Apollo Shares Drop Following Lock-Out

Shares in Apollo Tyres Ltd have fallen around five per cent since the announcement of a lockout at its Perambra factory. This plant accounts for nearly a quarter of Apollo’s global tyre production and has a capacity of 850 tonnes per day, yet even before the lockout it was not reaching anything near this amount – and it is thus not surprising that investors are showing signs of nervousness.

Following the announcement of a worker initiated go-slow in April, average daily output in the three months to the end of June dwindled to around 280 tonnes. It remains to be seen whether the company’s Chennai plant, with its 500 tonnes per day capacity, can take up the slack. Production is being increased there yet average production at Chennai during the current quarter is only expected to reach 100 tonnes per day; it will take until the end of the year to double this output figure. Furthermore, production at Chennai is divided between passenger car and truck and bus radials. The Perambra factory in India’s Kerala state, Apollo’s oldest facility, is dedicated to the production of cross-ply truck tyres.

According to Indian business journal Mint, analysts estimate that Apollo’s domestic sales may drop by around five per cent due to the length of time before the Chennai factory can offset the loss in production at Perambra.