Apollo Tyres Chairman Onkar S Kanwar said: "Despite the challenges posed by the Chinese imports, we have seen increased demand for our products from both OEs (original equipment manufacturers) and the replacement market across product categories in India." The company's newly-launched two-wheeler tyres have also been very well accepted by the customers, he added. "With the increased truck-bus radial capacity kicking-in the next 2-3 months, we are well poised to a higher volume growth in the fiscal," Kanwar said.

Quarterly Performance

The company witnessed decline in the raw material cost during first quarter ended June 2016 despite marginal increase in rubber price on yoy basis. But big increase in other expense and employee cost (as a % of sales, net of stock adjustment) put pressure on margins. The raw material cost as % of sales net of stock adjustments has declined 370 bps to 42.3%. The employee cost rose 40bps to 13.1% in Q1 FY 16-17. Other expenses rose 150 bps to 20.6%. Resultantly, operating margins slipped 140 bps 16.3%. Operating profit rose 6% to Rs538.32 crore on a y-o-y basis.

Domestic prices of natural rubber, which makes up more than 50% of the cost of a tyre, was almost steady at Rs 130-135 per kg during the Apr-Jun 2016 quarter. Prices were around Rs 120-130 in the same period a year ago. Previous to this, rubber prices had been trading lower in past fifteen-eighteen months on persistent worries about slower economic growth in the main consumer, China, and oversupply.

With 55% rise in other income to Rs 26.94 crore, PBIDT rose 8% to Rs565.8 crore. Interest cost rose 3% to Rs26.93 crore. Depreciation cost increased by 15% at Rs106crore. Thus, PBT registered 7% rise to Rs432.83 crore. After considering 270 bps decrease in the effective tax rate at around 27.3% and 3% drop in tax provision, PAT rose 11% at Rs314.73 crore.

During the quarter, the company earned 65% and 27% of its revenues from APMEA (Asia Pacific, Mid East and Africa) and EA (Europe Americas)respectively. Revenues from APMEA rose 5%. EA registered 44% rise in revenues. The other segment comprising of other business entities which constitutes 8% of overall revenues, registered almost tenfold rise in income to Rs 296.21 crore.

At the segment front, Indian business witnessed 2% rise in PBIT at Rs 360.82crore and constituted 79% of the total segment profit. Segment profit of EA operations rose 14% to Rs91.38 crore and constituted 20% of segment profit. Profit from other segment stood at Rs 6.58 crore vis a vis loss of Rs 2.2 crore in previous year.

Some of the new products introduced by the company in the Indian market, including the newly launched two-wheeler tyres, have seen good demand, especially in the replacement market. Similarly, the European operations reported increased sales of passenger vehicle tyres.

The company's board has approved raising of up to Rs 750 crore through private placement of non-convertible debentures.

The stocks is trading around Rs 175at BSE currently.