Apollo Tyres Q2 FY27 Earnings Call: Strongest Revenue Growth in 16 Quarters, Margins Hit by 25% RM Inflation (APOLLOTYRE)

Apollo Tyres Ltd held its Q2 FY27 earnings call on November 04, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Strongest Revenue Growth in 16 Quarters, Margins Compressed by RM Inflation

• Consolidated revenue of Rs.79.7 billion, up over 16% YoY — the strongest YoY revenue growth in the last 16 quarters; EBITDA of Rs.8.6 billion at a 10.7% margin, with profitability hit by elevated raw material costs, partially offset by cost discipline and operating efficiencies.
• India revenue up nearly 26% YoY to Rs.59.2 billion — an acceleration over Q1 FY 2026-2027, broad-based across replacement and OEM, with volume and pricing contributing almost equally; India EBITDA of Rs.6.6 billion at an 11.1% margin vs 15.3% in Q2 FY 2025-2026.
• Europe revenue declined 12% YoY to €157 million — weakness in truck and agriculture segments plus temporary supply disruptions from the Enschede plant closure; PCR continued to gain share despite subdued demand; Europe EBITDA margin at 10.3%.
• Volume growth of ~13% YoY — roughly half the quarter's overall growth came from volume; OEM channel led with ~25%+ growth, replacement grew low double digits, exports largely flattish.
• India replacement mix skewed to two-wheelers — 2W volumes grew ~25-26% YoY, PCR mid-teens, truck high single digits; PCR exports did not deliver strong volume growth.
• CFO transition — Ravi Kumar Shingari has taken over as CFO; Neeraj did not join the Q2 FY 2026-2027 call due to unexpected circumstances.

25% RM Cost Push vs 13-15% Price Hikes — a Persistent Gap

• Raw material basket up ~25% YoY in Q2 FY 2026-2027 — natural rubber up ~25-26% (unprecedented levels; NR has already touched the Rs.300 mark in India as of the call date), crude-led derivatives up 28-35%, steel cord up low double digits.
• Price increases of 13-15% cumulative by end-October FY 2026-2027 — vs the 16-17% increases the 25% H1 RM push would have required to hold margins flat; Apollo led price increases in some categories and followed in others, in line with industry trend.
• Additional 1-2% hikes announced around October FY 2026-2027 — further increases may come in December or January (Q3 FY 2026-2027), contingent on raw material movement and market/competition response.
• Q3 FY 2026-2027 RM basket expected up mid-to-high single digits sequentially — management is in an RM inflationary cycle with high volatility; the full impact of the 13-15% increases is expected to flow through in Q3 FY 2026-2027.
• OEM pricing largely formula-linked with a one-quarter lag — for select OEMs where pricing is not formula-linked, management secured negotiated increases; Apollo has led TBR price increases with 13-14% in replacement during FY 2026-2027 and secured similar increases across OEMs.
• RM expected to peak towards end of FY 2026-2027 — management now expects a high single digit RM increase in Q3 FY 2026-2027 (vs earlier expectation of stabilization), with tapering/stabilizing from FY 2027-2028, explicitly subject to geopolitical volatility.
• Analyst Basudev Banati flagged ~300-400 bps of Q3 FY 2026-2027 gross margin risk — his math: an ~8% Q3 RM basket increase implies a need for 5-6% price increases vs ~2% blended taken till October; he also flagged a possible 30-40% NR correction if it follows Brent crude's downward move (analyst's view, not management guidance).

Enschede Closure Reshapes the European Footprint

• Enschede (Netherlands) plant ceased operations at end of Q1 FY 2026-2027 — shut to move away from a high-cost manufacturing location; TBR manufacturing relocated from Hungary to the AP (India) plant; dismantling and equipment sale will take 2-3 quarters, extending into FY 2027-2028.
• Hungary is now the only operating plant in Europe — no plant operating costs going forward; only dismantling/equipment relocation costs may trickle in over the next few quarters (post-Q2 FY 2026-2027), which management does not expect to be significant.
• ~€2.3 million exceptional item booked in Q2 FY 2026-2027 — largely from employees remaining in a different legal entity, now taken into the books; the large part of Enschede-related costs is already in the accounts, with only cleanup costs remaining.
• European supply readiness expected by Q4 FY 2026-2027 — management expects manufacturing/supply facilities ready within two quarters and hopes for largely stable European operations with normalized margins in FY 2027-2028; warehouse reorganization, business model change and S/4HANA implementation expected complete by FY 2026-2027, or possibly Q1 FY 2027-2028.
• PCLT was the bright spot in Q2 FY 2026-2027 Europe — category grew 5% YoY with market share gains in a slow market, and Apollo Vredestein PCLT volumes grew northwards of 50%; declines concentrated in agri and TBR on supply chain reorganization and the Enschede/Hungary-to-India transition.
• Q3 FY 2026-2027 winter tire demand largely covered — smaller PCR sizes to be supplied from India and high-end tires from Hungary; management expects Europe to meet budgets from Q3 FY 2026-2027 onwards; agri and OHT supply expected to stabilize in FY 2027-2028.
• Medium-term Europe margin ambition of high-teens — management remains committed to building a European business capable of delivering high-teens operating margins over the medium term (period unspecified); margin recovery has taken longer than initially anticipated.

Fortnightly Cost Governance, Capex Cycle and Leverage

• Tight Q2 FY 2026-2027 cost control on other expenses and employee costs — attributed to weekly strategy meetings, A&P budgets limited to the BCCI collaboration, timely cost cuts as RM impact emerged, and tight checks on manageable costs like travel; freight flagged as outside the company's control.
• Cost control now institutionalized — management stated it has become an integral part of operations, with the entire leadership monitoring costs on a fortnightly basis going forward; the CFO declined to guide on whether the typical Q4 lump-sum increase in other expenses will recur in Q4 FY 2026-2027.
• H1 FY 2026-2027 consolidated net capex of ~Rs.15 billion — broadly in line with full-year FY 2026-2027 plans; plant capacities running at 85-90% across plants, making timely capex expansion necessary to avoid losing market share.
• Gross debt of ~Rs.1,500 crores raised in H1 FY 2026-2027 — including Rs.1,250 crores via non-convertible debentures at 8.5% interest; the debt is a combination of working capital and upcoming capex funding; the CFO deferred granular interest-treatment details to the IR team.
• Net debt/EBITDA at 0.9x as of 30 September 2026 — currently below 1x even with the additional debt; management is confident leverage will remain within workable limits despite expansion plans, though more debt may come in as expansions are embarked upon.
• Mid-teens ROCE targeted at stable state (period unspecified) — the CFO flagged a possible short-term ROCE impact during the capex cycle, with ROCEs expected to come back once the growth story is capitalized.

Pricing-Led Revenue Growth, Moderating Volumes, Margin Timing Uncertain

• Q3 FY 2026-2027 India volume growth guided at mid-to-high single digits YoY — against an inflated year-ago base from GST changes and BCCI demand in Q3 FY 2025-2026; the larger part of revenue growth to come from pricing actions.
• India demand conditions expected to remain supportive — reported volume growth may moderate over coming quarters on a higher base, while revenue momentum should benefit from pricing implemented since April 2026; margin-recovery direction is clear but timing depends on the commodity-market trajectory and geopolitical developments.
• No export guidance given — management cited volatility beyond control across export markets (Europe, America, Middle East, Southeast Asia) and is being careful and conservative on exports given strong domestic demand momentum.
• Historical margin context offered by IR head Himanshu Sharma — margins historically begin recovering as RM plateaus and peak as RM starts correcting; margins historically fell to single digits at the height of RM inflation but have held up this cycle; management declined to pinpoint the exact peak quarter ("crystal ball gazing").
• Analyst framing of the recovery path — India margins were as low as 7-8% in earlier downcycles vs ~11% currently (Q2 FY 2026-2027); the analyst is looking for a recovery toward 16% as price hikes and RM basket reversal play out (period unspecified), which he noted would address cash flow and RoCE questions; replacement demand is growing at double-digit despite price hikes (per management's earlier remarks referenced by the analyst).
• Long-term positioning — management remains highly confident: India positioned to benefit from a growing tire market, improving product mix and more rational pricing; Europe focused on improved competitiveness and a stronger operating model to leverage a significantly large profit pool.

OEM Wins, Digital Rollout and Sustainability Milestones

• New OEM approvals/engagements in Q2 FY 2026-2027 — with BMW, Mercedes-Benz, Mahindra and Tata Motors.
• SAP S/4HANA implementation completed for the US business — European and Indian rollouts next; the Europe-wide S/4HANA implementation is expected complete by FY 2026-2027, or possibly Q1 FY 2027-2028.
• Brand and rural outreach — BCCI-led campaigns expanded rural outreach in India, while targeted partnerships strengthened Vredestein's premium positioning in Europe.
• Sustainability and workplace recognition — Chennai plant won the CII National Excellence Award for Employee Relations; AP and Kerala plants achieved gold-level zero waste-to-landfill certification supporting Apollo's 2030 sustainability ambitions.