Apollo Tyres posted an 18 per cent fall in net profit during the last quarter. However, with raw material prices stabilising, Onkar S Kanwar, chairman, Apollo Tyres, expects to record positive growth in the first two quarters of next financial year. With its Chennai facility in the ramp-up mode, the company expects increased demand from the replacement market to improve production, challenging market leader MRF by tonnage. Kanwar spoke to Swaraj Baggonkar in an interview. Edited excerpts:
How do you see demand hit, as a result of the excise duty rise?
As far as Apollo is concerned, the excise duty rise will go into the market anyway; most manufacturers will pass on the increase. We see very positive results coming in Q1 and Q2 because things are getting stabilised. Specially the raw materials side. The prices are not going up, so they have stabilised. Going forward, we see a very positive growth. We will have a better recovery in these two quarters.
You don't expect any pressure on demand?
There are fairly large number of players in the market, so we don’t see any pressure. We are established players; price is well accepted. There is a 'pull' factor working for us. Today, we are offering all kinds of products. In the TBR (truck and bus radial) segment, we have 20 per cent of the market. There has been a lot of repeat demand. We are fairly large players in the replacement market.
What is your business strategy for the coming financial year?
We have already created a production capacity, which can cater to the export and domestic market. Today, we are exporting 14 per cent of the production and will take it to 20 per cent. We will create an outside market as home market. We have to treat the export market in the same manner as the Indian market.
The company announced plans for setting up two facilities of ^400 mn in east Europe and Brazil. How would you fund them?
We would tap both routes, internal and debt; it has to be a mix of both. As and when the plans finalise, we will share it with the board. It’s too early to comment on the specifics. We do not have any other fund raising plans.
While you are expanding globally, in India you remain second to MRF in terms of tonnage.
As far as numbers as concerned, we are getting closer (to MRF). Because they have two-wheelers and that's a very big number, where they score over us. In all other categories, we are way ahead (of MRF). We are not present in the two-wheeler segment.
Does the company intend to get into the two-wheeler market?
No. We do not have any plans to get into the segment. That is a very low technology (market) and we have a very high spend on marketing and advertising. We are looking at the higher end (of the market).
Are you planning any further expansion in India?
We have already done fairly large expansions in the recent past, so plans are right now for outside. We will be doing small expansions but we will not be expanding into a greenfield facility immediately. But if the market gives an opportunity with a dramatic change, we won’t be sitting behind.
How much are you spending as capex next year?
We are in the process of finalising the capex plans. We have to first approach the board for clearance and upon approval we can go to the press. In the past two years, we invested about Rs 2,500 crore as capex.