Home > Specials > Leadership > Leader in the spot light: Onkar S Kanwar

WHO: Onkar S. Kanwar, chairman and managing director, Apollo Tyres Ltd.

WHY: India’s second-largest tyre maker by market value is buying Cooper Tire and Rubber Co. for $2.5 billion in an all-cash transaction to gain access to the US automobile market, the world’s second-biggest. This transaction is one of the largest deals in India’s automotive industry.

BACKGROUND: Apollo Tyres has added new markets to its basket through acquisitions—Africa in 2006 and Europe in 2009. With Cooper, Kanwar’s company will get access to two large markets—North America and China, besides other countries. Cooper is the 11th largest tyre company in the world by revenue and supplies premium and mid-tier tyres worldwide.

STRATEGY: When Kanwar announced the acquisition the market capitalization of Apollo was just $800 million. Apollo Tyres will be making the acquisition through its holding company in the Netherlands and Mauritius and it will be funded through seven-to-eight year bonds and bank loans. Kanwar has set up a team to integrate Cooper Tire with Apollo Tyres and is not overly worried about this as there is no overlap in terms of factories or market. The deal is likely to create some 465-700 crore of value a year at the operating margin level for Apollo Tyres, according to the company.

CHALLENGES: The critical challenge for Apollo will come from the capital markets. Shareholders have made their lack of enthusiasm clear. Apollo Tyres has slumped as much as 31.92% since the deal was announced.

Kanwar has the difficult task of easing the fears of shareholders about rising debt levels following the acquisition. When Kanwar approaches the market for selling bonds in the next two to three months, he may face a bigger challenge as the cost of funds could rise, straining the balance sheet of the combined entity.

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