Reducing debt in the tyre industry is crucial for enhancing financial stability and operational flexibility. Lower debt levels strengthen a company’s balance sheet, enabling greater investment in growth and innovation. It also improves credit ratings, facilitates securing financing on better terms, and boosts investor confidence, which supports long-term growth.
Here are three such Tyre companies which have reduced their debt to a great extent:
Apollo Tyres Limited
Apollo Tyres Limited, an Indian multinational tyre manufacturer, operates six production facilities in India and Europe. The company offers a diverse range of tyres for various vehicles and markets its products under the Apollo and Vredestein brands.
In FY24, Apollo Tyres significantly strengthened its financial position by reducing its net debt from approximately Rs.4,300 crore to Rs.2,500 crore.
The debt reduction of Rs.1,800 crore (42 percent) was achieved through disciplined financial management and a consolidated free cash flow of around Rs.2,000 crore for the fiscal year.
The company’s net debt-to-EBITDA ratio improved from 1.4 to 0.5 during this period, while the net debt-to-equity ratio decreased to 0.81, down from 1.31 in FY23.
Looking ahead, Apollo Tyres plans to adopt a capex-light strategy, focusing on investments in digitalization and sustainability rather than large-scale expansions. The company aims to enhance productivity by leveraging artificial intelligence and machine learning.
With a market capitalization of Rs.32,222 crore, Apollo Tyres’ stock price opened at Rs.507.6 on Friday, almost similar to its previous close.
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CEAT Limited
CEAT’s principal business is the manufacturing of automotive tyres, tubes, and flaps. The company produces tyres for a wide range of vehicles, including two- and three-wheelers, passenger and utility vehicles, commercial vehicles, and off-highway vehicles.
In FY24, CEAT Ltd significantly strengthened its financial position by reducing its gross debt from approximately Rs.2,066 crore to Rs.1,593 crore.
This Rs.473 crore (23 percent) reduction in gross debt will greatly enhance CEAT’s financial stability, leading to lower interest expenses and improved profitability. Additionally, the improved debt-to-EBITDA ratio of 0.96 and the decrease in the debt-to-equity ratio to 0.4 will provide greater flexibility for future investments and growth initiatives.
With a market capitalization of Rs.11,627 crore, CEAT’s share price opened at Rs.2,878.05 on Friday, marking a 0.5 percent increase from its previous close.
JK Tyre & Industries Limited
JK Tyre & Industries Limited is a leading tyre manufacturer in India, producing tyres for passenger cars, commercial vehicles, and off-highway vehicles. Known for pioneering radial tyre technology, it operates 12 manufacturing facilities and serves over 105 countries globally.
JK Tyre & Industries significantly improved its financial health by reducing its net debt from approximately Rs.4,509 crore in FY23 to Rs.3,704 crore in FY24.
The debt reduction of Rs.805 crore (17.85 percent) strengthens the company’s balance sheet and enables greater liquidity. The net debt-to-EBITDA ratio improved to 1.75 from 3.39, and the decrease in the debt-to-equity ratio to 0.8 from 1.29, positioned JK Tyre for more growth and resilience in the face of market fluctuations.
With a market capitalization of Rs.10,897 crore, JK Tyres’ share price opened at Rs.415.55 on Friday, rising 0.012 percent from its previous close.
Written by – Siddesh S Raskar
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