ANALYSIS OF EXTERNAL BUSINESS ENVIRONMENT

1. Present detailed analysis of the sector and highlight the key opportunities,
risks and projections of the sector/industry. You must consider the industry
analysis framework(s) and models studied in Strategic Management course.

Industry Overview:

Market Size:

Porter’s Five Forces Analysis:

1) Bargaining power of supplier

Bargaining intensity of providers can be isolated in two sections according to the
request of industry.
a) Rubber There are two purposes for this being low first one is a large portion of the
tire firms get150 days kudos for buying the elastic from international market which
isn't the situation on the off chance that they get it from residential elastic producers.
What's more, the second reason is, this credit is being offered at LIBOR, which is
the London Inter-bank Offered Rate. It is the rate of interest at which banks obtain
stores from different banks.
b) Other Petro substance-based material (Carbon dark, Nylon tire line and so on.) The
intensity of providers is high in this class as India is limping back if there should
arise an occurrence of Petro based raw materials like carbon dark and synthetic
substances which account low in amount terms yet are staggering expense
generators. Likewise, the cost of NTC vacillates in line with the costs of
Caprolactam (an oil subsidiary)- it¡¦s main raw material. The costs of these materials
are out of hand of tire industry.

2) Bargaining power of purchasers

This can be isolated into two sections as takes after.
a) OEM's The OEMs are dependably in solid position when the bargaining intensity
of purchasers is concerned. The purpose for this is the greater part of them are
having contract with their relative tire producer under which the costs of tire
remains stable for this OEM independent of market cost. The advantages are given
to them as they are buying in mass and the connection gives the tire firms something
called mark affiliation.
b) Replacement The scene in substitution fragment is very invert as the bargaining
power for the substitution section is direct because of the way that the purchasers
are not that solid when contrasted with OEMs. The request in transports and truck
portion is constantly high on account of Indian poor street conditions separated from
this the buy is made in little units.

3) Threat of substitute
It is direct or as the industry is facing restriction from rereading division everywhere
throughout the globe. This less expensive choice, around 20-25% of the original tire
cost, is available in created nations since some decade back. What's more, this is
heading towards solid position here in India as well.

4) Threat of new entrants

The risk of new participant is direct or can be portrayed as low on the grounds that the
industry is exceptionally capital intensive and the level of mechanical skill required is
likewise very particular. Yet, in the event that we see from residential (Indian) industry's
point of view, this better can be defined as high. The reason being, worldwide tire
industry is now seeing mergers and acquisitions with a specific end goal to rebuild.
Furthermore, starting at now India and China going to be the centre point of exercises
similarly as tire industry is worried because of low generation cost and in addition other
applicable advantages. In this way, for any of the worldwide big cheese Indian
organization will be a decent choice to go for.

5) Industry rivalry
High, because gradually the overseas players are expanding their wings over Indian tyre industry and
also a limited and every player is moving towards automated technology, like ERP and SCM. Apart
from the aforementioned reason, the industry is seeing high competitive scenario at
present because of various reasons like rising input costs, low realizations from growing OEM
 segment where the vehicle manufacturers are not ready to share the burden of tyre firms, the portion
of replacement pie continuously taken away by the rereading sector which is slowly but firmly rising
its head and that to in high realization segment of Bus-Truck tyres and last but not the least the
unorganized sector is always there to give head ache to these established players like CEAT,
JK, Apollo and MRF etc.

Future Predictions:

2. Search for FIVE most relevant articles about the INDUSTRY published in last one
year. Gist these articles is useful in developing your view about the sector.
 Tyre industry to grow around 10% in FY2018: ICRA (5th March 2018)
The Indian tire industry is expected upon to post a higher volume development of 8-10
percent in FY2018, upheld by strong development get over all industry sub-sections,
expresses an ICRA look into note. The development will be upheld by improving
interest, rising fares and lower imports, alongside car creation anticipated that would
rise emphatically by in excess of 14 percent, up from 5.2 percent in FY2017 and 3.2
percent in FY2016. Subrata Ray, senior group VP, Corporate Sector ratings, ICRA
stated: "With stronger than anticipated volume uptick in M&HCV tires, tire tonnage
requirement is evaluated to develop by around 8 percent." The fare volumes are
assessed to develop by 10-12 percent for FY2018 and around 8-9 percent during
FY2019-22 with ideal request outlook and rising aggressiveness of Indian tire
producers, both regarding quality and pricing. In any case, ICRA says that minimal
effort Chinese tires in the abroad markets, particularly after the expulsion of ADD by
USA on Chinese tires in February 2017, remained a key test. The costs of manufactured
rubber increased by 29 percent, carbon dark up by 35 percent, and caprolactam by 14
percent.
 BASICS OF BUSINESS

3. What is the company’s business?

Apollo tyres is the 17th biggest tyre manufacturer in the world and 2nd biggest in India. Founded in
1972 as a single brand enterprise focusing on manufacturing & distributing two-wheeler tyres in
India, but over the period it ventured into manufacturing & distributing truck, passenger car, Bus,
Farm, speciality vehicle tyres, tubes & flaps. It has expanded its business through a series of mergers
and acquisitions. It has footprint across India, growing economies of Asia, Africa & Europe. It is one
of the largest radial tyre capacity in India (FY 2017): UHP & Winter tyres capabilities. It has 25%
market share in truck tyre. The company predominantly focuses on its two key brands Apollo &
Vredestein but it also owns regional brands Kaizen & Regal.

4. What are its main products and services? Name some of the company’s
brands.
Brands: Apollo and Vredestein comprise of tyres for passenger, commercial and off highway
vehicles. Brands Regal and Kaizen focus on the truck-bus tyre segment.

APOLLO:

 Apterra H/P
 Ultra-high-performance summer passenger vehicle tyre
 XTRAX
 Alnac 4G
 Apollo- Manchester United tyre
  Apollo Acti – for motorcycles & scooters.
 Aspire XP
 ActiZIP F2 & R3

VREDESTEIN: The Vredestein brand is over 100 years old and has achieved premium brand status in
the automotive industry. Products include car tyres, tyres for agricultural and industrial applications,
and bicycle tyres. It has a partnership with the famous Italian design agency Giugiaro since 1997.

 Ultrac Vorti
 Sportrac 5
 Ultrac Sessanta
 Quatrac 5

KAIZEN: Truck & Bus segment tyres. Launched in 1998, Well accepted internationally, sold in 10 +
countries.

 XDT
 100R
 XLM
 99R Plus
 36L PLUS
 50L
 S009
 77R
 L002
 27L
 ROO1
 L001

5. Does the company export its products OR render services to offshore

clients? To which countries?
Apollo tyres exports its products in over 100 countries. In the European continent its brand
Vredestein is famous among automobile manufacturers as it is a high end premium luxury segment.
In Europe alone, it has 3100 third party dealers. The company’s revenue generation is:

 69% from India

 26% from Europe
 5% from others

Countries where it exports its products are:

 Germany
 Tanzania
 Dubai
 USA
 Maldives
 Peru
 UAE
 Dubai
 Netherlands
 Haiti
 Iran
 Pakistan
 Sri Lanka
 Indonesia
 Jordan
 Malaysia
 Brazil
 Australia
 Vietnam & others
6. Highlight the difference, if any between the businesses of the three
companies
 COMPETITIVE STRATEGY & POSITION

7. Present a competitive analysis for three companies making use of the

frameworks studied in Strategic Management courses. Also comment on
the relative competitive position of three companies
Competitive analysis of the three companies:

A) SWOT Analysis of APOLLO Tyres:

Strengths:

 Geographic coverage across three continents: Asia, Africa and Europe

 Strong brand image
 Strong Financial Position
 2nd largest in market share holder in India
 High performance in European market in car segment
 Wide variety
 Extensive distribution
 Heavy investment on R&D

Weaknesses:

 Dependence on Indian markets

 Labour unrest affects the production and finance
 Lack of presence in 3-wheeler segment
 Manufacturing facilities in Africa are sub optimal
 Cost pressures due to availability of raw material

Opportunities:

 India is an emerging economy

 Growth potential in two-wheeler segment
 Improved lifestyle leading to growth of four-wheeler industry in India
 More tie-ups with Automobile companies as it’s mainly into B2B market.
 Improved Infrastructure has fuelled more and more transportation
 Emergence of India as a hub for small car production

Threats
 Price wars
 Stiff competition from national and international brands
 Cheaper technologies
 Volatility in prices and availability of raw material as India’s rubber production is less
than its demand.
 Cheap tyre imports from China
 Cyclical nature of automobile industry
 MANAGEMENT ANALYSIS

8. Study the profiles of the top officials of the companies, i.e. promoters, directors,
CEO, internal auditing firm etc. Highlight any significant negative about the
management of the company, if any. This refers to any incidence in past wherein the top
management has not acted in the interest of the shareholders or have been in pejorative
press. Highlight any news/incidence from past about the company and/or top officials
that the shareholders must look with suspicion and caution.

Management of Apollo tyres:

A. Director
Robert Steinmetz

B. Chairman & Managing Director

Onkar S. Kanwar

C. Vice Chairman and Managing Director

Neeraj Kanwar
 D. Board of Directors
1. Sunam Sarkar
2. Vikram S. Mehta
3. Neeraj Kanwar
4. Nimesh N. Kampani
5. Pallavi Shroff
6. Onkar S. Kanwar
7. Arun Kumar Purwar
8. Vinod Rai
9. General Bikram Singh (Retd.)
10. Akshay Chudasama
11. Francesco Gori
12. Robert Steinmetz
13. Dr. S. Narayan
14. Paul Antony

E. MANAGEMENT BOARD
NAME DESIGNATION
Daniele Lorenzetti Chief Technology Officer
Pedro Matos Chief Quality Officer
P K Mohamed Chief Advisor, R&D
Markus J Korsten Chief Manufacturing Officer
Satish Sharma President, APMEA
K Prabhakar Chief, Projects
Gaurav Kumar Chief Financial Officer
Mathias Heiman President, Europe
Marco Paracciani Chief Marketing Officer
Sunam Sarkar President & Chief Business Officer
Francesco Gori Advisor for Strategy
Martha Desmond Chief Human Resource Officer
Onkar S. Kanwar Chairman & Managing Director
Robert Steinmetz Director
Neeraj Kanwar Vice Chairman & Managing Director
 DIRECTOR’S REPORT

9. Read through carefully this section. Give highlights of three most significant items
mentioned in the Directors’ Report. What do they signify? Study the Remuneration of
Directors and Key Managerial Personnel and present a comparative analysis and
interpretation for the three companies.

Most significant information mentioned in the Apollo tyres Director’s report:

 From being a replacement market focussed Company in Europe, the year saw company
aggressively pursuing a strategy of building relationships with original equipment
manufacturers in Europe. Company’s premium brand, Vredestein, has been selected as
a fitment on the Volkswagen Polo, SEAT Ibiza and Ford Eco Sport and the supplies
have already begun to these automakers.
 APMEA business achieved a significant financial milestone of `10,000 crores and
Europe achieved its own record growth target. It was a synergistic flow across the
regions to achieve these goals.
 The Chennai plant ramped up its capacity by 50% and the Bias business saw a huge
resurgence on the back of a massive quality improvement programme laid the
foundation stone for next Greenfield plant in Andhra Pradesh, to expand the capacity
for both passenger car and truck/bus radial tyres.

Remuneration of director & key personals

COMAPARATIVE ANALYSIS & INTERPRETATION
 MANAGEMENT DISCUSSION AND ANALYSIS (MDA)

10. Read through carefully this section. Give highlights of three most significant items
mentioned in the MDA section. What do they signify?

APOLLO TYRES:
Three most significant items mentioned in the MDA:

 In a rapidly-rising raw material cost scenario, the Company is unable to pass on cost
escalations to consumers, in a timely fashion, due to intense competition and various
market dynamics resulting in pressure on margins.
 For FY2018, the sales volumes for the PCR business for Europe remained flat, but an
improvement in the product mix helped the region post a 3% growth for the year.
Launch of new products and start of a relationship with the OE segment were the
reasons for an improvement in turnover and market share in an overall declining
market.
 Government’s introduction of anti-dumping duty and pan-India GST resulted in the
decline of the low-cost Chinese TBR imports during the year, which was a threat to the
company till last year. Improved product portfolio across sub-segments such as steel,
mining and intermediate Consumer Vehicles helped the Company inch up its market
share in the Truck Bus Bias segment and cement its pole position with an estimated
27% share
 AUDITOR’S REPORT ANALYSIS
11. Who are the company’s auditors?

APOLLO

David Jones (Partner) , M/s. Walker Chandiok & Co LLP, Chartered Accountants.

12. List the main items on which the auditors’ report. Give details of three items that
significantly affect the financial statements.

APOLLO
The main items on the auditor’s report are:

• Report on the Standalone Financial Statements: information about what all financial
statement company has audited. This includes balance sheet, P&L, cash flow statement and
summary of the significant accounting policies.

• Managements responsibility for the standalone financial statements: its company’s

responsibility to maintain appropriate accounting policies

• Auditors responsibility: auditor’s responsibility is to express an opinion on the financial

statements provided by the company

• Opinion: The auditor expresses his opinion about the company’s performance. Key points
are:

i) The balance sheet, profit & loss statement and the cash flow statement indicated in
the report are in agreements with book of account.
ii) Financial statement complies with the accounting standard mentioned in the annual
report
iii) None of the director is disqualified from being appointed as the director.
iv) The company has made provision for the foreseeable losses
v) Proper books of account have been kept by the company
vi) Auditing includes checking the appropriateness of the accounting policies used and
reasonableness of the claims made in director’s report.

Three items that significantly affect the financial statements are :

 Accounting Policies
  Accounting Estimates
 Risk Assessments

13. How much was the auditor’s remuneration? Give the detailed breakup of the same.

14. Read through carefully this section. Highlight the concerns raised by the auditors in
their report. Give details of such items.

The concerns raised by the auditors in their report:

APOLLO: No Concerns were raised by the auditors.

MRF: No Concerns were raised by the auditors.

JK: No Concerns were raised by the auditors.

 CORPORATE GOVERNANCE REPORT

15. Read through carefully this section. Give highlights of three most significant items
mentioned in the Corporate Governance Report. What do they signify?

APOLLO

Corporate Governance Report states the philosophy of the company along with the laws
that govern the company. It states the code of conduct that is followed by the company.
Three most significant items mentioned in the Corporate Governance Report are:

 Board of Directors

Corporate Governance Report gives the composition of the board, the policies for
evaluation of the performance of directors. It states the functioning and procedure adopted
by the board along with the relationship between directors and managers. It also talks about
the profile of the chairman and MD and other relevant information regarding the board of
directors. This information is of significance importance to the shareholders as it is the
Board of Directors of the company that speak to the shareholders.

 Shareholder Information

The company states all the general information about the shareholder. CGR contains
information about the registered office, about the calendar of AGM. It also talks about the
dividend payment and unclaimed dividends. It further tells the information about stock
market price data and listings of stock exchange. Profit instalment is another point under
this head. The significance of this is that the financial specialist and the other key people
who read the annual report of the company get an idea about the shareholding pattern of
the company.

 Disclosure

Corporate Governance Report contains all the disclosures regarding the material
information of the company. The report contains disclosures regarding third party
transactions, accounting treatment and risk management. Disclosures regarding compliance
by the company and transfer of unclaimed shares is also shared. CGR contains disclosures
as per the rules and regulations of SEBI.
 SIGNIFICANT ACCOUNTING POLICIES
16. Read carefully the section Significant Accounting Policies from the Annual Report
and study carefully the accounting policies, estimates and assumptions followed by
the company over last five years for Sales & Other Income Revenue Recognition,
Inventory Valuation, Depreciation, Research & Development Expenditure, Tangible
Fixed Assets, Intangible Assets & Amortization, Impairment of Assets, Investments,
Segment Accounting, Provisions, Contingent Liabilities and Contingent Assets.
Compare the accounting policies, estimates and assumptions followed by the three
companies (intercompany and intra-company comparisons) and highlight the
significant differences and their implications on their relative financial
position/performance

APOLLO

Following are the Accounting Policies of Apollo Tyres:

INVENTORIES: Inventories are valued at the lower of cost and evaluated the net realizable
value after providing for obsolescence and different losses, where thought essential. The cost
contains the cost of procurement, cost of change and different costs including appropriate
production overheads in the instance of finished merchandise and works in progress, incurred
in bringing such inventories to their present area and condition. Exchange rebates or refunds
are deducted in determining the costs of buy. Net realizable value speaks to the evaluated
selling cost for inventories less all evaluated costs of culmination and costs important to make
the deal. If there should be an occurrence of raw materials, stores and saves and exchanged
products, cost (net of expense credits wherever relevant) is determined on a moving weighted
average basis, and, if there should arise an occurrence of work in progress furthermore, finished
merchandise, cost is determined on a First in First Out basis.

INTANGIBLE ASSETS: Intangible assets with finite valuable lives are conveyed at cost less
amassed amortization and impedance losses, assuming any. Intangible assets with indefinite
helpful lives that are obtained independently are conveyed at cost less aggregated debilitation
losses. The intangible assets are amortized over their separate individual assessed valuable lives
on a straight-line basis, commencing from the date the benefit is accessible to the gathering for
its utilization. There were no critical changes in the previous five financial year under the
strategy for this head.
DEPRECIATION: Up until FY 2013- 2014, Depreciation on assets was calculated on SLM
at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956. From
FY 2014 – 2015, depreciation is calculated on the SLM method in accordance with Schedule
II to the Companies Act, 2013

FIXED/TANGIBLE ASSETS: The company’s fixed/ tangible assets are depreciated at cost
less accumulated depreciation and accumulated impairment losses.

REVENUE RECOGNITION: Revenue is estimated at the reasonable/fair value of the

consideration received or receivable. Revenue is diminished for client returns, charges on sales,
assessed refunds and other comparative recompenses.

Revenue from sale of goods is perceived when the following conditions are fulfilled:
 Company has transferred the huge dangers and prizes of responsibility for goods to the
purchaser which for the most part coincides with the conveyance of goods,
 the Company retains neither continuing administrative involvement to the degree more
often than not connected with proprietorship nor powerful control over goods sold;
 the measure of revenue can be estimated dependably;
 it is likely that the financial advantages related with the exchange will stream to the
Company;
 costs incurred or to be incurred in regard of the exchange can be estimated dependably.

INVESTMENT VALUATIONS: Investment properties are estimated initially at cost,

including exchange costs. Resulting to initial acknowledgment, investment properties are
estimated in agreement with Indian AS 16 Property, Plant and Equipment necessities for cost
display, other than those that meet the criteria to be named held available to be purchased.
There were no huge changes in the previous five financial years under the strategy for this
head.

IMPAIREMENT OF ASSETS: Toward the finish of each reporting period, the Group audits
the carrying measures of its substantial and intangible assets or money generating units to
determine whether there is any indication that those assets have endured a weakness
misfortune. On the off chance that any such indication exists, the recoverable measure of the
benefit is evaluated keeping in mind the end goal to determine the degree of the impairment
loss.
INTER FIRM ANALYSIS:

NEWS ANALYSIS
17. Search on internet/ newspapers/ magazines and analyze in detail LATEST &
SIGNIFICANT five news articles about the company. Comment on the implication
of the news on the future performance of the company.

APOLLO

 Hungarian plant to allow Apollo Tyres to increase its connect with

European car makers (8th April 2017)
The new plant will help the company to increase its connect with the European markets.
It is the largest investment done by an Indian company in Hungary. Through this the
 company wants to target the original equipment makers. It has set its target of
penetration as 25% by next year.
 Apollo Tyres tops JD Power survey (16th May 2018)
Apollo tyres has been ranked no.1 in small car segment & no. 2 in mid-size cars segment
as per JD Power 2018 India Original Equipment Tyre Customer Satisfaction Index
(TCSI) Study. Research further says that its brand image has left a mark on customers
perception & decision making. Preference of the OE tyre brand during replacement has
increased to 54% in 2018 from 48% in 2017.
 Apollo Tyres gets on board with Hungarian Football (4th May 2018)
The company signed a three-year sponsorship deal with Hungarian Sports club DVTK.
Enhancing brand’s visibility across the sponsorship, promotion & time of the game.
This opportunity will increase the Brand awareness and will form an impression on its
target market which is youth & Gen Z.
 Foundation stone laid for Apollo Tyres' 7th manufacturing facility globally
(10th January 2018)
Apollo tyres has purchased 200 acres of land from Andhra Pradesh government and
plans to invest Rs. 1800 crore in this new production Plant. This new addition will
facilitate its production to meet its increasing demand. The company targets revenue of
10K crore from Indian market alone. This new addition is a step further in its direction.
 Apollo Tyres net sales up 22% in Q4, and 12% for full year (10th May
2018)
Net sales grew 22% to reach Rs 3982 crores as against Rs 3269 crores
Operating profit was up 33% at Rs 559 crores as against Rs 420 crores
Net profit reported grew 10% to close at Rs 250 crores for the quarter as against Rs 228
crores. Both, Indian and European Operations, continued with their growth momentum
and registered a revenue growth upwards of 20% in the last quarter of the financial year
2017-18, led by a strong performance in the commercial vehicle segment, especially
truck radials, in India, and passenger vehicle category in Europe.