Technology transfer and consultancy for the steel radial truck tyre project is provided by Continental Tyres, the fourth largest tyre company in the world. Apollo Tyres is the market leader in the Indian truck tyre market, which has been growing by 14 to 15 per cent. The growth in the current year was expected to be higher at 20 per cent, but with the change in the scenario for truck markets, the investor would do well to peg his expectations at 15 per cent.

There are challenges in the horizon for Apollo. The technology in the truck tyre industry is changing. Demand is shifting from the traditional cross-ply tyres, to radial tyres. In the passenger cars segment, nearly 50 per cent of the market is already radialised. Given the condition of Indian roads, one could expect an accelerated shift in the truck segment as well. Apollo is dependent upon `Continental Tyres' for its technology. It is interesting to note that the only other three who have the technology are exploring the Indian market on their own - Michelin, Goodyear Tyre and Bridgestone.

Michelin has severed its ties with MRF has has plans to set up on its own in the country. Bridgestone has a tie up with ACC for manufacture of radials in the country. Goodyear Tyres operates through its affiliate in India. That is the competition for Apollo.

Apollo has thus far having been a very small share of the OE segment in the tyre market.

In the tyre industry, replacement market forms the largest segment (about 58 per cent), followed by OEM (about 22 per cent). Export accounts for about 15 per cent. However, its supply to Ashok Leyland could give it the image recognition need to push itself further in this market. The company was also having labour problems, which have recently been sorted out. A long term agreement has been signed.

The company has been seen to rise its prices, whenever the market can take it. This protects it against the escalation in raw material cost, especially carbon, which has a co-relation to petroleum prices. At the same the time the company has not reportedly hesitated in cutting prices, whenever and wherever necessary to make an entry into OE segments.

Sales and other income during the financial year ended 31st March 2000 amounted to Rs 13702.3 million, against Rs 11520.6 million during the previous year, registering an increase of 18.9 per cent. The net profit, after tax, during the year amounted to Rs 760.6 million as compared to Rs 310.8 million during the previous year, recording the highest-ever growth of 144.7 per cent. The increase in net profit was mainly on account of better inventory/credit management, cost controls, increase in other income and savings in finance charges.

The equity share capital of the company increased from Rs 330.6 million to Rs 363.2 million on account of conversion of warrants issued in January, 1995. Free Reserves as on 31st March, 2000 amounted to Rs 3,606.8 million, against the paid-up share capital of Rs 363.2 million.

The scrip is a good investment for medium term investors.

By K Seshadri