. As the gross profit is found by deducting cost of goods

sold from net sales, higher the gross profit better it is. There is no standard gross profit ratio for

evaluation. It may vary from business to business. However, the gross profit earned should be

sufficient to recover all operating expenses and to build up reserves after paying all fixed interest

charges and dividends.

Gross profit margin = Gross profit/Net sales * 100

Net profit margin: Net profit ratio is used to measure the overall profitability and hence it is

very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm

shall not be able to achieve a satisfactory return on its investment.

This ratio also indicates the firm's capacity to face adverse economic conditions such as price

competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while

interpreting the ratio it should be kept in mind that the performance of profits can also be seen in

relation to investments or capital of the firm and not only in relation to sales.

Net profit margin = Net profit/Net sales * 100

Operating Profit Margin = Operating Profit/Net Sales * 100

Year 2009-10 2010-11 2011-12 2012-13

Gross profit

margin

13.76 7.90 6.48 7.94

Operating

profit margin

16.19 10.58 8.75 10.52

Net profit

margin

8.19 3.61 2.21 3.63

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Profitability position of Apollo Tyres:

The gross profit margin has not increased very significantly over the previous year, having

increased from 6.48% in 2012-12 to a mere 7.94 % in the year 2012-13. Likewise, the net profit

and operating profit margins too have not shown any major jumps from the preceding financial

year.

This conservative growth in profitability figures can be attributed to a global auto slowdown.

The Indian automotive industry, often considered to be a barometer of the economy, was not

immune to the global slowdown. In FY13, the industry witnessed weak customer sentiment and

high interest rates. The Indian tyre industry, in particular, was affected by low export demand.

However, profitability was maintained because of reduced raw material cost.

3.4.4 Activity ratios

These are concerned with measuring efficiency in asset management. They are also called

efficiency or assets utilization ratios. An activity ratio may be defined as a test of the relationship

between cost of sales and the various assets of the firm. The greater is the rate of turnover or

conversion, the more efficient is the utilization / management.

Depending upon the various types of assets, there are various types of activity ratios.

0

2

4

6

8

10

12

14

16

18

2009-10 2010-11 2011-12 2012-13

Gross profit margin

Operating profit margin

Net profit margin

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Assets turnover ratio: This ratio is also known as investment turnover ratio. It is based on the

relationship between the cost of goods sold and assets/ investment of a firm. Depending upon the

different concepts of assets employed, there are many variants of this ratio.

Inventory (stock) turnover ratio: This ratio indicates the number of times inventory is replaced

during the year. It measures the relationship between the cost of goods sold and the inventory

level. This ratio measures how quickly the inventory is sold showing efficient inventory

management.

Debtors Turnover Ratio: It establishes the relationship between net credit sales and average

debtors of the year. It indicates the number of times the receivables are turned over in ayear in

relation to sales.

These ratios show how the resources are efficiently utilized in the concern and are as follows:

Year 2009-10 2010-11 2011-12 2012-13

Asset turnover

ratio

2.56 2.10 2.46 2.27

Inventory

turnover ratio

11.19 7.11 7.94 8.48

Debtor

turnover ratio

48.27 35.11 31.35 29.68

The Asset turnover ratio for Apollo Tyres has not shown much variation over the years, and has

not been very high. A high ratio indicates efficient utilization of fixed assets. However, since the

industry norm for FY13 was at 1.57, we can conclude that the assets of the company have been

efficiently employed for driving sales.

The inventory turnover ratio has shown an increasing trend over the past three years, which

indicates better performance since it means that the investment in stocks is leading to higher

sales. Also, the industry average was at 5.59 for FY13, placing Apollo Tyres above the industry

performance in terms of efficient utilization of inventory.

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The debtor turnover ratio shows how quickly the debtors are converted into cash. A high ratio

indicates prompt collections from debtors. Ideally, this ratio should show an upward trend but for

Apollo Tyres, it has been decreasing over the years. However, on the positive side, the

company’s ratio is much higher than the industry norm of 6.91, and is one of the highest in the

industry. This indicates that Apollo Tyres is better able to manage its debtors than the other

companies in the industry.

Overall, Apollo Tyre’s performance has been better than the industry performance, indicating

efficient utilization of the resources and facilities at its disposal.

0

0.5

1

1.5

2

2.5

3

2009-10 2010-11 2011-12 2012-13

Asset turnover ratio

Asset turnover ratio

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3.4.5 Capital market ratios

Earnings per share (EPS) ratio: The earnings per share is a good measure of profitability and

when compared with EPS of similar companies, it gives a view of the comparative earnings or

0

2

4

6

8

10

12

2009-10 2010-11 2011-12 2012-13

Inventory turnover ratio

Inventory turnover ratio

0

10

20

30

40

50

60

2009-10 2010-11 2011-12 2012-13

Debtors turnover ratio

Debtors turnover ratio

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earnings power of the firm. EPS ratio calculated for a number of years indicates whether or not

the earning power of the company has increased.

Dividend payout ratio: The payout ratio and the retained earnings ratio are the indicators of the

amount of earnings that have been ploughed back in the business. The lower the payout ratio, the

higher will be the amount of earnings ploughed back in the business and vice versa. A lower

payout ratio or higher retained earnings ratio means a stronger financial position of the company.

Dividend Yield: This ratio indicates the return on the market price of a share and is calculated as

DPS/MPS * 100

Year 2009-10 2010-11 2011-12 2012-13

EPS 8.23 3.93 3.60 6.20

DPS 37.8 25.2 25.2 25.2

Dividend Yield 1.06 0.72 0.63 0.6

0

1

2

3

4

5

6

7

8

9

2009-10 2010-11 2011-12 2012-13

Earnings per share

Earnings per share

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Return on equity: It is the bottom line measure for the shareholders, measuring the profits

earned for each dollar invested in the firm's stock. Return on equity is defined as follows:

Return on Equity = Net Income/Shareholder Equity

0

5

10

15

20

25

30

35

40

2009-10 2010-11 2011-12 2012-13

DPS

DPS

0

0.2

0.4

0.6

0.8

1

1.2

2009-10 2010-11 2011-12 2012-13

Dividend Yield

Dividend Yield

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Return on investment: This ratio is more meaningful to the equity shareholders who are

interested to know profits earned by the company and those profits which can be made available

to pay dividends to them. Interpretation of the ratio is similar to the interpretation of return on

shareholder's investments and higher the ratio better is.

Year 2009-10 2010-11 2011-12 2012-13

ROE 26.98 10.97 9.21 14.26

ROI 24.99 11.65 12.81 17.43

0

5

10

15

20

25

30

2009-10 2010-11 2011-12 2012-13

Return on equity

Return on equity

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Market performance of Apollo Tyres:

The EPS helps in evaluating the prevailing market price of share in the light of profit-earning

capacity. The more the EPS, the better is the performance and prospects of the company. For

Apollo Tyres, its EPS has been on a declining trend, barring FY13, where in it jumped to Rs

6.20/share from Rs 3.60/share in FY12. The EPS has been higher for other companies in the

industry.

The company has maintained constant dividend of Rs. 25.2/share. The dividend yield has shown

a downward trend mainly because of constant DPS and increasing market price of shares over

the years, resulting in a decrease in yield per share.

The ROE has increased from 9.21 in FY12 to 14.26 in FY13. This is a favorable trend for the

owners and investors of the company.

The Return on Investment or Capital Employed has been on an upward trend over the last three

years, which shows an improvement in overall performance within the company. Moreover, the

industry average for this ratio for FY13 was 10%. Apollo Tyres having registered a return of

17.43% in the same year, performed more than satisfactorily in terms of industry performance.

0

5

10

15

20

25

30

2009-10 2010-11 2011-12 2012-13

Return on Investment

Return on Investment

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CHAPTER 4: SWOT ANALYSIS

The diagnosis of a firm’s strengths and weakness can be fruitful only if the environment factors

and market conditions are considered along with the internal capabilities. This approach

essentially involves matching of the internal capabilities with the environmental opportunities

and threat and is known as SWOT (strength and weakness, opportunities and threats) analysis.

Strengths:

First Indian Tyre Company to launch

exclusive branded outlets for truck tyres

and introduce radial tyres for farming

machinery segment.

Strong brand value lends credence to its

growth plans.

Diversified market base across multiple

geographies.

Extensive distribution networks in

domestic markets.

Leading player in the commercial vehicle

segment in India.

Dynamic leadership.

Weakness:

Not a strong presence in the 2 and 3

wheeler segment in India.

Inability to pass on cost escalation to

consumers, resulting in pressure on

margins..

Low earnings per share as compared to

other players in the industry.

Opportunities:

Started offering radial retreading facilities

to the truck and bus category, which it can

use to further leverage leadership position

in the market.

Company is foraying into high potential

markets such as South America, Australia

and Eastern Europe.

Acquisition of Cooper Tyres to increase

global presence.

New product segments-industrial tyres.

Threats:

Economic slowdown in key markets-

Indian and Europe –leading to decreased

volumes and capacity utilization.

Increased competition from global players

such as Michelin and Bridgestone.

Highly dependent on automobile industry.

High raw material price volatility

translating into pressures on margins during

a quick rise in their prices.

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Division of work:

1. Chapter 1 and Chapter 4 : Piyush Jain (221089)

2. Chapter 2: Rahul Verma (221111)

3. Chapter 3: Kritika Mehra (221066)

Maansi Gupta (221067)

R.N.V.S.S. Sri Krishna (221104)

4. Chapter 4 and Cash flow statement analysis: Pankaj Bansal (221084)