Summary
Apollo Tyres Ltd. - Q3 FY26 Earnings Call Summary Thursday, February 5, 2026 4:00 PM IST
Event Participants
Executives 2 Gaurav Kumar (CFO), Neeraj Kanwar (MD & Vice Chairman)
Analysts 11 Amyn Pirani, Arvind Sharma, Basudeb Banerjee, Joseph George, Kapil Singh, Mihir Vora, Mumuksh, Naveen Baid, Nitin Agrawal, Raghunandhan NL, Ronak Mehta (Host)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Consolidated Revenue | ₹7,740 crores | +12% YoY; Highest ever quarterly revenue driven by robust domestic demand and GST rate reductions. |
| Consolidated EBITDA | ₹1,190 crores | +22.4% YoY; Margins expanded to 15.3% from 13.7% YoY due to raw material tailwinds and operating leverage. |
| Standalone Revenue (India) | ₹5,140 crores | +13% YoY; Growth led by mid-teens volume growth in OEM and replacement segments. |
| Standalone EBITDA margin | 14.5% | +340 bps YoY / -80 bps QoQ; Sequential dip due to one-time BCCI sponsorship activation costs. |
| Europe Revenue | €180 million | Flattish YoY; Performance hindered by muted demand in the European passenger car market (-4% market growth). |
| Europe EBITDA margin | 17.9% | +520 bps YoY; Significant improvement driven by premiumisation (UHP mix at 52%) and cost discipline. |
| Consolidated Net Debt | ₹1,300 crores | -50% QoQ; Sharp reduction from ₹2,600 crores due to strong operational cash flows and inventory reduction. |
| Net Debt to EBITDA | 0.4x | Improved from 0.8x in Q2 FY26; Reflects aggressive deleveraging and asset sweating. |
| Raw Material Basket | ₹159/kg (Avg) | Natural Rubber at ₹195/kg, Synthetic at ₹170/kg; Management expects steady costs in Q4. |
Geographic & Segment Commentary
India Operations: Achieved highest-ever revenue with double-digit growth across all channels (OEM, Replacement, Exports). Truck and Bus Radial (TBR) utilization is near 100%, while Passenger Car Radial (PCR) is in the high 80s, necessitating new capacity. The BCCI sponsorship is driving strong brand pull in rural markets for two-wheeler and farm categories.
Europe Operations: The market remains weak with PCR growth at -4%, though Apollo’s revenue remained flattish, indicating slight share gains. Strategic focus remains on the “UHP” (Ultra High Performance) mix, which rose to 52% of sales. The Netherlands plant is scheduled to cease production by June 2026, shifting volumes to low-cost locations in Hungary and India.
Company-Specific & Strategic Commentary
Capacity Expansion (Andhra Pradesh): The board approved a ₹5,800 crore capex for the AP plant to expand PCR (10,500 tyres/day) and TBR (3,600 tyres/day) capacities over FY27–FY29. This represents a ~18% increase in PCR and ~24% in TBR India capacity to address impending supply constraints.
Digitalisation & Sustainability: Investments in AI are being scaled to drive factory efficiencies and improve customer service. The company won the National Water Award for its Chennai plant and partnered with the UNDP for biodiversity conservation, aligning with its ESG pillars.
Premiumisation Strategy: The Vredestein brand achieved its highest-ever volumes in India during Q3. Management is intentionally avoiding low-margin OE bids to protect profitability, focusing instead on high-margin replacement and premium segments.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Total Capex FY27 | ~₹3,000 crores | Includes ₹2,000 crores growth capex for India, Hungary expansion, and maintenance. |
| Total Project Capex | ₹5,800 crores (FY27-29) | Phased expansion: FY27/28 will be peak years; FY29 will see a tapering off. |
| A&P Spend | 2.5% of Sales | Normalizing from FY27 onwards to drive top-line growth after the initial BCCI sponsorship burst. |
| Net Debt to EBITDA | < 2.0x | Management remains committed to staying below this threshold even during the peak capex cycle. |
| Tax Rate | 25% - 26% | Expected shift to the lower tax bracket in FY27 following evaluation of new MAT regulations. |
Risks & Constraints
| Risk | Context |
|---|---|
| Capacity Constraints | Utilization in India is in the high 80s (100% in TBR); management warns of hitting limits by end of FY27 if expansion lags. |
| Demand Volatility | European markets remain in negative growth territory (-4%); recovery is slower than anticipated. |
| Raw Material Inflation | While currently steady, recent upticks in global rubber prices could impact P&L with a one-quarter lag. |
| Capex Intensity | The move from “bite-sized” to “lumpy” capex (₹5,800 crores) may pressure short-term ROCE and free cash flows in FY27-28. |
Q&A Highlights
Capacity Addition Rationale
- Question: Why move from “bite-sized” capex to a large ₹5,800 crore plan? (Joseph George)
- Answer: Line balancing and debottlenecking have reached their limits; further expansion requires civil construction, which necessitates a larger scale to be cost-effective (Gaurav Kumar).
Marketing Spend Impact
- Question: What is the impact of the BCCI sponsorship on the ground? (Mumuksh)
- Answer: It has created unparalleled brand reach, particularly in rural markets for farm and two-wheeler categories; dealer morale is at an all-time high (Neeraj Kanwar).
European Restructuring
- Question: When will the benefits of the Netherlands plant closure be visible? (Kapil Singh)
- Answer: Production stops in June 2026. Financial benefits from shifting production to Hungary and India will start flowing into the P&L from H2 FY27 (Gaurav Kumar).
Market Share Dynamics
- Question: Have we lost ground in PCR? (Nitin Agrawal)
- Answer: We avoided low-margin OE bids previously, leading to some share loss, but we are now recovering ground. Replacement market shares stand at ~30% for TBR and ~20% for PCR (Gaurav Kumar).
Key Takeaway
Apollo Tyres delivered a record-breaking Q3 FY26, with consolidated revenues reaching ₹7,740 crores (+12% YoY) and EBITDA margins expanding to 15.3%. The quarter was marked by a significant 50% QoQ reduction in net debt to ₹1,300 crores, bringing the Net Debt/EBITDA ratio to a healthy 0.4x. Strategically, the company is pivoting back to aggressive capacity expansion, approving a ₹5,800 crore investment for the Andhra Pradesh plant to increase India PCR and TBR capacities by approximately 20% over the next three years. While India demand remains robust across segments, Europe continues to face macro headwinds, prompting a structural shift of production to low-cost hubs. Management remains focused on maintaining a Net Debt/EBITDA below 2.0x despite the upcoming capex cycle, aiming for a transition to a 25-26% tax rate in FY27 to further boost profitability.
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