Apollo Tyres Ltd. makes a corporate announcement

The ₹10,000 million (₹1,000 Cr) NCD approval does not specify a dedicated end-use. The board announcement authorises the fund raise through private placement but does not identify whether the proceeds will refinance high-cost debt or fund new capex; that specific allocation could not be confirmed. ^[1]

Management has separately said that debt funding would support a combination of working capital and upcoming expansion, with further borrowing possible as the company executes its announced expansion plans. This is a broader financing comment, not an explicit earmarking of the ₹1,000 Cr NCD issue. ^[2]

Latest balance-sheet position — 30 September 2026

• Net debt: ₹3,259.9 Cr, based on borrowings of ₹3,888.3 Cr less cash and equivalents of ₹628.4 Cr. ^[3]
• Net worth: ₹17,553.2 Cr. ^[4]
• Derived net debt-to-equity: approximately 0.19x = ₹3,259.9 Cr / ₹17,553.2 Cr. ^{[3] [4]}
• The reported debt-to-equity ratio is 0.25x, which is a gross-debt measure and should not be confused with net debt-to-equity. ^[4]

The proposed issuance was approved after the 30 September balance-sheet date, so it is not reflected in the current 0.19x net debt-to-equity calculation. If the full ₹1,000 Cr were ultimately deployed into new capex, with equity unchanged and no offsetting cash generation, net debt-to-equity would rise mechanically to approximately 0.24x. If the funds were used to refinance an equivalent amount of existing debt—or remained as cash pending deployment—the immediate net debt-to-equity impact would be broadly neutral; refinancing would primarily improve interest cost and maturity structure rather than leverage.

Primary cause: raw-material inflation, with a lag in price pass-through. Management did not identify an adverse replacement-versus-OEM mix shift or a broad increase in operating expenses as the main reason for the Q2 EBITDA margin contraction.

• Raw materials: The raw-material basket rose approximately 25% from April 2026. Management said it had implemented price increases, but the average increase was only 11–13% versus the estimated 16–17% required to fully preserve margins. This gap directly compressed gross margin and EBITDA. ^{[5] [6]}
• Replacement vs. OEM mix: The presentation described growth as broad-based across both Replacement and OEM channels, with continued premiumisation in larger-rim PCR tyres and Vredestein. It did not frame an unfavourable channel mix as the principal margin driver. ^[7]
• Operating expenses: Management highlighted disciplined cost control and operating efficiencies as offsets to inflation, including tight control of A&P, travel and other controllable expenses. It therefore presented opex management as mitigating the margin pressure, rather than causing it. ^{[8] [9] [9]}

The reported profit increase to ₹292 crore, up 13.3% YoY, therefore coexisted with weaker operating profitability: the issue was that input-cost inflation temporarily outpaced pricing, while below-EBITDA items supported PAT. ^[10] Management’s margin-recovery route is further pricing, especially in Replacement, as the cumulative price actions catch up with raw-material costs.

Verdict: Apollo’s Q2 FY27 consolidated EBITDA margin of 10.7% was 1.2 percentage points above CEAT’s 9.5%, but Apollo did not demonstrate a materially better margin trend. Apollo’s India EBITDA margin fell from 15.3% to 11.1%, a 4.2pp contraction, versus CEAT’s consolidated decline from 13.53% to 9.50%, or 4.03pp. MRF’s Q2 FY27 margin could not be confirmed; its latest available comparable KPI is Q1 FY27, not Q2.

Q2 margin comparison

Apollo therefore retained the higher absolute margin, but the available underlying comparison suggests that its India business experienced broadly similar compression to CEAT. The difference is more in the margin level than in the direction or magnitude of deterioration.

How much does India–Europe mix explain?

Apollo’s H1 FY27 revenue mix was 69% India, 26% Europe and 5% other regions ^[13]. In Q2:

• India: Revenue rose 25.6% YoY, while EBITDA margin was 11.1% versus 15.3% a year earlier ^[7]. Management attributed the pressure primarily to raw-material inflation; the raw-material basket was approximately 25% higher YoY, with pricing actions only partly offsetting the increase ^[5].
• Europe: Revenue fell 12% YoY to EUR 157 million, reflecting weakness in truck and agriculture segments and supply disruption linked to the Enschede plant closure ^[14]. EBITDA margin was 10.3%, down from 12.7%, a 2.4pp contraction ^[15].

The mix provided some cushioning, because the larger India business had an 11.1% margin versus 10.3% in Europe. However, the regional margin gap was only 0.8pp, so geography alone cannot explain the difference between Apollo’s 10.7% consolidated margin and CEAT’s 9.5%. Apollo’s India business also suffered a sharp margin reset, meaning the dominant segment was not insulated from the commodity shock.

The more important divergence is operational: Apollo’s Europe margin was affected by temporary supply-chain and manufacturing-transition costs, while India benefited from strong growth, premiumisation and operating leverage. Management said Europe’s weakness reflected both softer market demand and the transition of manufacturing from Enschede and Hungary to India ^[16]. Consequently, the India–Europe mix explains part of Apollo’s margin profile, but the Q2 contraction was driven principally by common raw-material inflation and the timing of price pass-through, with Europe-specific restructuring adding an additional drag. A precise mix contribution cannot be calculated because Apollo reports the regional revenue mix for H1, while the segment margins are reported for Q2 and no margin bridge for the “other” regions is provided.