Warburg Pincus arm sells 3.5% stake in Apollo Tyres, rakes in ₹1,073 crore

The transaction involved 22.4 million shares priced at ₹477.35 apiece.

First Published22 May 2024

The deal involves offering up to 22.47 million shares at an estimated value of <span class='webrupee'>₹</span>1,040.6 crore (Image: Pixabay) — The deal involves offering up to 22.47 million shares at an estimated value of ₹1,040.6 crore (Image: Pixabay)

White Iris Investment, a subsidiary of private equity giant Warburg Pincus, on Wednesday offloaded a 3.5% stake in Apollo Tyres in a bulk deal on the BSE. The transaction, which included 22.4 million shares priced at ₹477.35 apiece, helped the firm rake in ₹1,073 crore.

The shares price represents a 3.97% discount to the closing price of 21 May.

The divestment by White Iris Investment garnered buying interest from ICICI Prudential and Morgan Stanley, which acquired stakes of 0.66% and 0.63% in Apollo Tyres, respectively, at the same price band.

The move coincided with a surge in Apollo Tyres' share price, which rose by 5.7% intraday, hitting its highest levels since 3 May. This surge was fuelled by trading of a significant volume of shares, totaling 22.5 million, on the BSE, according to Bloomberg.

Also Read: Apollo Tyres faces twin speedbumps of rising costs, weak demand

Emailed queries sent to an IIFL Securities Ltd spokesperson, which is managing the sale process, did not elicit any response till press time.

This isn't White Iris Investment's first divestment in Apollo Tyres. In December 2023, the investment firm had offloaded a 4.5% stake in the company through multiple block deals, amounting to ₹1,281 crore.

The news of the stake sale follows recent financial updates by Apollo Tyres. The company's fourth-quarter results show a 13.7% year-on-year drop in net profit to ₹354.1 crore. It posted a marginal uptick of 0.17% in operating revenue to ₹6,258 crore during the period. However, Apollo Tyres' gross debt reduced from ₹56 billion in March 2023 to ₹39 billion in March 2024.

Meanwhile, JP Morgan has upgraded Apollo Tyres to "overweight" citing its commitment to reducing debt and achieving sustainable growth.

While the company's fourth-quarter results fell slightly short of expectations on margins, JP Morgan believes upcoming price increases will counter it.

According to JP Morgan, several factors are going in favour of Apollo Tyres, including a rise in replacement truck tyre sales, strategic capital allocation that improves return on capital employed, as well as its focus on higher product margins through price adjustments to offset material costs and environmental regulations

JP Morgan has assigned a price target of ₹555 per share for June 2025, based on a specific valuation model and implying a mid-range price-to-earnings ratio and a moderate enterprise value to Ebitda multiple.