Not after volume, but after profitable growth, says neeraj kanwar of apollo tyres – moneycontrol.com gaston yla agrupacion santa fe

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Neeraj Kanwar, Vice Chairman and Managing Director, Apollo Tyres believes that “we are in a global village.” His monthly schedule reflects that belief. For the past six years, Kanwar has worked out of his “traveling office” in London. He divides his time between Netherlands, where Apollo unit Vredestein is based, and Hungary, where the tyre maker inaugurated a plant last year. Kanwar heads to Delhi once a month and spends a week at Apollo’s largest market.

The Managing Director’s calendar reflects the evolution of Apollo in the last one decade. About 40 per cent of its revenue now come from overseas operations. That is set to increase in the next two years, as Kanwar seeds operations in the US, Dubai and Thailand. Little wonder that the senior leadership of Apollo is also now spread across the world, in Amsterdam, Singapore, London and Delhi.

“We meet once a month, but each time in a different location depending on the geography we want to focus on. Last we met in London, and in June we are meeting in Hungary,” Kanwar told Moneycontrol over a video conference from his London office.

Our weak area is the high-end segment of cars. It’s more of a mindset as consumers prefer the foreign brands. We are changing that through brand building and showcasing the kind of technology we have. We will first get into the base models of luxury cars and then start going up.

It was a concern 1.5 years ago. Chinese tyres had garnered 30 per cent share of the truck radial market, selling at 50 per cent of the prevailing market prices. But demonetization and GST has had an impact on them, as most were cash transactions. And later last year, the anti-dumping duty came in. Now they are down to 15 per cent of the truck radial market.

We are constrained by oil prices. Natural rubber gets impacted. The impact is lagged and we will feel it within two months. We need to get ready and see how we can correct selling prices. We operate on thin margins of about 13-14 per cent. At a time when we are spending on brand building, R&D and new facilities, we need cash flows and healthy EBIDTA margins.

It has not been successful. One, it’s difficult to pronounce. And when it comes to buying a foreign brand, customers have other brands. Also, our strategy of bringing the product from outside to sell in India was not right. We have to see how we can make it in India and sell.

It is doing very well. We have gained market share. And we have a new distribution system. (Apollo had bought German tyre distribution firm Reifencom GmbH in 2015). We now sell 30 per cent of our tyres through Reifencom, from the earlier 20 per cent. While Netherlands and Germany are main markets for us, we are also looking at UK, Italy, France, Austria and the Nordic countries.

Currently we only have 5-10 per cent of the market covered in our products. There is a lot of R&D work needed to cover the 80 per cent. We need to put a lot of investment in R&D. I have 10 engineers in Netherlands working on only the US market. In two years, we will have a product range that will cover 75-80 per cent of market. Then you will see acceleration coming in, and then we will take a call on a local facility, or will produce in Hungary and sell in US.

Which are the other international markets that interest you?We have set up marketing and sales offices in Thailand and Dubai, for Apollo and Vredestein brands. While Dubai will cover Middle-East and North Africa, the Thailand office will look at the ASEAN region We want to see which one fructifies as a good market for Apollo. Once we reach a sustainable level of demand – USD 150 million revenue annually- then we will see how we want to go to the next phase.