Annual Report 2019-20 IN THE BUSINESS OF PROGRESS CONTENTS Apollo Tyres in brief 01-03 Apollo Tyres is one of the most trusted Corporate factsheet names in the manufacture and sale of tyres. The Company was founded in 1972 and is 04-13 headquartered in Gurugram, Haryana (India). Leadership and governance 06 Chairman’s message 08 Vice-Chairman’s message 10 Board of Directors Catering to all tyre segments 12 Management Team TRUCK AND BUS LIGHT TRUCK 14-77 Performance and progress 16 Key performance indicators 18 Know our capitals 20 Business model 22 Capital-wise information 36 Progress amidst volatility 38 Progress that is sustainable 40 Progress through people centricity 42 Value created for the stakeholders PASSENGER VEHICLES TWO-WHEELER 78-93 Management Discussion & Analysis 94-170 Statutory Reports 94 Board’s Report 107 Annual Report on CSR 113 Business Responsibility Report 138 Corporate Governance Report OFF-HIGHWAY 171-305 Financial Statements 171 Standalone 233 Consolidated Apollo Tyres’ success as a leading tyre such as: geo-political relations, economic manufacturer is inextricably linked with the growth, industry cyclicality, environmental progress of the people, the businesses we issues, technological innovation, safety and partner and the planet at large. We have consumer attitudes. Our FY20 performance is always persevered to exceed expectations, a reflection of the resulting uncertainties. It set new benchmarks and in some cases, is also a testament to our foundational values shape the future of the industry. and intrinsic strengths that have helped us navigate through these uncertainties. Our marquee brands, Apollo and Vredestein, enjoy premium positions in the commercial As we step into a new decade, replete with and passenger vehicle tyre segments in unexplored opportunities, we are keen on India and Europe, respectively. We are furthering our legacy and our leadership leveraging our brand equity, rich consumer on the global stage. Strong governance insights, extensive distribution network oversight, along with the experience of a and R&D prowess to accelerate our market culturally diverse Management Team, will expansion and grow our footprint in existing play a central role in ensuring we achieve our and new geographies. We are also extending strategic objectives. enduring bonds of trust with global Original The Annual Report 2019-20 is an article Equipment Manufacturers (OEMs) and of faith, confident as we are in our ability are seeing early success in this regard. to contribute to the world responsibly That said, we are not made complacent by and sustainably. It is a promise to our our leadership. stakeholders that we will stay at the We continue to evolve our strategies and cutting-edge of innovation and drive growth respond to a dynamic external environment and prosperity for all; and that we will stay in through constant innovation across our the business of progress. product range and a sharpened focus on cost discipline. Even as you read this, our operating context is undergoing substantial change owing to a wide range of factors, Corporate factsheet At a glance As one of the most trusted tyre businesses in India and globally, we persist in our aim to strengthen our market leadership to drive unprecedented growth for our stakeholders. VISION To be a premier tyre company with a diversified and multinational presence VALUES It’s about our instincts. It’s about the way we think. It’s the way we interact with the world. It’s our common culture. It’s a system of values that, like our six senses, defines who we are and how we work. Customer First Empowerment We believe that our customers and We take ownership for our actions and those whom they serve are central to responsibility for results. everything we do. Communicate Openly Business Ethics We are open and transparent in our We act with integrity. communication across geographies and levels. Care for Society One Family We actively participate in our local We celebrate our oneness through building communities to address health, safety, trusting relations, respect for diversity and environment and community needs. passion towards common goals. A truly global business We manufacture tyres in multiple state-of-the-art facilities and make them available across the world, through our extensive network of branded, exclusive, and multi-product outlets. 7 2 100+ Manufacturing Global R&D centres Countries served locations across India and Europe 2 Apollo Tyres Ltd. Corporate Overview Statutory Reports Financial Statements A strong portfolio of reliable brands Our two key brands Apollo and Vredestein cater to specific consumer segments and the product portfolio comprises tyres for passenger, commercial, off-highway vehicles and two-wheelers. Each has a distinctive positioning and brand language to match. A choice of global and Indian original equipment The Vredestein brand is over 110 years old auto players, the Apollo brand is available and has achieved premium brand status in across all categories, including commercial, the automotive industry. Products include passenger vehicles, two-wheelers, farm car tyres, tyres for agricultural and and industrial. industrial applications, and bicycle tyres. A calibrated financial strategy We approach long-term returns with efficiency, foresight and prudence. `160.96 Bn `28.36 Bn `4.76 Bn `19.62 Bn Gross Sales Capital Expenditure Net Profit EBITDA Outflow An endeavour for good We have an ambitious sustainability agenda focused on supporting the society’s holistic growth and preserving the planet that we cohabit. 5,81,585 `183.7 Mn 7,31,5 69 m3 70,804 GJ CSR Beneficiaries CSR Spend Water Recycled/Reused Energy Saved A people company The skills, experience, diversity and productivity of our employees enable us to deliver on our promises. ~17,20 0 Great Place Employees to Work-certified Annual Report 2019-20 3 Leadership and governance 4 Apollo Tyres Ltd. Corporate Overview Statutory Reports Financial Statements Apollo Tyres’ growth aspirations are driven by a strong and cohesive corporate governance structure comprising the Board of Directors, the Board Committees and the Management Team. Together, our leadership helps define and implement our strategy in line with our stakeholder commitments, while adhering to the strictest principles of compliance and ethics. This structure helps us manage risks and identify opportunities to drive sustainable value creation. Annual Report 2019-20 5 Chairman’s message ‘Adversity is said to be the mother of progress.’ 6 Apollo Tyres Ltd. Corporate Overview Statutory Reports Financial Statements Dear Shareholders, We are in the midst of very uncertain times due to the spread of COVID-19 in India and across the world. I hope that each one of you and your family members are safe and continue to adhere to It is heartening to inform that the various guidelines and take all necessary precautions. despite the crisis, we have been It has been my life’s mission to find opportunities in the face able to organise the virtual of challenges and in the process, deliver value to all our stakeholders, including employees, shareholders, customers, inauguration of our seventh partners and other relevant communities. The senior leadership manufacturing plant in and I have tried to instil the same belief in our colleagues at the Company, to make it a part of our values and ways of working. Andhra Pradesh, India in June Fuelled by our long-term vision of becoming a global leader in 2020. This was closely followed the industry and guided by our values, the Apollo Way, we have by the opening of our facility to successfully adapted to the changing market realities in the past, just as we continue to drive leadership even in the current ‘new manufacture high-end bias and normal’. Yet at the core, we continue to pursue our profitable steel radial tyres for the growth strategy, focusing on a three-pronged approach: consolidate market position in existing markets while seeking two-wheeler segment in Limda, new markets/new segments; continue investment in both our Gujarat, India in July 2020. brands, Apollo and Vredestein, as well as in capacity expansion to feed our markets; and explore other growth opportunities. FY20 was a tough year by all measures. While the auto industry had been on a slow growth path even in FY19, the last year Looking ahead, it is reasonable to assume that the uncertainty proved to be a complete dampener for the industry due to poor will continue. I personally do not see an early end of this ‘new consumer sentiment, increased cost of ownership on account normal’. Yet, the show must go on and we are already adapting of higher insurance cost, and higher financing cost owing to the and finding opportunities for growth. Our immediate priority is liquidity crisis in the Non-Banking Financial Company (NBFC) the safety and well-being of our employees, even as we continue sector. We were still bullish about the economy bouncing back to make the ‘new normal’ our normal. It is heartening to inform and did see signs of a recovery in the third quarter, but the fourth that despite the crisis, we have been able to organise the virtual quarter witnessed headwinds in the form of the COVID-19 inauguration of our seventh manufacturing plant in outbreak and the subsequent nation-wide lockdown. India saw its Andhra Pradesh, India in June 2020. This was closely followed economic growth hitting an 11-year low of 4.2% for FY20, even as by the opening of our facility to manufacture high-end bias and the auto industry sales fell 18%, adversely impacting the entire steel radial tyres for the two-wheeler segment in Limda, Gujarat, tyre industry, which, in turn, declined by 8%, in terms of total India in July 2020. tyres manufactured. I would like to take this opportunity to thank all banks and other As you leaf through the pages of the year’s Annual Report, you financial institutions, the Government of India and the respective will read about the actions we took during the year and the state governments, the Government of The Netherlands and the initiatives we will take to adapt to the new normal.