New Delhi: Onkar Kanwar, Chairman of Apollo Tyres, had declared on the Annual Common Assembly of the corporate final yr that Apollo had no plans of establishing greenfield manufacturing amenities in India anymore. As a substitute, the thought was to consolidate current amenities and deal with “unhealthy” prices by maximising asset utilisation and minimising investments.
Kanwar’s ideas have certainly been put into motion, as ATL saved INR 400 crore or practically INR 1.1 crore every day from the earmarked annual capital expenditure in 2023-24 by means of use of Machine Studying and Synthetic Intelligence.
ML and AI in tyre manufacturing? Sure, you learn proper. Because the demand state of affairs for varied kinds of tyres fluctuated, Apollo determined to get sensible about capital investments to not simply save prices but additionally maximise bang for the buck. Whereas the capex introduced initially of the fiscal yr was INR 1100 crore, solely INR 700 crore was really deployed. Using AI and ML helped Apollo take away manufacturing bottlenecks and obtain higher efficiencies at decrease spends.
Take the case of passenger car tyre capability, which was elevated from 68,000 per day to 73,000 per day at no extra value. Utilizing IoT, the corporate has related many of the manufacturing machines at its amenities to the cloud to create an information lake; this knowledge is analysed utilizing AI and ML. This single knowledge lake, which is underpinning all of ATL’s AI and ML initiatives, along with a set of digital innovation centres in several places is the important thing to maximising asset utilisation whereas minimising capex.
For 2024-25 too, ATL has a modest capex steerage of INR 1000 crore. Will this quantity once more see a downward revision? Vice Chairman and MD Neeraj Kanwar has stated throughout a number of investor calls that Apollo has had a heavy capital- intensive cycle within the final decade, establishing massive manufacturing capacities in Chennai, Hungary and in Andhra Pradesh. As on date, the corporate has seven amenities in all, of which 5 are in India and one every in Hungary and the Netherlands.
In accordance with analysts, Apollo is at the moment utilizing about 75% of its put in capability throughout all manufacturing amenities, which implies a few quarter of the capability is mendacity idle. The corporate is unlikely to spend considerably on capex except capability utilisation strikes up additional.
“Step by step, capex depth has been moderating as the corporate has been focussing extra on capability utilisation, robust steadiness sheet and excessive ranges of profitability. Within the medium time period, the corporate plans to cater to Indian markets by means of its Indian crops, European markets by means of Indian and Hungarian crops and the US market by means of Indian in addition to European crops,” stated a Mumbai-based brokerage. Considered capex spending has acquired a thumbs-up from most analysts monitoring the corporate.
So not solely is it not considering any new amenities for now, Apollo will give attention to worthwhile progress as a substitute of general market share, in a bid to realize 15% RoCE (return on capital employed). Within the Indian market, for instance, the corporate is strategically shifting away from decrease rim sizes in the direction of greater rim sizes in tyres for the reason that latter are extra worthwhile. Through the name with analysts after the March quarter outcomes final month, Kanwar additionally stated that 10-15% greater productiveness will be achieved from the present gear throughout ATL amenities by means of using AI and ML with out contemporary investments.
Apollo is being cautious on capex because of muted quantity progress expectations, which have been “behind preliminary expectations with common market circumstances being fairly powerful”. However having stated that, Apollo shouldn’t be averse to extend capacities the place wanted, with Chief Monetary Officer Kumar pointing that the capacities for passenger car tyres are already at about 80% utilisation and if present demand enhance expectations come true, a small capability addition can be performed.
Cautious optimism on demand
Apollo retains a cautious optimism on demand for tyres this fiscal. In India, the corporate expects the demand to select up put up elections. In April, double digit progress has already been seen in demand for passenger automotive and industrial car segments whereas demand for tyres from the agriculture sector is selecting up. Kanwar stated that even in Europe, there must be an enchancment in demand this fiscal over the earlier one.
The brokerage quoted earlier stated that ATL has been consistently engaged on value financial savings and the entire focus has been on enriching the product combine. Additionally, an ‘upsizing’ of the tyres in India and Europe is supporting ATL’s pursuit of profitability; ATL is a worth chief within the home passenger car tyre section and has been competing with premium manufacturers within the home market through the Vredestein vary of merchandise. The continual enhance in radialisation within the home industrial car market additionally augurs nicely for ATL’s profitability.
