Interview with Satish Sharma
Chief India Operations, Apollo Tyres Ltd
Have any of the foreign acquisitions really helped you
to increase your strength in the domestic market?
See, by
and large I would say it has its own strength. But then, it would also be
immodest to make that comment. Let’s say we put the Chennai facility for
essentially for truck-bus radials TBR) tyres. Now when we did that, we already
had TBR facility in South Africa. They deal with two brands Dunlop and Regal.
Dunlop is with us for 33 countries in Africa. And the brand we do globally is
the ‘Regal brand’. So what we did is we brought in the Regal product in India
and we did all our experimentations with the ‘Regal’ product. Of course, with
respect to Indian market, it had its shortcomings. But it gave us a headstart.
So there was a readymade product. So there was some absorption of technology.
At the end of the day, the product that we have today is called ‘Endurance’ in
the Apollo brand is a far cry from what the Regal product is. The other
acquisition in terms of the Holland acquisition, I think there has been a fair
amount of leverage. Because they are very strong in car tyres and they
are a very niche product in car and farm tyres. So in car, I would say they
have a production system called PIBS, which is based on information and technology
and essentially to do with production planning. For cars they make 600 stock
keeping units (SKUs). And we are today about 150-160. When you make truck
tyres, it’s about 12-13 SKUs. Each SKU has a different specification.
So what is this
PIBS?
That’s a
production planning system. So we borrowed that system from them and used it in
our Chennai facility for our car radials. It allows you to retain your
flexibility to manufacture large number of SKUs. So there is a fair amount of
learning on the car tyres. We have an R&D centre in Europe and Chennai.
Both these centres work very closely to leverage on each other’s strengths. For
instance, I know for sure the Indian operations helped them in mixing the
product. We have a huge strength as far as mixing is concerned because of the
fact that rubber is grown in Kerala and almost all rubber technologists come
out of that state. And we really are very, very strong. I would say we have
cutting-edge mixing technology and courtesy that, they were able to increase their
productivity in the mixing department. Of course the Holland (acquisition)
helped us to launch the ‘Apollo’ brand in Europe. So April 2010 or June 2010,
we launched the Apollo brand in a tyre show in Germany. And today, the sales
organisations of the Holland companies are selling the Apollo brand. So, there
is a fair amount of work which is happening post this acquisition.
Do companies copy your
formula?
They try. The point is that while it’s easy for me to say
these things, these are very difficult things to copy. This needs discipline, it needs a certain
vision. We have put something like 2,000
crore of investment in Chennai. Your business plan should be robust and you
must have Plan A, Plan B, Plan C. What will you do if the India market doesn’t
keep pace with your original thinking? So we have all these things, we believe,
in our pocket. So we are very successful. And very month we are getting
stronger and stronger. We fitted it in the OEs in 12 wheelers, not even in the
10 wheelers, because we chose that vehicle after doing a lot of research in the
market. They were very keen to fix our
product in 12 wheelers. They said nothing is going to go wrong on that, because
we have done our R&D. It is doing good in both Tata Motors and Ashok
Leyland outlets. Our competitors have fixed it to the 6-wheelers and
10-wheelers. So we have what we call a 360 degree approach. We are not only
looking at the first life of the products. We are looking at the 2nd life of
the products. We are working with our traders. We have developed something
called 100-odd traders which we call as ACRs-Apollo Certified Retailers. We
have tread rubber for them, special tread rubber. We are looking at the 2nd
life of the product. We have upgraded their tools at our cost (almost at 1 lakh per account). These 100 odd dealers
are spread across the country.
Is there a big market for
retreaded tyres?
There is a huge market for these tyres. See the advantage
you get is on the cost per kilometre. The tyre is the second most running
expenditure after fuel. One pair of truck radial tyres cost 40,000. If
the product doesn’t work, the dealer can end up losing his money and the
end users can arm-twist this guy to give
his receivables back.
You have also been quoted
as saying that you are shifting your entire production out of Kerala?
I
would say have been misquoted. We have 4-5 facilities in Kerala. We always have
to do a little bit of balancing of how much to grow in Kerala and how much not
to grow in Kerala. We started our lives with Kerala and we’ll stick to it. We
have 2 plants in the State. You know how strong unions are in Kerala. At times,
you have to become touch. It’s not easy to do industrial relations in Kerala.
Everybody knows. We are the largest manufacturers in Kerala now. And the state
government is, I would say, very supportive of us that we give employment
opportunities to so many and we have not walked out of that state.
Do you think the prices of
natural rubber are worrisome for you?
It’s very worrisome for us. We had an operating margin of
15pc. It was a good year for us, essentially so, because the raw material price
was alright. Rubber was more or less 100 a kg, and this has become 240 a kg. Now that kind of increase you
cannot pass on to the market. Our margins came down to 10pc in the last
quarter. And we see this margin erosion continuing. So there is a genuine
concern. Our raw material is in three buckets-rubber, crude oil (carbon black
derived from it) and steel. And you know what’s happening in these three
buckets. So while there is a revenue growth happening, we are seeing the
erosion of margins.
By 2015, you want to be
among the top 10 global tyre companies in the world and become a US $ 6 billion
company? Are you on the right track?
Yes, it’s actually 2015-16
financial year. So we have launched a programme called ‘AGILE’, which is an
acronym for Apollo Growth Innovation, Leadership and Excellence journey. And
this AGILE target is US $ 6 billion in 5 years, of which Zone I’s target is 3.2
billion dollars. Of the 3.2, I want to achieve 2 billion dollars (in the next
18 months).
Read the full interview in Motown India June 2011 issue