Apollo Tyres Ltd shares were down to their lowest in the past 18 months on Thursday. This was after the announced US$2.4 million deal to acquire US-based Cooper Tire & Rubber Co. The said decrease was due to the concerns raised about the tire company's debt.
The acquisition of Cooper by Apollo will be funded through a new debt. According to the estimates done by analysts, the post-acquisition leverage the combined firms will be raised 3.8 times net debt from the current 1.4 times.
The acquisition will form the seventh largest tire company in the world. Apollo will also be given a foothold in two of the top auto markets, China and United States.
In a report, Goldman Sachs stated that Apollo's net debt to equity ratio would increase regardless Cooper would service a great potion of the added debt that the Indian company would take to execute the deal.
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