Summary

The case introduces Apollo Tires, originating from India, one of the biggest tire manufacturing companies, headquartered in Gurgaon, India. Santanu managing a personal equity portfolio was considering to invest in high growth and undervalued stock to gain higher returns. However, he has narrowed down his investment decision to Apollo Tires Limited. The leading tire manufacturer in India, who have significantly diversified their products portfolio and geographic mix through organic investment and strategic acquisition of various small companies. After analyzing the market condition of Apollo Tires, it can be evaluated that it had experienced significant growth over the years in the diverse and competitive market of India. Furthermore, the company had expanded its reach to different demographic markets through effective strategic planning and the management of the company hinted towards more strategic changes to come in the future, which could enhance its current condition in the market. Moreover, it has been assessed that the stock price of the company after almost doubling between the years 2007 and 2010, had maintained tosee significant changes in the subsequent two years. Therefore, Santanu was faced with the tough decision with respect to Apollo Tires, whether to add its stocks in his equity portfolio or not. Santanu had also considered to use the free cash flows discounting valuation technique to identify and assess the condition of its stocks and estimate its future prospect of growth in the market. Which, in turn, would enable him to make an effective decision regarding the investment opportunity in Apollo Tires, while assessing its historic performance to estimate its future growth.

Apollo Tires Harvard Case Solution & Analysis

As Santanu, what is your assessment of the investment target?

As Santanu, it can be assessed that the investment target in “Apollo Tires”, was self-sufficient in the market in which, Apollo and a hand full of other competitors namely, Birla, Ceat, JK tires & MRF accounted for 70% of the total revenues generated in the Indian tire industry. Furthermore, it was assessed that foreign tire companies such as, Bridgestone and Goodyear intervention was minimal, as they operated in the market but on a much smaller scale and manufactured limited product categories. Moreover, other foreign companies such as Michelin, Hankook & Yokohama operated in the replacement market but on a limited extent. Therefore, it can be determined that, these foreign competitors were not a big threat to Apollo’s growth and share in the market. However, it could become a threat for Apollo, if these multinational companies decided to expand in the Indian tire manufacturing market and diversify their product portfolio. However, judging by the barrier to entry imposed by the government of India on these foreign companies, it was highly unlikely that these companies would consider investing more capital in the Indian market and become exposed to higher tax rates and government stipulation. Additionally, inspecting the historic growth of the company in the market, which would help to evaluate its future prospect of growth. The company had experienced significant growth through the formulation and implementation of effective strategic planning, in which the company made substantial organic investments and acquisitions to expand its business and gain a competitive edge over its competitors.....................

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