Apollo Tyres: 3.5% Stake Sold by Warburg Pincus Arm

Apollo Tyres Ltd. shares will be the center of attention following significant trading activity on Wednesday. Approximately 2.25 crore shares, equivalent to 3.5% of Apollo Tyres' total equity, were traded in a pre-market block window. Apollo Tyres shares experienced a 5% increase following the block deal.

On May 22, CNBC Awaaz reported that White Iris Investment, a Warburg Pincus subsidiary, planned to sell a 3.5% stake in Apollo Tyres. Warburg Pincus's goal was to raise ₹1,040 crore through the stake sale. The block deal was expected to be priced at a 4% discount to Apollo Tyres' previous closing price, with a floor price of approximately ₹460-465 per share, according to the report.

Warburg Pincus, a private equity firm, owns a significant 13.5% stake in Apollo Tyres. This ownership is distributed across its subsidiaries: White Iris holds 3.54% and Emerald Sage Investment Ltd holds 9.93%. A recent block deal indicates that White Iris is planning to sell its entire stake in Apollo Tyres.

This marks the second time Warburg Pincus' affiliate, White Iris Investment, has reduced its stake in Apollo Tyres. Previously, in December of last year, they sold a 4.5% stake in the company through block deals, generating ₹1,281 crore in revenue.

Apollo Tyres experienced a 14% drop in its consolidated net profit to ₹354 crore for the quarter ending March 2024. The decline was driven by increased expenses, as net profit had stood at ₹410 crore during the same period in the previous fiscal year. Revenue from operations remained relatively stable at ₹6,258 crore, marginally higher than the ₹6,247 crore reported in the fourth quarter of the previous fiscal year.

Following its strong fourth-quarter earnings, Apollo Tyres received upgrades from foreign brokerages Nomura and JPMorgan. JPMorgan raised its rating from 'Neutral' to 'Overweight' and increased its target price to ₹555 per share, up from ₹535. Nomura also upgraded the stock, moving from 'Reduce' to 'Neutral' and raising its price target to ₹512 from ₹478.

JM Financial, a domestic brokerage firm, recommends a 'Buy' rating for Apollo Tyres, with a target price of ₹550 per share. Of the 27 analysts covering Apollo Tyres, 17 hold a 'Buy' rating, while 5 each hold 'Hold' and 'Sell' ratings.

On Tuesday, Apollo Tyres Ltd.'s shares closed 2.03% lower at ₹482.60 apiece on the NSE, despite a 30% gain over the preceding year.

Apollo Tyres Ltd is an international tyre manufacturer and the leading tyre brand in India. The company has a total of six manufacturing units -- 4 in India and 1 each in the Netherlands and Hungary. India’s fifth and 7^th globally, is coming up in Andhra Pradesh.

The company markets its products under its two global brands – Apollo and Vredestein, and its products are available in over 100 countries through a vast network of branded, exclusive and multi-product outlets. The product portfolio of the company includes the entire range of passenger car, SUV, MUV, light truck, truck-bus, two-wheeler, agriculture, industrial, specialty, bicycle and off-the-road tyres, and retreading material and tyres.