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Parul Monga
Mumbai, July 9: Apollo Tyres is expected to report a net profit of Rs 45-47 crore for the financial year 1999-2000, compared to around Rs 30 crore in the previous fiscal. The company is expected to report an EPS of Rs 14-15 compared to an EPS of Rs 10 for the period ended March 1999. Turnover is likely to rise to Rs 1,400 crore compared to Rs 1,150 crore for fiscal 1998-99.
Analysts point out that the company has probably prepaid a loan of Rs 150-160 crore and that the tyre manufacturers are contemplating increasing tyre prices.
In the Rs 8,000 crore tyre industry, 65 per cent of the value comes from sale of truck and bus tyres. The replacement market forms 75 per cent of the overall sales. In terms of market share of truck and bus tyres together, JK and Vikrant tyres have a 21 per cent market share, which are at the top slot. The second is Apollo, which commands 20 per cent market share, along with Premier Tyres (which Apollo Tyres had recently taken over).
Tyre production for QI is up 20 per cent,while the cost of raw material is under control, with the prices of main raw material tyre cord and carbon black the prices of which are under control, while prices of rubber are on the rise.
For Apollo tyres, 75 per cent of the tyre sales comes from sales of truck tyres and the remaining 25-30 per cent from OEMs. Market sources also point out that earlier, there was a fear in the market that the lot of Apollo shares which were in litigation with Harshad Mehta will make its way into the market.
Market sources point out that the company is contemplating buy-back of these shares and this has further improved the sentiment at the counter. Added to this is the production of cement during April, which showed a sharp rise of 28 per cent. So, this will involve the movement of the cement despatches.
April 1999, according to CMIE, has recorded the highest growth in the last four preceding years. Despatches have grown by 12 per cent in February and March 1999 and had gained momentum in April 1999. For steel also,fiscal 1999-2000 has started on a positive note with the production of finished steel up by 1.5 per cent during April 1999. On the other hand, the LCV and HCV is up 35-40 per cent volume-wise, which constitutes 80 per cent of the tyre sales of Apollo tyres.
There is tremendous upside for tyre manufacturers, as sales in the replacement market, which is 70 per cent of the total tyre sales has increased, OEM sales are up, cement production is up (which means more movement), demand for tyres is up and all this is reflected in the 20 per cent rise in volumes for the first quarter for Apollo tyres.
Another factor pointed out by analysts is that the record food grain production with the estimated production at 201 million tonnes during 1998-1999 due to good monsoon. And the procurement of wheat by the Food Corporation of India and other state agencies during 1999-2000 has touched an all-time high of 12.94 million tonnes till May 10. "The tyre companies should benefit tremendously", said an analyst.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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