APL Apollo Initial (ICICI)

Equity Research INDIA
October 25, 2021

BSE Sensex: 60822
APL Apollo Tubes BUY
ICICI Securities Limited
is the author and
distributor of this report Catalysing the market growth of steel tubes in
India: Initiate with BUY Rs816
Initiating coverage APL Apollo Tubes (APL) has been able to premiumise steel structural tubes
through constant capacity expansion, quality control, expansion of its product
Metal tubes portfolio, brand marketing campaigns, and constant engagement with influencers
(i.e. fabricators and architects). In its journey to a dominant 50% market share in
India’s 4mtpa structural steel tubes market, APL has become a near net debt free
Target price Rs1,020 entity, generating consistent free cashflows and reduced its working capital to 8
days. Company is undertaking a volume expansion, which will take its capacity to
Shareholding pattern 4mtpa by FY24-FY25 (a potential 20-25% volume CAGR over FY21-FY25E). This
Mar Jun Sep
’21 ’21 ’21 would harmonise with the management’s vision of the structural steel market size
Promoters 37.0 36.8 36.8 growing towards 8-10mtpa in the medium term. APL is also catalysing the change
Institutional
investors 34.2 35.1 33.8 as it aims to increase the usage of large-diameter tubes in modular civil
MFs and others 5.4 5.3 4.6 construction. We initiate coverage with a BUY rating and target price of
FI/Banks 3.9 3.5 3.4
FIIs 24.2 25.7 25.3
Rs1,020/share. Sharp drop in steel prices poses interim margin risk; increased
Others 28.8 28.1 29.4 competitive intensity and higher related-party transactions too are risks to our call.
Source: NSE
 Creating and capturing the market. APL’s volumes have increased at ~24%
CAGR over past 10 years (~5x increase in capacity), as it now contributes to >50%
Price chart of the structural steel tubes market. Larger contribution from commodity products led
1200 to a range-bound EBITDA/te – management has been trying to address the same
1000 through improving the value-added mix, the latest being actively promoting usage of
800 heavy structures in modular construction. With a pan-India presence, APL has twice
the number of dealers and thrice the number of offerings compared to its nearest
(Rs)
600
400 competitor. With ~20-25% volume CAGR over FY21-FY25E, we expect APL to keep
200 increasing its market share.
0  Reduced working capital days to 8; significantly improved RoCE. Our dealer
feedback highlights: 1) “day zero” approach from APL, 2) focus on constant addition of
Oct-18
Apr-19
Oct-19
Apr-21
Oct-21
Apr-20
Oct-20
SKUs, 3) adequate supply to dealers across the country (in-time & on-demand)
allowing them to have 2-3x turnover vs competitor products, and 4) starting the
practice of offering upfront discounts while compressing the receivables cycle. APL’s
current working capital days is unmatched even internationally (based on I-Sec
Research). Steadily shrinking inventory days has muted the commodity price risk while
reduction in receivables days has rerated the return profile (table 14). APL generated
~Rs7.5bn of FCF over FY15-FY21 thereby catapulting itself into a near net debt free
entity. Valuation multiples have also reflected the same over the course of time.
 Catalysing market growth as greenfield expansion comes on-stream.
Management envisages to spend ~Rs10bn in the greenfield Raipur facility as it
intends to expand capacity to 4mtpa by FY24E. We expect ~40% RoCE from the
greenfield plant (table 7), given the new product profiles the management is
exploring out of the new plant. This will be a key driver for improving consolidated
RoCEs over the next 3-4 years.
Market Cap Rs204bn/US$2.7bn Year to Mar FY21 FY22 FY23E FY24E
Research Analysts: Reuters/Bloomberg APLA.BO / APAT IN Revenue (Rs mn) 84,998 118,428 108,994 120,094
Shares Outstanding (mn) 249.8 EBITDA(Rs mn) 6,787 8,416 11,248 14,387
Abhijit Mitra
abhijit.mitra@icicisecurities.com 52-week Range (Rs) 956/292 Net Income (Rs mn) 4,077 5,435 7,621 10,175
+91 22 6637 7289 Free Float (%) 63.2 EPS (Rs) 16.3 21.8 30.5 40.7
Mohit Lohia FII (%) 25.3 P/E (x) 50.0 37.5 26.7 20.0
mohit.lohia@icicisecurities.com
+91 22 2277 7510 Daily Volume (US$/'000) 6,579 CEPS (Rs) 14.1 20.4 26.2 35.6
Absolute Return 3m (%) 0.4 EV/E (x) 44.1 30.2 24.2 17.7
Absolute Return 12m (%) 175.6 Dividend Yield 0.2 - 0.4 0.5
Sensex Return 3m (%) 15.3 RoCE (%) 14.5 26.3 25.8 28.4
Sensex Return 12m (%) 51.5 RoE (%) 17.6 24.1 25.1 27.0
Please refer to important disclosures at the end of this report

APL Apollo Tubes, October 25, 2021 ICICI Securities
TABLE OF CONTENT
About the company ......................................................................................................... 3

Diversified geographical presence, product profile and end-user industries......... 10
Branding strategy .......................................................................................................... 12
APL Apollo received design patents for six innovative products ............................ 14
ERW steel market is ~44% of Indian steel tubes and pipes market ......................... 16
Merger arrangement with APL Tricoat ......................................................................... 25
Peer comparison ............................................................................................................ 28
Environmental, Social and Governance (ESG) ........................................................... 30
Group Structure ............................................................................................................. 32
Governance: Structure of the board and the committees ......................................... 34
Initiate with a BUY rating and target price of Rs1,020/share ........................................ 35
Financials........................................................................................................................ 36
Appendix ......................................................................................................................... 38
Index of Tables and Charts ........................................................................................... 42
2
About the company

APL Apollo Tubes was established in 1986 and is the largest and one of the fastest-
growing ERW steel tubes / structural tubes manufacturers in India, with a production
capacity of 2.6mtpa. APL has over 1,500 products varieties for multiple building
material structural steel applications and over 800 distributors spread across 300
towns and cities of India. The group’s product range includes GI pipes, GP pipes and
black pipes in both round and hollow pipes (rectangular and square cross-section)
within the ERW pipe segment.
Over the years, APL has steadily enhanced its capacities and widened its presence
across geographies by way of acquisition — Lloyd Line Pipes Limited (LLPL); acquired
in FY11, in Murbad (Maharashtra); SLMUL (acquired in FY08) in Bengaluru
(Karnataka) and AMPL (acquired in FY07) in Sikandarabad (Uttar Pradesh). In
addition, the company has established new units in Hosur (Tamil Nadu) in 2011 and in
Raipur (Chhattisgarh) in 2018. In FY20, APL purchased 200,000mtpa capacity in
Hyderabad from Shankara Building Products Limited. Further, it has set up capacity of
350,000mtpa for triple coated tubes in ATTL, subsidiary of SLMUL.
Currently, APL Apollo has 10 manufacturing facilities, with 3 plants in Sikandrabad

(Uttar Pradesh); 1 each in Hosur (Tamil Nadu), Murbad (Maharashtra), Raipur
(Chhattisgarh), Hyderabad (Telangana), Dujana (Uttar Pradesh); and 2 plants in
Bangalore (Karnataka).
Table 1: Major events/milestones

Year Major events/milestones
1986 Year of Incorporation and setting up of a manufacturing facility at Ghaziabad
1994-1995 Commissioning of a galvanising plant and listing on stock exchanges
2000-2002 Commissioning of a new tube mill and modern gallium high speed mills
2003-2004 Develops in-house hollow sections and launches pre-galvanised pipes
2007-2008 Develops in-house hollow sections and launches pre-galvanised pipes
2009-2010 Commissioning of the Hosur manufacturing unit; also started multiple warehouse across India
2011-2012 Acquisition of Lloyds Line Pipes
2013-2014 Launched door and window frames and railing tubes
2015 Achieved 1mtpa steel pipe capacity
2016-2017 Commissioning of the Raipur facility and establishing first DFT lines in Raipur, Hosur & Moradabad
2019 Acquisition of Taurus Value Steel and Apollo Tricoat (40.4% stake)
2021 Announced merger of Apollo Tricoat with wholly-owned subsidiary Shri Laxmi Metals Udyog
Source: I-Sec research, Company
3
Chart 1: Geographical presence of APL
Source: I-Sec research, Bloomberg
Table 2: Product profile

Product Sales Brands Applications
Volume
Apollo Structural 63%
APL Apollo Fabritech, APL Structural, Piling, Sheds, Handrails, Gates, Fencing,
Residential Buildings & Independent Homes 25% Apollo Build, APL Apollo Balcony Grills
Commercial Buildings, Warehouse & Factories 14% DFT, APL Apollo Column, Staircase, Light Structures
APL Apollo FireReady, APL
Infrastructure 20% Structural for Metros, Airports, Stadiums, Stations
Apollo AGRI
Industrial & Agriculture 4% Heavy Equipment
Apollo Z 19%
APL Apollo CoasVGuard
Residential Buildings & Independent Homes 14%
Galvanised structural steel tubes for coastal markets
Commercial Buildings, Warehouse & Factories 5%
Apollo Tricoat 14%
APL Apollo Green, APL Door Frame, Staircase Steps, Furniture, Plank,
Residential Buildings & Independent Homes 11% Apollo Bheem, APL Apollo Designer Tubes
Z+
Commercial Buildings 3% Fencing, Electrical Conduits
Apollo Galv 4% Apollo Steel Plank, Apollo
Commercial Buildings 3% Signature, Apollo Elegant, Galvanised structural, Greenhouse Structures, Plumbing
Industrial & Agriculture 1% Apollo Chaukhat Firefighting
Total 100%
Source: I-Sec research, Company
4
Chart 2: APL Apollo targets to increase revenue contribution from heavy
structures
Galvanised Tricoat Roofing Structures
Light Structures Heavy Structures General structures
100%
90%
80% 43%
70% 57% 58% 58% 55%
60%
6%
50%
6% 13%
40% 5% 5% 6%
5% 6% 5%
30% 8%
20%
20% 21% 21%
20% 21%
10% 7% 14%
13% 10% 7%
0% 6% 4%
FY17 FY18 FY19 FY20 FY21
Chart 3: APL’s structural product range
Chart 4: Product-wise EBIDTA/te – gradual improvement in mix drives

EBITDA/te improvement
FY18 FY19 FY20 FY21
8,000
7,000
6,000
6,589
5,000
5,691
4,000
5,021
5,000
4,880
4,704
3,000
4,000
3,952
3,800
3,707
3,658
3,283
2,000
2,923
3,775
3,707
2,052
1,658
6,728
4,703
6,040
4,138
4,721
4,717
1,361
5,568
4,720
7,072
4,362
2,933
1,000
1,615
0
Agri/Industrial
General Structures
Rust Proof Structures
Home Improvement
Overall EBIDTA/tn
Light Structures
Heavy Structures
Rust Proof Sheets
5
Chart 5: How APL Apollo went about creating the market
Table 3: Product-wise sales volumes, EBIDTA/te

Product Application FY18 FY19 FY20 FY21 Capacity
Sale Volume EBITDA/ Sale Vol Volume EBITDA/ Sale Vol Volume EBITDA/ Sale Vol Volume EBITDA/ (kte)
Vol (%) (kte) te (Rs) (%) (kte) te (Rs) (%) (kte) te (Rs) (%) (kte) te (Rs)
Apollo Heavy Structures 5% 52 3,707 6% 80 3,775 6% 101 4,000 6% 95 4,721 200
Structural
Light Structures 6% 70 3,658 8% 108 3,707 5% 87 3,800 13% 213 4,717 430
General 58% 656 2,052 58% 777 1,615 55% 898 1,361 43% 713 1,658 1,000
Structures
Rust Proof 21% 241 5,691 21% 279 5,568 30% 333 5,021 18% 294 6,728 450
Apollo Z Structures
Rust Proof 0% 0 4,704 0% 3 4,703 0% 2 5,000 1% 23 4,720 50
Sheets
Apollo Home Improve. 7% 113 6,589 14% 231 7,072 350
Tricoat
Apollo Galv Agri/Indus. 10% 111 4,880 7% 92 4,362 6% 99 3,952 4% 71 6,040 120
Consol. 1130 3,283 1,339 2,933 1,633 2,923 1,640 4,138 2,600
EBIDTA/te
Chart 6: Process flow

Raw Material
(HR Coil)
Pickling Slitting
Cold Rolled
Full Hard Apollo Standard / Apollo Galv
(CRFH) Apollo Structural (Hot dip
(Circular Tubes & Galvanised Tubes)
GP Coil Hollow Steel

(Galvanised Coils) Sections)
Apollo Z
(Pre-Galvanised
Tubes)
6
Leadership position in the ERW pipes industry
APL Apollo is an established player in the Indian structural tubes segment and holds
significant market share (>50%). The group has consistently expanded its
manufacturing capacities organically and inorganically over the years to 2.6mtpa,
which is more than 2.8x of its nearest competitor. Large scale enables the company to
enjoy economies of scale with regards to procuring raw materials and better fixed-cost
absorption. Further, the company enjoys highest market share in the industry
Chart 7: Domestic market share (%)
Others
18%
Player 4
7%
APL Apollo
Player 3 50%
7%
Player 2
9%
Player 1
9%
Over the years, APL has widened its presence across geographies by way of
acquisitions and capacity expansions. List of acquisitions is mentioned in table 4.
Further, in FY2020, APL purchased 200,000tpa capacity in Hyderabad from Shankara
Building Products Limited. Furthermore, APL has set up capacity of 350,000tpa for
triple coated tubes in Apollo Tricoat, subsidiary of Sri Laxmi Metal Udyog (SLMUL).
Including these APL Apollo’s aggregate capacity stands at 2.6mtpa. As a result,
product volumes have registered a CAGR of ~21% during FY12-FY21, whereas the
overall industry grew by ~5%. The growth has been achieved through increasing
production capacities, widening distribution networks and product branding.
Table 4: Summary of acquisition over the years – playing the role of market
consolidator
Year Target Company Capacity (kte)
2007 Apollo Metallex Pvt Limited 25
2008 Shri Laxmi Metal Udyog 50
2012 Lloyd Line Pipes 90
2019 Taurus Value Steel 200
2019 Apollo Tricoat (40.4% stake) 250
Table 5: Manufacturing locations

Plant State Capacity (kte) Products Manufactured
Raipur Chhattisgarh 350 GI, MS, HS
Murbad Maharashtra 350 GI, MS, HS
Hosur Tamil Nadu 550 GI, MS, HS
Sikandrabad Uttar Pradesh 700 GP, GI, MS, HS
Bengaluru Karnataka 100 GP, MS, HS
Hyderabad Telangana 200 GI, MS, HS
Dujana (Tricoat) Uttar Pradesh 100 Tricoat Products
Malur (Tricoat) Karnataka 250 Tricoat Products
Total 2,600
7
Chart 8: Number of manufacturing plants
12 Number of plants 11
10 10
10
8 7 7
6 6
6 5 5 5 5
4
4
0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
The manufacturing capacities of the company are geographically diversified across

regions. The group remains relatively insulated from regional demand-supply
dynamics. Further, the clientele is well spread across residential, commercial and
industrial construction, infrastructure, and industrial and agricultural applications.
Company has gradually reduced its dependence on the traditional ERW pipes
segment (used for irrigation and fluid transportation) to structural pipes used in the
construction segments (residential and commercial) that have significantly better
margins. It manufactures over 1,500 varieties of products. Further, APL is making
consistent efforts to increase the share of value-added products such as Apollo
Tricoat, Apollo Z and Apollo Galv to add products that garner better margins. With the
geographical diversity and diverse product mix, the company is safeguarded against
cyclicality and event-based risks resulting in the highest EBIDTA/te among ERW pipe
manufacturers in India.
Backward integration – CRM set up in Sikandrabad facility in FY19

The backward integration in structural steel manufacturing process was completed by
the company by introducing cold roll milling. Through this technology, it downsizes the
standard HRC coil width from 2mm to 1.2mm/1.4mm (which is used for manufacturing
of high-value products). Earlier, the company was getting customised HRC from Tata
Steel and JSW Steel at a much higher prices, and similar products were also supplied
to competitors. However, with the involvement of the cold roll milling at its
manufacturing facility, it is not only able to save on the process costs, but has also
created an entry barrier to the value-added products segment.
Direct forming technology (DFT)

The adoption of better technology provides the company unparalleled cost advantage
as compared to its peers. It purchased the DFT in 2016 from an Italian company,
Olympia. DFT enables the possibility to produce any customised size of Hollow
Section, included in the mill range, without roll change. DFT helps customise any pipe,
without roll change, which not only lowers the raw material cost but also saves time,
as in the case of conventional technology, all pipes are first made round (in shape)
and then given another shape, i.e., square, hollow, rectangle, etc., which increases the
conversion cost. In DFT, the entire rolling process is automated, which takes 1-2
8
hours, whereas in the conventional method it takes 8 hours to 2 days as the entire line
has to be changed manually. This reduces the set-up time significantly. Product
customisation has helped APL create a large and diversified client base since it can
meet different requirements.
Chart 9: DFT is helping asset turn Chart 10: Higher procurement is also helping save
procurement costs (RM cost/te against HRC price
average)
Fixed Assets Asset turn (RHS) 45
25 7.0
40
5.8 40
5.6 6.0 35
20 5.2
4.9 30
4.5 4.3 5.0 30
4.3 4.3 25
15 20
(%)
4.0
(Rs bn)
20
(x)
15
3.0 15
10 10
10 10
2.0 5
5
5 0
1.0 -5
5 7 8 9 10 12 18 20 -5
- - -10
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Source: Company data, I-Sec research. Source: Company data, I-Sec research.
9
Diversified geographical presence, product profile

and end-user industries
APL Apollo Tubes (APL) derives ~80% of sales from distributors. Company is expanding
its business across India in new cities, towns and villages and has increased its distribution
reach over the past few years. Currently, it has presence in 300 towns and cities across
India, with 29 warehouses, more than 800 distributors and 50,000 retailers. Distribution
reach and warehouses have rapidly expanded over the past few years, in line with growing
volumes. Company has introduced various innovative incentive schemes for dealers, to
push volumes. It is also improving its engagement with architects and fabricators and, the
influencers to educate about new product offerings. It organises fabricator-meets
periodically across towns, to educate fabricators about the products and new launches.
Table 6: An enviable assortment of distributors, retailers and fabricators

Channel Nos. Measures to boost volumes
Partner
Distributors >800 Solid relationship, attractive incentive plans
Retailers 50,000 Dedicated retailer binding programme
Fabricators 200,000 Apollo Connect Bonding Programs, Fabricator meets to promote the APL Apollo Brand
End - End-customer connect through Indian Premier League, Football, Kabaddi League.
consumers Amitabh Bachchan Campaign, TV Commercials, Radio, Social Media
Source: I-Sec research
Chart 11: Significant increase in the number of distributors

900 No. of distributors No. of warehouses (RHS) 35
800
30
700
25
600
500 20
400 15
300
10
200
5
100
0 0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
10
Chart 12: The South Indian market is only ~17% of Chart 13: MP, UP and Maharashtra contribute
the dealer network; contributes ~39% of revenues. >50% of the number of distributors – there are
several micro markets from where volumes can be
expanded
East
3% MP UP Maharashtra Others
North 100%
26%
90%
80%
West
32% 70%
60%
50%
40%
30%
20%
10%
South
39% 0%
FY21
Efforts to improve the delivery time

To improve delivery time, the company is creating mother warehouses pan-India, which
will improve the service time to dealers and distributors. In FY21, APL Apollo invested in
two warehouses in North (Noida) and East (Raipur) which will service the distribution
network in these regions. Further, the company has planned one warehouse each for the
South and West regions, which should be operationalised in the current year and will
improve the delivery time to dealers and distributors in these regions. In addition, the
company has strengthened and streamlined the supply chain, which has reduced delivery
time from 15 days a few years ago to about 4 days now. Company aims to achieve a
benchmark delivery time of 24 hours.
Strong demand visibility from tier 3/4 towns and rural India
Post the covid disruption, the company has witnessed strong demand from smaller towns
In FY21, APL Apollo and rural India. However, going ahead, management expects sales to be equally split
invested in two between rural and urban segments
warehouses in North
(Noida) and East Chart 14: APL Apollo has been looking to increase its penetration into tier 2/3
(Raipur) to service its cities on the back of its branding campaigns and central warehouse strategy
distribution network
in these regions.
Company has
planned one Tier 2 and the rest
warehouse each in 40%
the South and West

regions, which Tier 1 cities
should be 60%
operationalised in
FY22 to enhance its
tier-2 presence.
11
Branding strategy
APL Apollo Tubes (APL) has developed a focused branding strategy to create
awareness and visibility of the brand. The initiatives have resulted in better sales
growth in tier 2/3 cities and sales in small towns and villages are also growing due to
increased brand awareness.
In November 2019, the company signed Amitabh Bachchan as the brand ambassador
for all the brands housed under APL Apollo, for two years. Large-scale print and TV
commercials were launched to improve brand visibility. APL Apollo’s branding
initiatives through its association with Indian sports magnified its brand reach and
visibility across India and strengthened its brand recall. The APL Apollo Group
continued to retain Mr. Amitabh Bachchan as the ambassador for all brands housed
under ‘APL Apollo’. This association has elevated the brand out of the competitive
clutter.
Some of the sporting events sponsored by APL Apollo:

 Sponsored the Delhi Team in the IPL 2021, India’s biggest sporting event with
mass appeal and viewership.
 Principal sponsor of Haryana Steelers during the 7th season of the Pro Kabbadi
League.
 Sponsored four teams in the Hero Super League.
 Branding sponsor for the ‘India versus West Indies’ cricket series.
Also, the company has improved presence in trade expos, fabricator meetings, and
runs focused advertising & brand engagement programmes.
Chart 15: Branding expenditure

Advertisement and sales promotion Expenditure as % of revenue (RHS)
600 0.8% 0.9%
0.8%
500
0.7%
400 0.6%
0.5%
0.5%
(Rs mn)
0.4%
(%)
300 0.4%
0.4%
200 0.2% 0.3%
0.2%
0.2% 0.2%
100
0.1%
108 130 72 93 90 497 235
0 0.0%
FY15 FY16 FY17 FY18 FY19 FY20 FY21
12
Chart 16: Key brand campaign of APL Apollo
Chart 17: Key brand campaign of APL Apollo (Cont’d)
New product launches

Company launches 2-3 SKUs every month in its existing product segments. Further, it
is in process of launching two new product verticals, namely colour-coated tubes and
500 sq. ft. columns – first-time products for the Indian market.
500 sq. ft. columns: The 500 sq. ft. columns, have been developed for tall building
(high-rises and skyscrapers), PEB (pre-engineered buildings) and heavy infrastructure
namely airports, etc. Further, the company has signed an MoU with Zamil Steel
Buildings India to develop a market for pre-engineered steel buildings (PEB) made
from structural steel tubes. The usage of structural steel tubes in India is just 5% in
PEB structures against a global average of 20%. The company expects the
partnership to create a market of 0.2mtpa for high diameter and high thickness steel
tubes ‘Apollo Column’ in coming years.
Colour-coated tubes: This is targeted for interior furniture applications. In addition to

being superior to conventional products, it saves time and cost for the end-user.
13
APL Apollo received design patents for six

innovative products
The Office of the Controller General of Patents, Designs & Trademarks has recently
granted six registrations to the innovative products of APL Apollo Tubes. With these
fresh registrations, the overall patented portfolio for APL Apollo has risen to 16.
Chart 18: Key new design patents and applications Chart 19: Key new design patents and applications
Significant improvement in the working capital

Company has reduced its net working capital days to ~8 in FY21 from ~25 in FY20 by
shifting to a ‘cash and carry’ model. This, along with improved inventory management,
has resulted in lower requirement of working capital. Working capital shall still remain in
a comfortable range even if the company reverts to previous credit terms with its
customers in our view. The release of working capital was utilised to repay debts and
fund the capex.
Chart 20: Working capital days
45
40
40
35
30 34
25 29
25
20
15
10
5 8
0
14
With a change in working capital model, APL Apollo aims at becoming
net debt free by FY23
APL Apollo’s net debt has reduced to Rs1.6bn in FY21 from Rs7.9bn in FY20 as
the company switched over to the cash & carry business model and stopped giving
extra credit to its distributors and customers. This practice significantly lowered the
receivables from Rs4.8bn in FY20 to Rs1.3bn in FY21 and hence reduced working
capital requirement. The surplus cash thus generated was utilised towards debt
repayment and capex funding. Management is confident of maintaining similar working
capital levels and it targets to become net debt free by FY23.
Plans to expand steel tube capacity to 4mtpa
Company plans to achieve an annual capacity of 4mtpa of steel tubes from existing
capacity of 2.6mtpa. The planned capacity expansions of 1.4mtpa include addition of
0.4mtpa in FY22, 0.6mtpa in FY23 and 0.4mtpa in FY24. Of this, 1mtpa capacity will
be across the Raipur facility while the balance 0.4mtpa capacity will be across other
units. The expansion will be towards:
a) 0.2mtpa for 500x500mm diameter steel tubes which will be used in heavy building
structures
b) 0.2mtpa towards 500x500mm diameter colour-coated structural tubes
c) 1mtpa towards existing product categories
Of the above, the 0.4mtpa capacity expansion is underway at Raipur with expected
commissioning by the end of FY22. This should increase the overall capacity to 3mtpa
by the end of FY22.
Chart 21: Risks and mitigation framework – Balance sheet strengthening

Table 7: We expect ~40% RoCE from the new greenfield capex at Raipur
Management assessment
Scenario 1 Scenario 2 Scenario 3
Capex (Rs bn) (i) 10 10 10
Capacity (mtpa) 1.4 1.4 1.4
Utilisation (%) 90 80 75
Sales volume (mnte) 1.3 1.1 1.1
EBITDA/te (Rs) 7,000 6,500 6,000
EBITDA (Rs mn) 8,820 7,280 6,300
Depreciation (Rs mn) 500 500 500
EBIT (Rs mn) 8,320 6,780 5,800
Tax (@25%) 2,080 1,695 1,450
Working Capital (@9 days) (ii) 1,864 1,657 1,553
NOPLAT (iii) 6,240 5,085 4,350
Capital Employed (Rs mn)- i + ii (iv) 11,864 11,657 11,553
RoCE (iii/iv) 53 44 38
New greenfield capex is expected to drive up margins as well as return profile. This is also key to
support consolidated margins at ~ Rs5,000/te as steel prices drop.
15
ERW steel market is ~44% of Indian steel tubes and

pipes market
India’s steel pipes and tubes production capacity stands at ~21.5mtpa. The overall
industry is valued at ~Rs600bn and accounts for ~8% in global steel market. ERW
pipe market ~ 9.5mtpa.
Chart 22: Pipes market categorization in India
ERW pipe is manufactured by cold-forming a steel sheet into a cylindrical shape.

Current is passed between the two edges of the steel to heat the steel to a point at
which the edges are forced together to form a bond without the use of welding filler
material. India’s ERW market is ~8-10mtpa and APL is the largest player in ERW
segment with volume of ~1.6mtpa.
ERW pipes have various applications like fencing, line pipe, scaffolding, etc. ERW
steel pipes are available in various diameters, wall thickness, finish and grades. Major
applications include water pipelines, agriculture & irrigation, gas pipelines for LPG and
other non-toxic gas lines.
The traditional usage of ERW pipes has been for transportation of liquids and gases.
This has changed to hollow support structure at airports, metro stations, malls, pre-
engineered buildings, etc. Besides these urban infrastructure applications, ERW pipes
and tubes are fast emerging as replacements to certain traditional aluminium and
wooden parts in trucks and bus bodies.
16
Chart 23:Structural tubes production/consumption Chart 24: Structural tubes imports/exports
Production Consumption Imports Exports
8.0 1.6
7.0 1.4 1.5
1.5
6.0 6.7
6.4 1.2
5.8 1.2
5.0 5.5 5.4 1.0 1.1
5.2 5.3
(MT)
(MT)
5.0
4.0 4.3 0.8 0.9 0.9
4.2 0.8
3.0 0.6 0.7 0.7
2.0 0.4 0.5
1.0 0.2
0.0 0.0
FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21
Production has grown at a CAGR of ~10.4% over FY17-FY20 to 6.68mtpa; however, it

reduced in FY21 to 5.82mtpa due to covid impact. The industry witnessed strong
demand from domestic water infrastructure driven by Jal Jeevan Mission, oil
exploration, construction, infrastructure, and expansion of gas pipelines such as the
national gas grid and city-gas distribution. As a result, consumption growth outpaced
production growth and expanded at a CAGR of 15% over FY17-FY20. Due to
competitive pricing, high quality and geographical advantages, there is huge demand
for Indian manufactured pipes from regions such as Europe, Thailand, Malaysia,
Middle East, and Indonesia.
Chart 25: Sectoral pipes and tubes consumption
Source: Care Ratings, I Sec research
17
Chart 26: Steel pipes and tubes capacity (mtpa)
Large Players Small Players Total
6
5
4.9
4 4.6 4.4
3
3.1 2.9 2.9
2 2.6 2.4
2.3 2.2
1.8 1.7 1.8
1 1.5
0.1 1.2 0.3 0.6
0
Seamless
ERW-Structural
HSAW
DI Pipes
ERW-Non
LSAW
Structural
Chart 27: ERW segmental consumption

Infrastructure
10%
Energy and
Engineering
9%
Automobile
5%
Construction and
Building Material
68%
Agricultural
8%
Source: Care Ratings, I Sec research
Structural steel tubes (SSTs)
Structural steel tubes are widely used in the construction industry because of their
durability, high strength and low weight. SSTs are capable of withstanding high heat,
pressure, shock and vibrations. It is 100% recyclable and one of the most reused
materials in the world. While globally the proportion of structural steel tubes is around
10% of the total steel consumption, in India it lags at 4-5%. As such, there is further
scope for increase in the consumption level. Currently, SST market size in India is
~4mtpa and the demand for such tubes is expected to gain traction in the coming
years.
18
Chart 28: Structural steel tube consumption in India significantly lower than
global average
12%
10% 11%
8% 9% 9%
8% 8%
6% 7%
4%
4%
2%
0%
Global Europe Latam Japan Middle East Nort America India
Benefits of SST
 Environment friendly – recyclable, and lower greenhouse gas emission

 No underwater usage unlike conventional method
 Highly durable, sustainable, fire resistant, and easy to repair
 Swift erection helping reduce overhead costs
 Elevated stress-bearing capacity
 Excellent ‘strength to weight’ ratio
 Lightweight
Chart 29: APL Apollo enjoys leadership position in domestic SST market
Overall SST Volume APAT Volumes % of Market Share (RHS)
4.5 60%
4.0
4.0 50%
3.5 3.7
3.4 3.5 48%
3.0 40%
41% 3.4
2.5
(mnte)
36% 30%
2.0 32%
27%
1.5 20%
1.6 1.6
1.0 1.3
1.1 10%
0.9
0.5
0.0 0%
Structural steel market in India is under-penetrated as compared to global average

(chart 30). In India, such tubes account for only ~4% of overall steel market,
significantly lower than the global average of ~9%.
19
Chart 30: Structural steel tube market - India and global
Global Structrural Steel Tube Volume
Indian Structrural Steel Tube Volume
% of India's share in Global Market (RHS)
60 14.0%
51 53
50 48 12.5% 50
50 45 12.0%
10.0%
40
(mtpa)
8.0%
6.9% 7.6% 28 6.8%
30 6.2% 7.5%
7.3% 6.0%
20
4.0%
10 3.4 3.5 3.7 4 3.4 2.0%
3.1 3.3
0 0.0%
FY15 FY16 FY17 FY18 FY19 FY20 FY21
Chart 31: Structural steel tubes market as % of steel market

12%
10% 11%
8% 9% 9%
8% 8%
6% 7%
4%
4%
2%
0%
Global Europe Latam Japan Middle East Nort America India
Growth outlook remains robust
APL is market leader in structural tube segment with ~50% market share in India,
while the second and third players have market share of ~9% each. Further, the
company’s volumes grew at ~21% CAGR over FY12-FY21 as against industry growth
of ~5-6%. Company is the lowest-cost producer in the country with highest operating
margins. We expect the company to witness double-digit volume growth in the
structural pipe segment due to: i) government push for infrastructure, ii) revival in real
estate segment, and iii) increased acceptance of steel pipes over traditional materials.
20
Chart 32: Growth outlook
Steel Market SST Market
250
227
200
150
(mtpa)
140
100
90
50
22
13
4
0
2020 2023E 2030E
Chart 33: Global structural market segmental breakup
45% FY14 FY19 FY22E
40%
39% 40%
35% 37%
30%
25%
20% 23% 22% 22%

21% 22% 22%
19%
15% 17% 16%
10%
5%
0%
Residential Infrastructure Commercial Others
Growth drivers
 Growing vertical model of development; increased spending on skyscrapers
 Higher expenditure on infrastructure – highways, bridges, flyovers, and public
utilities
 Growth in e-commerce/warehouse construction demand
 Consumer preference for better quality residential construction
 Rising need for housing due to population explosion
 Ability to replace wood gives it an edge
21
Table 8: Emerging sectors driving steel tube demand

Segment Demand Drivers
 India’ logistics sector is one of the inefficient sectors when it comes to costing, as it comprises 13-14% of the nation’s GDP, which
is much higher as compared to many developed and developing nations (BRICS countries - 11%, US - 9.5% and Germany - 8%).
The logistics sector is expected to witness strong investment from the growth in e-commerce, online shopping and revival in
Logistics and economic activity.
warehousing  JLL projects significant investment in the warehousing space to scale up its storage capacity from 253mn-sqft in FY20 to ~379mn-
sqft in FY23E. Of this, sophisticated warehousing capacity (i.e. Grade A warehouse) is expected to increase to 188mn-sqft in
FY23 as against 113 in FY20. Sophisticated warehouses are large in size and technologically advanced. The investment in the
warehousing sector will drive the product demand for structural steel and would benefit APL.
EXHIBIT: India warehousing stock
Source: Company data, I Sec research

 Trends for affordable housing with low cost & faster completion is picking in India. Modular buildings, where steel modules are
Affordable
staked and connected together, will be key driver. Modular steel structures are constructed in-house with final assembly occurring
housing
on-site, where the steel modules are stacked and connected together.
Affordable housing (modular building concept)

 Airports: The government plans to start 100 additional airports by 2024. Also, it plans to invest Rs190bn in upgrading airport
infrastructure in the country, especially in smaller cities, over the next three years. These measures will create demand for APL
Urban Apollo’s products.
infrastructure  Metro rail: The government is working on delivering ~1,000km of metro rail system in the country by 2022. Also, over the next 4-5
years metro projects will see significant investments according to various studies. The growth across both these segments will drive
demand for structural steel and, with APL having a major 50% share in the segment, it will be a major beneficiary.
22
Urban real  The growth in this segment will be led by residential, commercial and retail segment, which will be driven by rapid urbanisation,
estate rising construction of malls, complexes and commercial offices.
 APL garners ~75% of its sales from building material segment (both construction and home décor) and will be directly
benefitted from growth across the real estate market in the country. The demand for structural steel is expected to grow
significantly across the real estate segment as it is replacing the conventional construction products.
 Also, high-rise buildings with G+20 floors in India are increasing, thereby increasing the consumption of structural steel. Further,
the government has formed a panel to look into the upward revision of FSI norms in all major cities, which will further increase
the construction of high-rise buildings.
EXHIBIT: How APL Apollo has created market
Conventional products Applications Why structural steel tube replaces these products?
Steel Angle/Channels Structural support, Towers infrastructure Uniform strength, Lower steel consumption
Wood Furniture, door frames, planks Cost-effective, termite-proof, environment-friendly
Aluminum Profiles Facades & Glazing Cost-effective, higher strength
Reinforced Cement Concrete Construction of Buildings Faster construction, environmental-friendly
Fabricated Metal Sheet Pre-Engineered Steel Buildings Lower steel consumption reduces overall project cost
EXHIBIT: Rise of skyscrapers in India
Table 9: Key case studies

Project Contractor Sub-contractor Client Year
Kempegowda International airport, Bengaluru L&T Yongnam GMR/BIAL 2019
Engineering
Myongnam Engineering Sub - Contractor for Bengaluru Airport had a requirement of hollow sections 350 mm x 250 mm X 10 mm from BIAL's
preferred make list suppliers for constructing the terminal building.
The preferred make list suppliers were not able to manufacture the required sizes considering they had the capability and capacity constraint. Yongnam
Engineering had almost decided to import these sizes from China with a 60 day lead time which would have increased costs.
The contractor approached APL Apollo Tubes Ltd, for supplying Hollow Sections of size 350 mm x 250 mm x 10 mm. APL Apollo was able to provide the
required sizes and quantity within 7 days of issuing the purchase order.
As per the company, this was possible because of DFT (direct forming technology). This technology helps in giving customised size more exceptional
flexibility and minimum lead time.
Kartarpur corridor passenger terminal at Dera Baba Nanak, Shaporji Pallonji 2019
Punjab
Approved vendors were unable to cater to the demand due to shorter lead time.
APL Apollo was given a pre-approval on the 24th July 2019 & an LOI on the 26th July 2019 to supply structural pipes. APL Apollo started dispatches
from the 27th July 2019 and had supplied approximately 500te out of the total requirement of 615te within 7 days of LOI.
Source: Company Data, I Sec research
Chart 34: Ongoing enquiries
Source: Company data, I-Sec research.
23
Benefits of using APL Apollo tubes in above steel structures
 20% less steel consumption in structure
 Faster project completion
 10% savings in total project cost
 Environment-friendly construction
Hospitals project – Delhi
 Multiple hospitals to be constructed in 150 days (tender out)
 2.2mn-sqft built-up area to be constructed using tubular technology
 Dry wall will be erected on tubular steel structure
 Deck slab will be cast on tubular steel structure
 All steel fabrication work will take place at the company’s fabrication shop
 Only assembly of structure will take place at site (zero on-site welding)
Chart 35: Process flow of creating a tubular structure in 50 days
24
Merger arrangement with APL Tricoat

In Feb 21, APL Apollo’s board approved merger of Shri Lakshmi Metal Udyog
(SLMUL, a wholly-owned subsidiary) and Apollo Tricoat Tubes Limited (ATTL, a step-
down subsidiary – wherein SLMUL held 55.82% stake as at December 2020), with
itself, and April 1, 2021, as the appointed date for the merger (swap ratio of 1:1 for
ATTL’s existing shareholders). The company expects merger to be completed by the
end of FY22. The proposed scheme of arrangement would simplify the group structure
and enable realisation of cost efficiencies. The amalgamation will be tax-neutral.
Chart 36: Merger arrangement
Rationale for merger

 Simplification of group structure
 Cost-efficiency to improve overall margins
 Strong balance sheet
 Increased cross-sell opportunities
 Increased size and economy of scale
 Greater financial flexibility for sustained growth
 Stronger platform for growth potential
25
Tricoat products
Tricoat operates across two product categories: i) home beautification, and ii) door
solutions. These two categories are further classified into Apollo Signature, Elegant,
Chaukhat and Plank.
Table 10: Key brands of Apollo Tricoat

Product Details
This is the highest selling product and serves as a replacement to a wooden doorframe. In FY20,
post commencement of operations, Chaukat was an instantaneous hit and managed to achieve
Chaukat
50,000MT in sales volume and achieved 100% utilisation in three months’ time. Post this, the
company expanded the capacity by 25,000te to 75,000te
This is flagship product in the Home Beautification segment. It achieved 80-90% capacity utilisation
Signature within 3-4 months in this segment. Post lockdown, Tricoat saw a ramp-up in demand and the
segment’s capacity was expanded to 125,000te (from 85,000te).
This finds application in handrails and fencing. In FY21, Tricoat expanded capacity in this segment to
Elegant
125,000te (from 25,000te in FY20).
It is a rectangular tube (with a height-to-width ratio of 1:10) and is a replacement for wooden tiles.
Plank
Plank finds application in home applications like roofing, staircases, etc.
In FY21, Tricoat managed to achieve sales volume of 231,000te, while operating at a capacity utilisation of
~66% (aggregate capacity at 350,000te) on the back of increased demand across all product segments.
Chart 37: Key products of Apollo Tricoat
Tricoat products to improve overall EBIDTA margins of APL Apollo

Tricoat offers innovative products that replace the conventional wood, brick, concrete
walls, etc. (which are nearly ~25% costlier than Tricoat’s products). These products
are largely offered in the B2C category and thus provide better margins compared to
standard structural tubes. With its distinctive offering and rising acceptances, the
segment is expected to report healthy performances, going ahead.
In FY21, EBITDA/te of Tricoat stood at Rs7,072 as against consolidated EBITDA/te of

Rs4,138 for APL Apollo. Tricoat’s products are value-added products, hence they
26
command higher premium. With the increased stake of Tricoat’s products in the
overall product portfolio, consolidated EBIDTA/MT is expected to improve further.
Chart 38: EBIDTA margins

Tricoat EBIDTA/te Consol EBIDTA/te
8000
7000
7,072
6000 6,589
5000
(Rs/te)
4000
4,138
3000 3,283
2,933 2,923
2000
1000
0
FY18 FY19 FY20 FY21
Table 11: Investor’s concern and our opinion

SEBI Restraining Order Tricoat merger Channel Financing by Other group businesses of
promoter group companies the promoters
SEBI has restrained APL
Infrastructure and Mr. Sanjay
Gupta, from accessing the The minority shareholders of
securities market and from APL Apollo (per our interaction)
buying, selling or otherwise had reservations on how the There were investor concerns Related party and promoter
dealing in securities in any APL Apollo Tricoat merger of promoter led group company bandwidth concerns. The
manner whatsoever, either happened. Apollo Tricoat providing channel financing to promoters are also directors in
directly or indirectly, for a shareholders benefitted from the distributors and a few other allied businesses
Key concerns
period of 2 (two) years from the the capex and promotion wholesalers. SMT Finance & such as Apollo Pipes (a listed
(past)
date of order, on account of activities done by APL Apollo Investment (in which the entity selling PVC pipes and
alleged contravention of on the subsidiary. Apollo promoters were directors) was fittings), APL Apollo building
provisions relating of SEBI Tricoat was repurchased by the vehicle to undertake the products, P N S stainless
(Prohibition of Fraudulent APL Apollo from the promoter channel financing. steels.
and Unfair Trade Practices group within a year from the
relating to Securities Market) promoter group investing in it.
Regulations, 2003 - in June
2020. *
APL Apollo has obtained
The management has noted
Both APL Infrastructure and Mr. regulatory approval to merge
that other businesses are not
Sanjay Gupta have stated that Apollo Tricoat with APL Apollo. The company has increased its
allied to APL Apollo. Mr. Sanjay
Management’ s the matter is with respect to The repurchase from the cash discount to the
Gupta acts as the chairman of
take some small investments carried promoter group was done at wholesalers and distributors to
Apollo Pipes in an independent
out by APL Infrastructure ~12 similar valuations to what the reduce the debtor days.
role and is not involved with the
years back. promoters had paid for Apollo
business operations.
Tricoat.
Our Take on The company has obtained an Apollo Tricoat merger will None of the dealers that we The related party transactions
the same order from Securities Appellate enhance the value mix of APL interacted suggested of any with the other group companies
Tribunal for a stay on the SEBI Apollo. channel financing from APL have been minimal and raise
order. Apollo. no concern. .
Source: I-Sec research, Company discussion
Note: * Link
27
Peer comparison
Table 12: Significantly higher market share on the back of higher capacity,
higher reach, higher SKUs
Market Share Capacity (kte) Distributors SKUs Plants
APL Apollo 50%+ 2600 800+ 1500+ 10
Surya Roshni 10% 930 250+ 500+ 4
Nezone 6-7% 600 100+ 500+ 4
Hi-Tech Pipes 6-7% 580 390+ ~600 5
Tata Structura 6-7% 450 200+ 1
Bhushan Steel 6-7% 300 2
Fortune group 2% 300 50+ 200+
Rama Steel tubes 5% 264 300+ 200+ 3
Source: Company data, I-Sec research
Table 13: Product mapping with competitors
Tata Steel BSL Surya Roshni Hi-Tech Pipes Rama Steel Tubes
ERW galvanised steel tubes and
Precision tubes, zinc coated GI pipes, black pipes, GP GI pipes, GP tubes, rectangular
Products pipes (in black color), hollow
tubes pipes and hollow sections, black tubes
sections, swaged poles
Oil & Gas segment, Infrastructure, Telecom, Defense,
Agriculture, Infrastructure,
Automobile, and water Power Distribution, Railways, Automobiles, Infrastructure, Real
Application firefighting, O&G,
pipeline projects in domestic Airport, Real Estate, Automobile, Estate, and Furniture
construction, among others
and export markets and Agriculture
APL Apollo's Apollo Structural, Apollo Apollo Galv, Apollo Z Apollo Structural, Apollo Z, Apollo Apollo Structural, Apollo Z, Apollo
presence Galv Galv Galv
Table 14: Financial comparison

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
APL Apollo
Volume(mnte) 0.20 0.29 0.46 0.57 0.68 0.89 0.93 1.13 1.34 1.63 1.64
Revenue (Rs.mn) 9,052 13,923 20,083 25,689 30,138 42,136 39,239 53,348 71,523 77,232 84,998
EBITDA (Rs.mn) 897 1,151 1,595 1,646 1,832 2,187 3,330 3,710 3,928 4,773 6,787
EBITDA % 9.90% 8.27% 7.94% 6.41% 6.08% 5.19% 8.49% 6.96% 5.49% 6.18% 7.99%
PAT (Rs.mn) 431 491 686 590 638 1,006 1,521 1,581 1,483 2,380 4,077
PAT % 4.76% 3.52% 3.42% 2.30% 2.12% 2.39% 3.88% 2.96% 2.07% 3.08% 4.80%
RoCE (%) 15.2 15.9 19.8 12.8 17.5 15.0 14.5 26.3
RoE (%) 18.2 16.4 18.7 13.8 12.9 17.8 21.6 18.9 15.4 17.6 24.1
Suryaroshni (Included LED as well)
Volume(mnte)
Revenue (Rs.mn) 23,060 30,257 35,439 30,310 28,571 29,642 31,455 49,312 59,750 54,711 55,614
EBITDA (Rs.mn) 1,927 2,308 3,097 2,372 2,268 2,424 2,298 3,459 3,720 3,542 3,793
EBITDA % 8.36% 7.63% 8.74% 7.83% 7.94% 8.18% 7.31% 7.02% 6.23% 6.47% 6.82%
PAT (Rs.mn) 675 526 771 534 541 631 662 1,080 1,208 1,025 1,583
PAT % 2.93% 1.74% 2.18% 1.76% 1.89% 2.13% 2.11% 2.19% 2.02% 1.87% 2.85%
RoE (%) 10.68 7.22 10.46 6.90 6.67 8.96 8.63 10.31 10.49 8.28 11.58
RoCE (%) 7.13 7.35 9.30 7.05 7.28 6.68 6.24 6.32 6.56 6.19 6.89
Hi-Tech Pipes Ltd
Volume(mnte) 0.14 0.16 0.23 0.269 0.283 0.271
Revenue (Rs.mn) 5,039 6,374 10,157 13,604 12,096 13,406
EBITDA (Rs.mn) 319 390 602 748 592 708
EBITDA % 6.34% 6.12% 5.92% 5.50% 4.90% 5.28%
PAT (Rs.mn) 65 104 210 274 204 228
PAT % 1.29% 1.63% 2.07% 2.01% 1.69% 1.70%
RoE (%) 9.80 13.53 18.49 18.67 11.75 11.11
RoCE (%) 6.32 6.52 9.01 9.48 8.19 7.89
Rama Steel Tubes Ltd
Volume(mnte) 0.06 0.08 0.10 0.10 0.10
Revenue (Rs.mn) 1,924 2,420 2,597 3,767 5,042 3,528 4,704
EBITDA (Rs.mn) 58 146 198 223 164 87 184
EBITDA % 2.99% 6.02% 7.64% 5.91% 3.26% 2.46% 3.91%
PAT (Rs.mn) 7 60 83 123 59 -19 97
PAT % 0.36% 2.49% 3.21% 3.27% 1.17% -0.54% 2.06%
RoE (%) 3.38 22.46 15.85 15.62 6.78 -2.15 9.82
RoCE (%) 3.13 8.14 9.22 9.51 6.02 22.25 6.09
28
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
JTL Infra Ltd
Volume(mnte) 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.03 0.06 0.05 0.09
Revenue (Rs.mn) 938 887 866 973 1,193 949 1,128 1,697 3,219 2,299 4,358
EBITDA (Rs.mn) 15 15 20 32 20 18 24 147 237 164 328
EBITDA % 1.62% 1.74% 2.27% 3.28% 1.64% 1.89% 2.15% 8.67% 7.35% 7.14% 7.52%
PAT (Rs.mn) 4 2 6 5 8 12 14 80 145 101 201
PAT % 0.43% 0.25% 0.69% 0.56% 0.70% 1.28% 1.22% 4.74% 4.51% 4.38% 4.60%
RoE (%) 2.85 1.54 4.04 3.51 6.38 8.50 8.85 34.15 32.86 16.46 20.70
RoCE (%) 1.96 2.18 2.19 3.54 3.33 3.63 2.67 12.68 15.27 8.04 11.24
Source: I-Sec research, Company data.
Table 15: Comparison with international players (FY21)

APL Apollo SSAB Maruichi Zekelman
Revenue (Rs bn) 85 68 106 185
EBIDTA % 7% 14% 17% 19%
Manufacturing capacity 2.6 1.1 1.4 2.8
Building Material & Infra sale as % of revenue 95% 60% 60% 80%
 APL dominates the domestic structural steel tubes industry with ~50% market
share (as of FY21). The dominant market share has come on the back of: i) timely
product portfolio expansion along with new launches, ii) steady capacity addition
(by expansions / inorganic acquisitions), iii) improvement and expansion in
distribution network, iv) shifting market share from unorganised players, v)
innovative alternative to traditional products.
 Given the scale of operations, APL is likely to maintain its leadership position in
the domestic industry. Further, with the capacity expansion plans, the company is
expected to gain additional market share.
 APL procures 2% of the Indian steel consumption and 10% of Indian HR coil
consumption. This enables it to obtain discount on its purchase, which is not
forthcoming to many of its peers.
 APL has a pan-India presence with plants in the North, West, South and Central
India, which leads to significant saving in freight costs resulting in higher margin
compares to its peers.
 In ~40% of its portfolio, APL does not face any competition as it produces a basket
of many small products with +1,500 SKUs. The nearest competitor has ~590
SKUs, which is almost one-third of APL’s offering.
 APL enjoys a technological advantage as compared to its competitors.
Key risks
 Exposure to intense competition: APL operates in an industry with low entry
barriers and fragmented structure. Though the company had ~50% market share in
FY21, and the second-best player is less than half of APL’s size, APL’s operating
margin has been modest at 5-8%. The ERW pipes industry is largely unorganized
and inherently competitive with the presence of multiple large established players
like Surya Roshni, Jindal Pipes, Welspun Corp., etc. Further, as ERW pipes are
standardised products and do not warrant a capital-intensive manufacturing process,
steel pipe/tube players with a diversified network across India can enter the market,
boosting competition. Also, competition from unorganised players is high.
 Exposure to volatility in raw material prices: ERW pipe manufacturers are steel
convertors, hence fluctuations in raw material prices are passed on to consumers,
29
but with a lag. Accordingly, as seen in the past fiscals, operating margin is
susceptible to fluctuations in the prices of steel (hot rolled coil). However, the
monthly pricing mechanism followed by APL and improved inventory management
policy are expected to reduce the impact of any significant price movement.
 Slowdown in economy or government spending on infrastructure: Slowdown
in the economy and government infrastructure spending could lead to slowdown in
steel demand, especially across the building and construction segment. This could
impact structural steel penetration within the steel sector and impact the
company’s volume growth and margins.
Environmental, Social and Governance (ESG)

Over the years, APL Apollo Tubes (APL) has added ~17.3MW of renewable energy
capacity at its production facilities to bring down CO2 footprint and is in the process of
adding another 22.5MW. To reduce the environmental effect, APL looks forward to
having all its plants ‘zero liquid discharge’ (ZLD), and is also upscaling the installation
of rainwater recharge systems at all its locations.
Chart 39: ESG performance indicators and targets
30
Table 16: Management profile
Mr. Sanjay Gupta Mr. Gupta has more than 30 years of experience in steel industry. Under his leadership, the company
Chairman and Managing Director has evolved and developed from a steel tube manufacturer into a global leader of branded structural
steel tubing products.
Mr. Ashok Kumar Gupta Mr. Gupta holds a Master’s degree in Physics and completed his PGDBA from AIMA. He is an industry
Vice Chairman veteran with over three decades of experience in working in critical management positions in reputed
(Non-Executive Director) organisations like SAIL, Jindal, Bhushan Steel, the L.N. Mittal Group and Shalimar Paints Limited, etc.
He has been the driving force for propelling the growth engine and yielding profitable results for the
company. He has worked as the managing director in APL Apollo Tubes in the past.
Ms. Neeru Abrol A chartered accountant by profession, Ms. Abrol has more than three decades of experience in the
Independent Director manufacturing and processing industry. She worked for 26 years with Steel Authority of India Ltd at various
critical management positions, which have provided her with in-depth knowledge of the steel industry and
its workflow. Ms. Abrol is currently serving as Director at TCNS Clothing Co Limited, Talentnomics India
and other companies.
Mr. Anil Kumar Bansal Mr. Bansal has four decades of experience in the banking industry. He worked as general manager of
Independent Director Union Bank overseeing North zone operations for 36 years and then worked as an executive director in
Indian Oversea Bank. Apart from APL Apollo, he is also independent director of NABARD, CARE Ratings,
Canara HSBC OBC Life Insurance Company.
Mr. Abhilash Lal A mechanical engineer and postgraduate from IIM Bangalore, Mr. Abhilash Lal has 30 years of experience
Independent Director in senior roles across financial services, including banking, consulting, real estate and private equity. His
diversified experience spans business development, strategy, and operations.
Mr. Vijender Singh Mr. Jain has completed his assignment as a member of Public Enterprises Selection Board (PESB), which
Independent Director has been set up by the government with the objective of evolving a sound managerial policy for central
public sector enterprises and to advise the government on appointments to top management posts at the
board level. In the past, he has served as the Chairman of Steel Authority of India (SAIL) and held the post
of executive director of Indian Oil Corporation (IOC).
Mr. Romi Sehgal Mr. Sehgal has more than 35 years of experience in steel tubes industry, right from designing and
Director manufacturing of tube mills to putting up greenfield projects, successful commissioning of projects and
ensuring uninterrupted optimum production from factories. He has been associated with APL Apollo Tubes
for the last 12 years. He is a science graduate and has worked at managerial and leadership positions in
reputed companies such as Atlas Steel Tubes, Atma Steel Tubes, Bharat Steel Tubes, and Gallium
Industries.
Mr. Vinay Gupta Mr. Vinay Gupta possesses in-depth knowledge of manufacturing and marketing of structural steel tubes
Director with over 20 years of experience in exports and international markets. He has been assigned the
development of the company’s Apollo Z (pre-galvanised steel tubes) product category. He received an
MBA from the University of Pennsylvania.
Table 17: KMP’s salary and remuneration

(Rs mn) Designation FY17 FY18 FY19 FY20 FY21
Mr. Sanjay Gupta Chairman and Managing Director 30.0 30.0 35.0 35.0 35.0
Mr. Ashok Kumar Gupta Vice Chairman 0.0 0.0 35.4 15.3 0.1
Mr. Vinay Gupta Director 15.9 15.9 18.3 18.0 18.0
Mr. Romi Sehgal Director 2.8 8.2 16.2 19.6 9.6
Mr. Deepak Goyal Chief Financial Officer 7.9 12.0 11.0 14.9 25.8
Mr. Adhish Swaroop Company Secretary 2.0 2.6 2.9 1.2 0.0
Mr. Deepak CS Company Secretary 0.0 0.0 0.0 0.8 2.3
Mr. Rahul Gupta MD Apollo Tricot 3.0 3.0 0.2 12.0 12.0
Mr. Rajeev Kohli Ex-MD Apollo Metalex 0.0 2.8 5.7 3.5 0.0
Mr. Sharad Mahendra Wholetime Director 10.2 20.9
Total 73.2 97 127.9 124.3 106.5
% of employee cost 9.7 11.3 11.8 8.7 8.2
% of PAT 4.8 6.1 8.6 5.2 3.0
Source: Company Data, Source: I-Sec research
31
Group Structure
The company is a part of Sudesh Group which was promoted by Late. Mr Sudesh Gupta.
Currently, group is being managed by Mr Sanjay Gupta along with his brothers.
Chart 40: Flowchart of Sudesh Group
Chart 41: Sudesh group family members
32
Table 18: Promoter and Promoter Group Holding
Particulars Share%
Rohan Gupta 0.9%
Rahul Gupta 1.2%
Verra Gupta 2.2%
Sanjay Gupta 0.1%
APL Infrastructure Pvt Ltd 32.0%
Table 19: APL Infrastructure Holdings

Particulars Share%
Mr. Sanjay Gupta 40.5%
Mr. Sanjay Gupta (HUF) 20.6%
Mr. Vinay Gupta & Sons 10.4%
Mr. Vinay Gupta 9.0%
Mr. Sameer Gupta 8.7%
Mrs. Vandana Gupta 4.6%
Mrs. Saroj Rani Gupta 2.2%
Sameer Gupta (HUF) 1.7%
Mr. Rahul Gupta 1.4%
Apollo Pipes 0.6%
Mrs. Neera Gupta 0.2%
Mr. Ajay Garg 0.0%
Mrs. Meenakshi Gupta 0.0%
Table 20: Promoter holding over the last 10 years
Name FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 1QFY22 Relation
APL Infrastructure P
31.1% 32.1% 33.6% 33.6% 37.6% 35.8% 36.9% 34.0% 33.8% 34.6% 33.7% 32.5% Holding Company
Ltd
Promoter Group
Apollo Pipes Ltd 1.4% 1.3% 1.3% 1.3% - - - - - - - -
Company
Chairman & Managing
Mr.Sanjay Gupta 0.9% 0.9% 0.8% 0.8% 0.9% 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1%
Director
Mr. Ashok Kumar Vice Chairman, not
0.0% 2.2% 3.7% 6.3% 7.0% 6.7% 0.3% 0.3% 0.3% 0.0% 0.0% 0.0%
Gupta related to promoter
Mrs.Neera Gupta 1.4% 1.3% 1.3% 1.3% - - - - - - - - Mr. Sanjay Gupta's Wife
Mr.Rahul Gupta - - - - - - - - - - 1.2% 1.2% Mr. Sanjay Gupta's Son
Mr.Rohan Gupta - - - - - - - - - - 0.9% 0.9% Mr. Sanjay Gupta's Son
Promoter owned
SMT Finance &
0.1% 0.1% 0.1% 0.1% - - - - - - - - Company - Closed down
Investment Ltd
in 2017
Mr. Sanjay Gupta's
Mr Sameer Gupta 0.1% 0.1% 0.1% 0.1% - - - - - - - - Brother, Apollo pipes Ltd
MD
Mr.Sanjay Gupta
1.0% 0.9% 0.9% 0.9% 1.0% - - - - - - - Mr. Sanjay Gupta's HUF
HUF
Mrs. Saroj Rani Mr. Sanjay Gupta's
1.9% 1.9% 1.8% 1.8% - - - - - - - -
Gupta Mother
Mr. Ashok Gupta's Wife,
Mrs.Veera Gupta - - - - - - 3.4% 3.2% 3.2% 2.3% 2.4% 2.2%
not related to promoters
Mr. Sanjay Gupta's
Mr. Vinay Gupta 0.1% 0.1% 0.1% 0.1% 0.1% - - - - - - -
Brother
Total Promoter
37.9% 40.9% 43.7% 46.3% 46.7% 42.5% 40.6% 37.5% 37.3% 37.1% 38.4% 37.0%
Holdings
Pledged Shares as 22% 22% 10% - - - - - - - - -
a % of promoter
holdings
33
Governance: Structure of the board and the

committees
Table 21: Board and committee composition
Board election subject to shareholder approval. Directors are elected for 5-year terms
Board has four independent directors out of eight directors
Some key committees Chairman Description
Audit committee Anil Kumar Bansal (Independent director) 3 independent directors out of 4 members.
Stakeholder relationship committee Anil Kumar Bansal (Independent director) 3 members with two independent directors.
Nomination and Remuneration committee Ms. Neeru Abrol (Independent director) 3 members with two independent directors.
Corporate Social Responsibility committee Anil Kumar Bansal (Independent director) 3 members with two independent directors.
Risk Management committee Virendra Singh Jain (Independent director) 5 members with four independent directors.
Finance committee NA NA
0 Board Committees composed of 100% of independent directors and reporting to the Board of directors (scope for improvement)
Key Committees with independent Chair
Audit Committee, Nomination and Remuneration committee, Risk Management committee
34
Initiate with a BUY rating and target price of Rs1,020/share

We initiate on APL Apollo with a BUY rating and target price of Rs1,020/share. This is
based on 25x FY24E P/E and 17x FY24E EV/EBITDA. The stock has seen a
massive rerating in the past 18 months on the back of Tricoat acquisition,
repayment of debt and steady growth. With an improving RoE and RoCE profile
(significantly higher operating leverage), higher growth driven by constant efforts
towards market creation, and steady increase in market share (to reach >60% in the
next 3-4 years in our view) – we feel that a multiple of 25x FY24E P/E is justified.
Table 22: Trades at a substantial premium to global peers; in line with domestic building material peers
Current P/E P/E EV/EBITDA EV/EBITDA
(US$ mn) Revenue EBITDA PAT Market Cap 1y 2y 1y 2y ROE 1y ROE 2y PB 1y PB 2y
Maruichi Steel Tube 1,520 229 131 2,150 9.3 13.4 4.6 6.4 8.1 4.9 0.7 0.7
Tung Ho Steel Enterprise Corp 1,456 206 121 1,574 7.8 7.3 6.1 6.1 18.6 16.5 1.3 1.2
Zhejiang Hailiang 6,749 156 98 3,473 16.4 11.8 14.7 10.7 12.1 14.6 2.0 1.8
Guangdong Xiongsu Technology G 300 47 31 620 16.0 13.1 9.8 8.0 9.9 11.0 1.7 1.5
Prince Pipes & Fittings Ltd 279 49 30 1,026 39.6 29.8 23.6 18.4 16.8 19.0 6.3 5.4
Global average 17.8 15.1 11.7 9.9 13.1 13.2 2.4 2.1
APL Apollo 1,133 90 54 2,667 39 28 25 18 25.1 27.0 9.8 7.5
 Key risks to our earnings and margin assumptions are: falling steel prices and
normalising spreads. We believe the management’s assessment that drive
towards value-addition would lead to a normalised EBITDA of Rs5,000/te as
volumes grow towards 4mtpa.
 We believe slower than anticipated pickup in steel tubes market or equal
marketing and distribution push by peers can lead to market share erosion / lower
than expected revenue growth for APL.
35
Financials
Table 23: Profit and Loss
FY20 FY21 FY22E FY23E FY24E
Revenue 77,232 84,998 118,428 108,994 120,094
Material costs 65,786 71,648 102,010 89,358 95,911
Gross Margin 11,447 13,350 16,418 19,636 24,183
Employee costs 1,422 1,296 1,411 1,389 1,458
Other expenses 5,252 5,266 6,591 6,999 8,338
Total expenses 72,459 78,210 110,013 97,746 105,707
EBITDA 4,773 6,787 8,416 11,248 14,387
Depreciation 959 1,028 1,100 1,275 1,375
Other Income 222 359 340 249 630
EBIT 4,036 6,119 7,656 10,222 13,642
Interest 1,073 661 380 20 20
PBT 2,963 5,458 7,276 10,202 13,622
Tax 403 1,381 1,841 2,581 3,446
PAT 2,560 4,077 5,435 7,621 10,175
Table 24: Balance Sheet
Balance Sheet FY20 FY21 FY22E FY23E FY24E
Equity Share Capital 249 250 500 500 500
Reserves and Surplus 14,267 16,697 21,140 27,720 36,505
Net Worth 14,516 16,947 21,639 28,219 37,004
Borrowings 7,280 4,425 4,225 225 225
Other non-current liabilities 672 755 755 755 755
Deferred Tax Liab 1,012 1,112 1,112 1,112 1,112
Total Liab 23,480 23,239 27,731 30,311 39,096
Gross Block 17,160 18,491 21,991 25,491 27,491

Less: Acc Dep 2,449 3,477 4,577 5,851 7,226
Net Block 14,711 15,014 17,415 19,640 20,265
CWIP 101 1,077 1,077 1,077 1,077
Other LT assets 3,333 3,893 3,893 3,893 3,893
Investments 152 148 148 148 148
Working Capital (Exc cash) 4,727 (472) 1,175 1,033 1,114
Cash and Cash equivalents 456 3,579 4,024 4,520 12,599
Current Assets 13,907 10,412 14,738 13,084 14,147
Inventory 7,842 7,599 10,820 9,478 10,173
Receivables 4,764 1,306 1,820 1,675 1,845
Loans, Advances & others 1,302 1,507 2,099 1,932 2,129
Current Liabilities and Provisions 9181 10,884 13,563 12,051 13,032
Provisions 173 177 177 177 177
Total Assets 23,480 23,239 27,731 30,311 39,096
Table 25: Cashflows
PAT 2148 4263 5435 7621 10175
+ Depreciation 959 1028 1100 1275 1375
+ Non-cash items 972 360
Working capital changes 1017 4121 (1648) 142 (81)
Cashflow from operations 5096 9771 4887 9037 11469
Investing Activities
Capex (3092) (2869) (3500) (3500) (2000)
Investments (1430) (3868) 0 0 0
Others 173 269
Cashflow from investing activities (4349) (6468) (3500) (3500) (2000)
Financing activities
Changes in share capital 1775
Changes in reserves & surplus 0
Changes in debt (949) (3111) (200) (4000)
Dividends (411) (743) (1041) (1390)
Others (1193) (474)
Cashflow from financing activities (778) (3586) (943) (5041) (1390)
Net changes in cash (32) (283) 445 496 8079
FCF 2003 6902 1387 5537 9469

36
Table 26: Ratios
Per Share Data (in Rs)
Recurring EPS (Diluted) 10.2 16.3 21.8 30.5 40.7
Reported EPS 102.9 163.2 21.8 30.5 40.7
Recurring Cash EPS (Diluted) 14.1 20.4 26.2 35.6 46.2
Dividend per share (DPS) (Diluted) 1.4 - 3.0 4.2 5.6
Book Value per share (BV) 58.1 67.8 86.6 113.0 148.1
Growth Ratios (%)

Operating Income 8.0 10.1 39.3 (8.0) 10.2
EBITDA 21.5 42.2 24.0 33.7 27.9
Recurring Net Income 72.7 59.3 33.3 40.2 33.5
Diluted Recurring EPS 72.7 59.3 33.3 40.2 33.5
Diluted Recurring CEPS 65.6 45.1 28.0 36.1 29.8
Valuation Ratios (% YoY)

P/E 79.6 50.0 37.5 26.7 20.0
P/CEPS 57.9 39.9 31.2 22.9 17.6
P/BV 14.0 12.0 9.4 7.2 5.5
EV / EBITDA 44.1 30.2 24.2 17.7 13.3
EV / Operating Income 2.7 2.4 1.7 1.8 1.6
EV / Operating FCF 105.2 29.7 147.1 36.0 20.2
Operating Ratios
Gross Margin (%) 14.8 15.7 13.9 18.0 20.1
SG&A/Sales (%) 6.8 6.2 5.6 6.4 6.9
Other Income / PBT (%) 7.5 6.6 4.7 2.4 4.6
Effective Tax Rate (%) 12.3 10.4 16.4 26.6 45.2
NWC / Total Assets (%) 20.1 (2.0) 4.2 3.4 2.8
Inventory Turnover (days) 44 39 39 39 39
Receivables (days) 6 2 2 2 2
Payables (days) 13 14 12 12 12
D/E Ratio (x) 47.0 5.0 0.9 (15.2) (33.4)
Return/Profitability Ratios (%)

Recurring Net Income Margins 3.3 4.8 4.6 7.0 8.5
RoCE 14.5 26.3 25.8 28.4 26.9
RoNW 17.6 24.1 25.1 27.0 27.5
Dividend Payout Ratio 22.5 13.6 - 13.7 13.7
Dividend Yield 0.2 - 0.3 0.5 0.7
EBITDA Margins 6.2 8.0 7.1 10.3 12.0
37
Appendix
Direct forming technology (DFT)
DFT is the innovative route to tube production, which enables production of any
customised size of hollow section, included into the mill range, without roll change
(batch order processing). This gives an extreme reduction in set up time. Compared to
traditional production processes, this method is completely automatic and
computerised. Set-up operations are easy, accurate and fast. APL Apollo did set up
DFT production lines in FY18
Advantages of APL Apollo’s DFT tubes
 Direct material saving of 2% to 10% depending upon specifications, size and

thickness as compared to tubes manufactured by conventional technology.
 Physical and theoretical weight of the tubes will be same, as per IS 4923.
 Corner radius are sharp, uniform and aesthetically looks good
 Odd sizes (any size can be rolled out subject to minimum order quantity)
 Short delivery period
Chart 42: Indicative savings by using DFT Technology
38
Chart 43: Square hollow section product range
Product range
12mmx12mm to
300mm x 300mm
Thickness
1mm x 12mm
New thickness range

from 14mm to 20mm
is coming up.
39
Chart 44: Rectangular hollow section product range
Product range
26mmx13mm to
400mm x 200mm
Thickness
1mm x 12mm
New thickness range

from 14mm to 20mm
is coming up.
40
Chart 45: Circular hollow section product range
Product range
21.3mm x 355.6mm
Thickness
1mm x 10mm
New 12mm
thickness profile is
coming up.
41
Index of Tables and Charts

Tables
Table 1: Major events/milestones ......................................................................................... 3
Table 2: Product profile ......................................................................................................... 4
Table 3: Product-wise sales volumes, EBIDTA/te ................................................................ 6
Table 4: Summary of acquisition over the years – playing the role of market consolidator . 7
Table 5: Manufacturing locations .......................................................................................... 7
Table 6: An enviable assortment of distributors, retailers and fabricators .......................... 10
Table 7: We expect ~40% RoCE from the new greenfield capex at Raipur ....................... 15
Table 8: Emerging sectors driving steel tube demand ....................................................... 22
Table 9: Key case studies ................................................................................................... 23
Table 10: Key brands of Apollo Tricoat............................................................................... 26
Table 11: Investor’s concern and our opinion ..................................................................... 27
Table 12: Significantly higher market share on the back of higher capacity, higher reach,
higher SKUs .................................................................................................................. 28
Table 13: Product mapping with competitors...................................................................... 28
Table 14: Financial comparison .......................................................................................... 28
Table 15: Comparison with international players (FY21) .................................................... 29
Table 16: Management profile ............................................................................................ 31
Table 17: KMP’s salary and remuneration.......................................................................... 31
Table 18: Promoter and Promoter Group Holding .............................................................. 33
Table 19: APL Infrastructure Holdings ................................................................................ 33
Table 20: Promoter holding over the last 10 years ............................................................. 33
Table 21: Board and committee composition ..................................................................... 34
Table 22: Trades at a substantial premium to global peers; in line with domestic building
material peers ............................................................................................................... 35
Table 23: Profit and Loss .................................................................................................... 36
Table 24: Balance Sheet..................................................................................................... 36
Table 25: Cashflows ........................................................................................................... 36
Table 26: Ratios .................................................................................................................. 37
Charts
Chart 1: Geographical presence of APL ............................................................................... 4
Chart 2: APL Apollo targets to increase revenue contribution from heavy structures .......... 5
Chart 3: APL’s structural product range ................................................................................ 5
Chart 4: Product-wise EBIDTA/te – gradual improvement in mix drives EBITDA/te
improvement.................................................................................................................... 5
Chart 5: How APL Apollo went about creating the market ................................................... 6
Chart 6: Process flow ............................................................................................................ 6
Chart 7: Domestic market share (%) .................................................................................... 7
Chart 8: Number of manufacturing plants ............................................................................. 8
Chart 9: DFT is helping asset turn ........................................................................................ 9
Chart 10: Higher procurement is also helping save procurement costs (RM cost/te against
HRC price average) ........................................................................................................ 9
Chart 11: Significant increase in the number of distributors ............................................... 10
Chart 12: The South Indian market is only ~17% of the dealer network; contributes ~39%
of revenues.................................................................................................................... 11
Chart 13: MP, UP and Maharashtra contribute >50% of the number of distributors – there
are several micro markets from where volumes can be expanded .............................. 11
Chart 14: APL Apollo has been looking to increase its penetration into tier 2/3 cities on the
back of its branding campaigns and central warehouse strategy ................................. 11
Chart 15: Branding expenditure .......................................................................................... 12
Chart 16: Key brand campaign of APL Apollo .................................................................... 13
Chart 17: Key brand campaign of APL Apollo (Cont’d) ...................................................... 13
42
Chart 18: Key new design patents and applications ........................................................... 14
Chart 19: Key new design patents and applications ........................................................... 14
Chart 20: Working capital days ........................................................................................... 14
Chart 21: Risks and mitigation framework – Balance sheet strengthening ........................ 15
Chart 22: Pipes market categorization in India ................................................................... 16
Chart 23:Structural tubes production/consumption ............................................................ 17
Chart 24: Structural tubes imports/exports ......................................................................... 17
Chart 25: Sectoral pipes and tubes consumption ............................................................... 17
Chart 26: Steel pipes and tubes capacity (mtpa) ................................................................ 18
Chart 27: ERW segmental consumption............................................................................. 18
Chart 28: Structural steel tube consumption in India significantly lower than global average
...................................................................................................................................... 19
Chart 29: APL Apollo enjoys leadership position in domestic SST market ........................ 19
Chart 30: Structural steel tube market - India and global ................................................... 20
Chart 31: Structural steel tubes market as % of steel market ............................................ 20
Chart 32: Growth outlook .................................................................................................... 21
Chart 33: Global structural market segmental breakup ...................................................... 21
Chart 34: Ongoing enquiries ............................................................................................... 23
Chart 35: Process flow of creating a tubular structure in 50 days ...................................... 24
Chart 36: Merger arrangement ........................................................................................... 25
Chart 37: Key products of Apollo Tricoat ............................................................................ 26
Chart 38: EBIDTA margins ................................................................................................. 27
Chart 39: ESG performance indicators and targets ............................................................ 30
Chart 40: Flowchart of Sudesh Group ................................................................................ 32
Chart 41: Sudesh group family members ........................................................................... 32
Chart 42: Indicative savings by using DFT Technology ..................................................... 38
Chart 43: Square hollow section product range.................................................................. 39
Chart 44: Rectangular hollow section product range .......................................................... 40
Chart 45: Circular hollow section product range ................................................................. 41
43
This report may be distributed in Singapore by ICICI Securities, Inc. (Singapore branch). Any recipients of this report in Singapore should contact ICICI Securities,
Inc. (Singapore branch) in respect of any matters arising from, or in connection with, this report. The contact details of ICICI Securities, Inc. (Singapore branch) are
as follows: Address: 10 Collyer Quay, #40-92 Ocean Financial Tower, Singapore - 049315, Tel: +65 6232 2451 and email: navneet_babbar@icicisecuritiesinc.com,
Rishi_agrawal@icicisecuritiesinc.com.
"In case of eligible investors based in Japan, charges for brokerage services on execution of transactions do not in substance constitute charge for research reports
and no charges are levied for providing research reports to such investors."
New I-Sec investment ratings (all ratings based on absolute return; All ratings and target price refers to 12-month performance horizon, unless mentioned otherwise)
BUY: >15% return; ADD: 5% to 15% return; HOLD: Negative 5% to Positive 5% return; REDUCE: Negative 5% to Negative 15% return; SELL: < negative 15% return
ANALYST CERTIFICATION
I/We, Abhijit Mitra, MBA (Finance), BE; Mohit Lohia, CA; authors and the names subscribed to this report, hereby certify that all of the views expressed in this
research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or
indirectly related to the specific recommendation(s) or view(s) in this report. Analysts are not registered as research analysts by FINRA and are not associated
persons of the ICICI Securities Inc. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies
mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.
Terms & conditions and other disclosures:
ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution
of financial products.
ICICI Securities is Sebi registered stock broker, merchant banker, investment adviser, portfolio manager and Research Analyst. ICICI Securities is registered with
Insurance Regulatory Development Authority of India Limited (IRDAI) as a composite corporate agent and with PFRDA as a Point of Presence. ICICI Securities
Limited Research Analyst SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities
is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset
management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on
www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our
associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research
Department. ICICI Securities and its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of
any companies that the analysts cover.
Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume
etc as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit
icicidirect.com to view the Fundamental and Technical Research Reports.
Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.
ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Institutional
Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, and target price of the
Retail Research.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained
herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to
any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information
herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other
reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such
suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory
capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its
accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document
or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all
customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report
constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their
own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any
recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates,
foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report.
Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before
investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be
subject to change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the
subject company for any other assignment in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from
the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage
services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage
services from the companies mentioned in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its
associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation
of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of
this report.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the
report as of the last day of the month preceding the publication of the research report.
Since associates of ICICI Securities and ICICI Securities as an entity are engaged in various financial service businesses, they might have financial interests or
beneficial ownership in various companies including the subject company/companies mentioned in this report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other
jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any
registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain
category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
This report has not been prepared by ICICI Securities, Inc. However, ICICI Securities, Inc. has reviewed the report and, in so far as it includes current or historical
information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed.
44

APL Apollo Initial (ICICI)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

APL Apollo Initial (ICICI)

Uploaded by

Copyright:

Available Formats

Equity Research INDIA

October 25, 2021

Please refer to important disclosures at the end of this report

About the company ......................................................................................................... 3

About the company

Currently, APL Apollo has 10 manufacturing facilities, with 3 plants in Sikandrabad

Table 1: Major events/milestones

Source: I-Sec research, Bloomberg

Table 2: Product profile

Chart 3: APL’s structural product range

Source: I-Sec research, Bloomberg

Chart 4: Product-wise EBIDTA/te – gradual improvement in mix drives

Rust Proof Structures

Rust Proof Sheets

Source: I-Sec research, Bloomberg

Source: I-Sec research, Bloomberg

Table 3: Product-wise sales volumes, EBIDTA/te

Chart 6: Process flow

GP Coil Hollow Steel

Table 5: Manufacturing locations

The manufacturing capacities of the company are geographically diversified across

Backward integration – CRM set up in Sikandrabad facility in FY19

Direct forming technology (DFT)

Diversified geographical presence, product profile

Table 6: An enviable assortment of distributors, retailers and fabricators

Chart 11: Significant increase in the number of distributors

Efforts to improve the delivery time

the South and West

Source: I-Sec research, Bloomberg

Some of the sporting events sponsored by APL Apollo:

Chart 15: Branding expenditure

Source: I-Sec research, Bloomberg

Chart 17: Key brand campaign of APL Apollo (Cont’d)

Source: I-Sec research, Bloomberg

New product launches

Colour-coated tubes: This is targeted for interior furniture applications. In addition to

APL Apollo received design patents for six

Significant improvement in the working capital

Source: I-Sec research, Bloomberg

ERW steel market is ~44% of Indian steel tubes and

Chart 22: Pipes market categorization in India

Source: I-Sec research, Bloomberg

ERW pipe is manufactured by cold-forming a steel sheet into a cylindrical shape.

Production has grown at a CAGR of ~10.4% over FY17-FY20 to 6.68mtpa; however, it

Chart 25: Sectoral pipes and tubes consumption

Source: Care Ratings, I Sec research

Chart 27: ERW segmental consumption

Source: Care Ratings, I Sec research

Structural steel tubes (SSTs)

Source: I-Sec research, Bloomberg

 Environment friendly – recyclable, and lower greenhouse gas emission

Structural steel market in India is under-penetrated as compared to global average

Chart 31: Structural steel tubes market as % of steel market

Source: I-Sec research, Bloomberg

Growth outlook remains robust

Chart 33: Global structural market segmental breakup

45% FY14 FY19 FY22E

20% 23% 22% 22%

Table 8: Emerging sectors driving steel tube demand

Source: Company data, I Sec research

Source: Company data, I Sec research

Source: Company data, I Sec research

Source: I-Sec research