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[Audio Gap] Earnings call. First of all, best wishes for you and your family's health and safety. Last few months have been very difficult for all of us, and I would like to take this opportunity to thank all our stakeholders for their continued support. In recent times, we have announced a slew of measures to support our employees, including tie-ups with leading hospitals, extending insurance coverage and financial assistance to families in case of any mishap, et cetera. We are closely monitoring the situation, and we remain extremely focused on ensuring well-being of all our employees, our dealers, our suppliers and all our stakeholders. Moving on to business. The positive demand momentum continued in India in quarter 4, resulting in strongest quarter in terms of revenue. In Europe, we saw demand recovery in the fourth quarter. In both geographies, we gained market share in key product categories. Coming to Q4 financial performance, I'm extremely pleased with a healthy operating performance in India and an extremely strong and steadily increasing operating margins in Europe. This was achieved despite rising raw material pressure. We are leveraging new age technologies to increase engagement level with our stakeholders, reengineer, optimize processes and reduce costs on a long-term sustainable basis. In Europe, despite uncertain economic environment, we have successfully executed the Enschede plant specialization, which, in turn, helped us significantly improve operating performance of our European operations. Despite second wave of COVID-19 hitting us hard, we will remain focused on converting the current crisis into an opportunity and emerge from this as a leaner, much more efficient and much more effective company. Over the last 1 year, efforts on various fronts have ensured that we have emerged stronger through this pandemic crisis and a much better place than last year to face the ongoing challenge. I'm happy to report that despite COVID-19 crisis, we've been able to significantly strengthen our balance sheet, both in terms of solvency and liquidity. Our net debt EBITDA for the consolidated operations stood at 1.5x as of 31st March 2021 as compared to 3.2x as of 31st March last year. Going forward, the focus will continue to be on controlled capital allocation, [ sweating ] of our assets and keeping the balance sheet leverage at reasonable levels. Finally, in terms of outlook, while we have limited ability to forecast near-term demand trends given the multiple COVID-19 outbreak and its impact on business, I would use this opportunity to reiterate our focus areas. First, we are committed to use this opportunity to emerge as a leaner and a more efficient organization. Second, we continue to see huge opportunities in our key markets over medium and long term and are well placed to leverage the same, given our investments in the capacity, in R&D, in brand building, in our distribution and our cost optimization. I'm deeply pained by the adverse impact of COVID-19 on all our employees and their families and would prioritize safety, health and well-being of my fellow employees above everything else. With this, I will conclude my opening remarks, and I'd like to hand over to Gaurav, our CFO. Please stay safe, stay healthy. Thank you.
Thank you, Neeraj, and good afternoon, ladies and gentlemen. Continuing from where Neeraj left. Again, I would like to iterate that as a company, we are focused, first and foremost, on the safety and well-being of our employees and the relevant stakeholders. In India, all of us are facing the unprecedented challenge dealing with this pandemic. The uncertainty around business is back almost around the same situation as last year. However, given the various strategic measures taken through last year in both the India and the Europe operations, we are far better placed and in a stronger financial position to face the current situation. To just list some of these measures, the AP Greenfield was successfully commissioned and is ramping up. We have had market share gains across segments in India. We've increased our distribution network in India, Europe and some of the other geographies; a successful execution of the specialization of the Dutch plant, leading to improved cost competitiveness in Europe and already being visible in the improved margins; continuing to improve our product mix in the passenger car tyre segment in Europe; sweating of the assets, leading to a significant improvement in our return on capital employed; and the leveraging levels now at healthy levels. Moving on to the financial results. The consolidated revenue for the quarter stood at INR 50.3 billion, a growth of 39% over the same quarter last year. This was contributed by a big growth from the Indian operations, but all the operations registered growth vis--vis the same quarter last year. The consolidated EBITDA for the quarter stood at INR 8.1 billion, a margin of 16%, compared to a 13% plus in the same period last year. This was helped by the significant growth in top line, a continued control over costs and the European operations showing the signs of significantly improved profitability on the back of the Dutch plant specialization. We have already mentioned our strengthening of the balance sheet. The net debt decreased from INR 60 billion in March '20 to INR 43 billion 1 year down the line, with the net debt-to-EBITDA being at 1.5x. Moving on to India operations. The revenue for the quarter was INR 36.3 billion, a growth of 49% over the same period last year and 6% even on a sequential basis. This was a record high for the Indian operations and coming on the back of a record high in the previous December quarter. The Indian operations have delivered 2 consecutive quarters of record all-time high revenues. On a full year basis also, the Indian operations delivered a growth of 5% over previous year, in spite of running at negative growth through the year till the end of last quarter. The plants are operating at near full capacity, ensuring optimal sweating of assets. The top line growth for the quarter was driven by volume growth in all the channels, OEM, replacement and exports. And in terms of product segments, all segments posted strong growth. However, given the impact of Q1, the overall industry still ended up with negative growth across product segments, except the farm category, in spite of the strong recovery in the second half of the year. Based on our internal estimates, we have had market share gains across all segments, which shows our strong competitive position across categories. For the Indian operations, the EBITDA for the quarter stood at INR 5.6 billion, a margin of 15.4%, as compared to a 14.4% for the same period last year. The margin in the preceding quarter were upwards of 21%. The margins were maintained at these levels in spite of a very severe cost push on account of raw material of as much as 12%. Price increases have been taken in Q3 and Q4, but more is needed. One point to highlight is we take out the impact of a onetime higher SIPCOT other operating income. The fall in EBITDA margin was about 370 basis points. The net debt for the Indian operations decreased from INR 48 billion in March '20 to INR 36 billion in March '21, again, indicating a strong and a healthy balance sheet. In terms of outlook, we have seen a moderation in demand post mid-April, and while any one of us would have a limited ability to forecast near-term demand given the pandemic crisis, our discussion with various market participants indicate that May is likely to be the most impacted month, and thereafter, the demand environment is expected to improve. We expect the demand to revive strongly like last year once the current wave is over, and over midterm, the demand outlook remains strong. The raw material cost pressures would continue. The operations on the whole are geared up to take advantage of the demand and our strengthened competitive position. Moving on to Europe. Revenues for the quarter were EUR 135 million, up 8% compared to the same period last year. This growth was supported by an overall demand recovery and also market share gains in the UHP passenger car tyre segment and TBR segment. The EBITDA for the quarter stood at EUR 24 million, a very healthy 18% plus, a significant [ recovery ] from the margins that we were reporting just a short time back. The margin recovery has been supported by improvement in sales mix, our UHP proportion for the year has increased to 36%, cost containment measures and successful execution of the Dutch plant specialization. Even in Europe, we were able to maintain a very healthy liquidity situation on back of measures like reduction in CapEx, improvement in collections from customers and efficient working capital management. The liquidity position was maintained in spite of funding the cost of specialization, the social plan package that had to be paid to approximately 500 colleagues who left the Dutch operations in this quarter in excess of EUR 50 million. The outlook for the Europe operations is positive. Europe economy is showing signs of recovery, and we expect growth to come back. The improved cost competitiveness position will help us drive margins to these healthy levels. Thank you, and we would be happy to take your questions.
Thank you, sir, for your opening remarks. [Operator Instructions] The first question is from Mr. Raghunandhan.
I hope everyone at Apollo family are safe. Two questions. Firstly, congratulations on strong Europe performance. In Europe terms, Q4 Europe revenue is almost similar to Q2 revenues, but the EBIT margin has increased by a significant 600 bps. So there is improvement in RM, employee costs, other expenses. Can you please elaborate and whether business is sustainable going forward? And also this -- the benefit of 500 employees leaving, since when will that actually reflect in numbers? That's my first question.
Okay. I'll try and answer this and Gaurav, you come in also. So yes, the profit margins that you have seen in quarter 4 are sustainable going forward. That was one of the main reasons of doing the specialization in Europe. I want to also mention here is that we are now looking at selling more the ultra high-performance and the UUHP sizes. Previously, we were at mid 30s as a percentage to the entire basket, which has gone up to now 37%, 38%. These are higher profit margin products, which are going into the market. Market share has also gone up in this category to around 2.7% market share, which has gone up in Europe. So our focus going forward is going to be in this category also. Trying to see how we can gain our market share in the ultra high performance. Your second point, already the benefits has started coming in slowly because the people that have been removed have been one since February and a little bit in March. You'll see the major input -- the major benefit coming in this financial year. Gaurav, do you want to add to that?
So Raghunandhan, yes. The entire restructuring specialization has been completed. You've seen a large part of that benefit coming in the current quarter. We will now see that benefit flowing through for the full year.
My second question is on the commodity prices. There has been a significant uptick. And if you can share the commodity basket, which you normally share, and also indicate what is the expectation for Q1 in terms of RM cost increase? And is the company in a position to take price hikes? I think even recently, competitors like MRF have -- I mean, last week, taken about 2%, 2.5% price hikes. How much more price hikes are required? And what is the plan there?
Gaurav?
Yes. So Raghunandhan, just to talk about the overall basket on the raw material, as I mentioned, moved up by almost 12% sequentially. Natural rubber was at INR 140 a kg; synthetic rubber at INR 135; carbon black at INR 75. Going forward, we expect this pressure to continue. Even for Q1, sequentially, we expect the raw material prices to be up by close to high single digits vis--vis this quarter that we are talking about. Yes, MRF has finally taken the price increase, and it's effective today. So that will provide us the ability to now start thinking of the next price increase. We've done 2 lots in Q3 and Q4, one each in each quarter, and we will start thinking about the next price increase.
Next question is from Mr. [ Nishit Jalan ].
Congratulations on the excellent performance. My first question is on Europe. How are you looking at pricing scenario in Europe because cost pressures can impact margins in Europe as we have already seen complete [indiscernible] pricing increase over there. And another question on [indiscernible] specifically after this extraction exercise a reduction of capacity levels and [indiscernible] what is the peak revenue potential that you can do in Europe as you see capacity [indiscernible]?
Gaurav, did you understand that question?
The first question was on the pricing, if I got Nishit right, in Europe. And the second was on the peak revenue potential for Europe post this specialization.
Will you answer them, Gaurav?
Yes. So Nishit, in Europe, people are beginning to take price increases. The raw material escalation is hitting Europe operations only from the current quarter. Even in Q4 or the January to March quarter, our Europe operations, and I would suspect similarly, the other peers did not face the cost escalation on account of a much larger dependence on synthetic rubber and also a strong euro. So the cost pressures on account of raw material are now beginning to come into the June quarter. We have not had across the board price increases. People are taking selective price increases, but also with market recovery, it is coming through. We, ourselves, have announced price increases in select categories of mid-single digits. So we are dealing with the situation. To your second question on the maximum revenue potential. With this specialization and a very different sourcing perspective, a large part of European operations, especially on the passenger car, would be sourced from the Indian operations. So in terms of saying what is the capacity or revenue potential from the capacity in Europe itself would not be the right metric. Over a 5-year time frame, we are looking at revenue in the order of EUR 750 million to EUR 800 million for our European operations.
Got it, Gaurav. Just one follow-up on this. We have done about EUR 135 million revenues in Europe in this quarter. So at this revenue run rate, but of course, the capacity utilization, which the Hungary and Netherlands plants are operating at. Just wanted to get a sense of how much we will need to import from India and how much we can cater demand globally?
Sure. So at the current levels, the Hungary plant was operating at about 75%, Nishit. The Dutch plant, based on the reduced capacity and specialization, was operating close to peak capacity.
The next question is from Mr. Siddhartha Bera.
Congrats for a great set of results. For my first question, again, is on Europe. So on the margin side, I mean, can you highlight if there was any COVID-related benefit in the quarter? Anything of that sort in the quarter results?
Gaurav?
Yes, Siddharth, no, there was no COVID-related benefit, et cetera. All of those were in the previous quarters announced by the various governments, and we got some part in Netherlands and in Hungary. In the current quarter, there was no COVID-related.
Okay, understood. And second is on the India margin side, again, I mean, in your presentation, you have talked about a lot of things you are doing to bring down your cost on the commodity side by focusing on various recipes. Also talked about some fixed cost reduction initiatives you are taking. So I just wanted to check -- I mean, first, for the quarter, what I see is that the commodity cost for you has been lower than what others have reported. And second is how much of some of these initiatives can we expect to bring in more benefit on the commodity side, if possible, going ahead?
So Siddharth, it's an ongoing dynamic situation, which the company is already investing a lot in R&D. We try and see how we can further reduce the waste of our tyre, also collaborative effort with universities and with suppliers of raw material to try and see how we can come up with new formulas, which could be cheaper and which could be better in performance. This is an ongoing activity. Part of it is sustainable and part more things will happen as we go along. And this is the basic vision of the company is to try and see how we have to come up over this commodity prices increase and try and reduce our raw material input costs coming into the tyre. It's an ongoing kind of work that is happening in the organization. Gaurav, do you want to add anything there?
No.
Okay. Thank you.
Okay. So last thing is if you can highlight the stand-alone gross debt and net debt levels and a sustainable tax rate, what we should assume for the business going ahead?
Gaurav?
Yes. So the gross debt, Siddharth, was INR 50 billion and the net debt was INR 36 billion, as I mentioned earlier. Ravi, you would like to talk on the tax question?
Yes. If I could just get the question again? Sorry, I missed the last part because of network hitches.
I just wanted to check what should be a sustainable tax rate which we should assume going at for the India and Europe business for '22?
So Siddharth, the ETR, currently is around 31% for the India business and around 25% for the Europe business. And we -- this will probably be the ETR for the coming financial years. For India, we are also monitoring the reduced rate of tax, which has been announced by the government a year back. And at the moment, we are in a beneficial position to -- we will continue with the current tax system.
The next question is from Mr. Rahul Sharma.
So I just wanted to check on the raw material side. So what I've got, we have seen globally is that, especially the American manufacturers are running out of straw material to manufacture tyre. So are we facing anything like that because people are saying or the new articles are mentioning that the China is cornering the raw material market. So are we facing such issues on sourcing of raw material?
So Rahul, there is a challenge on availability of raw material. But because of our good relationships with all our raw material suppliers. Today, I can say that we are holding inventory. We are -- obviously, it's a challenge, but we are not seeing any loss of production because of raw material supplies.
Okay. Okay. And on the price hike side, the current margin of 15%, 16% that we have. So what kind of hike would we need to take to maintain that kind of margin? Or apart from price hike, are we doing something on the fixed cost side that can be done on a sustainable basis to maintain that kind of margin?
Well, no, like I mentioned to you in my opening remarks, there's a lot happening digitally on looking at our processes in the organization, looking at our logistics costs, looking at our supply chain costs, and introducing a lot of digital applications in the system to try and reduce all these hidden costs. Again, that's an ongoing, which will be sustainable. As already, I have mentioned to you earlier quarters also, we have very clearly identified bad cost versus good costs. We have been able to reduce our fixed costs going forward. Actually, COVID has really taught us new ways of doing business. So digital launches of our products have happened whereby reducing our travel cost and the entire cost of launching of a product has come down to really negligible with more reach of customers, we -- as you know, we launched our AP plant, again, digitally, which is doing very good. So these are some of the costs which will stay within the organization and are sustainable. As far as price hikes are concerned, what I've already mentioned, we have done a 3% price hike in truck. We will continue to keep on increasing prices as we go along. And we have to see -- it's a very clear balance between price and market share. As you know, we are clearly the market leaders in all related product categories. So we'll continue to look at volume, but we are looking at very clear profitable growth. We are not going to go after just market share and keeping prices at a low point. We continue to increase our market share, but profitably. That is the mantra of the organization.
Okay. Okay. Any CapEx and revenue growth guidance for the current year?
Gaurav?
Rahul, in the current environment, as I mentioned, the demand part is very uncertain. So difficult to give a specific guidance. We would definitely see still healthy growth, given that last year, numbers were impacted, and we are at a run rate of a significantly higher number. So at a bare minimum, I would say we would -- we would look at a 20%-plus growth top line this year. On the CapEx front, the expected cash outflow for the Indian operations is about INR 1,800 crores. This is higher than the INR 1,600 crores that we had talked earlier. The growth CapExes are all the same, as we mentioned earlier, which is largely completion of the AP greenfield. However, in the current scenario, we have upped the spend on maintenance of our plants and some of the digitization initiatives and infrastructure to make sure that we are able to take advantage of the strong demand once it comes back.
Okay. Okay. And good luck for the current year.
Thank you, Rahul.
The next question is from Mr. Mayur.
So going through the numbers. I wanted to understand if there's a difference of gross margin between Indian operations and overall what we've reported for this year. Indian operations are much lower. So are you saying that the hit of RMC is probably the highest in India at this point?
Let me try and answer that, Gaurav.See, India product mix is very different to Europe product mix. India product mix is much more heavier on natural rubber, which is at an all-time high. Our main production is on truck, even PCR, but truck constitutes to over 60%, 65% of our production. Whereas Europe is mainly on PCR. So the raw material prices that have gone up are really hitting on not only on the truck side, but also on the IBD side. And that is why you see a margin difference between Europe and India. Gaurav, would you like to add anything else?
And Mayur, this is not something the unique phenomenon only for this quarter. Indian operations or operations in any of the developing nations, raw materials as a percentage of sales have always been higher compared to a U.S. or European operations. So yes, the gross margins of our Indian operations are typically lower than the European operations.
Yes, sure, no. So I was just looking at the difference, that difference has probably gone up pretty significantly in this quarter. And as you mentioned that this quarter, cost is only about INR 140 of natural rubber. And currently, I believe natural rubber is hovering at INR 170 mark. So do we expect significant pressure coming in the Indian business despite -- I would want to assume if the industry takes a 4% hike this quarter, there will still be a significant hit coming on to the gross margins. Am I reading it right?
Yes, as I mentioned, even going into Q1, the raw material prices are expected to go up sequentially in high-single digits. So the pressure would come. And the movement that you are talking about is also correct because while we saw a 12% increase in raw materials in our Indian operations, there was no such increase for the European operations. And that's why the differential trend you see that you're talking about on the gross margin.
Right. And one last question. So since you're saying that our Dutch operations are technically at full capacities and we do believe we could do better numbers from the European arm as well. So you expect a typical double-digit growth coming into the overall European business as well?
Again, subject to how the pandemic situation plays out, Mayur, we are looking to target a double-digit growth on the top line front in the Europe operations.
Next question is for Mr. Jinesh Gandhi.
My question pertains to our CapEx and capacity. Given our expectation of reasonably good growth for FY '22 and demand outlook bearing the COVID situation remains strong. Do we need to look at next ways of growth for India capacity as well?
No. I think, Jinesh, we have already mentioned. Andhra is in its second phase of expansion, where already CapEx is gone and most of it will go in this year. Within the amount that Gaurav has mentioned, that will be the final AP for now. And we will see how the demand picks up in various geographies. Right now, there is no growth CapEx that is going into the organization.
Okay. Okay. And secondly, we were planning to shut some of the capacities of our Dutch plant to Hungary and India. So can you guide on by when should we expect that shifting to happen and what kind of capacities will be added to India and Hungary plant?
Gaurav, do you want to answer that?
Yes. Jinesh, when we say shifting of capacity, that capacity already exists. There are minor debottlenecking kind of investments that are going in Hungary, which will up the capacity from 4.5 million units to 5.5 million passenger cars. India, the AP ramping up. So the shifting of capacity when we talk, it's in terms of that the sourcing mix would change. So to give you a broad idea if in FY '20, the Dutch plant had produced about 3.7 million passenger car units, in FY '22, that would be 0.5 million passenger car units. And about 3 million plus additional units get sourced from Hungary and India.
Got it. Got it. So effectively, we are seeing 1 million additionally from Hungary and 2 million from India, is that understanding correct?
No, it would be even more from Hungary because Hungary was not at its peak level in FY '20, the number that I talked about. So in the current year FY '22, Hungary capacity would still be only at 4.5 million and only towards end of FY '22, and for FY '23, it will start going up and be at 5.5 million.
The next question is from Amyn Pirani.
My first question is actually just a clarification on the European operations. So if I look at the presentation, quarter-on-quarter revenues are flattish, and margins have improved significantly. But in the segmental reporting, it appears that both revenue and segmental results are down. Is it because of reifen? Or is there something else which is there in the segment results? Maybe [ segment ] format?
Gaurav?
Should I take the question? Yes. So, Amyn, you're right. When you look at the segmental results, because that has to, regulatory-wise, capture all of Europe, it includes reifen. Reifen has a seasonally very large string from the December quarter, which is the winter tyre season to the next quarter. For the European manufacturing and sales operation, which is our Dutch operations, Hungary plant and whatever is imported, that is flattish. And that is where the big margin uptick has happened on account of the salary costs, particularly coming down in the January to March quarter.
Fair enough. That's helpful. Secondly, my question was more on the increasing sourcing from India for the European sales. Now -- so second part question is how should we think of margins as you shift the sourcing? Because first, my question is, when you sell Vredestein-branded tyres in Europe, which are made in India, does it impact pricing, if at all? And secondly, while you have a lower cost of operations in India versus Europe, there will be the addition of freight cost, which, in the case of tyres, is -- can be quite significant. So how should we think of profitability going forward for the European revenues as sourcing becomes increasingly from India?
Okay, I'll take the first question. And the answer is no. It does not have any significant price reduction, not at all, whether the tyres are made in India or whether they are made in Europe. The brand, Vredestein, itself is a premium brand in the European market. So we do not intend to reduce prices at all. Gaurav?
Yes. Yes. And Amyn, we have looked at it. So by sourcing from India, even after adding the freight cost, we are not compromising on the margins. And that is where the supply chain teams becomes very critical of the allocation of production and the production and optimization between plants and geographies. But fundamentally, with the ramping up of Hungary, we are, in 1 to 2 years' time, going to be reaching our original hypothesis that the landed cost of a product from India, after taking into account the freight and the inventory cost, is where our Hungary cost of production should be. So to that extent, we would be fairly neutral between the 2 borrowing exchange rates.
Okay, okay, Okay. so basically, you are saying that if landed cost of India is equal to Hungary cost of production, then both of them combined should definitely be better than Netherlands? So ideally, directionally, it should be margin effective, basically?
Yes.
The next question is from Sonal Gupta.
Just a couple of first clarifications. One is, is there -- I mean, the other operating income is high in this quarter as well. So is there any one-off in the other operating income?
No. Sonal, there's no one-off. There is a certain amount of investment promotion subsidy, which earlier had stopped because of the switch from VAT to GST, and there was a lack of clarity. So compared to previous quarters, before Q3, the number would be higher. That number is just a little short of INR 40 crores, and that may be the extent to which you're feeling it's higher.
So this will continue every quarter now?
That's correct.
Okay. And just on the raw material cost side also for India. I mean, like you said, you've seen almost 12%. But if you look at the raw material cost as a percentage, it's moved only 300 basis points quarter-on-quarter. So I understand -- I mean, there's obviously some price increase as well, which is probably offsetting 300, 400 basis points. But is there some benefit of lower cost inventory still in this quarter? Or is this pretty much, I mean, at market right now?
It would be pretty much at market because 1 of the other things that was happening through the year, given the strong demand, there was not a large amount of inventory that we were carrying. We were fairly tight, whether on raw material or finished goods inventory. So there would not be any significant backlog of previous quarter, just about maybe maximum a month, 3 weeks to a month.
Right. And sir, could you give reifen numbers for the quarter and the year?
Just one minute. So reifen for the quarter was EUR 30 million compared to the same period last year of EUR 26 million. For the full year, reifen reported EUR 180 million compared to a revenue of EUR 164 million the previous year.
Right. And reifen full year EBITDA would be?
Full year EBITDA would be EUR 9 million.
EUR 9 million. And just last question from my side is, in terms of -- I mean, just understanding this shift between Europe and India. So have you already started supplying tires from India to Europe? And I mean, like so is a lot of that transition already happened?
Well, it's an ongoing thing. It takes time for the malls have already in India. Already, production has started in the earlier quarter. Yes, tyres are going into Europe. But as we go along, ramp-ups will happen and the major quantity will start coming in, in this fiscal year.
Okay. So we're not waiting for the AP capacity to come in for this to ramp?
No, this is happening within AP, within Baroda, within Chennai. So it's all over allocated. To answer you question, it does not have any drills around export because of Andhra.
The next question is from [ Mansi Soman ].
So my first question is, could you provide us the segment-wise capacities for the truck and bus segment, passenger cars and the LCV and other segment? And also provide our international capacities?
Gaurav?
Yes. So Mansi, our capacity on the truck bus bias is about 450 metric tonnes. On the truck radial side, once AP ramps up fully, we will be a little short of 800 metric tonne or about 14,500 tyres per day. On passenger car side, it's in excess of 300 metric tonnes per day, or in number of tyres, in excess of 50,000 tyres per day in India.
Sir, on the LCV and the other segment?
I won't have the numbers overall, but our total capacity now, once AP ramps up, would be about 2,000 metric tons per day.
Okay. And sir, the international capacities?
On the international side, Hungary, in 2 years' time, would be at 5.5 million passenger car tyres per annum, which is, I think, about 17,000 car tyres per day. And if you add the Dutch plant PCR capacity of 0.5 million, our total European capacity would be 6 million tyres per day. On the truck radial side, we are currently at a small capacity in Hungary of 450,000 tyres per annum.
Okay. Okay. Sir, one additional question. So in Andhra Pradesh, what is the additional capacity that is coming in? And when should we expect it to come?
We will reach the planned capacities by the end of this fiscal year, so by March '22, where we will get to 15,000 passenger car tyres per day and 3,000 TBR per day. That number is changing every month. So it would not really have any relevance whether I give you a March number or an April number.
The next question is from Kaushik Poddar.
With the prices of commodity being so volatile, what is the steady-state margin we can think about?
Kaushik, we really do not want to comment on a margin guidance, which we have never. At the end of the day, we can give you a steady-state or a normalized margin if one gives us a steady-state raw material basket price. It's a dynamic situation. It's our largest cost element and has to be managed through intelligent sourcing, the work that R&D does that Neeraj talked about, which is working on recipes, price increases. So we really can't give you a steady-state margin.
The next question is from Mr. [ Jitendra Khatri ].
Yes, sir, I wanted to ask you in earlier European subsidiary, for the employee cost on sales, would that be pretty much in line with how the other tyre makers are operating out there? Or there is some substantial scope for cost savings?
Tyre benefit of the specialization of the Enschede plant has still not come in. But now in quarter one, you will see the cost as a percentage to sale further coming down from where it is. And that will be very much in line with the international players who are playing in Europe.
Okay. Okay. So what will be the scope of the savings, so let's say, right now, if the number is around 25%...
It will come below 20%. Once at a steady stage, it should be below 20%.
Okay. And sir, and when we talk about the capacities, often an interchangeable term is used, tyres per day, metric tonnes per day. Is there a standard conversion between the two that you use or if you can communicate to us be for TBR, TBB or PCR?
Gaurav?
[ Jitend ], there is no standard conversion rate because the product rates are very different, and it's also not as if the capacities are fungible from one category to the other. So the overall capacity, while on buyer side, there is some amount of interchangeability possible. So a metric tonne per day would be a relevant figure. But if you talk of TBR capacity or passenger car capacity, you would always be better off taking the numbers per day or the numbers per annum.
The next question is from [ Vishal Sik ].
Yes. Congratulations on good set of numbers. I wanted to ask how much market share have you gained in the different categories in FY '21? That would be my first question. In India.
Gaurav, do you want to take that?
Yes. So [ Vishal ], in -- yes. As per our estimates in passenger car and agri, we have gained almost close to 400 basis points on market share.
So that we stand at how much? Like after 400 basis points, you stand on how much market share?
We should be at around 21%. And on the truck side, we would be overall at about 30%. We believe we have gained about close to 100 basis points market share.
And sir, if we see the math, if the raw material have gone up by 12%, and we have taken approximately 4% increase in pricing. So the 8% -- and in -- then how -- where are we saving if raw material has gone up by 12%? We have taken only 4% price increase, but our margins are down only by 3% quarter-on-quarter.
So the 1-odd percent [ Vishal ], that you're talking about and the number may be slightly lower if we go into exact decimals. That's the saving on the fixed costs that Neeraj talked about, which is continuously focusing on the good cost, but eliminating the bad costs. We have talked about the digital initiatives. We have talked about digital product launches, digital conferences, et cetera, and a whole lot of other costs that we have looked to control through the year.
Okay. And just a follow-up question. You said the consolidated debt stands at [ INR 40 million ], right? Net debt?
INR 43 million.
INR 43 million, yes.
The next question is from Mr. Basudeb Banerjee.
Congrats for a good set of numbers. A few questions. One, at current level, what will be the annual sustainable maintenance CapEx for India and for Europe separately?
So Basudeb, the annual maintenance CapEx for India should be about INR 200 crores to INR 250 crores. Why I did a range of INR 50 crores that in some of the years, if a mix per maintenance comes up, the number may go up. For Europe, that number would be in the region of EUR 20 million.
Sure. Second question, sir, on a sequential basis, in India, if you can comment on truck replacement volume change for Apollo assets?
On a sequential basis, Basudeb?
Truck replacement, yes.
Just a minute. So for replacement, on a sequential basis, in fact, truck was down by about 5%.
Okay. More or less commensurate with another peer who gave commentary on that. Third thing, sir, in your annual numbers balance sheet, if I see inventory and receivables, the movement, but in current liability, the movement has been much sharper, which is resulting in bulk of working capital reduction. So any year-end phenomenon because of COVID payables got delayed or which will be taken care in coming quarter, how to look at that?
While we can look at the details, but there has been no delay in payables. Both our operations are sitting on a fairly healthy balance sheet and excess cash. So we have not delayed out any payables, Basudeb. But to your specific query, we'll have to look at it in detail and come back to you.
Sure. And last question, sir, as you mentioned, down the line, Hungary will be 5.5 million PCR per annum, and Dutch will be 0.5 million. So the Dutch -- from where it has been reduced to 0.5 million as such?
So the Dutch plant, as I mentioned, in FY '20, Basudeb, produced 3.7 million units of passenger cars.
So that has been restructured to 0.5 million?
Yes. As of now, when we say restructured or specialized, it's only around the people. We have equipment as and when if you look to expand capacity, if there are some equipment which are in good condition and can be used, we will do that.
So to look at Europe operation as a whole, that's operating almost at full?
Yes. Currently, based on the specialization of the plant, the Dutch plant is operating at full capacity almost.
And Hungary producing roughly, as you said, of 4.5 million?
Yes. To clarify, the 4.5 million that we are targeting in the current year will also almost be a full capacity of Hungary because the debottlenecking of Hungary capacity will start this year. So the capacity ramping up will only start happening in the second half. And only in FY '23 will the Hungary plant have the capacity of 5.5 million.
And this debottlenecking will cost you how much, sir?
This will cost us somewhere in the range of EUR 10 million to EUR 15 million. Some of that CapEx is being incurred as we speak.
Sure. Sure. So roughly, one can assume that post debottlenecking of Hungary and when the utilization, which is at higher levels in Hungary, the next level of expansion in Europe can be through furthering -- recalibrating the production in Dutch plant?
We will take a call on that, Basudeb, it it's 5.5 million of Hungary and with the production optimization along with India plants. We are good for at least a couple of years. So at this stage, what is further needed is something, of course, that will be taken down the line based on how the product mix evolves.
The next question is from Mr. Nishit Jalan.
Two questions from my side. Firstly, you mentioned that in Europe, the landed cost of tires from India is almost the same as that of Hungary. So then does it -- is it fair to assume that in future, there is no point doing capacity expansion in Europe because obviously, CapEx per tonne in Europe will be higher than in India? And in terms of profitability, it's equal. So ideally, it makes sense to expand capacity in India whenever needed. That's the first question.
So Nishit, it's also not a static phenomenon. As I said, it also plays into exchange rate and the freight costs. It's an evaluation that could be done continuously. And also, take into account that at a certain point, dependence on export, import, whichever way you look at it beyond a certain point, starts becoming a risk in itself. But fundamentally, yes. And that position will be reached down the line. It's not the case today. But as Hungary ramps up, if that condition remains, yes, we are neutral between expanding capacity in India or Europe. And to your point, yes, the return on that investment would also be taken into account as to where that CapEx should be incurred.
Okay. My second question is more on India business, slightly longer term. If I look at in the last 7 to 8 years, the ASP per AG for the company has been kind of flattish, which means there has hardly been any inflation in the tyres -- in tyres. While obviously, in India, we have seen inflation everywhere. And if I combine this with the fact that the ROCE profile of tyre industry is generally quite low. That's true for everybody in the sector, not only for Apollo. So then how should we look at it? Why, as an industry, we are not deferred to increase tyre prices, to improve ROCE of the business? That's more of an industry-driven question. But obviously, you being market leaders in a couple of important segments now, I wanted to get your thoughts, right? Because summit of an inflation is definitely possible in every commodity, which we have not seen in tyres. So sir, your thoughts on this will be helpful.
Yes. I think from my side, I'd like to say today, if I see the past 15 to -- 15 years to 10 years trend in pricing, the Indian industry has matured from what we were and to now where we are. Even if you see our ROCEs have improved over time, okay? But obviously, yes, we cannot compare ourselves to auto components or to the OEMs in the auto segment. It is a very, I would say, a labor-intensive industry, very, very dependent on commodity prices, oil prices, and there is a very clear balance on volume and pricing. And given the heavy competition in the -- in India, up until recently, China was exporting tyres into India in huge amounts. Only last year, the government came up with a restriction list. So you have seen prices of passenger car tyres going up. And -- significantly up and therefore, you are seeing margin improvements happening. So it's really -- the industry is maturing and slowly, slowly. As we are the leaders in the industry, both in volume and in pricing, we have to take the lead. And there is always a lag effect of competition coming and supporting us in this difficult times. Gaurav, do you want to add anything?
The only other point is, Nishit, that one of the other factors for this industry have been with the shift from bias to radial, the capital intensity has gone up. And what you are seeing is over the last 5, 7 years that you mentioned, a significant increase in capital intensity, which has impacted the ROCEs. And as the whole thing becomes more and more radial, the industry would start also pricing and giving returns commensurate to the previous times before the 7-year period.
The next question is from Mr. Shashank Kanodia.
Yes. I just wanted to ask now since we have quite a substantial cash balance. Sir, how will we have broad base [indiscernible] go forward?
Shashank, I couldn't get your question, substantial cash balance?
Yes. So sir, how will be your gross debt [ reduction ] going forward, right? So we normally -- we used to hold less than INR 2,000 crores of cash balance. But now it's in excess of INR 2,000-odd crores. So when do we see gross debt repayment for us picking?
Yes. So Shashank, we have scheduled debt repayments over the next 3-odd years of INR 500 crores, INR 600 crores each year in India and a certain amount of EUR 15 million to EUR 20 million in Europe. The current year, the CapEx in India is still a substantial amount. So we may not see a further gross debt reduction in the current year. But going forward, as the operation is growing, that number would again come down further.
Right. So the growth debt figure on portfolio basis will be roughly INR 6,500-odd crores as of financial year ending?
Just one minute. Yes. It is INR 6,400 crores.
Right. And sir, secondly, Mr. Kanwar alluded to returning to the double-digit return issue trajectory some time later during the first time. Sir, any tangible time line that you have to put or any 15% kind of [indiscernible] in the next 2 years or 3 years?
So Shashank, if you take out the Q1 quarter, which was a washout for any player or any industry, both for India operations and for consolidated operations, if we just annualize the 9-month results, so not just the last quarter, our ROCEs would already be in double digits. So we are already moving towards that goal. It is something that we understand is a parameter financial benchmark on which we were not at the right levels, and we are focused on delivering that on a consistent basis.
Right. Sir, then lastly, any [indiscernible] in the standalone employee cost? Or is it a sustainable run rate going forward?
See, the sustainable level at AP ramp up -- ramps up, there may be some increases in manpower cost, but nothing substantial.
The next question is from [indiscernible].
Congratulations on these great numbers. I just have a quick question on the expansion in your -- in the rural Indian side, I see that you guys have reached to 5,800 outlets and sub dealers. So what exactly are we looking? Why are the so aggressive in the rural side, certainly? And the second question would be what is the cost implication of this?
This is our drive to get into new areas of distribution. And as you know, India today is banking a lot on the rural segment. This is not a new initiative. It's been there for the past 3 years. Only we've gone a bit more aggressive since we have launched our 2-wheeler category range. As you know, 2-wheeler is very important in the rural market. Given that we are very strong in agri, given that we are very strong in truck bias, the entire composite of the entire product portfolio is beneficial, very beneficial in the rural market. I wouldn't say there's any additional costs. There's a normal cost of adding distribution to the network, but there's no additional cost of adding rural distribution in the company. But this is also one of the key areas, which has given growth to Apollo and gained market share in the Indian market.
The next question is from a [ Mr. Prayesh ]. The next question is from Mr. Basudeb Banerjee.
A few questions. Missed out one. Sequentially, Gaurav, can you say how much has the change been in your euro, rupee realization?
The euro, rupee realization, meaning?
Transition.
Ravi, do we have the exchange rate movement?
I'll just look for it, Gaurav.
And second thing is with the fleet owners business being not in a great shape for an extended period. So how is the radialization in replacement market happening as per [indiscernible]?
Gaurav?
So Basudeb, With the restriction on imports, overall, we saw the fairly good resurgence of buyers. So on your radialization in the replacement market, it's not reversed, but maybe the growth trajectory slowed down a little in this year. It is still around the 50% mark on the replacement segment.
So right way to infer will be that the rising radialization and replacement as of now has steadied rather than moving up?
It still moved up a few percentage points, but the growth -- the increase has slowed down a bit.
Sure. And the last question, at what utilization level you are presently operating in your TBR before Andhra Phase 2 comes in?
Just a minute. Yes, for last quarter, for example, we were operating at about 90% on the TBR front.
And what is the existing -- including Andhra Phase 1?
Andhra Phase 1, Basudeb, through FY '21 was a constantly changing figure. So whatever was the capacity available, we would be at about 90%.
And closing FY '21 in TPT terms will be almost TBR?
We have Chennai just short of 12,000 at about 11,500 truck radials a day. And Andhra was -- I think that that's around 1,000 radials a bit.
And in TPT terms? [Audio Gap]