InvestorQ : How did Apollo tyres record such a sharp growth in profits in the Dec-20 quarter?
swati Bakhda made post

How did Apollo tyres record such a sharp growth in profits in the Dec-20 quarter?

Sam Eswaran answered.
11 months ago

Even as the auto industry has seen a sharp pick-up in the last few months, a big beneficiary has bene the tyre sector which derives ancillary demand from the auto sector. One such big beneficiary was Apollo Tyres of the Omkar Kanwar group. Apollo Tyres had a stellar Dec-20 quarter with PAT up 155% at Rs.444 crore supported by 17% growth in revenues.

Profits were not just about revenues but also came on the back of better deployment of working capital during the quarter. This led to less funds locked up in the working capital cycle thus freeing up capital for other corporate applications. The lower input costs also helped the company despite risks of supply chain disruption.

If you turn to the top line, the consolidated sales for Q3 was at Rs.5,153 crore with markets in Asia Pacific, Middle East and Africa showing very strong sales traction. The global markets have benefited immensely from the global auto recovery and that has kept tyre demand buoyant. Apollo Tyres benefited from the global recovery in the auto industry.

More importantly, the global auto recovery also created a sharp spike in original equipment manufacturer of OEM demand for tyres. Operating margins of Apollo moved up smartly from 5.67% to 12.85% on a YOY basis as working capital traction helped. Apollo also reported stronger PAT margins at 8.61% for Dec-20 quarter against 3.94% in Dec-19 quarter.