Apollo Tyres Q1 FY27: Strong growth, but raw materials hit margins

Apollo Tyres opened FY27 with healthy top line growth but visible margin pressure. In Q1 FY27, consolidated revenue rose 12.8% year on year to INR 73,978 million. EBITDA was flat at INR 8,680 million, taking the consolidated EBITDA margin down to 11.7% from 13.2% in Q1 FY26. The company attributed the margin compression primarily to raw material cost inflation.

The quarter also carried a significant management update. CFO Gaurav Kumar announced on the call that he plans to leave Apollo Tyres after more than 22 years, noting that he took the decision after completion of the Enschede project.

India delivered the strongest quarterly growth in 14 quarters

India operations were the key growth driver. Standalone revenue grew 15.6% year on year to INR 54,619 million, which management described as the highest ever revenue for the India business. The growth was largely volume-led. Management shared that volume growth across channels was in double digits: replacement was up 13%, OEM up 10%, and exports up 15%.

While demand and volumes were strong, India profitability moderated. Standalone EBITDA margin declined to 12.0% from 13.6% in Q1 FY26. Management said raw material costs escalated sharply in Q1, and pointed to positive pricing actions underway to mitigate the impact.

Financial snapshot (Q1 FY27)

Europe: revenue stable, margins impacted by cost push and transition

In Europe, Q1 FY27 revenue was broadly flat. The presentation reported Europe revenue of EUR 147 million, up 0.5% year on year, with EBITDA margin declining to 8.9% from 10.8%. Management said the decline was driven by cost push, and also highlighted overlap costs as the company executes the Enschede closure and shifts production.

The Netherlands plant stopped production in June 2026 as planned. Management expects financial and operational benefits from the restructuring to start materialising from H2 of FY27.

One structural change underway is the shifting of production from the Netherlands to Hungary and India. Management described that a large part of the Netherlands volume is expected to shift to Hungary, while some lower-end tyres (including 14-inch and 15-inch tyres) are being transferred to India. They indicated the transition process should be completed around September to October 2026.

Management also provided a directional view of medium-term margin potential in Europe. When asked about the overlap costs, the CFO said that without the overlap, Europe margins in Q1 would have been around 11%. On a full-year basis, with the restructuring, the company aims to deliver high teens EBITDA margins for European operations.

Pricing actions and raw material inflation set the tone for H1 FY27

The most important operating variable discussed on the call was raw material inflation. Management stated that raw material costs increased sharply in Q1, and that commodity prices are expected to remain volatile until the geopolitical situation in West Asia stabilises. Based on the current outlook, management expects raw material inflation of about 8% sequentially in Q2 for India operations.

To defend margins, the company has been taking calibrated price increases. Management explained that Q1 price actions were implemented in multiple tranches through the quarter. While the total price hikes implemented in Q1 were about 7% to 9%, the impact flowing into revenue was only about 3% to 4% because of staggered timing.

For India, management said the current quantum of implemented price increases is about 9% in TBR and 11% in other categories, while the overall requirement to cover the inflation is about 15% to 16%. As a result, they indicated that one to two more price increases are still needed.

For Europe, management said the raw material impact was initially smaller because the first inflation wave was driven by natural rubber. They stated that Europe’s raw material basket went up by about 8% in Q1, and that the second quarter would see a bigger hit. Total price increases needed for Q1 and Q2 in Europe were described as about 10% odd, while only 3% to 4% had been implemented at the time of the call.

The company also shared indicative raw material prices for the quarter: natural rubber at INR 225, synthetic rubber at INR 250, carbon black at INR 125, and steel cord at INR 165. For Q2, management suggested inflation would be largely natural-rubber led, with an average expected upwards of INR 260.

Capex ramp-up, stable leverage, and a clear Europe transition path

Apollo Tyres reported a stable leverage position in the presentation, with net debt to EBITDA at 0.4x (TTM). The CFO stated on the call that absolute consolidated net debt was about INR 1,700 plus crore, and consolidated capex in Q1 was about INR 650 crore.

However, management also indicated that FY27 could see a modest increase in leverage as capex rises. They stated the company will be a net borrower and net debt to EBITDA may go up slightly during the year.

On the capacity side, management said Hungary’s passenger car tyre capacity expansion is almost about to start, with production and ramp-up expected in H2 of FY27. They indicated Hungary output would rise from about 17,000 passenger car tyres per day to 21,000.

For India, management indicated incremental capacity should start coming on stream towards the end of FY27 and then ramp up through FY28.

Takeaways from Q1 FY27

Q1 FY27 reinforced Apollo Tyres’ current operating reality. Demand in India appears robust, capacity utilisation is high, and volume growth is supporting revenue momentum. At the same time, raw material inflation has compressed margins in both India and Europe, and the company is working through a multi-step pricing response with a lagged P&L impact.

The Europe restructuring is a key swing factor for the rest of FY27. The Enschede plant closure and the shift of production towards Hungary and India created transition costs in Q1, but management expects benefits to begin from H2 FY27. The second major swing factor is raw material behaviour. Management expects continued inflation into Q2, with pricing actions ongoing, and potential cooling in natural rubber from Q3 as seasonal effects fade.