STATEMENT OF PROFIT & LOSS

FOR THE YEAR ENDED MARCH 31, 2012 Note Year Ended March 31, 2013 Rs. Million 94529.05 9454.14 85074.91 B11 573.77 85648.68 Year Ended March 31, 2012 Rs. Million 89,065.35 7,486.60 81,578.75 181.94 81,760.69

1. Revenue from Operations: Gross Sales Less : Excise Duty Net Sales 2. Other Income 3. Total Revenue (1 +2) 4.Expenses : (a) Cost of Materials Consumed (b) Purchase of Stock-in-Trade (c) Changes in Inventories of Finished Goods, Work in Process & Stock-in-Trade (d) Employee Benefit Expenses (e) Finance Cost (f) Depreciation & Amortization expenses (g) Other Expenses Total Expenses 5. Profit before Tax (3 - 4) 6. Tax Expenses (a) Current Tax Expense (b) Less: MAT Credit (Note - C 3) (c) Net Current Tax Expense (d) Deferred Tax 1060.12 1060.12 559.79 1619.91 Profit for the Year (5-6) Earnings per Share of Re 1 each: (a) Basic (b) Diluted C25 6.20 6.20 3.60 3.60 3125.28 515.19 301.29 213.90 547.90 761.80 1,813.33 B13 B12 B14 B5 B12 (73.71) 4268.52 2609.73 2200.71 10685.65 80903.49 4745.19 234.51 3,686.53 2,413.01 1,856.92 8,876.98 79,185.56 2,575.13 B12 B12 58673.64 2538.95 59,733.79 2,383.82

See accompanying notes forming part of the financial statements In terms of our report attached For DELOITTE HASKINS & SELLS Chartered Accountants GEETHA SURYANARAYANAN Partner Gurgaon May 10, 2013 SUNAM SARKAR Chief Financial Officer & Whole Time Director P N WAHAL Head (Sectt. & Legal) & Company Secretary ONKAR S KANWAR Chairman & Managing Director U S OBEROI Vice Chairman & Managing Director M R B PUNJA Director

BALANCE SHEET
AS AT MARCH 31, 2012 Note As at March 31, 2013 Rs. Million As at March 31, 2012 Rs. Million

A. EQUITY & LIABILITIES: 1 Shareholders' Funds : (a) Share Capital (b) Reserves and Surplus (c) Money Received against share warrants 2. Non-Current Liabilities: (a) Long-term Borrowings (b) Deferred Tax Liabilities (Net) (c) Other Long Term Liabilities 3. Current Liabilities: (a) Short-term Borrowings (b) Trade Payables (c) Other Current Liabilities (d) Short-term Provisions B3 C17 B3 B4 5394.15 6000.95 4625.63 1910.92 17931.65 TOTAL B. ASSETS 1. Non-Current Assets : (a) Fixed Assets (i) Tangible Assets (ii) Intangible Assets (iii) Capital Work-in-Progress (b) Non-Current Investments (c) Long-term Loans & Advances B6 B7 B5 30663.90 79.64 2489.73 33203.27 6126.95 1689.94 41020.16 2. Current Assets: (a) Inventories (b) Trade Receivables (c) Cash & Cash Equivalents (d) Short Term Loans & Advances (e) Other Current Assets B8 B8 B8 B9 B10 11208.26 2731.36 1541.92 1869.66 0.70 17351.90 TOTAL
See accompanying notes forming part of the financial statements In terms of our report attached For DELOITTE HASKINS & SELLS Chartered Accountants GEETHA SURYANARAYANAN Partner Gurgaon May 10, 2013 SUNAM SARKAR Chief Financial Officer & Whole Time Director P N WAHAL Head (Sectt. & Legal) & Company Secretary ONKAR S KANWAR Chairman & Managing Director U S OBEROI Vice Chairman & Managing Director M R B PUNJA Director

B1 B2 C5

504.09 22802.39 107.75 23414.23 13383.68 3518.40 124.10 17026.18

504.09 19,971.95 20,476.04 12,619.88 2,958.61 123.61 15,702.10 7,512.52 8,160.85 4,109.42 1,733.91 21,516.70 57,694.84

58372.06

28,447.02 59.30 3,106.56 31,612.88 5,626.51 2,054.11 39,293.50 11,114.17 3,639.13 1,155.93 2,492.11 18,401.34 57,694.84

58372.06

CASH-FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2013

Year Ended March 31, 2013 Rs. Million
A. CASH FLOW FROM OPERATING ACTIVITIES (i) Net Profit Before Tax Add: Adjustments for: Depreciation and Amortization Expenses (Profit) / Loss on Sale of Tangible Fixed Assets (Net) Dividend from Trade & Non Trade Investments Provision for Compensated Absences Unclaimed Credit Balances / Provisions written back Finance Charges (Net of Interest Capitalized) Interest Income Unrealized Forex Fluctuation Loss / (Gain) on Reinstatement Doubtful Receivables / Advances Written Off (ii) Operating Profit Before Working Capital Changes Changes in Working Capital Adjustments for (increase) / decrease in operating assets: Inventories Trade Receivables Short-term loans & Advances Long-term loans & Advances Adjustments for increase / (decrease) in operating liabilities: Trade Payables Other Current Liabilities Other Long-term liabilities Short-term Provisions (iii) Cash Generated from Operations Less: Direct Taxes Paid (Net of Refund) Net Cash From Operating Activitie0s CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (Including Interest Capitalized) Proceeds from Sale of Fixed Assets Long Term Investment made in Subsidiary Long Term Fixed Term Deposits With Banks Matured Dividends Received from Trade & Non Trade Investments Interest Received Net Cash Used in Investing Activities CASH FLOW FROM FINANCING ACTIVITIES 4745.19 2200.71 2.22 (0.18) 26.71 (85.88) 2609.73 (63.42) 63.11 1.02 1,856.92 12.80 (0.18) 22.62 (33.22) 2,413.01 (58.51) 14.19 -

Year Ended March 31, 2012 Rs. Million

2,575.13

4754.02 9499.21

4,227.63 6,802.76

(130,46) 882.62 779.43 (85.54) (2208.77) (232.02) 63.65 179.65

249.17 (1,574.70) 1446.05 91.14 729.16 (11.52) 2.43 (24.72) (1,472.87)

(2197.49) 8747.77 1047.83 7699.94

695.35 5985.85 594.56 5,391.29

B.

(3692.96) 82.78 (500.74) (5.01) 0.18 61.53 (4053.92)

(5,557.91) 52.04 (33.04) 9.94 0.18 56.87 (5,471.92) 6,256.89 (3,006.21) (848.14) (292.89) (2,316.03) (3210.13) 435.89 1155.93 (56.98) 66.17 28.26 1004.52 1541.92 (0.09) 71.18 30.24 1440.41 (206.38) (247.62) 1,412.63 (17.59) 76.11 27.40 1,291.53 1,155.93 (56.98) 66.17 28.26 1,004.52

C.

107.75 Long Term Borrowings Received 3000.00 Repayment of Long Term Borrowings (1339.35) Bank Overdraft / Short Term Borrowings (net of repayments) (2118.37) Payment of Dividends (including Dividend Tax) (292.89) Finance Charges Paid (Net of Interest Capitalized) (2567.27) Net Cash Used in Financing Activities Net (Decrease) / Increase in Cash & Cash Equivalents Cash & Cash Equivalents as at Beginning of the year (Gain)/Loss on Reinstatement of Foreign Currency Cash and Cash Equivalents Less: Bank Deposits with Original Maturity over Three Months Less: Unpaid Dividends Bank Accounts Adjusted Cash & Cash Equivalents as at Beginning of the year Cash & Cash Equivalents as at the end of the year (Gain)/Loss Reinstatement of Foreign Currency Cash and Cash Equivalents Less: Bank Deposits with Original Maturity over Three Months Less: Unpaid Dividends Bank Accounts Adjusted Cash & Cash Equivalents as at the end of the year In terms of our report attached For DELOITTE HASKINS & SELLS Chartered Accountants GEETHA SURYANARAYANAN Partner Gurgaon May 10, 2012 SUNAM SARKAR Chief Financial Officer & Whole Time Director

ONKAR S KANWAR Chairman & Managing Director

NEERAJ KANWAR Vice Chairman & Managing Director

S NARAYAN Director

P N WAHAL Head (Sectt. & Legal) Company Secretary

Important Information Extracted from ANNUAL REPORT

The auditors have given a clean chit report on the companys annual report. The company has major acquisition plans and is in talks to acquire Cooper tyres. The ApolloCooper deal is estimated to be the largest outbound acquisition by any Indian firm till date Misappropriated Cash to the worth of 76.44 Million, recovered from the erstwhile employees has been accounted as Indirect Income and has significantly contributed to the increase in profits. It has been disclosed by the auditors in the annexures of their report. Straight Line method has been used for calculation of depreciation of tangible assets. FIFO has been used for valuation of finished foods and WIP whereas weighted average has been used for valuation of raw materials, spares and other traded goods. No Fixed Asset has been re-valued this year.

Interpretation of DuPont chart:

PAT/sales: The ratio has increased by 65.3% showing increased efficiency of sales. This can be due to increase in selling price or reduction in costs. In the case of this company, the cost raw material has reduced significantly (referring the common size analysis). Capital turnover ratio has decreased despite increase in net sales. This can be considered in 2 ways: Increase in reserves: In this case the company has proposed the same dividend, even though the PAT has increased by more than $2000 million. Increase in Fixed assets and working capital: The Company has invested in Buildings, plant and machinery. Working capital has increased owing to decrease in current liabilities. The working capital is however still negative.

Information regarding investments and borrowings:

The company has issued unsecured long term debentures worth $3000 million. This has been used to repay a few long term loans and also certain current liabilities and also for the purchase of fixed assets. Long term borrowings of the nature debentures and loans amounting to about $900 million have matured, thus making them current liabilities. The company has also accepted deposits from customers and employees (short term).

Leverages
Operational leverage has increased from 2.11 to 3.25, signifying increasing risk due to expenditure in fixed assets. For this company the increase is due to new investments in machinery and buildings. This makes sense as the company is planning to expand its operations. Financial leverage has decreased due to increased earning, though the interest expenses have increased marginally. The increased operational leverage is reflected in the combined leverage, which has increased.

Profitability Ratios
The gross profit ratio has increased from 23.5% to 28.14% mainly because of the increase in net sales and decrease in the cost of raw materials consumed. The Net Profit Ratio has increased from 3.67% from 2.22%. ROI has increased from 5.47% to 8.47%. One of the major reasons driving the profitability improvement was raw material prices which continued to be fairly stable. Raw material prices were down 9% compared to last year. Particularly, both natural and synthetic rubber was down significantly compared to last year. Due to decrease in Cost of raw materials the proportionate increase in the profits is greater than the increase in net sales leading to the increase in profitability The fluctuation in the Rupee value and the cash recovered from erstwhile employees in the misappropriate expenses case have increased the other income which has further led to the increase in the net profits. EPS of the company has increased by 72.20% while market price of the share has remained constant at Rs 83.45. Therefore P/E ratio has decreased. However after the announcement of the expansion plan the market perception has changed and the MPS has reduced considerably thereby increasing the P/E.

Solvency Ratios and Performance Indicators

Debt/Equity ratio has decreased mainly due to decrease in short term loans from 7512.52 million rupees to 5394.15 million rupees. Proprietary Ratio is 1.02 which is still higher than the ideal range for manufacturing sector (0.67:1 to 0.75:1) Quick ratio of the company is on the lower side (0.34) in spite of Current ratio (0.97) being close to ideal (1:1). This indicates a high dependency on Inventory which means that company relies too much on inventory or other assets to pay its short-term liabilities. Debtors Velocity and Creditors Velocity have decreased significantly (by around 25%). This indicates efficient management of debtors and creditors during the current financial year.

Cash Flow

Net cash from operating activities: increased to Rs. 7699.94 million from Rs. 5391.29 million We see that net cash flow from operating activities has increased by 42%. This is mainly due to decrease in trade payables and other current liabilities of Rs. 2208.77 million.

PRESENCE OF CREATIVE ACCOUNTING

The WIP and finished product closing inventory seems to be much higher than the closing stock of raw materials, as compared to the previous years. The opening stock might have been undervalued in order to reduce the costs of raw materials consumed to push the overall profits up.

Specific Strengths of Apollo Tyres

OPERATIONAL STRENGTHS
Apollo Tyres Ltd. Bought US-based Cooper Tire and Rubber Co for $2.5 Billion, making it the largest outbound acquisition by any Indian automobile firm till date which would make Apollo Tyres Ltd, worlds seventh largest Tyre-maker. Cooper Tire being a bigger firm than Apollo Tyres will double its revenue and more importantly gives the foothold in U.S., Latin America and European markets. Apollo registered 29.39% growth in Operating Profits for the financial year13 and 42.85% growth in net sales despite economic slowdown in Indian and European markets. Theres a generic trend of boost in profitability due to depreciated raw material cost in Automotive Industry. Apollo tyres is market leader in Truck and Light truck segments with 27% market share and 2 nd highest in Passenger car market with 17% market share. The company has three strong product brands in its domestic market: Apollo in India, Dunlop in 32 African Countries and Vredestein in Europe.

FINANCIAL STRENGTHS
Strong Financial Vision, while observing the ROI change over the year, we have observed that Capital employed has increased. The Long term Liabilities have increased while the firm has cut short its Short term liabilities. Fixed assets have increased. The dividends are decreased and reserves and surpluses are increased. This all directs to the point that the company is investing long term and is having well thought out strategy towards the same. Comeback on all fronts, The Company has seen decrease in all significant ratios (Net Profit Ratio, ROI, Return on Net worth etc.) from 2011 to 2012, and the same have increased significantly on all fronts from 2012 to 2013. Higher Profitability Ratios (Net Profit Ratio, ROI and Return on Net Worth) display positive growth of the company to the investors. Increased Debt-Service Coverage Ratio (1.95 from 1.01) increases credibility to Financiers/ Banks thus increasing the potential of procuring funds for further expansion plans.

Specific Weaknesses of Apollo Tyres

Poor liquidity: The current ratio of the company is 0.97 implying that the working capital is negative. This is not usual as the company has raised huge long term loans. As the loans have been used to fuel the expansion plans, working capital position is still poor. Increasing Operating risks: The expansion of the company and high investment in fixed assets like plants and machinery using cash from long term loans puts the company in a risky position. The company has to gauge the growth opportunities properly before acquiring and investments. Debt-equity ratio The company has a debt to equity ratio of 1.49, whereas it can ideally be between 2 and 3. This could mean the company is depending more on current liabilities(the working capital is negative).It can also be interpreted that the company is foreseeing high debts in the future and is hence maintaining a good debt-equity ratio by increasing reserves and equity. Inventory Management The closing inventory has been more than the opening stock which might be a sign of poor inventory management. Raw Material Costs Dearth in the domestic supply of natural rubber coupled with the depreciation of the rupee has made the input costs very volatile as both the national and the import costs would increase. The company at present imports 15% of rubber needed. Other points The market price of the shares has been falling since the announcement of acquisition of cooper tyres. Investors fear a huge financial strain on the balance sheet due to the deal. While the acquisition will be positive for the company in the longer run, the near-term challenge for the company would be to successfully integrate Cooper Tire and Rubber Company operations with itself and raise investor confidence.

Remedial Measures
Increase Liquidity As the debt/equity ratio is low the company can take more long term loans to clear its current liabilities In order to increase the liquidity the company might want to divert its inflows partially for clearing current liabilities rather than investing a major chunk in FA. Though the investment in FA will yield results in the long run the negative working capital is a concern Backward Integration The company has acquired rubber plantations in Asia but the yield cannot be tapped till 5-7 years. Therefore the company might want to do commodity hedging in order to reduce the risk exposure in importing the natural rubber. Investor Concerns The company has huge acquisition plans on its cards. Though this might be a good strategy to transfer the risk exposed abroad. The investors are sceptical because of the huge financial burden. Therefore it should announce a proper risk management plan to increase the confidence.

ANNEXURES
1. Ratio Calculations:
Type Ratio Of Value Ratio Formula 2013 2012

Net Profit Ratio (%age) Return (%) on Investment

3.67

2.22

7.73 Per Share 6.20

5.01

Profitability Ratios

Earnings (Rs/share)

3.60

Return on Equity (%)

13.35

8.86

Return on Net Worth

* 100

8.47

5.47 23.57 0.86

Gross Profit Ratio (%) Current Ratio

28.14 0.97

Liquidity and Solvency Ratios

Debt Equity Ratio

1.49

1.81

Proprietary Ratio

1.02

1.19

Quick Ratio

0.34

0.34 15.00

Debtors Velocity (days)

11

Performance Indicators

Stock Velocity (days)

67

66.00

Creditor Velocity (days) Total Assets Turnover

36 48.00 1.45 1.41

Capital Turnover Ratio

2.1

2.26

Price Earnings Ratio Dividend pay-out Ratio (%age) Interest Coverage Coverage Ratio

13.5

22.2

0.08

0.14 2.84

3.36

Dividend Coverage

12.40

7.20

Debt Service Coverage

1.95

1.01

2. DuPont Analysis: ROI

7.73%

*100
3.67% 2.1

PAT
3125

Sales
85074

Sales
85074

Capital Employed FA

40440

Gross Profit

23935

Other Income

573.77

Other Expenses

10685

41020

WC

(580)

Net Sales
85074

COGS
61139
Direct Expense

Equity

23414

Materials 58673

Non Current Liabilities 17026

CA
17351

CL
17931

2615

3. Common Size Statement of Expenses with respect to Net Sales:

Common Sized Analysis for Statement of Profit and Loss Amount Percentage of Net (Rs. In Million) Sales [85074.91] 2013 85074.91 573.77 58673.64 2538.95 (73.71) 4268.52 2609.73 2200.71 10685.65 80903.49 4745.19 1619.91 3125.28 2012 81578.75 181.94 59733.79 2383.82 234.51 3686.53 2413.01 1856.92 8876.98 79185.56 2575.13 761.8 1813.33 2013 100.00% 0.67% 68.97% 2.98% (0.09%) 5.02% 3.07% 2.59% 12.56% 95.10% 5.58% 1.90% 3.67% Percentage of Net Sales [81578.75] 2012 100.00% 0.22% 73.22% 2.92% 0.29% 4.52% 2.96% 2.28% 10.88% 97.07% 3.16% 0.93% 2.22%

Item Revenue from Operations Other Income Material Cost Purchase of Stock in Trade

Changes in Inventories of Finished Goods, Work in Process & Stock-in-Trade Employee Benefit Expenses Finance Cost Depreciation & Amortisation expenses Other Expenses Total Expenses Profit Before Tax(PBT) Total Tax Expenses Profit after Tax(PAT)

4. Altman Z-Score Model:

Z= 1.2 X1 + 1.4X2 + 3.3X3+ .6X4 + 1.0X5, where X1 = Working Capital to total assets; X2 = cumulative retained earnings to total assets X3 = earnings before interest and taxes to total assets; X4 = market value of equity to book value of total liabilities; X5 = sales to total assets Altman Z Score of Apollo Tyres for year 2013 is 2.663

5. Cash Conversion Cycle:

Current Year Avg. Inventory holding period (67 days) + Avg. Debtors collection period (11 days) - Creditors payment period (36 days) = 42 days Previous Year Avg. Inventory holding period (66 days) + Avg. Debtors collection period (15 days) - Creditors payment period (48 days) = 33 days

6. Leverages:
Leverages Operating Leverage (OL) Financing Leverage (FL) Combined Leverage (CL) Formula 2013 2012 Contribution/EBIT 3.25 2.11 EBIT/PBT 1.55 1.94 Contribution/PBT 5.04 4.09