Apollo Tyres’ shares are down 25% so far in 2026 and touched a 52-week low of ₹374 on the NSE on Monday. The sell-off came even though the company reported better-than-expected profitability in its March quarter (Q4FY26) results on 14 May.
Consolidated revenue increased 14% year-on-year to ₹7,336 crore, while Ebitda grew faster by 27.6% to ₹1,069 crore. The margin expanded 153 basis points (bps), aided by healthy margins across Asia Pacific, the Middle East and Africa and Europe.
The India business (63% of FY26 consolidated revenue) remained Apollo’s key growth driver, with the management indicating over 20% growth in TBR (truck and bus radial) replacement and OEM volumes. While passenger car radial tyre replacement growth was over 20%, OEM volumes were up in single digits.
On the earnings call, CFO Gaurav Kumar said demand trends remain strong across categories and channels, even in Q1FY27. Part of this momentum is attributed to premiumization initiatives and increased brand visibility after Apollo Tyres became the lead sponsor of the Indian men’s and women’s cricket teams. Advertising spends rose to about 4% of revenue in Q4FY26 versus the normalized level of about 2%.
Conversely, export volumes grew by mid-single digits due to supply constraints from India and weaker demand in the US market.
The management indicated that input costs could rise in the high teens in Q1FY27, driven primarily by elevated natural rubber prices. New vehicle purchases would be impacted if fuel/commodity costs continue their inflationary trajectory.
Given the commodity headwinds, Motilal Oswal Financial Services has factored in a 250-bps Ebitda margin contraction in the India business in FY27, which it expects to recover gradually in FY28. To fight rising costs, Apollo has hiked prices by 6-8% and forecasts further increases. The management expects the Ebitda margin to recover to historical levels of about 16% in the medium term.
Meanwhile, Europe volumes grew in the low single digits last quarter and revenue fell by 3.3% year-on-year. The company’s plan to close the Enschede plant in the Netherlands may keep investors cautious in the near term, although Apollo expects restructuring benefits to start reflecting from H2FY27.
On the brighter side, net debt dropped to about ₹1,600 crore in FY26 from ₹2,500 crore a year earlier, and net-debt-to-Ebitda improved to 0.4x from 0.7x.
Apollo intends to proceed with its capex plan, focusing more on domestic expansion.
However, Nomura Research cautioned that significant capex of ₹3,500 crore/ ₹3,000 crore for FY27/28 could impact free-cash-flow generation. The stock’s sharp drop means valuations now seem reasonable at about 13 times FY27 earnings estimates, as per Bloomberg data. But margin woes may keep meaningful upsides at bay in the near future.