‘We cannot ignore the US or China’

Apollo Tyres has embarked on a global expansion plan in the past couple of years – after the takeover attempt on US-based Cooper Tire failed in December 2013 – the company has re-jigged its plans, and has begun work on a greenfield site in Hungary, having bought Dutch tire maker Vredestein in 2009. It has sales offices in Thailand, Dubai and Brazil as it considers the possibility of expanding in these regions. Last year it tied up with Manchester United. Reflecting its global ambitions, Managing Director Neeraj Kanwar is based out of London, and spoke to Business Line about his plans to make the company into one of the world’s top 10 in the sector.

The non-Indian market currently accounts for 45 per cent of your revenues – could you see a day when it accounts for more than 50 per cent?

India is our home market and main foundation. We are leaders in India and intend to keep up that leadership position, so we will keep expanding plants in India. I think that we will see 50:50 eventually but I don’t see India going down to below 50 unless there is a global acquisition that takes place.

What is the focus for the Hungarian facilities?

We will obviously cater to Eastern Europe but mainly Western Europe and the US. It is a big step for us because this is a massive investment - $ 475 million – and it’s the first time we’re setting up a greenfield project outside of India. I am pretty bullish about it and very optimistic about the project

Do you still have the ambition to be a $6 billion company and if so by when?

Our initial vision of 2016 was not achieved - we are far from achieving that. We are in a phase where we are setting out vision for 2020. It’s a bottom up kind of exercise the entire company is doing.

Are you actively considering acquisitions?

Now we have reached approximately $ 2.5 billion –with acquisition and organic growth. That is our vision going forward – a mixture of organic and inorganic. We will look at acquisitions. Right now nothing is on the table but yes we are always looking at how we can grow the company. We are growth oriented and we want to go to new continents.

What are your plans for the US and China?

I am seriously looking at China – I cannot ignore China. If our ambition is to become a top ten in the world, we cannot ignore the US or China. I don’t have anything right now – eventually one has to enter those markets.

In the US, we sell both Vredestein and Apollo there but on a small scale. The answer to that market is not selling to the US but sourcing there, eventually. But now we are just getting a feeling and have no plans for sourcing from the US right now. Our focus is Europe, South East Asia and taking Hungary up to a level where we can say we have 80-90 per cent utilisation.

In Europe the focus is getting to the original car manufacturers – in India we sell to the VW and Audis of this world – now in Europe we are in very positive discussions with them for taking our tyres.

What is the potential for European market share?

It’s currently around 2.5 per cent, but even with Hungary coming up we see it moving to 3 per cent. But Europe gives me a stepping-stone into technology and creating brands because that’s the main thing going forward. In the next five years we are emphasizing building both brands and technology. If we get this right, the sky is the limit.

What are your priorities?

If I get technology right – the product right for the customer and build the brand around it obviously we can go pretty far. We’ve been working on these two pillars – we have a marketing office in London where we have people going through the brand journey and giving it new life. You will see much more of Apollo awareness drive happening in all markets. Marketing budgets are going up.

Then comes the technology story, which is split between India and Europe. We have 300 technologists between the European and Indian R&D centres. We’re putting a lot of emphasis on giving people the right training, and working with universities. Cars are becoming smarter and smarter, and tyres are becoming a very important part of the car. That is where we are looking at innovations.

Two years on what are your thoughts on the Cooper Tire deal?

We are a much stronger company. We are much wiser. There is much more to learn. I don’t look back. I have to keep the company moving irrespective.

Listing in Europe?

Yes that is my plan eventually – that is one of my visions, whether it takes four or five years.

In India we are listed in Mumbai and cannot get out of that. So I will look at eventually creating good value out of the international business.

This brand exercise and technology journey is primarily to do that. And then at the right time I will look at an international listing of the international business.

Future growth?

In India there is growth obviously – with the government hopefully putting in the right reforms, we will see greater growth than what has been happening. For Europe we see growth with new Apollo brands coming in, and there is growth happening in new markets – Thailand, Malaysia, Philippines, - and in the Middle East we are looking at Dubai, Saudi, Emirates and Iran. Northwest Africa is another big market for us.

Your take on the budget?

It’s positive. Nothing drastic happened – positive or negatively. They have spoken a lot about infrastructure that is required, which will not only help the economy but also individual corporates have a growth story. This is a critical year coming up to see if those reforms are actually implemented on the ground.

COMMENT NOW