Apollo Tyres Q2: A 25% Raw Material Rise Met 11-13% Price Rises, and India Margin Fell to 11.1% From 15.3%

Apollo Tyres reported standalone ("India") revenue of ₹59,217 mn for July-September 2026 against ₹47,149 mn a year earlier (up 25.6%, per the company), and standalone EBITDA of ₹6,546 mn at an 11.1% margin against ₹7,206 mn at 15.3%. On the call the CFO said raw material costs rose "approximately 25%" since April, that the company would have needed "16% to 17%" in price to hold its margin, and that it had taken an average of "11% to 13%" in the half, rising to "13% to 15%" by the end of October. On our arithmetic, the standalone raw material bill rose 38.5% against revenue up 25.6%, so raw material took 68.3% of each rupee of revenue against 62.0%. The call's numbers show how much of a cost shock the company has passed on, and the gap tells a reader what the next two quarters depend on.

The idea in one sentence

A tyre company with brands, OEM approvals and a dealer network can raise prices in steps, but it cannot raise them at the speed raw material moves, so the margin is the part of the cost shock that nobody has yet paid for (our reading); Apollo's Q2 documents let us size that part.

The fact that breaks the assumption

The headline reads like a match. The CFO said the company had "implemented pricing actions of up to 15% in the Replacement segment", against raw material "approximately 25%" higher since April. But "up to 15%" is a ceiling, not the average. Asked what it would take to hold margins, the CFO answered:

"to compensate and maintain the margins at similar levels, we would have needed around, you know, 16% to 17% price increase" ([TR]). The average actually taken, in his words, was "between 11% to 13% price increases" in the first half, and "between 13% to 15%" across categories by the end of October. So the cost has outrun the price by roughly three to six points on the company's own figures for the half, a gap that was narrowing but, at the end of October, had not shut (our arithmetic: 16-17% needed less 11-13% taken).

One concrete thing, followed: the standalone income statement

The deck's standalone ("India") profit and loss shows the effect. All figures standalone, ₹ million, Q2 FY27 against Q2 FY26 ([IP] slide 10, with [RS] for the lines behind raw material):

Three things follow. First, the rupee amount left after raw material grew only 4.6% while revenue grew 25.6%: the extra rupees of revenue covered the extra rupees of raw material (revenue rose ₹12,068 mn, raw material ₹11,241 mn, our arithmetic), but not enough to keep the percentage. Second, the CFO says volume and pricing contributed "almost equally" to the top line. If volume was about 12% (our assumption from "almost equally", not a company figure), the same rupee spread per unit would have lifted revenue less raw material by roughly ₹1.3 bn to about ₹20.1 bn (our arithmetic), so the per-unit shortfall is about that size and the volume growth alone was hiding it. Third, the offset came from overheads: staff plus other costs rose 13.8% against revenue 25.6%, which gave back 2.1 points of margin that the spread had taken away. Mix and inventory costing both sit inside these numbers and the filings do not separate them.

The mechanism: two clocks run at different speeds

The CFO described the pricing process in three sentences worth keeping. On timing: "the pricing actions can't be taken at the same pace at which you see the RM moving". On the October round: "somewhere in the range of 1% to 2%" per category, with "planned increases which may come in December or January depending upon how the RM is moving and how the competition or how the market is responding". On competition: the price rises are "more or less in line with the industry trend", with Apollo "leading" in some categories and others leading in others.

Our reading is that this is the structure of the pricing power, and it has two clocks. The first is the replacement clock, set by dealers and rivals: steps of a few points, taken when the market will bear them, and, per the CFO, in line with the industry trend, by his account. The second is the OEM clock: the CFO said OEM pricing is "largely formula linked" and "comes with a lag of one quarter", while in another answer he said OEM pricing is "not a formula linked pricing" and the team had "managed to implement these price increases" by negotiation. In a further answer he said "there were some OEMs wherein it was not formula linked". The filings do not say which OEMs sit on which terms. What they do say is that the OEM channel "led the pack" on volume, with growth of "25% plus", ahead of replacement in the "low double digits". Our reading: the channel with the longer lag grew fastest in the quarter in which costs rose fastest, which would weigh on the margin until the formulas catch up.

The cost clock is still running. The CFO guided that the raw material basket "may move up around mid to high single digits" from Q2 to Q3, with natural rubber at "the INR 300 mark in India" and crude-linked derivatives up 28% to 35% year on year. His expectation was that it would be "peaking towards the end of the year". Standalone raw material took 65.9% of revenue in Q1 and 68.3% in Q2 (our arithmetic from [IP] slide 10), so the percentage was still worsening a quarter after the price actions began.

What held the margin up: overheads and operating leverage

The deck credits "Disciplined cost management and operating leverage" for partly offsetting the raw material inflation. The CFO said the weekly strategy meeting looks at costs "that can be shifted to a future date", with "a very strong discipline around our A&P budgets", and that cost discipline has become "a very integral part of our operations". India capacity utilisation for the half was 92% ([IP] slide 4). Our reading: operating leverage is real, since revenue grew far faster than staff and other costs, but the filings do not show how much of the saving is deferral and how much is permanent.

BEAR CASE: where this breaks

• The gap may widen before it closes. An analyst put it to the CFO that a Q3 basket rise of about 8% against price rises of about 2% "mathematically implies December quarter further 300 bps, 400 bps of gross margin risk". The CFO did not accept the arithmetic: "put it very simplistically", he said, and offered to take the detail offline. That is not a denial and not a number, and the company gives no margin guidance beyond "the direction of recovery is clear". The CFO said the full effect of the 13% to 15% already taken will "probably" arrive in Q3, but the CFO said how much of that "compensates the RM cost portion" would be "more clear as we move towards the end of the quarter".
• The base turns against volume. The CFO expects India volume growth of "mid to high single digits" in Q3 against "almost the mid-teens" in the first two quarters, because Q3 last year already had the GST change and the BCCI campaign. Our reading: pricing is carrying the growth, which tests how much demand the higher prices give up. Replacement still grew in the low double digits after rises of this size, which is evidence of pricing power now; there are only two quarters of it.
• The consolidated margin did not fall only in India. Consolidated EBITDA was ₹8,554 mn against ₹10,207 mn, down ₹1,653 mn; the standalone fall was ₹660 mn, about 40% of it (our arithmetic). The remainder, which includes Europe, other subsidiaries and eliminations, went to ₹2,008 mn from ₹3,001 mn, a margin of about 9.8% against 14.2% on revenue of ₹20,465 mn against ₹21,162 mn (our arithmetic; a residual, not a reported segment). Europe's reported EBITDA margin was 10.3% against 12.7% on revenue of €157 mn against €177 mn ([IP] slide 6; sales and manufacturing operations, excluding the Reifencom distribution business), with the CFO tying Europe's revenue fall to weak truck and agriculture segments hit by supply disruption from the Enschede closure, and the slower margin recovery to "market softness and transition-related challenges". A pass-through story that explains India does not explain the rest.
• Cash is absorbing the cycle. Consolidated net cash from operations was ₹2,642 mn in the half against ₹13,154 mn a year earlier, with inventories up to ₹61,145 mn from ₹54,523 mn at March 2026 (up 12.1%, our arithmetic) and trade receivables up to ₹39,089 mn from ₹31,908 mn ([RS], consolidated). Net debt to EBITDA is 0.9 times (company), and the CFO said further debt may come with the announced expansion. This is not strain, in our reading. The CFO put a large part of the first-half working-capital impact down to "payouts related to the plant shutdown", so the cash line is not only the cost cycle.
• Review, not audit; one call. The conclusion on both the consolidated and standalone results is not modified, but the reviewer says a review "is substantially less in scope than an audit". The price figures are management's, from one call, and the filings do not let us test them. The results PDF is a scan.

Why it costs the reader something

A reader who takes price rises of up to 15% as covering a 25% cost rise will expect the margin to have been protected. It was not: the average price taken was below what the company says it needed, and the standalone margin fell 4.2 points (our arithmetic: 15.3% to 11.1%) while the revenue left after raw material was thinner per unit (our rough arithmetic above). A reader who takes the opposite view, that the pricing power failed, would miss that the rupee spread still rose, that replacement kept growing after the rises, and that the company's old troughs were lower; an analyst on the call said India margins used to fall "as low as 7%, 8%" in earlier down-cycles, and the company's Investor Relations head said that in earlier cycles margins "used to get down to single digit margins". What the filings cannot tell a reader is how much of Q3's cost the 13% to 15% will cover, because no document prints the realised price, the OEM formula terms or the inventory cost lag. Those are the three numbers to look for next.

The concrete thing, again

"to compensate and maintain the margins at similar levels, we would have needed around, you know, 16% to 17% price increase." Against that, the company reports an average of 11% to 13% for the half and 13% to 15% by October. In Q2 that left standalone raw material at 68.3% of revenue, revenue less raw material up 4.6% on revenue up 25.6%, and a margin of 11.1% held there by overhead restraint, some of it on costs the CFO described as deferrable. The brand and the network let Apollo raise prices by double digits in a quarter and keep volume growing; the numbers say they did not let it raise them fast enough, and the filings do not show whether that is the pricing power or the first half of its test.

Sources

• [RS] Apollo Tyres, outcome of the board meeting, results and review reports, 4 Nov 2026 (NSE)
• [IP] Apollo Tyres, Q2 FY27 earnings presentation, 5 Nov 2026 (NSE)
• [TR] Apollo Tyres, transcript of the Q2 FY27 earnings call, filed 6 Nov 2026 (NSE)
• Earlier Moat & Margin piece on the company: Apollo Tyres moat
• The results were first reported in: Daily filing digest, 4 Nov 2026

Educational research, not investment advice. Every figure above is drawn from Apollo Tyres' own filings (results and review reports of 4 November 2026, the earnings presentation of 5 November 2026, and the earnings-call transcript filed on 6 November 2026), read from the primary documents on 8 November 2026; derived figures are our arithmetic, labelled as such. MoatSCORE: 5.18 (read live on the Moat Screener on 8 Nov 2026, where it is labelled first-pass). It is provisional. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.