Apollo Tyres bets on service model, premiumisation to maintain margins

The company is launching a subscription service called Avolve that promises to cut down the tyre costs of truck fleets by 10-15% through more efficient tyre management. The company is looking to bring in revenues upwards of Rs 500 crore through this brand-agnostic platform by FY28.

“My experience tells me it is a very conservative number,” said Satish Sharma, president for Asia Pacific, Middle East and Africa at Apollo Tyres.

Meanwhile, the company is looking to maintain its EBITDA margins by focussing on expansion in high-margin products, especially through its premium brand Vredestein, said Neeraj Kanwar, the vice chairman and managing director of the company.

The company is also looking to expand in the US, Europe and the Middle East, with an aim to bring in up to 45% of its consolidated top line from overseas markets from 40% at present, he said.

In India, the company is the market leader in commercial vehicle and passenger car tyres but lags behind peers like MRF and Ceat in the two-wheeler tyres market. Kanwar said that the company does not want to get into the mass-market two-wheeler segment and will only focus on a niche premium market.

“I don’t want to be leaders in terms of volumes,” Kanwar told ET. “I want to be leaders in my profitability. And if you see, consistently for the past five or six quarters, we have beaten all Indian peers in terms of EBITDA margins.”The company reported a consolidated EBITDA margin of 16% for the March quarter. The margin was up 475 basis points compared to the corresponding quarter last year, primarily led by subsiding input costs.

With improving margins and no significant investment on the horizon towards capacity expansion, the company is looking to pare its debt further. Apollo Tyres has a net debt of Rs 4,300 crore as of 31 March, which was 1.4 times its EBITDA. However, the company has no target to achieve zero net debt, Kanwar said.

The company has a target to achieve $5 billion (Rs 40,000 crore) revenue by FY26. It reported a top line of Rs 24,568 crore in FY23.

Speaking about the succession planning at Apollo Tyres, Kanwar, who succeeded his father Onkar Kanwar into the business, said that his next generation is not looking to join the business.

The reporter was in Hungary at the invitation of Apollo Tyres.