Aiming to increase volumes by 20-25% in FY17: APL Apollo Tubes

APL Apollo Tubes reported good earnings result earlier today, with revenue going up 51 percent to Rs 1,179 crore year-on-year (YoY) and net profit increased 309 percent to Rs 27.5 crore (YoY).

In an interview with CNBC-TV18, MD Ashok Gupta said the company aims to achieve volume growth of 20-25 percent in FY17 and sees promoter stake increasing in the company going forward. Below is the verbatim transcript of Ashok Gupta's interview with Reema Tendulkar & Mangalam Maloo on CNBC-TV18. Mangalam: Your revenues this quarter grew by 51 percent. Could you break it up in terms of volume and value and at the same time what is the contribution of value-added products to your total sales mix? A: Our revenue has grown up almost in tandem with volume growth, so volume growth also is in tandem around 50 percent. So far as year as a whole is concerned, we have got around 40-50 percent of growth in volumes plus we have got growth in EBITDA as well which has again gone up by 37 percent. Revenues have gone up by 30 percent and EBITDA has gone up by 37 percent for the year as a whole. Reema: In the first nine months of the year, you had a volume growth of 30 percent. This quarter you are saying it is a volume growth of 50 percent, so that is a substantial increase in the growth rate. What lead to that? Was there any additional capacity which came on stream and what would your guidance be for FY17 volume growth? A: This Q4 was very good for us because the sentiment in the market improved as the government has introduced minimum import price (MIP) because of MIP the price of steel was improving and whenever prices are going up, the sentiment improves and demand increases because of that we were able to increase our volume substantially. Going forward our volume growth will continue to be around 20-25 percent which we are having for the last nine-ten years and that momentum will be maintained in the coming year as well. Mangalam: What is the kind of improvement that we can see on the margins because you have a lot of focus on value-added products, so what proportion of your revenue comes from the value-added products and what is your target for that? A: There are two products; galvanized pipes which are GI pipes and pre galvanised pipes. These products give us significantly better margins. They constitute about 30 percent of our total revenue. However, going forward we hope to improve the percentage to more than 30 percent but in addition to that now we are going into totally new segment. We are importing from Europe, a technology known as direct forming technology - with this technology the squares can be directly made from steel without making it round first, not only that this will result in saving of 8-10 percent to the user. This segment will be operational by yearend, so by yearend this year and near year our margins will further improve. Currently our EBITDA margins are around Rs 3,200 per tonne. Going forward they should be improved to Rs 3,500 and maybe by next year they should be around Rs 4,000 per tonne. This is because of the technology that we are bringing. However, let me tell you that this is the first time that the technology will be coming in India. Till now all the squares and rectangles formed are first formed into round and then formed into rectangle and square. Hence, with this technology, it will be directly formed. Reema: Your realisations in the first nine months - that\\'s the data that we have, were down on an average by 15-18 percent. What was the realisation in Q4 when you compare it to a year ago and do you expect realisations to remain under pressure even going forward or have prices started moving up? A: Since the prices were moving down of steel from Q1 to Q3, the realisations decreased. The Q4 was better because steel prices improved. Going forward steel prices are likely to be stable at the current level. So do not envisage any reduction in the realisation from Q4 level to this particular year. Mangalam: Your promoter holding from last quarter to this quarter has come down by almost 2 percentage points. The promoter holding has come down from 42 percent to 40 percent, any particular reason for that and are the promoters looking to sell more or increase their stake in the company going forward? A: The promoters will not be reducing their holdings going forward. They will be only increasing it and the reason for minor reduction of 2 percent which you see is requirement of funds for various application and also induction with new investors. So this is a very minor change and going forward our holding will only increase, it will not decrease.