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Apollo Tyres, has decided to drop its plan to raise $150 million (around Rs 800 crore) through a Qualified Institutional Buyers (QIB) citing the volatile market condition.
The tyre maker was planning to dilute around 10 per cent through QIB. Meanwhile, the company has said it will go-ahead with its expansion plan of around Rs 500 crore, both in India and in international operations.
In an analyst call Gaurav Kumar, Group Head - Corporate Strategy and Finance, Apollo Tyres said in the given the current market situation we would not be raising the money through QIB.
The company had took approval from the shareholders for a period of 12 months which will lapse in November.
Replying to an email sent to the company, the spokesperson said we continue to evaluate the market situation in key geographies and hence our expansion plans. All fund raising options, including QIP, are subject to our funds requirements and market conditions.
In its report ICICI Direct stated with the ample capacity available amid low utilisation levels, the management has decided to go slow on the expansion plans and shelved the plans of raising capital. We had earlier factored in a 10 per cent equity dilution. With the dilution overhang completely removed, EPS growth for Fiscal 2014E, Fiscal 2015E looks more attractive.
The companys capacity in India stood at 45,000 tyres a day in the car segment, 5,500 tyres a day in the truck-bus radial tyres (TBR) segment while truck cross-ply capacity stood at 10,000 tyres a day. In tonnage, capacity stood at 1400 MT a day with utilisation levels at 75 per cent.
In Europe and South Africa companys capacity utilisation is around 85 per cent and 70 per cent respectively.
While, the company decided not to go ahead with QIB plan, companys capex are expected to fund through internal accruals.
The management has indicated that capex plans in the near term would be slightly lower with no significant capex to be done. Overall, the capex would come to around 500 crore, which include around Rs 250 crore will be towards to convert capacity from trucks to Off-highway Trucks (OHT), while maintenance capex would be done in South Africa and in Europe.
The management also indicated that activity on the Thailand greenfield project has been slowed down due to market slowdown and availability of adequate capacity.
The company is the second largest tyre manufacturer in the country with a clear lead in the commercial vehicle segment. It has a manufacturing presence in Asia, Europe and Africa,and exports to over 118 countries.
