We expect double-digit growth by associating with cricket: Apollo Tyres MD

Neeraj Kanwar says the ₹579-crore India team sponsorship is a long-term brand bet aimed at deeper rural reach, stronger dealer interest and double-digit growth

Neeraj Kanwar, vice-chairman and managing director of Apollo Tyres made an unexpected record bid to win the lead sponsorship rights for the national cricket team for two and a half years. In a video call with Surajeet Das Gupta, he talks about the reasons behind this big gamble on cricket and how the company plans to leverage this association for its business.

 

You paid a substantial ₹579 crore to win the Board of Control for Cricket in India (BCCI) sponsorship rights for the cricket team that comes to over ₹4 crore per match. What are the economics of forking out so much and how does it help Apollo?

 

Cricket today in India is obviously the most watched sport and it integrates the entire country. Its reach with media is not only in the urban areas but also in rural markets where it's very expensive for us to reach with advertising. With cricket, we will reach nearly 1.4 billion people in one stroke to tell them about our brand. Then, there is a rub off effect in reaching the Indian diaspora too. We are long-term players. The pact we have with Manchester United is for over 12 years despite its current performance. But the association has to match with our business.  

 

What is the kind of return on investment you expect from this new association?

 

It's a bit too early to say. We have to wait for six months or so. I'm hoping that the return on investment (RoI) will be good and revenues will increase because of this brand association. My expectation is that we will see double-digit growth due to this association.

 

Will the association help in attracting more dealers to Apollo Tyres?

 

We are already seeing it is giving us mileage. I can see many more dealers in India keen on the brand. This will help us get into newer rural markets. Our aim is to expand our distribution network, specifically in cars and two-wheelers. And, agri and trucks will follow. It will help us increase our revenue and ensure margin improvement. Currently, we have 5,000 dealers in India. We expect this to increase by 10-15 per cent.   

 

How much do you generally spend on advertising and publicity and will sponsoring the Indian team lead to sharp increase in your ad and promotion budgets?

 

We generally spend around 2 per cent of our net sales on advertisement and publicity, and will remain within that range even after the BCCI deal. That's the broad guideline that the board has given us. We have to cut back from other activities to keep within the cap. 

 

You gave substantial global play in markets in Europe, US and Asia, not necessarily big cricket playing nations. So, is the deal more to do with leveraging in global markets?    

 

I would say primarily 80-85 per cent of it is India focused as it is our primary market, accounting for 65 per cent of our revenue. Football in the UK — where we sponsor Manchester United — gives us global reach. But there are markets like UAE, Africa and the UK where Apollo’s tyres are sold, with cricket having a large following. And, many countries like the Netherlands have also started playing cricket.

 

Are you over with your investment cycle in Apollo Tyres or would you be looking for acquisitions in other countries?

 

Apollo has only been on a heavy capex cycle. So, we've put out three plants — one in Chennai, one in Hungary and recently in Andhra Pradesh. We have been investing a lot in our plants and technology. So, now we are sitting back and trying to consolidate all these plants and increase productivity by using AI tools. I am not looking at acquisitions or inorganic growth. We'll continue to grow our Hungary plant to service the US and Europe and that's how we will tackle the global markets. It was very important for us to bring our debt down and that we have now done. So, our balance sheet is comfortable now and gives us more fire power for the next cycle of growth and sales pick up after goods and services tax (GST) reduction.

 

You once nearly acquired a US tyre company but it did not materialise. What are your plans in the US now?  

 

We are not looking at anything right now as far as the US is concerned. For me, in the US right now, I'm only looking at creating the brand and looking at only marketing and distribution.