Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA+/Stable/Crisil A1+’ ratings on the bank facilities and outstanding debt instruments of Apollo Tyres Ltd (ATL). Crisil Ratings has withdrawn its rating on the company’s non-convertible debentures (NCDs) Rs. 605 crore (see ‘Annexure: Details of rating withdrawn') as these were completely redeemed. This is in line with the Crisil Ratings policy on withdrawal of rating on debt instruments.

 

The rating reaffirmation reflects the ATL’s healthy and established business risk profile, driven by its strong position in the domestic tyre market with material market share in the truck and bus (T&B), well-diversified revenue profile, and good operating capabilities. The rating is also supported by the company’s healthy cash generating ability and comfortable financial risk profile. These strengths are partially offset by susceptibility to cyclicality in the tyre industry and to volatility in raw material prices, and exposure to intense competition leading to limited pricing power.

 

The ratings continue to reflect ATL’s healthy operating performance, in line with expectations, and its strong financial risk profile. The company’s revenues grew by ~3% to Rs.26,105 crore in fiscal 2025 from Rs.25,318 crore in fiscal 2024 driven by healthy domestic demand, even as revenues from Europe remained largely stable. Crisil Ratings expects ATL’s revenues to register steady growth of 4-6% annually driven by better volumes from automobile original equipment manufacturers (OEMs), as well as from the aftermarket following reduction in goods and services tax (GST) on tyres, making them cheaper. Furthermore, there has been a recovery in demand in Europe supporting the growth in revenues. Operating profitability dipped to 13.7% in fiscal 2025 from 17.7% in the previous due to increase in raw material prices, mainly natural rubber and carbon black. This also led to moderation return on capital employed (RoCE) to 10.7% in fiscal 2025 from 15.8% in the previous corresponding fiscal. Rubber prices have largely stabilized in the current fiscal, which along with modest volume growth will lead to operating margins stabilizing at 13-14%. Besides, the company has decided to shut down its facility at Enschede in Netherlands on account of high cost of operations. Once the same is completed , ATL’s operating margins and return metrics are expected to witness more stability. Nevertheless, any steep increase in input prices both globally and domestically will remain a monitorable.
 

ATL’s financial risk profile remains strong, underpinned by moderate debt levels relative to its substantial net worth of approximately Rs. 13,700 crore as of March 31, 2025. As a result, company's gearing of 0.33 times (improved from 0.4 times as of March 31, 2024). The company recorded an exceptional loss of Rs. 550 crore in the first half of fiscal 2026 due to the closure of its Enschede plant in Netherlands; total outgo on account of the closure of the plant is estimated at Rs.580-600 crore, and will be funded from accruals with payout happening in fiscal 2027. With  capital expenditure plans (approximately Rs. 1,500 crore each for this fiscal and the next) and healthy annual cash accruals from operations (expected to be around Rs. 2,600-2,800 crore), reliance on debt funding is expected to be low, keeping debt metrics at comfortable levels over the medium term; gearing is projected to remain below 0.4 times. Debt coverage metrics, such as net debt (including dealer deposits) to earnings before interest, tax, depreciation and amortization (EBITDA), stood at 1.04 times in fiscal 2025, and is expected to improve to under 1 time over the medium term, with gradual debt repayments and stable profitability. The company's liquidity is further supported by cash surplus of approximately Rs. 885 crore as of September 30, 2025 and modest utilization at 7% on bank loan limits of Rs.3031 crore for past 10 months ended October 2025.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of ATL and all its subsidiaries, as they are in the same business and have strong operational and financial linkages. These companies have been collectively referred to as ATL.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths 

• Strong position in the domestic tyre industry with substantial market share in the truck and bus (T&B) segment: ATL is the leading manufacturer of radial tyres for the domestic T&B segment and has established its position in the light commercial vehicles, tractors and passenger car radial (PCR) divisions in India. Moreover, its market share remained stable across segments in fiscal 2025. A pan-India distribution network comprising ~6,500 dealerships, including exclusive outlets that operate under the Apollo brand, strengthens the market position. Despite intense competition, the company will likely sustain its market share given its established brand, healthy operating efficiency and wide distribution network.

 

• Diversified revenue, driven by presence in different geographies and segments: Diversification in revenue streams will continue to shield the business from unfavourable conditions in any segment or geography and lend stability to cash flow. Besides its strong foothold in the domestic T&B segment, the company operates in the European PCR market under the Vredestein brand. In the first half of fiscal 2026, the APMEA (Asia Pacific, Middle East and Africa) operations accounted for around 64% of the consolidated revenue, followed by Europe (around 28%), with the remaining coming from other regions such as the US.

 

In terms of channel mix, the replacement market accounted for ~80% of the consolidated revenue in the first half of fiscal 2026, thereby assuring steady revenue flow. Also, within the domestic operations, truck and bus segment contributed 53%, passenger vehicle segment at 22%, while tractor and light commercial segment contributing 6% and 9% with remaining contribution from others. Revenue diversification across geographies, products and channels should continue to lend stability to the topline.

 

• Good operating capabilities and above average return metrics: ATL’s operating margins have ranged between 12.5-14% during fiscals 2022-2025, except in fiscal 2024, when due to benign raw material prices, operating profitability rose to ~18%. Natural and synthetic rubber prices rose sharply in fiscal 2025, but company was able to stabilize margins at ~14%, due to product mix and modest price hikes. Operating margins are expected to stabilize at these levels, despite slowing sales in Europe due to benefit arising from closure of low margin Enschede plant in the Netherlands, but material improvement is unlikely due to intense competition in India and overseas markets. Return on Capital Employed (RoCE) was `11% in fiscal 2025, and is expected to settle at ~11-12% over the medium term.

 

• Strong financial risk profile: Healthy cash accruals over time, prudent capex spend and controlled debt levels, have led to improvement in ATL’s financial risk profile, with the net debt (including dealer deposits) to EBITDA and interest cover ratios at 1.04 times and 8.11 times in fiscal 2025 (1.65 times and 6.36 times in fiscal 2023), while gearing too has improved to 0.33 times at March 31, 2025 from 0.56 times at March 31, 2023). Capex averaged ~Rs.1000 crores per annum between fiscals 2023-2025, and is expected at Rs.3,000-crore over fiscals 2026 and fiscals 2027. Spend will be towards maintenance and capacity expansion of ATL’s facilities in Andhra Pradesh and in Hungary. The company also has a liability of around ~Rs.580-600 crore for payment towards closure of Enschede plant in Netherlands in fiscal 2026 which is likely to be funded from internal accruals. Given the expected healthy accrual of Rs.2600-2800 crore annually, no major debt addition is likely, leading to better debt metric over the medium term. For instance,  the debt metrics are expected to remain strong over medium term. For instance, net debt/EBITDA and interest cover are expected at ~0.75 times and 10-12 times in fiscal 2027. However, any debt-funded additional capex or inorganic expansion will remain a monitorable.

 

As per order from Competition Commission of India (CCI) dated February 2, 2022, a penalty of 5% was imposed on average standalone turnover for fiscals 2012-14 on five tyre companies, including ATL, for allegedly acting in contravention of the provisions of Section 3 of the Competition Act, 2002 and increasing the prices of T&B tyres sold in the aftermarket in fiscal 201112. A penalty of Rs.425.5 crores was imposed on ATL. The Company, thereafter, filed an appeal against the aforesaid order before the National Company Law Appellate Tribunal, New Delhi (NCLAT), which through its judgement dated December 1, 2022 disposed off the appeal by remanding back the case to CCI for review. CCI filed an appeal in the Honorable Supreme Court against the Order passed by the NCLAT. This case was last heard in September 2025, however a decision or final order from the Honorable Supreme Court is awaited. Pending decision, ATL has not made any provision for the possible penalty, as its management believes it has a strong case for non-application of the same. However, even if the same fructifies, ATL is expected to have sufficient financial flexibility to arrange for the necessary funding, without material impact on its financial risk profile.

Key Rating Drivers - Weaknesses 

• Susceptibility to cyclicality in the tyre industry and to volatility in raw material prices: The business remains susceptible to cyclicality in the tyre industry, driven by fluctuating demand from end-user commercial vehicle players, especially in the T&B segment. Demand for tyres depends on economic growth and infrastructure development. For instance, subdued economic growth in Europe had impacted the volume in the first half of fiscal 2024 and partly in fiscal 2025. However, in first half of fiscal 2026, both domestic and Europe geography witnessed healthy volume growth driving the revenues. Furthermore, raw material cost forms majority of the operating costs, including the prices of natural rubber and carbon black. While the price of natural rubber depends on global demand, area under cultivation and yield, the prices of carbon black and other raw materials are based on crude oil prices. Hence, the profitability of tyre manufacturers is exposed to volatility in raw material prices.

 

• Exposure to intense competition and limited pricing power in the tyre industry: ATL faces intense competition from other established domestic players such as MRF Ltd, CEAT Ltd and JK Tyre & Industries Ltd. In the European operations, ATL is a market follower, and the pricing is determined by market dynamics. Hence, the competitive intensity limits the ability to fully pass on any raw material price increases to the customers.

Liquidity Strong

ATL is expected to generate strong annual cash accruals of Rs.2600-2800 crore against yearly debt obligations of Rs.500-600 crore and annual capex plans of Rs.1500 crore, which is also sufficient to cover any incremental working capital requirements. Liquidity is also supported by cash surplus of ~Rs.885 crore as of September 2025 and modest average utilization of ~7% on bank loan limits of Rs.3031 crore for the past 10 months ended October 2025. However, part of the liquidity may be utilized to make good the settlement needed for closure of the Enschede plant in Netherlands

Outlook Stable

ATL’s business risk profile is likely to remain strong driven by its solid position in the domestic tyre industry aided by continued steady demand from the OEM and aftermarket segments, besides its good operating efficiencies. Financial risk profile will also remain strong aided by continued healthy accruals from its domestic and international business, prudent funding of capex and efficient working capital management.

Rating sensitivity factors

Upward factors:

• Growth in revenue and healthy operating profitability, leading to sustenance of RoCE above 15%
• Significant deleveraging resulting in steady improvement in the net debt to EBITDA ratio

 

Downward factors:

• Material weaking in market share in the T&B segment, and moderation in operating profitability
• Sizeable additional debt funded capex or inorganic expansion leading to net debt to EBITDA in excess of 2 times.

 

Environment, social and governance (ESG) profile

The ESG profile of ATL supports its already strong credit risk profile.

 

The tyre sector has a significant impact on the environment because of high greenhouse gas emission of core operations and waste generation. The sector has a social impact because of its large workforce. Apollo has continuously focused on mitigating its environmental and social impact.

 

Key ESG highlights

• ATL is committed to climate transition and aims to achieve net-zero emissions by 2050. In this regard, the company has undertaken several initiatives, including the integration of an Internal Carbon Pricing (ICP) mechanism into the evaluation of capital projects, aligning its climate transition targets with the Science Based Targets initiative (SBTi), reducing greenhouse gas (GHG) emissions, improving energy efficiency across operations, and increasing the utilization of renewable energy sources. As a result, the company’s Scope 1 and 2 emissions intensity has shown a declining trend, falling at a CAGR  of ~11% and remaining in line with the peer average.
• Cementing its commitment towards water stewardship, the company has implemented several measures to enhance water reuse and recycling across its manufacturing facilities. During fiscal 2025, the share of recycled water as a proportion of total water withdrawn increased to ~48%, up from ~41% in fiscal 2023. The company has also adopted various water-saving initiatives across its operations. Consequently, its overall water withdrawal intensity demonstrated a reduction trend, falling by ~8% CAGR between fiscal 2023 and fiscal 2025 and remaining lower than that of its listed peers.
• To mitigate environmental impacts, the company remains committed to sustainable sourcing of raw materials. In line with this, it has adopted the Apollo Sustainable Natural Rubber Policy (ASNRP), which is aligned with the Global Platform for Sustainable Natural Rubber (GPSNR). During fiscal 2025, the company reported that 100% of its natural rubber suppliers had signed the ASNRP.
• On the workforce management front, ATL has implemented several employee well-being initiatives. As a result, the attrition rate among the permanent workforce declined by 2 percentage points year-over-year, reaching ~8% in fiscal 2025.
• The company’s governance structure is characterized by a Board comprising 50% independent directors, along with a dedicated investor grievance redressal mechanism and robust financial disclosures. Further, a Board-level Business Responsibility and Sustainability Committee has been established to oversee and monitor the company’s ESG priorities.

About the Company

ATL, established in 1972, manufactures automotive bias and radial tyres, and tubes. It has plants in Kochi (Kerala), Vadodara (Gujarat), Pune (Maharashtra), Chittoor (Andhra Pradesh) and Chennai. The product profile includes prominent tyre brands in the T&B, light truck, passenger car and farm vehicle segments in India, catering to both OEMs and the replacement market. In February 2013, the company sold its South African operations to Sumitomo Tire for $ 60 million.

 

In May 2009, Apollo acquired Vredestein, a subsidiary of Amtel-Vredestein NV, incorporated in the Netherlands, for € 40 million. Amtel-Vredestein NV, Russia’s largest tyre manufacturer, was declared bankrupt by a court in the Netherlands in April 2009. However, its subsidiary, Vredestein, was excluded from bankruptcy as it had separate financing arrangements.

 

Vredestein has one manufacturing unit in Enschede near Amsterdam, with capacity of 55 lakh tyres per annum. It produces premium, high-speed PCRs, collapsible passenger car tyres, and agricultural tyres. It has two brands, Vredestein and Apollo, in the premium and mid-range segments, respectively. In fiscal 2016, ATL acquired Reifencom GmbH, a distributor that operates 37 stores in Germany, for € 45.6 million.

 

ATL reported revenue of Rs 13,392 crore and profit after tax (PAT) of Rs 271 crore in the first half of fiscal 2026, compared with revenue of 12,772 crore with net profit of Rs 599 crore, for the corresponding period of the previous fiscal. The company booked extraordinary expense of Rs.550 crore in the first half of fiscal 2026, relating to the closure of the Enschede plant in Netherlands.

Any other information: Not applicable