Apollo Tyres has outlined capital expenditure of Rs. 35 billion (US$ 361.5 million) for FY27, to expand manufacturing capacity amid strong demand and high utilisation across its India and Europe operations, a senior company official said.

Gaurav Kumar, Chief Financial Officer, Apollo Tyres, said the company's capacity utilisation stood at around 90% across both India and Europe in Q4FY26. "Given the healthy demand outlook, we expect full capacity utilisation and therefore will continue to progress on our planned expansion initiatives," he said during the company's Q4FY26 analyst call.

For FY27, nearly Rs. 3 billion of the Rs. 35 billion capex will be incurred in India, where Apollo is expanding both truck and car tyre capacity. The balance will go towards Europe, where passenger car tyre expansion at their Hungary plant is already underway.

Apollo said FY27 capex is largely committed, though there could be some flexibility in FY28 if demand slows because of macroeconomic pressures.

"As we saw in Q4, our capacity utilisation was already 90%. Through April, we struggled in terms of keeping up with the demand. So, right now, we would definitely be going ahead as per our capex plans. If we see a slowdown, we would have some flexibility for FY28. FY27 would largely be committed," Kumar said.

According to a report by an investment bank, Apollo Tyres' FY27 capex plan of Rs. 35 billion marks a sharp increase from its average annual run rate of Rs. 9 billion over the last four years. The company incurred capex of Rs. 13.549 billion in FY26, against Rs. 7.306 billion in FY25 and Rs. 6.739 billion in FY24.

"While the expansion is necessary to support future growth amid 90% utilization levels, the elevated capex, along with sharp raw material inflation, is likely to increase leverage, suppress free cash flow generation and keep profitability under pressure in the near term," the investment bank said.

Demand remains strong

Apollo's decision to move ahead with expansion comes on the back of strong demand in Q4FY26. The company saw high-teens year-on-year volume growth in both replacement and original equipment segments in India.

In replacement, both truck-bus radial and passenger car radial categories grew more than 20% during the quarter. In the OEM channel, TBR also grew more than 20%, while passenger car radial volumes grew in single digits. Export volumes grew in mid-single digits, impacted by geopolitical issues.

Kumar said demand in April remained strong across categories and channels, giving Apollo Tyres confidence that the momentum seen in Q4FY26 would continue into Q1FY27. However, he cautioned that geopolitical developments in West Asia have increased volatility in raw material, energy and logistics costs, putting near-term pressure on margins.

To offset this, Apollo has already announced price hikes of 6-8% for the current quarter. Of this, 3-5% has been implemented in the Indian market, while the remaining increase is expected to come through in May. The management, however, said these hikes would cover only about half of the input-cost pressure, making further price increases necessary if commodity prices remain elevated.

CEAT also steps up capex

Apollo is not alone in expanding capacity. Rival CEAT has also lined up higher India capex for FY27 as its capacity utilisation crossed 90%. CEAT plans to invest around Rs. 13.5-14 billion in India in FY27, nearly 25% higher than the Rs. 10.76 billion capex incurred in FY26. The company said the investment will be used to create capacity in line with demand.

CEAT MD and CEO Arnab Banerjee said the company would spend cautiously in Q1 because of uncertainty and raw material inflation, but still expects growth and maintenance capex of Rs. 13-14 billion during the year.

FY26 performance

Apollo Tyres closed FY26 with consolidated revenue of Rs. 284.706 billion, up 9% year-on-year. Its EBITDA (earnings before interest, taxes, depreciation and amortisation)came in at Rs. 41.432 billion, up 16% on year, and EBITDA margin expanded to 14.6% from 13.7%. Net profit for the year stood at Rs. 13.718 billion, up 22.4%.

Apollo Tyres' FY26 sales mix remained replacement-heavy, with the channel contributing 79% of consolidated revenue, while OEMs accounted for 21%. Regionally, India remained the largest market with a 63% contribution, followed by Europe at 30% and other markets at 7%.