Apollo in talks for foreign collaborations

My colleagues Promit Mukherjee and Beryl Menezes co-authored this story appearing in DNA Money edition on Saturday, Feb 23, 2013.

Apollo Tyres, India’s largest tyre maker, is exploring collaborations with foreign companies to enter markets where it is not currently present in, starting with Latin American and Southeast Asia.

Onkar S Kanwar, chairman, Apollo Tyres, said, “We are in talks with a few players wherein they will take products from us in our country and gives us products, for example, in Brazil. This approach will be a win-win for both.”

Kanwar said the company is likely to make a few announcements on collaborations by early next fiscal.

The tyre manufacturer, which has earlier acquired companies in Europe and Africa, now betting on collaborations.

“That’s going to be the future for a lot of tyre manufacturing companies looking to enter the untapped foreign markets,” he said.

India contributes almost 60% to Apollo’s revenues with the rest coming from overseas.

“We want outside India business to reach 70% from the current 40% in the next few years,” he said.

On capital expenditure for the next fiscal, Kanwar said, “In Thailand, we are looking at investing $300-400 million in the initial stages. Similarly, we are also looking at inorganic opportunities in other markets globally.”

While the overall automobile industry is witnessing challenges, Apollo has decided not to completely depend on Indian OEMs and spread risks evenly.

On impact of the recent production cuts by Tata Motors, Kanwar said, “While we have not cut down production, we have decided to export those products in Middle East and Southeast Asia that are now classified as domestic markets for the company. We have been servicing all of them the same way and will continue doing so in the future as well.”

On backward integration, the company is looking to secure supply of rubber its key raw material.

“We have signed up with a team of scientists in Arizona for growing rubber on arid lands, which have no water and lot of sunshine. We are investing heavily in this; all I can say is that initially it will be a few million dollars. We are investing in Russia too in this regard,” he said.

Once this is achieved, the company plan to give seed and facilities to farmers in Gujarat and Rajasthan and buy rubber from them.

The company eyes 25-30% raw material security in the next two to three years.

On challenges being faced by the automobile industry, Kanwar said a revival will happen sooner or later, but the well-diversified companies will always do well.

Follow Ashish K Tiwari on twitter @ashishktiwari