Apollo Tyres says cancels Hungary project

MUMBAI (Reuters) - Apollo Tyres Ltd (APLO.BO: Quote, Profile, Research) said on Monday it is withdrawing its planned facility at Gyongyos, Hungary, citing administrative hurdles and division within the local community on the issue.

The tyre maker would seek an alternative location elsewhere in Hungary or Europe, it said in an e-mailed statement.

Apollo Tyres said it was reconsidering the Hungarian project due to "potential divisions" within the Gyongyos community.

"The decision to withdraw from Gyongyos preempts the need to divide local citizens with a vote on the desirability of having this investment in the area," the company said.

Apollo had said in January that it would invest 200 million euros (about $294.9 million) in the plant in Gyongyos with an annual capacity of 7 million tyres a year. It was to have begun initial production from June 2009.

Apollo Tyres, which is also investing around $320 million in India and South Africa to boost capacity, said the cancellation may have "a short-term financial and resource allocation impact."

"The cancellation will not impact immediate valuations, but it could be a negative going forward," Rishabh Bagaria, an analyst at Pinc Research said over telephone.

"Considering Apollo Tyres is a well placed company with a strong balance sheet, they could have really leveraged on this project," Bagaria said.

The firm has received a number of offers from other industrial parks in Hungary for the planned investment, it said. Offers have also come in from Slovakia it added.