Apollo Tyres: Cooper buyout takes a toll

Weak demand from car manufacturers due to sluggish sales did not weigh down Apollo Tyres significantly in the quarter to June with demand for replacement tyres partly compensating for slower volumes.

It reported a rather flat topline growth for the quarter over the past year, but sequentially, the topline grew 6% for the standalone entity and close to 5% on a consolidated basis. Despite its better-than-expected performance, Apollo Tyres continues to be under the watch of institutional investors who are bearish on the stock ever since it announced the buyout of Cooper Tyres.

While the mutual fund shareholding has hit a decade low of 2.72%, FIIs are also exiting and their shareholding has slipped to 26.3% in June ’13 quarter from 28.62% in March ’13.

With concerns of serious leveraging of Apollo Tyres’ balance sheet following its Cooper acquisition, which is likely to go through by the end of this calendar year, there is declining investment interest on the part of institutional investors. The stock has corrected almost 40% from its peak price of Rs 100 before the Cooper announcement.