Apollo Tyres jumps nearly 6% on block deal buzz; Warburg Pincus likely seller

Shares of Apollo Tyres rose nearly 6% in opening trade on Wednesday, driven by spurt in volume trade amid a report that global private equity firm Warburg Pincus LLC is looking to sell around 3.5% stake in the tyre manufacturing company via block deal. Warburg Pincus plans to offload 2.24 crore shares through its subsidiary, White Iris Investment, which will fetch around ₹1,040 crore. White Iris Investment currently holds a 3.54% shareholding in the company.  

As per the report, the floor price for the block deal is expected to be in the range of ₹460-465 per share, 4% discount to Tuesday's closing price. On May 21, the tyre maker's shares closed 2.09% lower at ₹482.15 apiece on the BSE. IIFL will likely be the broker for the deal.

In December, White Iris Investment sold 4.5% stake in Apollo Tyres for ₹1,281 crore through multiple block deals.

Driven by strong volume, Apollo Tyres shares opened higher at ₹500.35, up 3.77% against the previous closing price of ₹482.15 on the BSE. In the early trade, the tyre heavyweight gained as much as 5.7% to ₹510, while the market capitalisation rose to ₹31,680 crore. The counter witnessed a surge in volume as 2.26 lakh shares changed hands over the counter compared to the two-week average of 1.53 lakh shares.

Apollo Tyres shares touched its 52-week high of ₹559.85 on February 8, 2024, and a 52-week low of ₹365.50 on September 28, 2023. The largecap stock has risen 34% in a year; 18% in six months; and 3% in a month.

Last week, Apollo Tyres signed a deal to acquire a 5.09% stake in Tamil Nadu-based Green Infra Wind Energy Generation, which is expected to be completed by June 2025. The objective of acquisition is to procure renewable power for its manufacturing facility in Chennai.

Green Infra Wind Energy Generation operates group captive power plant projects aggregating up to 23 MW in the state.

Apollo Tyres has closed the financial year 2023-24 with a consolidated net profit of ₹1,721.87 crore, up 64.64% against ₹1,045.84 crore in the last fiscal. The revenue from operations rose 3.3% to ₹25,377.7 crore from ₹24,568.13 crore in FY23. On the operating front, EBITDA rose 34% YoY to ₹4,447.3 crore, while margin improved by 404 basis points to 17.5%.  

The board of the company has recommended the dividend of ₹6 per equity share (i.e. 600%) on face value of ₹1 each for FY24, subject to shareholders’ approval.

For the fourth quarter ended March 31, 2024, the tyre manufacturer posted consolidated net profit at ₹354 crore, down 14% YoY on account of higher expenses. The revenue from operations rose marginally to ₹6,258 crore as compared with ₹6,247 crore in the fourth quarter of 2022-23 fiscal. EBITDA was up 3% YoY at ₹1,028 crore, while margin stood at 16.4%.

Going ahead, the company expects demand momentum to pick up post general elections. “We will continue to focus on business fundamentals, cost control and free cash flow generation,” the company said in its earnings report.

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