New Delhi: Buoyed by rising demand from auto makers, Apollo Tyres Ltd, the country’s largest tyre maker, reported a strong increase in annual sales and profit, but a spike in rubber prices may dent profitability this fiscal.

Net sales rose to Rs8,120 crore, a jump of 63% over the year earlier, while net profit stood at Rs653 crore compared with Rs139 crore. The firm earns Rs6 out of every Rs10 from its Indian operations. This is the first time it has reported results on a consolidated basis after the acquisition of Netherlands-based Vredestein Banden BV last year.

“As I see it, the overall demand scenario will continue to play a positive role in the growth of the tyre industry," said chairman Onkar S. Kanwar. “The unsubstantiated rise in natural rubber prices of over 150% in just 14 months is going to be a dampener and a huge challenge."

Treading strong: Apollo Tyres chairman Onkar S. Kanwar says the rise in rubber prices of over 150% in 14 months is going to be a dampener. Ronjoy Gogoi/HT

The firm plans to invest Rs1,100 crore in capacity expansion in the fiscal to March.

Rising rubber prices have resulted in industry lobby group Automotive Tyre Manufacturers Association (ATMA) requesting the government to reduce import levies on raw rubber. Meanwhile, they plan to raise prices.

“The effect of the steep rise in rubber prices will be visible in results announced after the first quarter of this fiscal year," said Rajiv Budhiraja, secretary general of ATMA.

Apollo plans to raise prices by 3.5% in June. Tyre firms are also looking to reduce dependence on supplies to auto makers and move towards after-market sales. At present, Apollo sells 13% of its production to auto makers.