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| Apollo Tyres looks to be among world's top 10 |
| S Kalyana Ramanathan / London May 22, 2009, 21:52 IST |
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Apollo Tyres, post its acquisition of Dutch tyre maker Vredestein Banden BV, is now keen to take its manufacturing footprint into the Asean (Association of South East Asian Nations) region.
After enjoying the status of a significant tyre maker in India for over 30 years, the company now wishes to move into the global league to be among the top 10 tyre makers in the world in the next five years.
The company’s 38-year old Vice-Chairman and Joint Managing Director Neeraj Kanwar says that, given the intrinsic bulkiness of a product like automotive tyres, manufacturers like Apollo, who are keen on a global presence, will have to set up manufacturing bases in important markets.
Three years ago, Apollo made its first foreign acquisition by buying Dunlop’s South African operations. Last week, the company completed the acquisition of Vredestein Banden for an undisclosed sum. On a consolidated basis, the group’s turnover now stands at around $1.5-1.6 billion, making it the largest tyre company from India. The Dutch acquisition, with a top line contribution of nearly $425 million (Rs 2,000 crore), accounts for a fourth of this.
With its current operations in India, Africa and Western Europe, the group hopes to cross $2 billion (nearly Rs 10,000 crore) in turnover by March 2011, says Kanwar.
“It took us 30 years to cross the first billion-dollar mark in sales. The next should come in just about three years,” he adds. Now with Europe and Africa being part of its global presence, the next move will be either in China or relatively smaller Asean countries.
“Exports cannot be more than 30 per cent from any location. Without a strong domestic demand, we will not buy or set up greenfield projects anywhere,” says Kanwar. Within Asean itself, Thailand, Philippines and Indonesia count as prominent targets for the company, says an insider.
While the company continues to expand its global presence, its Indian operations are also fast reaching a critical stage. The new plant in Chennai, in which the company will be completing its first phase of expansion by November 2009 and second phase by September 2009, will have a capacity to make 100,000 truck and bus radial (TBR) tyres and 7.5 lakh passenger car radial (PCR) tyres a month, making this plant the company’s largest plant in the country.
In all, the company will be investing close to Rs 1,600 crore in this new plant. Three years after acquiring Dunlop South Africa, Apollo will make its first major expansion there with an investment of $40-50 million (around Rs 190-240 crore) over the next 16 to 18 months, which will double its capacity to make TBR to 1,400 tyres per day and a 25 per cent increase in PCR to 12,500 tyres a day.
Kanwar says that integrating the three operations (India, Africa and Western Europe) will be the next big challenge. Apart from accessto lucrative markets, technology, brands and R&D capabilities have been strong reasons for acquisitions outside India. The 90-member R&D team in Vredestein Banden can play a pivotal role for product development strategy for the entire Apollo group in the coming years. Members from the group in India will meet their new Dutch colleagues in the first week of June to discuss the road map for this integration work.
“Integration of technology, along with what to sell to which market and at what price will be discussed,” says Kanwar.
Even traditional critics of the tyre industry in India, like S P Singh, the convenor of the All-India Tyre Dealers’ Association, agree that the only way Indian tyre makers can access technology to make safety-regulated products is by acquiring companies outside India.
“This is the best way to access European markets, which have very stringent safety standards,” says Singh.
Despite its global plans, the most difficult challenge for the company today is, however, from its operation that is closest to home. The plant in Kalamassery in Kerala (Apollo has its registered office in Kerala), which makes technologically outdated cross-ply tyres, has reached a point where it cannot be expanded.
The company wishes to move this plant to Irapuram (also in Kerala) that is 40 kms from its Kalamassery plant. This move has been opposed by the union.
“At 80 tonnes a year output, the plant is not profitable on a standalone basis. Unless we can take that to 200 tonnes, it will not be profitable,” says Kanwar.
If and when the union agrees, it will be the next big expansion for Apollo Tyres in India after the new plant in Chennai goes into commercial production.
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