Apollo Tyres shelves $150 mn fund raising via QIB

The company has said it will go-ahead with its Rs 500-crore expansion plan both in India and international operations

Apollo Tyres has decided to drop its plan to raise $150 million (around Rs 800 crore) through a Qualified Institutional Buyers (QIB). It may be noted the company was planning to dilute around 10% through QIB.

The management has attributed the decision to the market development. Meanwhile, the company has said it will go-ahead with its expansion plan of around Rs 500 crore, both in India and in international operations.

Talking to Analysts, Gaurav Kumar, Group Head - Corporate Strategy and Finance, Apollo Tyres said that “given the current market situation we would not be raising the money through QIB”.

It may be noted, company took approval from the shareholders for a period of 12 months, which will lapse in November.

In an email response company's spokesperson said "we continue to evaluate the market situation in key geographies and hence our expansion plans. All fund raising options, including QIP, are subject to our funds requirements and market conditions."

ICICI Direct research report on Apollo Tyres stated “with the ample capacity available amid low utilisation levels, the management has decided to go slow on the expansion plans and shelved the plans of raising capital. We had earlier factored in a 10% equity dilution.

With the dilution overhang completely removed, EPS growth for Fiscal 2014E, Fiscal 2015E looks more attractive”.

Company's capacity in India stood at 45,000 tyres a day in the car segment, 5,500 tyres a day in the truck-bus radial tyres (TBR) segment while truck cross-ply capacity stood at 10,000 tyres a day.

In tonnage, capacity stood at 1,400 MT a day (along with Chennai capacity) with utilisation levels at 75%. In Europe and South Africa company's capacity utilisation is around 85% and 70% respectively.

While, the company decided not to go ahead with QIB plan, company's capex are expected to fund through internal accruals.

The management has indicated that capex plans in the near term would be slightly lower with no significant capex to be done. Overall, the capex would come to around 500 crore, which include around Rs 250 crore will be towards to convert capacity from trucks to Off-highway Trucks (OHT), while maintenance capex would be done in South Africa and in Europe.

The management also indicated that activity on the Thailand greenfield project has been slowed down due to market slowdown and availability of adequate capacity.

The company is the second largest tyre manufacturer in the country with a clear lead in the commercial vehicle segment. ATL has a manufacturing presence in Asia, Europe and Africa,and exports to over 118 countries.