Shares of Apollo Tyres today slumped by over 21 per cent to hit a one-year low in early trade, after the company said it will take over US-based Cooper Tire & Rubber Co in an all-cash deal valued at about Rs 14,500 crore (USD 2.5 billion).
After making a weak opening, shares of the company further tanked 21.41 per cent to Rs 72.30 -- its 52-week low on the BSE.
At the NSE, the stock plunged 21.37 per cent to hit a one- year low level of Rs 72.30.
Following the decline in the stock, the market capitalisation of the company tanked by Rs 918 crore to Rs 3,719 crore.
"We are concerned about the huge debt burden which could strain the balance sheet of the combined entity," said Surjit Arora, Research Analyst (Institutional Equities) at Prabhudas lilladher.
"While the acquisition will be positive for the company in the longer run, the near term challenge for the company would be to successfully integrate Cooper Tire and Rubber Company operations with itself," Angel Broking said in a report.
Post the transaction, Apollo Tyres will become the seventh largest tyre maker in the world by revenue at USD 6.6 billion from its current 16th position at USD 2.5 billion and give it greater access to US, the second largest automobile market in the world after China.
As part of the deal, Apollo Tyres will take over the operations of Cooper, including eight plants and 14,000 employees in different parts of the world. The American firm is the 11th largest tyre maker in the world with a revenue of over USD 4 billion.
Meanwhile, the broader market was also trading weak with the BSE benchmark Sensex quoting at 18,829.59, down 209.07 points at 1200 hrs.