Apollo Tyres Q4 FY26: Strong growth, steady margins, and a tougher cost cycle ahead

Apollo Tyres ended Q4 FY26 with a clear split screen. Demand was strong and profitability improved, but management also flagged a sharp rise in input costs as the next near-term challenge.

On a consolidated basis, the company reported Q4 FY26 revenue of INR 73,357 million, up 14.2% year on year. EBITDA rose 27.6% to INR 10,688 million and the EBITDA margin expanded to 14.6% from 13.0% last year. For FY26, consolidated revenue was INR 284,706 million, up 9.0%, while EBITDA grew 16.0% to INR 41,432 million. The full-year EBITDA margin stood at 14.6%, up 88 basis points.

Net leverage also continued to improve. Net debt reduced to INR 16 billion at March 2026 from INR 25 billion a year ago, taking net debt to EBITDA to 0.4x. FY26 free cash flow was INR 20 billion, up from INR 13 billion in FY25, supported by strong operating cash flows.

India: high-teens growth and margin expansion despite higher brand spends

India operations were the main engine of quarter-on-quarter momentum. The investor presentation reported India revenue of INR 52,370 million in Q4 FY26, a 14.3% year-on-year increase. EBITDA margin for the quarter improved to 14.6% from 11.2% in Q4 FY25.

Management attributed the growth to robust underlying demand and a boost from GST rate reduction and brand visibility enhancement. The company also highlighted that truck and bus radial replacement delivered its highest ever quarterly volumes. In passenger car tyres, the premium mix continued to improve.

A notable point was the scale-up in advertising and promotion in Q4. On the call, the CFO said advertisement and sales promotion rose to about 4% of sales for the quarter, versus a typical 2%, driven by activation spends linked to cricket jersey sponsorship. Management said this would normalise going forward, but remain slightly higher than historical trends, guiding towards around 2.5% plus of sales over time.

The company also gave a positive near-term demand read. April volumes were described as equally strong, and management expected the momentum to continue through Q1, even as the cost environment became more volatile.

Europe: stable margins, muted market, and a major restructuring nearing completion

In Europe, Apollo reported a mixed quarter. Q4 FY26 revenue was EUR 170 million, down 3.3% year on year in the presentation, while volumes grew low single digit. Management clarified on the call that the decline was driven largely by lower other operating income rather than weakness in core sales.

Europe EBITDA margin improved slightly to 14.6% from 14.3% in Q4 FY25, aided by lower raw material costs during the quarter. The company also continued its premiumisation agenda. The investor presentation noted that the UHP mix rose to 50% in Q4 FY26 from 48% a year ago.

However, management acknowledged that European margins are still below earlier normalised levels of 16% plus. The CFO linked this to a sluggish market over the last two years, combined with elevated energy costs and wage inflation in Western Europe.

A key strategic milestone is the closure of the Enschede plant. Management confirmed production will cease on June 30, 2026. In Q4 FY26, the company took a non-cash write-off of EUR 43 million on the plant’s fixed assets. The CFO indicated that it would take about one additional quarter to stabilise post-closure, and that margin benefits should start flowing in H2 FY27 as the European footprint becomes more cost competitive.

There is also a cash element to the restructuring. Management stated that there would be cash outflows in FY27 linked to the social plan and related costs, with an overall EUR 55 million plus cash provision already taken.

Cash flow, capacity, and the FY27 capex push

Apollo’s cash generation remained a highlight. FY26 capex increased to INR 14 billion from INR 8 billion in FY25, while free cash flow rose to INR 20 billion. Management explicitly connected the stronger balance sheet to the ability to invest in growth capex over the next two to three years.

Capacity utilisation is already high. The investor presentation showed utilisation of 85% in India and 93% in Europe for FY26. On the call, management described utilisation as around 90% across India and Europe and said the company expects full capacity utilisation given demand trends.

In this context, Apollo outlined FY27 capex of INR 35 billion, with nearly 80% directed toward growth and capacity expansion. The CFO added that close to INR 3,000 crores of this would be in India, focused on expanding both truck and car tyre capacity. In Europe, the key expansion is in Hungary, where passenger car tyre capacity is being ramped up.

Management also indicated that while the capex plan has some flexibility, FY27 is largely committed given current demand and capacity constraints.

The near-term watchlist: raw material inflation and pricing response

The most direct near-term risk flagged was sharp raw material inflation. Management said raw material costs are expected to rise mid to high teens on a sequential basis in Q1 FY27, driven by volatility tied to developments in West Asia and broader commodity markets.

Apollo has already begun passing through price increases. In India, the company announced price hikes of 6% to 8% for the current quarter, with 3% to 5% already implemented and the remainder expected to come through in May. But management also said more increases may be needed beyond the 6% to 8% to fully offset the cost push.

In Europe, Apollo announced a 2% price increase and said it typically follows the actions of larger global peers in that market. Management also noted that for the same level of raw material inflation, the required price increases in Europe are smaller than in India.

Pricing lags are also relevant for OEM supply. Management said many OEM contracts follow a formula with about a three-month lag, meaning margins can face pressure until the formula resets pricing.

What stood out from FY26

Operationally, the company delivered a solid FY26 with improving profitability and a stronger balance sheet. Consolidated revenue rose to about INR 285 billion, EBITDA to about INR 41 billion, and the EBITDA margin held at 14.6%. Net debt reduced sharply and leverage fell to 0.4x.

Strategically, management is pushing multiple levers at once: capacity expansion in India, ramp-up in Hungary, a significant restructuring in Europe through the Enschede closure, and ongoing premiumisation in both markets.

The immediate challenge is cost inflation. Management was clear that raw materials, energy, and logistics are turning more volatile, and that multiple rounds of price increases may be required. The next few quarters are likely to be shaped by how effectively pricing actions catch up with the mid to high teens input cost increase, while demand remains firm.

Conclusion

Apollo Tyres’ Q4 FY26 message was consistent across the presentation and the call. Demand in India remains strong, Europe is expected to see better momentum in Q1, and the company is entering FY27 with high capacity utilisation and a stronger balance sheet. The big swing factor is the input cost cycle.

With FY27 capex planned at INR 35 billion and a key European plant closure nearing completion, the company is positioning for growth and improved competitiveness. But management’s own guidance suggests near-term margins will face pressure until multiple rounds of pricing action absorb the mid to high teens raw material inflation.