"To be a global player, it is crucial to be a leader in India"

Written by Malabika Sarkar | Malabika Sarkar | Updated: Jul 21 2009, 05:53am hrs
Sunam Sarkar
Apollo Tyres is perhaps among the few companies that havent been hit hard by the general economic slowdown. With double-digit growth last year, the company says the worst is behind us and it is looking at a positive year ahead. In this interview to FEs Malabika Sarkar, Sunam Sarkar, chief financial officer, Apollo Tyres, talks about its acquisition of the Netherland-based tyre manufacturer Vredestein Banden BV (VBBV) last year and what the company plans to do to meet the growing demand.

Whats the outlook for the tyre sector in India this year against the global market meltdown Has it affected your sales

India and Indian tyre companies have fared better than many others because of our growing economy and high internal demand. The year is already looking up and we are witnessing a demand revival in automotive sales. In India the major chunk of revenues for the tyre industry comes from the commercial vehicles segment. This segment is usually the first to register a decline and the last to pick-up.

As far as Apollos sales are concerned, last year was challenging, especially, the third quarter. Yet, we were one of the few tyre manufacturers globally to register a profit quarter-on-quarter throughout FY 2008-09. This was primarily because we had anticipated a slowdown and had taken timely measures to prepare ourselves for the same.

This is a significant year for us. Our Chennai greenfield, a state-of-the-art radial project with an investment of Rs 1,100 crore, is expected to become operational by the end of this year with an initial production capacity of 150 tonnes. Combined with this is the integration with Vredestein in the Netherlands. The worst is behind us. We expect a positive year and see a steady growth in sales.

Competition in the segment is becoming intense. How does Apollo plan to hold on to its customer base

Customers are becoming increasingly aware. They know what they want and where to get it. We offer our customers a smart choice, which is value for money apart from satisfying various other parameters like style, speed and performance. But more importantly, Apollo has focused on offering a complete service experience rather than just selling a product. To this end, we have established branded retail outlets for our passenger vehicle and commercial vehicle customers. These outlets, apart from showcasing and selling products in a comfortable ambience, are equipped with facilities like waiting lounges, refreshment counter and entertainment zones, and are manned by trained staff who can guide the customers in selecting the best tyre for their vehicle.

Also, for the last few quarters our marketing campaigns have been designed to provide maximum value to our network partners and consumers, and have been well received.

In an interview to The Financial Express, last year, a company spokesperson said that Apollo is driving at top gear to reach the groups turnover goal of $2 billion by 2010. How close are you to that mark

Internally, we call it Mission 2010x2010: To be a two billion-dollar company by the year 2010. We are well on our way towards achieving our mission. Recently, we acquired the premium Dutch tyre manufacturer, Vredestein Banden BV (VBBV), which is based in the Netherlands. Vredestein adds Rs 2,200 crore to our topline, taking the turnover to around US$ 1.6 billion. That leaves another $400 odd million to be accounted for by March 2011.

Talking about VBBV, what did you gain from the acquisition in terms of brand, marketing and production capability

To begin with, Vredestein gives us access to the highly-competitive, quality-conscious and tech-savvy European market with its well-established distribution network in Europe and select regions of the world, including the US. Moreover, it is a strong, premium brand in Europe and is recognised for its world-class passenger car tyre technology. It also owns a second tier, popular value brand called Maloya.

Vredesteins manufacturing unit in Enschede, near Amsterdam, has a production capacity of 5.5 million passenger car radials. Yet another gain is the pool of talented individuals who have now come into the Apollo fold. And of course, it is a profit making and fast growing enterprise. This acquisition couldnt have come at a better time. Weboth Apollo and Vredesteinsee it as an ideal strategic fit.

How important is the Indian market in comparison to the markets overseas

The Indian market is our first domestic market and our home turf. To be a global player, it is almost mandatory for us to be a clear cut leader in this market. The lions share of our revenues comes from this market. Naturally, it plays a key role in all our plansstrategic or tactical, long term or short term.

We are constantly exploring ways to nurture, better service, and enhance our presence this market. Having said that, southern Africa and Europe are our other two domestic markets and those also feature prominently in our ambitions for profitable growth.

Retreading, or replacing the worn-out thread of the old tyre with a new one, costs only 20% of a new tyre but increases its life by 70-80%. Being a price-conscious market, do you see retreading emerging as a big threat

Retreading does offer a cost-effective and environmentally-friendly solution. For us it is not a threat, but in fact compliments our portfolio. Apollo offers both retreading material and retreaded tyres for commercial vehicles. One must remember that while retreading has its few considerable advantages and works well in some situations, fresh tyres have their own strengths and benefits. Its a question of establishing an equation between application and fit.

Tyres imported from China, which are at 25% cheaper, now constitute about 5% of the market. Does the China factor worry you

We do not really have an issue with imports as long there is a level playing field and they do not compromise on quality and safety standards. Just the fact that the imported tyres are 25% cheaper says something for them. The tyre industry association ATMA (Automotive Tyre Manufacturers Association) has been taking a proactive stand and has raised the issue with the government. On many of them like putting commercial radial tyres on the restricted list, the government has taken a firm stand. I am sure by working together; we will be able to safeguard the interests of Indian customers and the industry.