Comparative Analysis of Apollo tyres ltd. and MRF ltd.

Comparative Analytical Report of Apollo Tyres Ltd. & MRF Ltd.

1.

Introduction

This project is about comparing the two nominated tyre companies (i.e. Apollo tyres ltd. & MRF ltd.) on the basis basis of goodwill, net sales, sales, production, market shares, etc. Before comparing these two tyre companies, lets us first have a look on their history, foundation, plants, etc.

APOLLO TYRES Apollo Tyres Ltd. is the world's 15th biggest tyre manufacturer, with annual

revenues of Rs. 88.6 billion (US$ 1.99 billion) in 2010. It was founded in 1976. Its first plant was established in Perambra, Kerala in 1977. In 1994 it started selling tyres for 2-wheelers. In 2006 the company acquired ‘Dunlop Tyres International’ of South of South Africa. In 2009, Apollo Tyres acquired the Netherlands-based winter-tyre maker ‘Vredestein Banden B.V. (VBBV)’ for an undisclosed sum from Russia's ‘Amtel-Vredestein NV’ . The company now has bankrupt largest tyre manufacturer ‘Amtel-

four manufacturing units in India, two in South Africa, two in Zimbabwe and 1 in Netherlands. It has a network of over 4,000 dealerships in India, of which over 2,500 are exclusive outlets. In South Africa, it has over 900 dealerships, of which 190 are Dunlop Recognized Dealers. In March, 2010, it won an agreement with Volkswagen AG to supply the VW Polo assembled in India with Apollo tyres as Original Equipment. Apollo tyres ltd. gets 59% of its revenues from India, 28% from Europe and 13% from Africa. It is planning to become the 10th biggest tyre manufacturer in the world with annual revenues of $6 billion by 2016.

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MRF TYRES Madras Rubber Factory , popularly known as MRF, is a major tyre

manufacturing company located in Chennai, Tamil Nadu, India. The name was later changed as "Manorama Rubber Factory". MRF is mainly involved in making vehicle tyres. It is India's largest tyre manufacturing company, and among the 12 largest worldwide. It exports to more than 65 countries. In 1946, a young entrepreneur, Mr. K.M. Mammen Mappillai, opened a small toy balloon manufacturing unit in a shed at Tiruvottiyur, Madras (now Chennai). Although the factory was just a small shed without any machines, a variety of products, ranging from balloons to industrial gloves and contraceptives, were produced. During this time, MRF established its first office at 334, Thambu Chetty Street, Madras (now Chennai), Tamil Nadu, India in 1947. In 1952, MRF ventured into the manufacture of tread rubber, and with that, the first machine, a rubber mill, was installed at the factory. MRF soon became the only Indian-owned unit to manufacture the superior extruded, non-blooming and cushion-backed tread-rubber, enabling it to compete with the MNC's (Multinational companies) operating in India at that time. The Company was incorporated as a private limited company on 5 November 1960 and was converted into a public company on 1 April 1961, and additional capital was issued in order to start the manufacture of automobile tyres and tubes in collaboration with the Mansfield Tire & Rubber Co. , Mansfield, Ohio, U.S.A. The Company was given permission to export tyres having Mansfield trade mark to all world markets except U.S.A. and Canada. The main plant for production of tyres and tubes were established on 4 December 1962. In 1967, MRF became the first Indian company to export tyres to USA - the very birthplace of tyre technology. In 1973, MRF scored a major breakthrough by being among the very first in India to manufacture and market Nylon tyres. In 1979, the Mansfield Tire & Rubber Co., U.S.A. offered for sale out of its holding shares in the company. After some time, the Company crossed several milestones in its history and went into technical collaboration with BF Goodrich Tire Co., USA in 1980. The name of the Company, Madras Rubber Factory Ltd. was changed to MRF Ltd. in the same year. MRF Ltd launches premium truck tyre Super Lug 50-FS in 2007. In 2011, MRF Ltd. inaugurated its 7th manufacturing facility at Ankanpally near Hyderabad, exclusively for radial tyres. MRF Ltd crosses gross revenue mark of ₨ 10,000

crores in the same year (2011).

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2. Goodwill Calculation and Comparison

Goodwill: Every business entity has its own reputation, which it acquires by

providing good quality goods, reasonable prices, better services, etc. The reputation he acquires is known as goodwill in accounting terminology. In other words, Goodwill is an accounting concept which means the value of an entity over and above the value of its assets. The term was originally used in accounting to express the intangible but quantifiable "prudent value" of an ongoing business beyond its assets, resulting perhaps from the reputation, which the firm enjoyed with its clients. Goodwill is an intangible asset, but it can be calculated. So, we calculate the goodwill of the two above mentioned companies (i.e. Apollo tyres ltd. & MRF ltd.) during the last five years in order to know which one is better in goodwill comparison.

Calculation of Goodwill during last five years (i.e. March 07 – March 11) on the basis of Average profit method on 3 years purchase.



In order to find out the goodwill of the two mentioned companies, i.e. ‘Apollo Tyres ltd.’ & ‘MRF ltd.’ on the basis of average profit method, first, we must need their net profits during last five years.



APOLLO TYRES:

Below is the table showing the N et profits of ‘Apollo Tyres Ltd.’ during last five years after all appropriations have been made. Year

Net Profit (Amount in crores)

2006 – 2007

113.42

2007 – 2008

219.30

2008 – 2009

108.12

2009 – 2010

415

2010 – 2011

198.30

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Calculation of Goodwill: Goodwill is to be calculated by average profits multiplied by no. of years purchased. Average profits =

Total profits

=

Total profits No. of years 113.42 crs. + 219.30 crs. + 108.12 crs. + 415 crs. + 198.3 crs.

= 1054.14 crores

1054.14 5

Average profits =

=

Goodwill



210.828 crs .

= Average profits x No. of years purchased (i.e. 3)

=

210.828 x 3

=

632.484 crs.

MRF TYRES:

Below is the table showing the net profits of ‘MRF ltd.’ during last five years after all appropriations have been made. Year

Net Profit

(Amount in crores)

2006 – 2007

171.78

2007 – 2008

141.97

2008 – 2009

256.32

2009 – 2010

353.98

2010 – 2011

619.42

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Calculation of Goodwill: Goodwill is to be calculated by average profits multiplied by no. of years purchased. Average profits =

Total profits

=

Total profits No. of years 171.78 crs. + 141.97 crs. + 256.32 crs. + 353.98 crs. + 619.42 crs.

=

1543.47 crores

Average profits =

= Goodwill

1543.47 5 308.694 crs .

= Average profits x No. of years purchased (i.e. 3)

=

308.694 x 3

=

926.082 crs.

From above calculations, it is concluded that the MRF is better than Apollo as its goodwill is higher by 293.598 crores



The Comparison of Goodwill between the two is also shown in Graphical Representation on the next page.

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3. GRAPHICAL REPRESENTATION

Profit Comparison

Apollo

700 MRF 600

s e r o r c n i t n u o m A

500

400

300

200

100

0 2007

2008

2009

2010

2011

Years

Graph showing net profits comparison between Apollo tyres Ltd. & MRF Ltd.


Goodwill Comparison 1000

Apollo )

s 800 e r o r c n i 600 ( l l i w d 400 o o G

MRF

200

0

Above is the graph showing goodwill comparison between ‘Apollo Tyres Ltd.’ & ‘MRF Ltd.’, which is already calculated above on Average profit method basis after compiling last five years profit.

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4. Sales Calculation Given Below is the chart which determines the sales of Apollo tyres Ltd. and MRF Ltd. from March 07 – March 2011.

(Amount in crores)

Year

Apollo Tyres Limited

MRF Limited

2007

3,781.01

5,054.20

2008

4,255.04

5,731.63

2009

4,559.23

6,164.06

2010

5,438.57

8,104.31

2011

6,025.45

10,644.86

It is concluded from the above tabulated chart that the sales of MRF Ltd. Is higher than the sales of Apollo Tyres Ltd. by:    

1273.19 crores in 2007 1476.59 crores in 2008 1604.83 crores in 2009 2665.74 crores in 2010 4619.41 crores in 2011

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Given Below is the graph which determines the Net sales of Apollo tyres Ltd. & MRF Ltd. from March 2007 – March 2011.

Sales Comparison

(Amount In Crores)

12000 10000 8000 t n u o 6000 m A 4000

Apollo MRF

2000 0 2007

2008

2009

Years

2010

2011

9

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5. Net

Profits

Given Below is the chart which determines the Net Profits of Apollo tyres Ltd. from March 2007 – March 2011.

(Amount in crores)

Year

Total Income

Total Expenditure

Depreciation Interest & tax

Other adjustments

Net Profit

2007

3,311.86

(2,959.51)

(74.23)

(161.23)

(3.47)

113.42

2008

3,719.62

(3,215.71)

(87.81)

(194.4)

(2.30)

219.30

2009

4,099.29

(3,734.48)

(98.01)

(166.88)

8.2

108.12

2010

5,065.66

(4,228.88)

(122.7)

(296.75)

(2.38 )

414.99

2011

5,490.68

(4,900.43)

(147.35)

(263.960

19.31

198.25

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Given Below is the chart which determines the Net Profits of MRF Ltd . from March 2007 – March 2011. (Amount in crores)

Year

Total Income

Total Expenditure

Depreciation

Interest & tax

Other Adjustments

Net Profit

2007

4499.37

(4035.76)

(153.41)

(138.42)

_____

171.78

2008

5147.82

(4711.96)

(169.52)

(135.67)

11.3

141.97

2009

5476.62

(4759.9)

(249.32)

(211.08)

____

256.32

2010

7641.69

(6784.83)

(260.75)

(242.95)

0.82

353.98

2011

10064.6

(9234.54)

(247.63)

(367.92)

404.9

619.42

It is concluded from the above tabulated chart that the Net Profit of;     

MRF ltd. is greater than Apollo tyres ltd by 58.36 crores in 2007 Apollo tyres ltd is greater than MRF ltd. by 77.33 crores in 2008 MRF ltd. is greater than Apollo tyres ltd by 148.2crores in 2009 Apollo tyres ltd is greater than MRF ltd. by 61.01 crores in 2010 MRF ltd. is greater than Apollo tyres ltd by 421.17 crores in 2011


6.

Shares in Market

Following are the statements representing Shares Structure of the two tyre manufacturing giants in market; Apollo tyres ltd. and MRF ltd.

APOLLO TYRES LTD: CATEGORY OF SHAREHOLDER

NO. OF SHAREHOLDERS

TOTAL NO. OF SHARES

TOTAL NO. OF SHARES HELD IN DEMATERIALIZED FORM

TOTAL SHAREHOLDING AS A % OF TOTAL NO. OF SHARES AS A % OF (A+B)

AS A % OF (A+B+C)

(A) Shareholding of Promoter and Promoter Group

Indian

17

234,594,242

234,586,792

46.54

46.54

Foreign Total shareholding of Promoter and Promoter Group (A)

1

1,977,000

1,977,000

0.39

0.39

18

236,571,242

236,563,792

46.94

46.94

(B) Public Shareholding

Institutions NonInstitutions Total Public shareholding (B)

216

181,002,097

179,075,017

35.91

35.91

116,301

86,451,431

74,091,050

17.15

17.15

116,517

267,453,528

253,166,067

53.06

53.06

Total (A)+(B)

116,535

504,024,770 489,729,859

100.00

100.00

(C) Shares held by Custodians and against which Depository Receipts have been issued Sub Total

Total (A)+(B)+ (C)

-------116,535

--------

-------

504,024,770 489,729,859

-------100.00

-------100.00

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MRF LTD :

CATEGORY OF SHAREHOLDER

NO. OF SHAREHOLDERS

TOTAL NO. OF SHARES

TOTAL NO. OF SHARES HELD IN DEMATERIALIZED FORM

TOTAL SHAREHOLDING AS A % OF TOTAL NO. OF SHARES AS A % OF (A+B)

AS A % OF (A+B+C)

(A) Shareholding of Promoter and Promoter Group

Indian

107

1,131,993

1,129,814

26.69

26.69

Foreign Total shareholding of Promoter and Promoter Group (A)

7

21,625

21,625

0.51

0.51

114

1,153,618

1,151,439

27.20

27.20

(B) Public Shareholding

Institutions NonInstitutions Total Public shareholding (B)

116

639,181

637,448

15.07

15.07

30,706

2,448,344

1,207,357

57.73

57.73

30,822

3,087,525

1,844,805

72.80

72.80

Total (A)+(B)

30,936

4,241,143

2,996,244

100.00

100.00

(C) Shares held by Custodians and against which Depository Receipts have been issued Sub Total

Total (A)+(B)+(C)

--------

--------

30,936

4,241,143

--------

--------

2,996,244

100.00

------100.00

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7.

Conclusion:

Apollo & MRF, both have their unique and strong bases in the world of tyre making. Their products are acclaimed world widely due to quality and functional utility. As far as my study is concerned i.e. “Comparative Analytical report of Apollo tyres Ltd. & MRF Ltd.”, which reveals the basic analytic parameters on which they can be compare from each other. These parameters includes, sales, net profits, goodwill and shares in the market. On the conclusion, it is found that from last five years (2007 – 2011) which are the study period taken for comparison reveals that MRF leads Apollo by 293.598 crores. MRF’s total goodwill has very much impact due to

high net profits in 2009- 2010. MRF ltd. taken 400 crores lead over Apollo ltd. only in 2011. MRF tyres Ltd. has upshot market with increase in proportionate sales by every passing year. In 2011 only, MRF has dominated over Apollo by creating the humongous sales difference of 4619.41 crores. Contrary to above facts, Apollo tyres has very strong base hold over their company as only 53.06% of total shares are withheld by public as compare to MRF’s 72.80%. MRF has 114 shareholders comprising its promoter group which holds over 11 lakh shares making the tally of 27.20% of its total shares while as Apollo on the other hand has only 18 shareholders of promoter group which holds the 23.6 crore shares, i.e. 46.94% of total shares. Public shareholding of MRF comprises 30.8 thousand shareholders, which owns 30 lakh shares, i.e. 72.80% of total shares while as, in Apollo 1.16 lakh public shareholders holds 26.7 crores making it 53.06% of total share. On the conclusive note, both the companies are prospering with respect to their previous records but in comparison to each other, MRF has the upper hand.

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Comparative Analysis of Apollo tyres ltd. and MRF ltd.

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