1. Maintain ‘buy’ on Apollo Tyres, target Rs 240: Kotak

Maintain ‘buy’ on Apollo Tyres, target Rs 240: Kotak

Apollo Tyres announced the acquisition of 100% stake in Germany based tyre retailer, Reifencom, for 45.6 million euro (at 0.3X FY2014 revenues)

By: | Updated: November 21, 2015 1:23 AM

Apollo Tyres announced the acquisition of 100% stake in Germany based tyre retailer, Reifencom, for 45.6 million euro (at 0.3X FY2014 revenues). Reifencom is a profitable and zero-debt entity, operating 37 retail stores and an online portal, accounting for ~4% market share in the replacement segment of Germany’s passenger car tyre market.

The acquisition will provide better market access to Apollo’s European operations and its ‘Apollo’ branded tyres, in our view.We continue to remain positive on the growth prospects of Apollo’s European operations, expecting it to significantly scale-up its presence in the next 3-5 years.

Apollo board has approved the acquisition of Reifencom GmbH, a multi-brand tyre retail and distribution firm, based in Germany. The company operates 37 outlets and an online portal –– reifen.com, through which it sold ~2 mn passenger car tyres in FY2014 (~4% market share in the German replacement PC tyre market). Its sales have been stagnant in FY2012-14, averaging Euro147 mn, around 1/3rd of which came through the online channel. The operations are profitable, though margins are much lower than Apollo’s Europe business margins of 17% (FY2015). It operates an asset-light model; most of its stores and warehouses are on lease, enabling it to remain debt free, as per the management. The acquisition would be 100% financed through cash and is expected to be completed in the one-three months.

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