A year ago, investors questioned Apollo Tire’s $2.51 billion bid as a reckless takeover by Cooper Tire. The deal fell through. But Apollo Tire’s share price has nearly doubled in the past year. ET finds out what is happening to the Kanwar family.

Ambition is hard to control. Using Apollo Tires Kanwars under Kanwars For example, even a 38% drop in its share price in 2013, year June to December monthly, could not kill its momentum as investors harshly criticized its decision to spend 25% to buy Cooper Tire for $ billion. /p The deal failed miserably and on December 30, 2013 was canceled. The next day, in a meeting attended by all executives, the company launched another engine of growth, including investment in a new global plant. It was decided to invest Rs 475 crore in a new plant in Hungary. This will be the company’s first newly developed plant outside India and will be able to produce up to 12 million tires for cars, trucks and heavy vehicles.

Kanwar, Vice Chairman and Chairman, Apollo Tires added, “We will not stop with inorganic expansion. We need to realize our vision and immediately focus on B’s organic growth plan.” : “This does not mean that we have stopped inorganic expansion. We remain open to it and will explore new opportunities. ‘

Subsequently, in July 1 this year, Apollo Tyres announced an additional investment of Rs 200 crore in 200 plants in Chennai and Kerala.

It was expected that there would be at least a short break in recovering from Cooper’s breakdown. But that is not the case for Kanwar. They are hungry for growth and have enough money to support it. The company expects to report a net profit of Rs. 100 crore for the 2014 financial year.

Adding 600 via the Cooper deal The first attempt at $100 million in revenue backfired, so the second attempt seems to have worked better. However, Apollo’s FY2014 revenue is still only $2.2 billion.

In the last 12 months, Apollo Tires shares have nearly tripled to Rs 226x outperforming the BSE Sensex which has risen about 40% in the same period. In December 2013, the Kanwarr family 38 one of the lowest points in the tire manufacturing process, no one could have predicted that the stock would rise so high.

Other tire stocks also rallied sharply in 2013. At the same time, some tires outperformed Apollo Tires.

The strong recovery in the Apollo stock market suggests that the company is bouncing back this year after a disastrous 2013 2000. The question is how did the Kanwar family achieve such a dramatic change?

Michael Ward, Director of Corporate Advisory, Corporate and Institutional Banking, RBS “Apollo has benefited from its ability to think and act quickly, decisively and sometimes unconventionally, in a little-known industry.”

Thanks to the Canwals. They have stuck to their ambitions of building a global presence through acquisitions, buying new plants overseas and exporting to India. That said, some macroeconomic conditions have worked in their favor and helped them along with other tire makers. But perhaps no one is better Tyres 2009 Vredestein Banden than Apple.

V Factor

Ward first saw the speed and determination with which Apollo acquired the Dutch tire company. This marked Apollo’s entry into Europe.

In 2008-09, the world was in recession and Friedstein was in trouble. The deal was struck with the company’s former Russian owners and had an enterprise value of about €200 million.

This was partly due to the low cost of the acquisition, but also thanks to Kanwars’ efforts to turn things around.

The elder Kanwars recalls that Friedstein’s employees were plagued by negativity and uncertainty. Everyone was worried that their jobs would suffer.

So Kanwars brought Vredestein’s 50 prominent senior executives to India. “We brought them into the factory so they could meet the employees. They were here for two or three days. They don’t know much about India or Apollo. It was very important for us to expose them to our culture. It’s important.” He said.

In 2008, Vredestein had sales of €306 million and EBITDA of 11.5%. After the Tyres acquisition, sales increased to €459.9 million and EBITDA (Ebidta) of 17.8% in fiscal 2014.

“Ambitious acquisition of Vredestein and good at integration,” said Apollo Ward. Ashwin Kedia, market analyst and co-founder of Alchemy Capital Management, added: ‘It was time for Vredestein to be acquired, and at a lower price. ‘ He has been following the company closely for the past 15+ years.

Global focus is working

Global acquisitions-Vredestein and Cooper operated well but were eventually terminated-are not the only way for the Kanwarr family to build an international presence. Exporting from India is another way. Driving the latter are the two Ps: passion and profit.

“We are the first made-in-India car brand to sell independently in Europe, and that makes us proud,” says Neeraj Kanwar. “We have already sold 100 Apollo brand passenger car tires 10,000 units in Europe.”

The global market has also provided better profitability. He added, “Our margins in our European business are as high as 17-18%, while the margins in our Indian business are as high as 11-12%.

Europe is now Apolloo’s second largest market by revenue. In fiscal 2014, its European business contributed about 29%, while 61% 10% of its revenues came from its Indian business From its global business.

However, 95% of European sales come from the aftermarket. The aim of investing in a new plant in Hungary is to increase profits by selling directly to car and truck manufacturers (OE or OEM sales). The Apollo and Vredestein brands have a market share of about 3% in the passenger car segment, which is expected to rise to 5% once production begins at the new Hungarian plant.

Analysts believe Apollo Tyres’ European bet is paying off. “They are allocating capital to Europe and the economy is bottoming out,” said Kedia. ‘

Chairman Kanwar wants Apollo to become one of the top 10 tire companies in the world. It is currently ranked 17th.

I always thought Apollo was one of the most likely candidates to be in the top 10 in Asia or even the top six in the world, but the goal is to be a top 10 tire company,” said Ward, of RBS Corporate and Institutional Banking, “and there are more places to do that,” he said. Better than available. Taiwan’s Magis and China’s Zhongce Rubber are on the rise. A growing number of Chinese companies are competing with Singapore’s Garton Group. ‘ He added.

Perhaps the only global market where Apollo has underperformed is South Africa. While some of the businesses were sold late last year, the rest underwent a corporate restructuring process. This was due to uncompetitive cost structures, ongoing labor unrest and related issues.

Favorable Winds

In addition to ambitious global expansion, these two macroeconomic factors also favor Apollo.

First, crude oil prices have fallen from $102 to less than $80 over the past year. Rubber prices have also fallen by 24%. This has helped improve profitability. The company’s EBIDTA margin for the first half of the current fiscal year was 14.1%, an improvement from 12.8% higher than the same period last year.

Secondly, truck sales in the automotive sector also picked up as business confidence and growth prospects in India recovered.

Both are being used as a double enhancement. Arora, Research Analyst, PL India Surjetet, said, “We believe in Apolloololo At the same time, our margins are likely to widen given the correction in rubber and crude oil prices.” Huge capital investment and cash flow pressure are his only caveats.

The company is confident that it can finance itself through debt and internal accruals. Evidence of this comes from dividend payments. “We have maintained 50% Last year, we paid 75% of the dividend. ” said senior Kanwarr.

Kedia said, “We believe Apollo Tyres is in a favorable position and the commercial vehicle business can improve cyclically.” . “Over the years, they’ve become very capable in truck tire technology and very strong in truck lunch lines.”

With all the positive developments, Apollo’s Cooper mistake last year is now a distant memory. But questions about Kanwars. Questions still need to be asked. Why did the deal go wrong?

“We have a great internal team and 20 teams Many due diligence external consultants,” Neeraj said. But I don’t think I can understand the nature of the company’s Chinese partner. I met him before I signed the contract. He was very nice, as if we had known each other for a long time. But surprisingly, after the deal was announced, the guy didn’t budge. ‘ He added.

On October 31, 2014, the Delaware Court of Chancery ruled that Cooper had failed to meet his “contractual obligations” because he lacked control over his largest Chinese subsidiary.

The Kanwar family has forgotten Cooper’s failure. So have investors and the stock market.