Warburg Pincus divested a 4.25% stake in Apollo Tyres for ₹1,175 crore through open market transactions on Thursday, marking a significant institutional exit from the tyre manufacturer. According to block deal data on the National Stock Exchange (NSE), US-based Warburg Pincus, through its arm Emerald Sage Investment Ltd, sold a total of 2,70,10,000 shares representing the 4.25% stake in Gurugram-based Apollo Tyres. The shares were disposed of at an average price of ₹435 apiece, taking the transaction value to ₹1,174.93 crore. After the latest transaction, Emerald Sage Investment's holding in Apollo Tyres has come down to 5.68% from 9.93%. A clutch of institutional investors stepped in to buy the shares at the same price, with ICICI Prudential Mutual Fund emerging as the biggest buyer, picking up more than 1.9 crore shares, or a 3% stake in the company, for ₹829.98 crore. SBI Life Insurance Company acquired 56.32 lakh shares for ₹245 crore, and Bajaj Life Insurance purchased 22.98 lakh shares for ₹99.96 crore. Shares of Apollo Tyres rose marginally to close at ₹444.40 apiece on the NSE, reflecting positive investor sentiment following the institutional activity.
Apollo Tyres reported consolidated net profit of ₹348.87 crore for Q1 FY27, compared with ₹12.88 crore in the corresponding quarter last year, as reported by The Economic Times. Revenue from operations increased 12.8% year-on-year to ₹7,397.79 crore, supported by steady demand across domestic and international businesses. However, total expenses were higher at ₹7,012.03 crore as compared to ₹6,171.15 crore in the previous year. The sharp improvement in earnings was partly driven by the significantly different exceptional impact, with the company reporting an exceptional gain of ₹24 crore during the quarter, compared with an exceptional loss of ₹370 crore in the year-ago period. The company had posted a net profit of ₹12.88 crore a year ago, which included the net impact after tax of restructuring and impairment of the Netherlands plant amounting to ₹273 crore. Chairman Onkar Kanwar commented: "We delivered healthy revenue growth during the quarter, supported by robust demand across market segments and sustained high-capacity utilisation across our manufacturing network."
UBS has upgraded Apollo Tyres to Buy from Neutral with a revised target price of ₹590 per share, implying a potential upside of around 34% from Friday's closing price of ₹439.95. According to CNBC TV18, the brokerage believes the outlook is improving as management takes concrete steps to strengthen its India business, including investments in brand building such as sponsorship of the Indian cricket team's jersey. The upgrade comes as UBS sees prospects for the company's Europe business turning more constructive, while investors remain overly focused on near-term commodity cost pressures and recent execution challenges. The brokerage notes that the market is underappreciating the tyre-maker's medium-term earnings recovery potential, as the stock continues to trade at a discount to peers and has underperformed the broader tyre sector over the past four years.
UBS expects EBITDA to rise 21% year-on-year in FY28E, supported by easing commodity pressures and improving business conditions. While Q2FY27 could see further pressure, with natural rubber prices having risen 22% quarter-on-quarter in Q1FY27, UBS expects a meaningful improvement in earnings thereafter. The brokerage believes the market is underappreciating Apollo Tyres' medium-term earnings recovery potential, as demand remains robust and strategic initiatives begin to gain traction. Apollo Tyres is one of the leading tyre manufacturers in India with seven manufacturing units - 5 in India and 1 each in the Netherlands and Hungary. The company markets its products under its two global brands – Apollo and Vredestein, and its products are available in over 100 countries. According to CNBC TV18, UBS sees a more constructive outlook for Apollo Tyres' European operations alongside the improving India business prospects, with the overall outlook for the company improving as management takes concrete steps to strengthen both operations.
This marks the second major institutional exit from Apollo Tyres in recent months, following Warburg Pincus' arm White Iris Investment's divestment of a 3.54% stake in May 2024 for ₹1,073 crore. The latest transaction demonstrates continued institutional confidence in the company's long-term prospects despite short-term market volatility. The significant participation of multiple institutional investors including ICICI Prudential Mutual Fund, SBI Life Insurance Company, and Bajaj Life Insurance indicates strong institutional demand for quality tire manufacturing assets. The positive market response to the Warburg Pincus exit, with shares rising to close at ₹444.40, suggests investors view the divestment as a strategic move rather than a negative development for the company's future prospects.
