Apollo Tyres has obtained an enabling resolution to raise USD 200 million and will look to fuel its growth through the organic route, Neeraj Kanwar, vice chairman and managing director of the firm has said.
Also read: How the Apollo, Cooper Deal was botched
Apollo had made an ambitious USD 2.5 bid for US-based Cooper Tires -- something that did not play out – but in an interview with CNBC-TV18's Shereen Bhan, Kanwar said the company may dilute equity to fund its future growth.
Excerpts from the interview.
Q: One of the other concerns is the enabling resolution that you have already had cleared from your board to raise about USD 200 million either by way of debt or equity, do you really need to through with this at this point in time because you are generating enough cash?
A: We have taken an enabling resolution up to USD 200 million. So, we have an expansion programme of around Rs 1500 crore for the truck radial to remain as leaders in the truck market and this is a profitable business for us. So, we are generating double EBITDA margins through selling truck radials and through the Chennai facility. So, that is a positive for us.
We are also looking at restructuring our Kerala unit which are very old units running on old technology. So, we are going into off-highway tyres (OHT) which is industrial, OTR, floatation tyres, agri tyres, which will incur a capex of around Rs 500 crore.
Q: So, altogether about Rs 1,900-2,000 crore.
A: Yes. Rs 2000 crore and this is to be spent over the next three years. So, nothing here and now that we have taken an enabling resolution. This is something that will give us strength to go and do these capital expenditures.
Q: What would you prefer debt or equity because there are concerns on equity dilution?
A: As a promoter I can tell you we are looking at equity coming in.
Q: How much would that mean in terms of dilution?
A: We have not finalised the number right now, we are still studying the market. We are in no rush to go and pick up this USD 200 million.
Q: What would be the tentative timeline that you could look at for this fund raising?
A: We have a one-year window and that is what we are operating in.
Q: The markets are doing well at this point in time, I would imagine that you would want to go through with it sooner rather than later?
A: Not really because I see a huge rush in the market to go and pick up money and you have seen a lot of money has been raised in the past two months. So, I am in no rush. I need to see the right price. That is when Apollo will come out.
Q: You were hoping that Cooper would give you a big leg-up as far as the global tyre pecking order is concerned. That obviously did not go through, so how does that change your aspirations on the global map?
A: I am not in the race of getting up the pecking order.
Q: But you have said that several times over, I want to be in the top 10 [globally] by 2016.
A: I have gone away from that because I have learnt a lot.
Q: What is the target for you -- and I am not talking to you about a short term target, about the next 12 or 24 months because a lot of these things won't even kick-in by then – but is there a five-year target?
A: Right now there is no target in our minds right now because we are just putting these plans into place. Once these plans are totally ironed out then I can come out and say that this is my five-year target.
We are looking at a 2020 target which will be fueled by organic growth and obviously it might [also] be something inorganic we would look at.
Q: But the preferred option at this point in time is organic growth?
A: Yes, 100 percent.
Q: So by 2020 will you be in the top-10?
A: I hope so.
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