apollotyres.com
September 2012
Apollo Tyres Ltd.
apollotyres.com 2
36 Years Young Company
• Multi-national, originating in India
– Manufacturing presence in 3 continents – Asia, Europe & Africa
• Publicly listed, promoter family owns ~47%
• 27% CAGR over last 5 years
• A global Top 15 tyre company
• Consistently profitable with an unbroken dividend record since 1989
2006:Acquired Dunlop Tyres in South Africa
2009:Acquired Vredestein Banden BV in Netherlands
1976:Registration of Apollo Tyres Ltd.
1977 : First plant in Perembra Kerela
1991 : Second Plant in Limda, Gujarat
1995 : Third Plant at Kalamassery, Kerela
2010 : Chennai Greenfield for truck & car radials
Key Milestones
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Industry Overview
apollotyres.com
7.8 8.7 8.8 9.9 10.7 11.6 11.7 13.6 14.7 14.42.1 2.3 2.9 3.1 3.3 3.7 3.74.3 4.6 5.0
8.4 10.0 11.9 13.614.2
16.8 18.822.5
29.3 30.3
2.3 2.32.7
3.0 3.83.8 3.8
4.9
5.4 5.6
25.625.8
27.930.3
35.2
38.7 40.1
48.4
61.965.2
2.1 2.12.2
2.2
2.4
2.72.4
2.3
2.22.3
-6.0
4.0
14.0
24.0
34.0
44.0
54.0
64.0
74.0
84.0
94.0
104.0
114.0
124.0
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Mn
No
.
Truck/ Bus Light Trucks Passenger Cars Farm Two Wheelers Others
Truck/ B us , 54%
Light Trucks , 9%
P as s e nger C ars ,
14%
Fa rm , 8%
Two Wheele rs ,
13%
Others , 3%
4
Indian Tyre Industry – Strong Volume Growth
CAGRFY 08 - 12
CAGRFY 03 - 12
Two Wheeler
10.9% 13.9%
Farm 10.3% 10.0%
Passenger Cars
15.4% 15.8%
Light Truck 9.9% 7.6%
Truck/ Bus 7.1% 5.7%
Domestic Sales Volume
Strong demand growth across various product segments
Revenue Segmentation – Industry dominated by Commercial Vehicles segment
apollotyres.com
100%
95%
27%
96%
65%
52%
21%
72%
68%
0% 20% 40% 60% 80% 100% 120%
Western Europe
Central Europe
Eastern Europe
North America
South America
Asia
India
Africa / Middle East
World
Radialization Levels
5
Indian Tyre Industry – Low radialisation in truck segment
Opportunity in Truck Radial Segment
Expected to reach 35%+ in the next 3 years owing to infrastructure development and OE thrust
Most of the demand now met by domestic production
Domestic Production, 82%
Imports, 18%
Truck Radial Market Share
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4.7
0.6 0.8
4.5 4.1
- -
7.5
0.8 1.5
6.8 6.8
FY 2013 E Capacity
Imports Exports FY 2013 E Domestic
Availability
FY 2013 E Demand
FY 2015 E Capacity
Imports Exports FY 2015 E Domestic
Availability
FY 2015 E Demand
2.7
0.7
1.2 4.7
0.3
1.3 6.3
1.2 7.5
FY 2012 Apollo Other Players FY 2013 E Apollo Other Players FY 2014 E Other Players FY 2015 E
6
Indian Tyre Industry – Demand Supply situation : Truck Radials Truck Radial Supply – Industry Capacity (Mn Units)
Demand Vs. Supply
Capacity being built up to take care of increase in future demand
Apollo,
35%
Others,
65%
Apollo,
32%
Others,
68%
Apollo,
27%
Others,
73%
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36.2
5.0 4.3
36.8
34.3
39.2
6.0 3.9
41.4 41.6
FY 2013 E Capacity
Imports Exports FY 2013 E Domestic
Availability
FY 2013 E Demand
FY 2015 E Capacity
Imports Exports FY 2015 E Domestic
Availability
FY 2015 E Demand
28.7
1.9
5.6 36.2 0.9
1.6 38.8 0.5 39.2
FY 2012 Apollo Other Players FY 2013 E Apollo Other Players FY 2014 E Other Players FY 2015 E
7
Indian Tyre Industry – Demand Supply situation : Passenger Car Tyres Passenger Car Tyres Supply – Industry Capacity (Mn Units)
Demand Vs. Supply
Further capacity is in line with the future demand
Apollo, 24%
Others, 76%
Apollo, 25%
Others, 75%
Apollo, 24%
Others, 76%
apollotyres.com
Michelin, 50%
Other Branded, 14%
Chinese/ Economy brands, 36%
80 97 192
333
560
885
778 864
1,032
604
1%1%
2%3%
5%
8%
7%6%
7%
4%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
-
200
400
600
800
1,000
1,200
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012% of domestic availability
Units '000
Imports - Truck Tyres
211 551
1,004 1,064 930
1,498
3,242 3,300
4,239
4,761
3%
6%
10%9%
7%
9%
17%15% 14%
16%
0%
5%
10%
15%
20%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
% of domestic availability
Units '000
Imports - Passenger Car Tyres
8
Indian Tyre Industry – Imports vis-a vis domestic availability
Branded tyres sell at a competitive price. The Chinese/ Economy brand sell at a 10 –15% discount
China and Thailand constitute 90% of Economy brands
Imports upto FY 2006 were primarily cross ply. Radials gradually increased with increase in radialisation level and anti dumping duty on cross ply - Cross ply currently is negligible
Michelin, 16%
Hankook, 8%
Yokohama, 6%
Other Branded, 32%
Chinese/ Economy brands, 38%
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27%29% 28%
28%
27% 27%
25% 26%21%
27%21%
25% 31%
28%
27% 28%
28% 27%26%
27%
7% 9% 10% 11%13% 13% 13%
16%19% 17%
0%
5%
10%
15%
20%
25%
30%
35%
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Apollo's Market Share
Truck Light Truck PCR
9
Indian Tyre Industry – Market Share
Reduction in truck tyre market share in FY 2011 is on account of lost production due to plant shut down in the first half of the year
Apollo, 27%
MRF, 21%
JK, 19%
CEAT, 11%
Birla, 14%
Good year, 0%
Others, 4% Imports, 4%
Truck
Apollo, 27%
MRF, 26%
JK, 19%
CEAT, 7%
Birla, 6%
Good year, 0%
Others, 14%Imports, 0%
Light Truck
Apollo, 17%
MRF, 21%
JK, 9%
CEAT, 3%Birla, 0%
Good year, 13%
Bridgestone, 18%
Others, 3%
Imports, 16%
Passenger Car
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4.7 3.9
5.5 5.9 5.7
6.2 6.2 6.5 6.6
6.9
21% 22% 22%
19%21%
23%22%
25%
22%
18%
0%
5%
10%
15%
20%
25%
30%
-
2.0
4.0
6.0
8.0
10.0
12.0
CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008 CY 2009 CY 2010 CY 2011
Apollo Market Share
Industry Sales ( Mn No.s)
660
526
759
898
753
957 992
739
969 1,057
21%
28%
24% 23%
28%
22% 22%
25%
18% 18%
0%
5%
10%
15%
20%
25%
30%
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008 CY 2009 CY 2010 CY 2011
Apollo Market Share
Industry Sales ( '000 No.s)
10
South Africa Tyre Industry – Market Share
Loss in market shares in last 2 years due to influx of Chinese imports
Passenger Car
Truck
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Europe Tyre Industry – Market Share
Continued gains in passenger car tyre market shares with capacity ramp up
337 350
363 371
385 391
372
340
374 382
1.2% 1.2%1.3%
1.3% 1.4% 1.4%1.4%
1.6% 1.5%1.7%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
200
250
300
350
400
450
500
550
CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008 CY 2009 CY 2010 CY 2011
Apollo Market Share
Industry Sales (Mn. No.s)
Passenger Car
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RM Cost Trend - Annual
100 118 115
195
234
100
146
87
140
237
100 122 125 116 125
100
133 118
138
176
-
40
80
120
160
200
240
280
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Base Price Index
RM Cost Trend
Natural Rubber SBR 1502 Steel Cord Carbon Black
100 125
114
147
190
-
25 50
75
100 125
150
175
200
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Base Price Index
Overall RM Cost Trend
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RM Cost Trend - Quarterly
100 95 91 85 85 100
122 129
102 110
100 107 108 113 115
100 109 112 116
128
-
40
80
120
160
Q1- FY12 Q2- FY12 Q3- FY12 Q4- FY12 Q1- FY13
Base Price Index
RM Cost Trend
Natural Rubber SBR 1502 Steel Cord Carbon Black
100 102 101 95 98
-
25
50
75
100
125
Q1- FY12 Q2- FY12 Q3- FY12 Q4- FY12 Q1- FY13
Base Price Index
Overall RM Cost Trend
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Industry Overview – Previous year highlights….
India
• Softening of demand
• Pressure on the cross ply truck tyre capacities due to increase in radialization & lower demand growth
Europe
• Demand continues to grow with performance positively affected by previous strong winters
South Africa
• Demand recovering though still not back at previous levels
• Imports continue to dominate the market and causing challenges for domestic players
Overall
• Raw material cost push continued adding to pressure on margins
• Raw material prices stabilized in the second half though at high levels
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Industry Overview – Current year highlights….
India
• Recovery in replacement demand even though economy remains sluggish
• Decline in OE demand
Europe
• Significant demand decline due to economic conditions – no growth in volumes
South Africa
• Demand continues to recover
Overall
• Raw material decline leading to improvement in margins
• Raw material prices expected to remain soft
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Company Overview
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431 496 574 656 680 745 775 8351050
1250
150175 175
325
345
345
-100
100
300
500
700
900
1100
1300
1500
1700
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
MT
/ D
ay
Consolidated Capacity
16 19 22 26 33 37 41 50 55
82
- - - -
10 10 9
31 34
40
-
20
40
60
80
100
120
140
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Rs. Bn
Consolidated Top Line
17
Apollo Tyres – Growth Journey
Healthy top line growth aided by organic investment and strategic acquisitions in FY 2007 & FY 2010
CAGR (5 years) : 27%
CAGR (5 years) : 15%
Overseas
Domestic
Overseas
Domestic
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Apollo Tyres – Growth Journey
Current
Brand Positioning
Current
Truck BiasLight Truck Bias & RadialPCR (‘S’ & ‘T’ & ‘H’ rated)Farm Bias
Truck RadialUHP PCR (Upto ‘Z’ rated)OTR BiasFarm Radial
10 Years ago
10 Years ago
Truck BiasLight Truck BiasPCR (‘S’ & ‘T’ rated)Farm Bias
Product Portfolio
Organic growth of revenue & market share in India during FY01 –FY06 has been supplemented with the acquisition of global brands, technologies & markets in the last 5 years
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Truck, 83%
Light Truck, 8%
Passenger Car, 2%
Farms & Others, 7%
Truck, 63%
Light Truck, 12%
Passenger Car, 15%
Farms & Others,
10%
Truck, 47%
Light Truck, 8%
Passenger Car, 33%
Farms & Others,
12%
19
Apollo Tyres – Growth Journey
Customer Segments
5 Years ago Current10 Years ago
5 Years ago Current10 Years ago
Product Segments
Even as OEM share continued to increase in India with growth and entry into passenger car tyre segment, replacement continues to enjoy a major portion of the pie - South Africa and Europe operations are primarily present in the replacement market
A well distributed product portfolio compared to dominance of truck tyre segment earlier .
Replacement, 87%
OEM , 13%
Replacement, 82%
OEM , 18%
Replacement, 73%
OEM , 27%
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India
100%
India79%
South Africa21%
India66%
South Africa11%
Europe23%
20
India
Apollo Tyres – Growth Journey
Manufacturing Presence
5 Years ago Current10 Years ago
India
India
South Africa
Netherlands
Revenue
5 Years ago Current10 Years ago
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Apollo Tyres – Raw Materials
Natural Rubber constitutes the largest component of the overall raw material cost
Well distributed sourcing ensuring relationships with all major suppliers
Natural Rubber, 43%
Synthetic Rubber, 20%
Carbon Black , 10%
Steel Cord, 4%
Tyre Cord Fabric, 1%
Others, 22%
Raw Material Composition
Africa / S. Africa, 5%
Asia, 33%
Europe/ CIS, 12%
India, 47%
Rest of World, 3%
Raw Material Sourcing
Africa / S. Africa, 6%
Asia, 35%India, 58%
Natural Rubber Sourcing
Africa / S. Africa, 9%
Asia, 46%
Europe/ CIS, 26%
India, 16%
Rest of World, 2%
Synthetic Rubber Sourcing
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0.7
2.7 1.8 1.7 2.1
1.5
3.1
7.9
11.7
8.7 4%
14%
8%
6%
5%3%
6%
10%
13%
7%
0%
2%
4%
6%
8%
10%
12%
14%
16%
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
% of Sales
Rs. Bn
Capital Investments
22
Apollo Tyres – Financial Track Record
The Company has consistently invested in growth over the years even in difficult times
Substantial Capital Investment in FY 2010 – 12 in Chennai Greenfield
2.1 1.7 1.8 2.3
4.1
6.1
4.4
12.0
10.2
12.0
13.3%
9.0%8.2% 8.9%
9.5%
13.1%
8.8%
14.7% 11.5%
9.9%
0.0%
4.0%
8.0%
12.0%
16.0%
20.0%
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
EBIDTA Margin
EBIDTA (Rs Bn.)
EBIDTA
apollotyres.com
1.9 2.7
4.1 5.2
6.3
3.6 5.3
13.6
22.9
27.0
0.9
1.7
2.6
2.3
1.6
0.6
1.3
1.2
2.3 2.3
-
0.5
1.0
1.5
2.0
2.5
3.0
-
5.0
10.0
15.0
20.0
25.0
30.0
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Net Debt : EBIDTA
Net Debt (Rs. Bn)
Net Debt : EBIDTA
23
Apollo Tyres – Financial Track Record
Proceeds from Equity Issue (Rs Mn)FY 2004 : 1,348FY 2007 : 2,554FY 2008 : 644FY 2009 : 411
1.9 2.7
4.1 5.2
6.3
3.6 5.3
13.6
22.9
27.0
0.4
0.5
0.7
0.8
0.7
0.3
0.4
0.7
0.9
1.0
-
0.2
0.4
0.6
0.8
1.0
1.2
-
5.0
10.0
15.0
20.0
25.0
30.0
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Net Debt : Equity
Net Debt (Rs. Bn)
Net Debt : Equity
apollotyres.com
2,445
3,614 8.7%
11.4%
0%
2%
4%
6%
8%
10%
12%
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
3M-FY 2012 3M-FY 2013
EB
IDT
A M
arg
in
Rs
Mn
28.2
31.6
0
5
10
15
20
25
30
35
40
3M-FY 2012 3M-FY 2013
Rs
Bn
.
24
Apollo Tyres – 3M – FY2013 Financials
Net ProfitEBIDTA
Net Sales
771
1,380
2.7%
4.4%
0%
1%
2%
3%
4%
5%
-
500
1,000
1,500
2,000
3M-FY 2012 3M-FY 2013
Net
Pro
fit
Marg
in
Rs M
n
apollotyres.com 25
Apollo Tyres – Stock Performance & Shareholding
• EV/ EBIDTA : 5.6• P/E : 9.1
9%
16%
6% 6% 6%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
%
Dividend Payout Ratio
Promoters, 47%
FIs/ Banks/ Mutual
Funds, 11%
Retail
Investors, 18%
FIIs/ NRIs/ Foreign
Bodies Corporate,
23%
Shareholding Pattern
60
70
80
90
100
110
120
130
140
150
Base Price Index
Apollo Price Sensex
apollotyres.com 26
Apollo Tyres – Looking Ahead
• Strengthen leadership position in Commercial Vehicle Segment in India - ramp up of Chennai Greenfield to gain market share in truck radial segment
• Continue journey towards becoming a leader in the passenger car segment in India
• Continue volume gains in Europe through dual brand strategy
• Provide cost competitive production base to Europe operations through initially India and later a dedicated Greenfield
• Return South Africa operations to profitability
And the Journey continues…..
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On a Journey
To
Move the World