Riding on robust domestic demand, Apollo Tyres Ltd reported strong double-digit growth across channels in India, even as Europe remained subdued, prompting the company to sharpen its focus on premiumisation, product approvals and capacity expansion.
“We saw robust double-digit growth in all channels. All our three product categories saw strong growth, underscoring the strength of replacement and OEM demand,” said Managing Director and Vice Chairman Neeraj Kanwar during the earnings call.
In contrast, Europe presented a muted demand environment across key segments. The company registered a flattish year-on-year topline in line with broader market trends. Demand in the Netherlands and across Europe has been marginally negative over the past year, though the decline has moderated. Over the long term, Europe is expected to grow at a modest 1–2%, he said.
Capacity Push as Utilisation Nears Peak
Chief Financial Officer Gaurav Kumar said India capacity utilisation is currently in the high 80% range. With demand momentum expected to continue, the company anticipates hitting capacity constraints soon.
Recently, the Board approved a ₹5,800-crore capex plan for its Andhra Pradesh plant to expand both Passenger Car Radial (PCR) and Truck & Bus Radial (TBR) capacities over FY27–FY29.
Accordingly, India PCR capacity will increase from 58,000 tyres/day to 68,500 tyres/day and India TBR capacity from over 15,000+ tyres/day to 18,600 tyres/day.
Growth capex in FY27 alone will be about ₹2,000 crore, while overall capex for FY27 is estimated at nearly ₹3,000 crore, including ongoing PCR expansion in Hungary and routine operational spends of around ₹700 crore annually. FY28 capex could exceed FY27 levels. Full revenue benefit from the expansion is expected from FY30 onwards, he said.
Europe Restructuring, Hungary to Gain
The Enschede plant in the Netherlands will cease production by end-June 2026 (Q1 FY27). Production is being transitioned to Hungary and India, with benefits expected to flow through from the second half of FY27. While Hungary expansion is underway, there are no immediate plans for additional capacity in Europe.
Strong Q3, Balance Sheet Comfort
Apollo Tyres delivered a strong Q3 FY26, posting record revenues, expanding margins and sharp balance sheet improvement. India demand remains robust across segments, while Europe profitability improved despite muted volumes.
The ₹5,800-crore capex signals confidence in sustained domestic growth, though it may temporarily moderate free cash flow. Net debt stands at just 0.4x EBITDA, giving the company headroom to fund expansion comfortably.
Raw material outlook for Q4 remains steady. Advertising & Promotion (A&P) spends are expected to normalise from FY27 to around 2.5% of sales, compared with elevated Q3 levels (about ₹150 crore including sales promotions).
Return on Capital Employed (ROCE) is currently at ~13.5%, with management targeting an improvement towards 15% under the next five-year vision cycle (FY27–FY31).
With high utilisation levels, disciplined cost focus and strong domestic momentum expected to continue into Q4 and early FY27, Apollo Tyres appears poised to enter a new investment-led growth cycle.