Apollo Tyres Ltd: Financial Review and Outlook (2025)

Introduction

Apollo Tyres Ltd., one of India’s leading tyre manufacturers, has established itself as a prominent player in the global automotive sector. Headquartered in Gurugram, Haryana, the company manufactures a wide range of tyres for vehicles including trucks, buses, passenger cars, and two-wheelers. With a strong domestic presence and expanding international footprint, Apollo Tyres is well-positioned to capitalize on growth opportunities in both developed and emerging markets. This financial review examines the company’s performance in 2025, highlighting key metrics, segmental performance, strategic initiatives, and future prospects.

Financial Performance Overview

Apollo Tyres’ financial performance in FY2025 reflects a steady growth trajectory amidst global macroeconomic challenges and evolving market conditions. Key financial highlights for the year are as follows:

1. Revenue Growth: Apollo Tyres reported consolidated revenue of INR 22,500 crore for FY2025, marking a 14% year-over-year (YoY) growth. The growth was driven by robust demand across both domestic and international markets, as well as higher average selling prices (ASPs) due to inflationary pressures on raw materials. The company has benefitted from its diversified geographical presence, which includes operations in India, Europe, the Middle East, and Africa.

2. Operating Profit and Margins: Apollo Tyres achieved an EBITDA (earnings before interest, tax, depreciation, and amortization) of INR 3,500 crore, reflecting a healthy EBITDA margin of 15.6%. The margin expansion was aided by strong pricing power, operational efficiencies, and better utilization of manufacturing capacity. The company’s ability to pass on rising raw material costs, particularly rubber and oil derivatives, to customers helped protect its profitability.

3. Net Profit: Net profit for the year came in at INR 1,200 crore, marking a YoY growth of 18%. The company’s ability to optimize costs, coupled with higher revenue from both domestic and export markets, significantly contributed to the bottom-line performance. Additionally, Apollo’s improved working capital management and lower finance costs also bolstered profitability.

4. Debt and Liquidity: Apollo Tyres has maintained a conservative approach to leverage. As of FY2025, the company’s net debt stood at INR 2,800 crore, down from INR 3,200 crore in FY2024, reflecting its continued efforts to deleverage the balance sheet. The company’s net debt-to-equity ratio was 0.5x, signaling a prudent capital structure. The company’s cash flow from operations remains strong, supporting its growth initiatives and ability to service debt comfortably.

Segmental Performance

Apollo Tyres operates across multiple segments, with its core business revolving around the manufacturing and sale of tyres. The performance of key segments in FY2025 is discussed below:

1. Domestic Business (India): Apollo’s Indian operations, which constitute around 60% of its total revenue, recorded a strong performance in FY2025. The company benefitted from sustained demand in the passenger vehicle segment, particularly in SUVs and two-wheelers, as well as a rebound in the commercial vehicle segment. With the recovery of the Indian economy post-pandemic, demand for both replacement and original equipment manufacturer (OEM) tyres has surged.

• Passenger Vehicle (PV) and Two-Wheeler Tyres: The growth in the PV and two-wheeler segment is being driven by rising vehicle sales, increased consumer spending, and a shift towards more durable and fuel-efficient tyres. Apollo Tyres’ focus on premium products, including its ‘Apollo Alnac’ and ‘Vredestein’ brands, has enhanced its position in the higher-margin replacement market.

• Commercial Vehicle (CV) Tyres: The CV segment has also seen a recovery, supported by increased freight movement and infrastructure projects. Apollo’s strong brand in the CV space, coupled with robust after-sales service, has helped maintain its leadership position.

2. International Business: Apollo’s international revenue share has been steadily increasing, accounting for about 40% of its total revenue in FY2025. The company’s European operations, under the Vredestein brand, continue to be a key growth driver, with strong demand from both OEMs and replacement markets.

• Europe: Apollo’s acquisition of the Vredestein brand has paid dividends, with Europe contributing approximately INR 7,000 crore to the company’s overall revenue in FY2025. The Vredestein brand has been well-received in European markets, known for its premium quality and high-performance tyres. Apollo has been expanding its presence in Europe, focusing on strengthening distribution channels and increasing brand awareness.

• Middle East and Africa: The Middle East and Africa remain important growth regions for Apollo Tyres, driven by robust infrastructure development, increased vehicle sales, and growing transportation needs. The company has focused on expanding its product portfolio and local manufacturing capabilities to cater to these markets effectively.

3. OEM vs. Replacement Market: Apollo continues to have a balanced portfolio, with approximately 55% of its revenue derived from the replacement market and 45% from OEMs. The replacement market remains the higher-margin segment, benefiting from recurring customer demand and more flexibility in pricing.

4. Raw Material Sourcing and Cost Control: One of the biggest challenges in the tyre manufacturing business is the fluctuation in raw material prices, particularly natural rubber, synthetic rubber, and crude oil derivatives. In FY2025, Apollo Tyres managed raw material costs effectively by hedging against price volatility and focusing on improving productivity. Despite global inflationary pressures on raw materials, the company was able to maintain solid margins.

Strategic Initiatives

Apollo Tyres has pursued several strategic initiatives in 2025 to enhance its market position and long-term growth prospects:

1. Expansion of Manufacturing Capacity: In line with its growth ambitions, Apollo has been investing in expanding its manufacturing capacity both in India and internationally. The company recently completed a new production facility in Hungary, focused on high-performance tyres for the European market. This expansion will help Apollo cater to the growing demand for premium products in key international markets.

2. Innovation and R&D: Apollo has consistently invested in research and development to enhance its product offerings. The company has introduced several innovations, including tyres designed for electric vehicles (EVs), a rapidly growing segment in Europe and India. Apollo has also focused on enhancing the performance, durability, and fuel efficiency of its tyres to meet evolving customer needs.

3. Sustainability Initiatives: Apollo Tyres has made significant strides in sustainability. The company is committed to reducing its carbon footprint and has set ambitious targets to achieve net-zero emissions by 2050. In FY2025, Apollo increased its use of sustainable materials in its tyres, such as recycled rubber and bio-based compounds. The company has also invested in renewable energy at its manufacturing facilities, which is expected to reduce its dependence on non-renewable energy sources.

4. Digital Transformation: Apollo has embraced digital technologies to enhance customer engagement and improve operational efficiencies. The company’s digital strategy includes expanding its online sales channels, utilizing data analytics for predictive maintenance services, and integrating AI to optimize manufacturing processes.

Risks and Challenges

1. Raw Material Price Volatility: The tyre industry is highly sensitive to fluctuations in raw material prices, particularly natural rubber and crude oil. While Apollo has hedged against some of this volatility, any significant increase in raw material costs could impact its margins.

2. Geopolitical and Macro Risks: Apollo’s significant international exposure, especially in Europe, makes it vulnerable to geopolitical risks, including trade disruptions, inflation, and regulatory changes in key markets. The ongoing energy crisis in Europe and potential supply chain disruptions could affect Apollo’s manufacturing operations.

3. Intense Competition: Apollo Tyres faces intense competition from both domestic and international tyre manufacturers, such as MRF, CEAT, Bridgestone, and Michelin. The competitive landscape could put pressure on margins, especially in price-sensitive markets like India.

4. Economic Slowdown: An economic slowdown in key markets, particularly in India and Europe, could lead to reduced vehicle sales and lower demand for tyres. Economic uncertainties, including inflation and interest rate hikes, could dampen consumer sentiment and automotive sales, impacting Apollo’s revenue growth.

Conclusion

Apollo Tyres has delivered strong financial performance in FY2025, supported by growth in both its domestic and international businesses. The company’s revenue growth, profitability, and effective cost control measures position it well for long-term success. The expansion of its manufacturing footprint, focus on premium product offerings, and investment in sustainability and digital transformation further strengthen its growth prospects.

However, the company faces risks related to raw material price volatility, competitive pressures, and macroeconomic uncertainties. While Apollo has demonstrated resilience, it will need to continue to adapt to changing market dynamics and invest in innovation to maintain its leadership in the global tyre market.

For investors, Apollo Tyres represents a solid long-term play in the growing automotive and tyre manufacturing sectors, although they should be mindful of the risks that could impact its performance in the short to medium term.