American private equity firm Warburg Pincus Llc., through its subsidiary Emerald Sage Investment Ltd, has agreed to purchase compulsorily convertible preference shares (CCPS) worth ₹1,080 crore (about $150 million) in Apollo Tyres Ltd.
The investment represents a primary capital infusion into the company and is subject to shareholder and regulatory approvals, Apollo Tyres said in a statement on Wednesday.
“We see a compelling growth story in Apollo Tyres and believe the company is well-positioned to build upon the strong leadership position it has carved out within the industry. Warburg Pincus is excited to partner with the management team of Apollo Tyres in this journey and looks forward to supporting them during the next phase of the company’s growth," said Vishal Mahadevia, managing director and head, Warburg Pincus India.
Apollo Tyres issued 108 million CCPS of face value of ₹100, which carry a dividend of 6.34% per annum. At a conversion price of ₹171.29, these CCPS are convertible into 63 million shares of the company within a maximum period of 18 months from the date of their allotment.
Established in 1972, Apollo Tyres is promoted by Onkar Singh Kanwar and his son Neeraj Kanwar. The Gurugram-based firm makes automotive bias and radial tyres, and tubes in its plants in Kochi, Vadodara, Pune and Chennai, besides a unit each in Netherlands and Hungary. Its product profile caters to both original equipment manufacturers and the replacement market, in the truck and bus, light truck, passenger car, and farm vehicle segments in India. The company markets its products under its two global brands Apollo and Vredestein, and sells its products in over 100 countries through a network of branded, exclusive and multi-product outlets.
As on 31 December, the tyre maker’s consolidated sales stood at ₹12,545 crore, declining 4.2% over the corresponding period of the previous fiscal year, while net profit during the period fell 42.7% to ₹399 crore. Earnings before interest, taxes, depreciation and amortisation (Ebitda) margins fell 20 basis points year-on-year to 11.5% in the April-December period.
“Their (Warburg Pincus’) investment is a strong vote of confidence in our business, management team and growth prospects. I believe the company will benefit from the backing of a large financial investor of their pedigree and our partnership will further strengthen Apollo Tyres’ board and governance," said Onkar Singh Kanwar, chairman and managing director of Apollo Tyres.
Warburg Pincus is a global investment firm with more than $58 billion in private equity assets under management. The firm’s active portfolio comprises more than 190 companies across various sectors and geographies. Founded in 1966, the PE firm has raised 19 private equity funds, which have invested more than $81 billion in more than 890 companies in more than 40 countries.
In November, Reuters reported that Warburg Pincus was looking to raise up to $1.5 billion for its first fund targeting deals in India, which it looked to close by the first-half of 2020.