Apollo Tyres to start production at AP plant in Sept.


Apollo Tyres Ltd. (ATL) is expecting to start commercial production of truck tyres at its Andhra Pradesh plant during September 2020, said a top official.

“The AP plant is still in its infancy stage. We have started the passenger car tyre production. The truck tyres production has still not started. We expect to start commercial production of truck tyres in September,” said Gaurav Kumar, chief financial officer, Apollo Tyres Ltd, during an earnings call.

Mr. Kumar announced that ATL reduced its capex for the current fiscal by ₹400 crore to ₹1,050 crore for the Indian operations along with deferment of all increments for employees and salary cut at top level.

According to him, ATL had already incurred ₹2,200 crore out of the ₹3,800 crore capital expenditure planned till March 2020, and out of the ₹1,050 crore capex for current fiscal, the largest chunk is for Andhra Pradesh. In India, the maintenance capex is pegged at about ₹200‐300 crore and in Europe between ₹150‐200 crore.

“The AP plant ramp up would be completed in FY22. Going on from there, it would, of course, depend on demand, but I can safely say that FY23‐FY24 there should be only maintenance capex and we should be strongly be cash flow positive,” he said.

ATL’s current inventory level stands reduced by almost ₹250 crore, or about seven days of sale. The current levels of inventory are lower and have dipped because of production constraints, where we have to operate the plants within safety guidelines; and with the demand being extremely strong, we are walking a fairly tight rope right now, he said.

Despite subdued financial performance, ATL strengthened its balance sheet with cost control measures, tight control over capex and a timely equity raise. Its net debt decreased to ₹5,200 crore from ₹6,000 crore in the previous quarter.

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