Apollo Tyres slumps 26% on debt concerns

Shares of Apollo Tyres today fell sharply by 26% on concerns over debt burden due to the company's acquisition of US-based Cooper Tire & Rubber Co for about Rs 14,500 crore ($2.5 billion).

The stock fell to 52-week low of Rs 67.75, down by 26.35% on BSE during the day. It settled at Rs 68.60, showing sharp loss of 25.43% over previous close.

At the National Stock Exchange, the stock nosedived by 26.05% to close at Rs 68.

Tracking weakness in the stock, the market value of the company tanked by Rs 903 crore to Rs 3,734 crore.

"We are concerned about the huge debt burden which could strain the balance sheet of the combined entity," said Surjit Arora, Research Analyst (Institutional Equities) at Prabhudas Lilladher.

"While the acquisition will be positive for the company in the longer run, the near term challenge for the company would be to successfully integrate Cooper Tire and Rubber Company operations with itself," Angel Broking said in a report.

Post the transaction, Apollo Tyres will become the seventh largest tyre maker in the world by revenue at $6.6 billion from its current 16th position at $2.5 billion and give it greater access to the US, the second largest automobile market in the world after China.

As part of the deal, Apollo Tyres will take over the operations of Cooper, including eight plants and 14,000 employees in different parts of the world. The American firm is the 11th largest tyre maker in the world with a revenue of over $4 billion.

Meanwhile, the broader market was also weak with the BSE benchmark Sensex closing down 213.97 points at 18,827.16 points.