Apl Apollo Tubes Limited · NSE:APLAPOLLO
Apl Apollo Tubes — Investor Presentation (August 2021)
70 slides from Apl Apollo Tubes's investor presentation, Aug 9, 2021
Slide 1: APOLLO we CRAFT STEEL
APOLLO we CRAFT STEEL
Slide 2: Safe Harbour
Safe Harbour Except for the historical information contained herein, statements in this presentation and the subsequent discussions, which include words or phrases such as "will", "aim", "will likely result", "would", "believe", "may", "expect", "will continue", "anticipate", "estimate", "intend", "
Slide 3: Contents
Contents Overview FY21 Transformation Porter's Five Forces Core Competence Structural Steel Applications Exciting Future Financial Priorities & Performance Merger Update ESG Initiatives Key Takeaways
Slide 4: APL Apollo Overview
APL APOLLO OVERVIEW
Slide 5: APL Apollo at a Glance
APL Apollo at a Glance 1 Leading structural steel tube brand Core Business 14Brands Four Product Categories 50% Market Share* 2.6 Million Ton Structural Steel Capacity 8 Patents 10 Plants 2,124 Employees 800+ Distributors 1,500+ Products 5 *Market share is for FY21
Slide 6: Product Category
Our Brands Apollo Structural Product Category* Structural steel construction material: Residential, Commercial, Infrastructure Fabritech, Build, DFT, Column, FireReady, Agri Apollo Z Galvanized structural steel construction material: Residential, CoastGuard Commercial, Infrastructure Apollo Galv Gal
Slide 7: Product Category – Application & Sales Mix
Product Category – Application & Sales Mix* Product Category Sales Volume Mix (%) Applications Apollo Structural 63% Residential Buildings & Independent Homes 25% Structural, Piling, Sheds, Handrails, Gates, Fencing, Commercial Buildings, Warehouses & Factories 14% Balcony Grills, Staircase, Light S
Slide 8: Brand Equity
Brand Equity 8
Slide 9: Brand Equity
Brand Equity ( APL Cus BADHT! HAL HIMMAT mn Ne] ANDAR KI TAQAT SE fs | (STEELERS)
Slide 10: B2C Channel
B2C Channel Distributors 800+ Distributors – Solid Relationships, Incentive plans Retailers 50,000+ Retailers – Retailer bonding program Fabricators, Architects & Structural Engineers 200,000+ Fabricators, Architects, Structural Engineers & Developers – Apollo Connect Programs, Fabricator/Architect
Slide 11: Transformation
Transformation
Slide 12: FY21 – Converted crisis into opportunity
FY21 – Converted crisis into opportunity Market Share Gains Solid cash flow generation Gained market share to 50% from 40% in structural Op cash flow of Rs9.9Bn and Free cash flow of tubes in India Rs6.1bn Cash and Carry model Market Expansion Net Working capital decreased to 8 days from 25 Started
Slide 13: Porter's Five Forces
Porter’s Five Forces
Slide 14: Porter's Five Forces
Porter’s Threat of Entry - Scale of 2.6m ton capacity; wide gap between No. 2 Player Five Forces Bargaining power of distributors - Vast distribution network (access to 800+ distributors, 50,000 retailers, 200k fabricators) - 50% market share in structural steel - Technology advantage (DFT, ILG) tub
Slide 15: Core Competence
CORE COMPETENCE
Slide 16: Our Business Moat
Our Business Moat... Highest no. of Lowest cost producer products with (largest buyer of HR coil) 1,500 SKUs Highest scale with 10 plants Highest Premium pricing to peers Profitability (2.6Mn ton capacity) (brand strength) Largest sales network Technology edge & (800+ distributors) Innovation Lowest
Slide 17: Dominant Leadership
Dominant Leadership APL's Market Share (%) Peer Market Share FY21 50 40 37 31 18% 27 27 APL Apollo Player 1 7% Player 2 50% 7% Player 3 Player 4 FY16 FY17 FY18 FY19 FY20 FY21 9% Others 9% Capacity (Mn Tons) Number of Plants 11 2.5 2.6 10 10 2.1 1.8 7 7 6 1.3 1.3 FY16 FY17 FY18 FY19 FY20 FY21 FY16 FY
Slide 18: Unique Capabilities
Unique Capabilities Developed structural Distribution Innovative steel Technology products network market in India First Mover advantage Direct Forming Technology Ground breaking for big structural solutions products B2C channel for last Roofing solutions, No.1 Leader; Focused on steel strength and
Slide 19: Structural Steel Tubes Applications
STRUCTURAL STEEL TUBES APPLICATIONS
Slide 20: Structural Steel Tubes Applications
Structural Structural Steel Steel Tubes Applications Applications 20
Slide 21: Structural Steel Tubes Applications
Structural Steel Structural Steel Tubes Applications Applications 21
Slide 22: Market Creation
Market Creation
Slide 23: Growing Strength to Strength
Growing Strength to Strength Volume (k tons) 1,633 1,640 1,339 50% Market Share 1,130 932 in Structural Steel 894 Tubes 657 530 426 300 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 • Developed Structural steel tube market in India • Focused on steel strength and building material application •
Slide 24: How have we created market..
How have we created market.. Conventional Why Structural Steel Tube How to replace Construction Applications the conventional replaces these products? Products products ?? Structural support, Uniform Strength, Steel Angle/Channels Towers Lower steel consumption infrastructure Low Diameter Furniture,
Slide 25: New Opportunities to revolutionise construction industry
New Opportunities to revolutionise construction industry Warehousing Affordable Housing Urban Infrastructure Urban Real Estate 25
Slide 26: Structure Steel Tube: Warehousing
Structure Steel Tube: Revolutionise the Construction Industry • JLL projects that there will be 344 mn sq. ft of warehousing space in India by 2022 Warehousing • Logistics, engineering, auto and ancillaries, e-commerce, FMCG, retail and telecom, and white goods have remained the biggest demand drive
Slide 27: Structure Steel Tube: Affordable Housing
Structure Steel Tube: Revolutionise the Construction Industry • Trends for affordable housing with low cost & faster completion is picking in India • Modular Building will be the future construction methodology Affordable Housing • Modular steel structures are constructed in-house with final assembl
Slide 28: Structure Steel Tube: Urban Infrastructure
Structure Steel Tube: Revolutionise the Construction Industry • Govt plans to start 100 additional airports by 2024 Urban Infrastructure • To invest Rs19,000 crore in upgrading airport infrastructure in the country, especially in smaller cities over next three years 28
Slide 29: Structure Steel Tube: Urban Real Estate
Structure Steel Tube: Revolutionise the Construction Industry • India’s vertical growth pushed high-rises buildings with G+20 floors or more to record highs in 2019 Urban Real Estate • Government has formed a panel to look into the upward revision of FSI norms in all major cities 29
Slide 30: India at the start of Structural Steel Usage
India at the start of Structural Steel Usage Structural Steel Tubes Market as % of Steel Potential Structural Steel Tubes Market in India Market (2020) (Mn Tons) 11 227 9 9 8 8 7 140 5X 4 90 3X 22 13 4 Global Europe LATAM Japan Middle East North India 2019 2023E 2030E America Steel Market Structural
Slide 31: Structural Steel Tubes essential for new age construction
Structural Steel Tubes essential for new age construction Growth Drivers Benefits - Growing vertical model of development - Environmental friendly - Increased Spending on Skyscrapers - Recyclable & lower greenhouse gas emission - Higher expenditure on infrastructure - No underwater usage unlike conv
Slide 32: Structural Steel Tubes Market expansion linked to construction activity
Structural Steel Tubes Market expansion linked to construction activity Global Structural Steel Tubes Market Indian Structural Steel Tubes Market expansion expansion 16,000 54 900 5.0 14,000 52 800 4.5 12,000 700 50 10,000 600 4.0 48 500 8,000 3.5 46 400 6,000 44 300 3.0 4,000 200 2,000 42 2.5 100 -
Slide 33: Structural Steel Tubes Uses
Structural Steel Tubes Uses Global Structural Steel Tubes Uses - Segment wise Indian market taking off in all segments (Mn ton) breakup(%) 1.8 1.6 17 16 1.4 19 1.2 22 22 23 1.0 22 22 0.8 21 0.6 37 39 40 0.4 0.2 2013 2018 2021E 0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021E Residential Infrastruct
Slide 34: Structural Steel Market Expansion
Structural Steel Market Expansion Global Structural Steel Market growth forecasts (Mn Ton) Growth Drivers for India 167 160 168 Rising population accompanied with 159 153 142 improvement in living standards 138 127 124 Requirement for strong, durable quality of construction for private residences In
Slide 35: Future of Construction
Future of Construction 35
Slide 36: We are ready..
We are ready.. Opportunity Size.. Where we are.. Our strengths.. FY21 sales volume New innovative Potential structural was 1.6Mn ton products steel market size of: Current capacity is Branding 22Mn by 2030 2.6Mn ton Fixed costs of Future capacity unutilized capacity addition linked to factori
Slide 37: On-Going Enquiries
On-Going Enquiries Hospital (2mn sqft) Oxygen Plant (0.1mn sqft) To be completed within 6 months Structured completed in 15 days Structure to be completed within 50 days More enquiries inline Benefits of using APL Apollo tubes in above steel structures • 20% less steel consumption in structure • 10%
Slide 38: Oxygen Plant Delhi
Oxygen Plant Delhi Truss Rafter Purlin Weight of the steel Girt structure completely made of steel tube ranges in 3 to 4 kg/sq ft. which is lower than weight of Column conventional steel building All components of oxygen plant’s steel structure are made up of APL Apollo steel tube
Slide 39: Hospitals Project – Delhi
Hospitals Project – Delhi • Multiple Hospitals to be constructed in 150 days (Tender out) • 2.2mn sq ft Built-up area to be construct using Tubular Technology • Dry Wall will be erected on Tubular Steel Structure • Deck Slab will cast on Tubular Steel structure • All Steel Fabrication work will take
Slide 40: Tubular Structure in 50 Days (Process flow)
Tubular Structure in 50 Days (Process flow) Fabrication Civil Foundation Tube Manufacturing Tubes are sand blasted, then Civil Foundation & Arrangement of Hospital Building Production of 6,000 ton ERW tubes connected using connectors Structure anchor bolts at site to install tube per day columns Tra
Slide 41: Design Features -> Faster Construction/Low Cost
Design Features -> Faster Construction/Low Cost 1. Minimum no. of Sections: Main Skelton built using 4 Sizes of Structure Steel Tubes Tube Sizes are 300X300mm, 400X200mm, 300X150mm & 250X150mm • Benefit 1: Fabricator can order tubes without any MOQ constraint • Benefit 2: No need for fabricator to m
Slide 42: Tentative Construction Schedule – 50 Days
Tentative Construction Schedule – 50 Days Area 2.2mn sq ft Items Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10 Week 11 Week 12 Week 13 Week 14- 21 Detail Drawings & Approval Civil Work Supply of tubes Fabrication Dispatch to site Erection at site Finishing at site Tubular St
Slide 43: Financial Priorities & Performance
FINANCIAL PRIORITIES & PERFORMANCE
Slide 44: Financial Priorities under Strong Governance
Financial Priorities under Strong Governance Growth Earnings • Profitable Organic Growth • Drive sustainable EPS growth • Commitment to R&D and Talent • Attain earnings objectives across • Innovate products to replace economic cycles conventional construction methods • Achieve ROCE ≥ 30% Capital All
Slide 45: On path of Premiumization..
On path of Premiumization.. 1 2 4 Focusing on products which Moving towards solution Leveraging APL Apollo brand are aesthetically appealing driven offerings and equity and command premium heavy weight structural steel tubing products for large real estate 3 5 and infra projects Consumer centric Inn
Slide 46: Growing Strength to Strength
Growing Strength to Strength Volume (k tons) EBITDA (Rsm) 1,633 1,640 6,787 1,339 1,130 4,774 894 932 3,928 3,710 3,330 657 2,817 530 2,547 426 373 1,832 300 1,613 1,666 1,159 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Q1FY22 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Q1FY22 6,825 Net
Slide 47: Growing Strength to Strength
Growing Strength to Strength ROCE (%) ROE (%) 26.5 23.9 24.8 22.8 21.4 21.4 20.8 21.0 21.2 20.3 20.5 18.4 18.4 18.9 19.3 17.5 17.4 16.5 15.0 13.5 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Net Debt/EBITDA (x) Net Debt/ Equity (x) 3.0 1.2 1.2 1
Slide 48: Growing Strength to Strength
Growing Strength to Strength Operating Cash Flow (Rs Bn) Interest Coverage Ratio (x) 9.3 9.8 5.1 4.0 4.0 3.7 3.8 3.6 3.0 3.2 0.9 0.1 FY 16 FY 17 FY 18 FY 19 FY20 FY21 FY 16 FY 17 FY 18 FY 19 FY20 FY21 Net Debt (Rs Bn) Net Working Capital (Days) 8.1 46 7.7 7.9 43 40 6.5 5.9 29 25 1.6 8 FY 16 FY 17 FY
Slide 49: Growing Strength to Strength
Growing Strength to Strength Operating cash flow to EBITDA(%) 144 Capex to operating cash flow (%) 349 107 95 91 184 158 169 25 54 4 10 FY16 FY17 FY18 FY19 FY20 FY21 FY16 FY17 FY18 FY19 FY20 FY21 5 Du-Pont ROE (%) 25 Free cash flow (Rs Bn) 6.1 4 20 3 2 15 1 0.7 -1.5 -1.5 -0.1 -0.4 0 10 FY16 FY17 FY1
Slide 50: De-commoditizing Product Portfolio
De-commoditizing Product Portfolio Gradually improved our value added product contribution FY18 FY19 FY20 FY21 Q1FY22 Annual Product Application Category Sales Mix Volume EBITDA/Ton Sales Mix Volume EBITDA/Ton Sales Mix Volume EBITDA/Ton Sales Mix Volume EBITDA/Ton Sales Mix Volume EBITDA/Ton Capaci
Slide 51: Global Peer Benchmarking
Global Peer Benchmarking 19% 17% 14% 85 APL Apollo 185 7% 106 Maruichi Zekelman 68 SSAB SSAB Maruichi Zekelman APL Apollo Revenue (Rs Bn) EBIDTA Margin (%) 2.8 2.6 60% 60% 80% 1.4 95% 1.1 SSAB Maruichi Zekelman APL Apollo SSAB Maruichi Zekelman APL Apollo Manufacturing Capacities (mn tons) Building
Slide 52: Balance Sheet & Cash Flow Statement (Consolidated)
Balance Sheet & Cash Flow Statement(Consolidated) P&L Statement (Rsm) Q1FY22 FY21 Balance Sheet - Assets (Rsm) FY21 FY20 Cash Flow Statement (Rsm) FY21 FY20 Sales Volume (k Ton) 373 1,640 Cash & Bank Balance 3,579 456 EBITDA 6,787 4,774 Receivables 1,306 4,764 Accounts receivables 3,470 846 Net Reve
Slide 53: EBITDA Bridge (Rs/Ton)
EBITDA Bridge (Rs/Ton) 1,170 840 233 352 368 1384 358 6,825 4,742 EBITDA Employee Freight Selling & Power & Value Tricoat Industry EBITDA 31-Mar-21 Cost Admin others Addition margin Demand Pull 30-June-21 53
Slide 54: Consolidated Cash Flow Bridge (Rsm)
Consolidated Cash Flow Bridge (Rsm) 7,881 9,771 154 17 623 1,624 2,797 Net Debt 31-Mar-20 Op. cash flow Investment Capex Interest Capital Increase Other Net Debt 31-Mar-21 265 Business continues to Capex being funded from Net debt declined 79% on solid generate strong internal cash flows free cash f
Slide 55: Key Takeaways
Key Takeaways
Slide 56: Solid Future Outlook
Solid Future Outlook Sufficient capacity for double digit annual sales volume growth in long term Three focus areas: Cash flows and Growth in High Diameter and High profitability Thickness Tubes led by DFT • Improving EBITDA/ton technology based products • Improving free cash flows • ROCE enhancemen
Slide 57: Enhancing Presence and Unlocking Opportunities
Enhancing Presence and Unlocking Opportunities Local Market Presence aided by 3-tier Distribution and Solid Supply Chain Mechanism 800+ Distributors 50,000+ Retailers and Fabricators 300 Towns and Cities 57
Slide 58: APL Apollo & Apollo Tricoat Merger
APL APOLLO & APOLLO TRICOAT MERGER
Slide 59: Transaction Highlights
Transaction Highlights • The Board approved the merger of Shri Lakshmi Metal Udyog Limited and Apollo Tricoat Tubes Limited (Apollo Tricoat)with APL Apollo Tubes Limited (APL Apollo) on 27 February 2021 • Apollo Tricoat’s minority shareholders will receive for each equity share held: One equity sh
Slide 60: Transaction Highlights
Transaction Highlights • Effected by way of a Scheme of Amalgamation • Conditional on shareholder approval at each of APL Apollo and Apollo Tricoat, as well as regulatory approvals • Transaction governance in line with Indian regulations and best practices Big Four Accounting firm KPMG Assurance a
Slide 61: Strategic Rationale
Strategic Rationale Creation of stronger platform for Simplification of group structure growth Potential re-rating to benefit all Ability to offer innovative products shareholders resulting in higher margins Strategic Rationale APL Apollo Cost efficiencies to boost overall Greater financial flexibil
Slide 62: Merger Arrangements
Merger Arrangements Existing group structure Key Mechanics Promoter and Promoter Group1 Public APL Infrastructure Pvt. Limited – 32.46% APL Apollo 2B Tubes Ltd Issue of shares Sanjay Gupta – 0.14% 2A Amalgamation 100% Cancellation Veera Gupta*2 – 2.33% of 1 Amalgamation Rahul and Rohan Gupta – 2.1%
Slide 63: Benefit for APL Apollo Share holders
Benefit for APL Apollo Share holders • EPS Accretive: Net profit increase by 13.5%, Dilution of 9.7% • ROE Accretive: 100% of Apollo’s Tricoat profit to boost return profile • Margin Accretive: Apollo Tricoat’s high margin products to lift APL Apollo’s profitability • Addition of innovative value ad
Slide 64: APL Apollo ESG Engagement
APL APOLLO ESG Engagement
Slide 65: Materiality Assessment
Materiality Assessment RESPONSIBLE RESPONSIBLE BUSINESS OPERATIONS Corporate Governance | Energy Management | Market Presence | Economic Water and Effluent Performance Management | Emissions Management | Waste Management | Environmental Compliance RESPONSIBLE RESPONSIBILITY EMPLOYEMENT TOWARDS COMMU
Slide 66: ESG Framework
ESG Framework ESG Vision & Mission ESG Governance ESG Focus Areas RESPONSIBLE RESPONSIBLE RESPONSIBLE RESPONSIBILITY BUSINESS OPERATIONS EMPLOYEMENT TOWARDS COMMUNITIES ESG Performance Indicators and Targets Responsible Communication
Slide 67: ESG Performance Indicators and Targets
ESG Performance Indicators and Targets PERFORMANCE INDICATORS TARGETS Corporate Governance Number of cases in violation of code of conduct Zero cases of violation of code of conduct RESPONSIBLE BUSINESS Average training hours per employee on Code of Conduct Yearly training on Code of Conduct for all
Slide 68: ESG Performance Indicators and Targets
ESG Performance Indicators and Targets PERFORMANCE INDICATORS TARGETS Health & Safety Lost time Injuries Achieving Zero Incident and Zero Harm by 2025 Average training hours per employee to site employees on Provide 4 hours of safety training (per site employee) to site health and safety employees A
Slide 69: Strong Management
Strong Management Directors (Non Executive) Neeru Abrol Executive Team Director at TCNS Clothing Co Limited & others|Awarded best achiever by ICAI | 26 Yr experience in SAIL Abhilash Lal 3 decades of professional experience in senior roles across financial services including banking, PE & others San
Slide 70: Thank You
Thank You For further information, please contact: Deepak Goyal Anubhav Gupta APL Apollo Tubes Ltd APL Apollo Tubes Ltd Tel: +91 120 404 1400 Tel: +91 120 404 1452 Email: deepakgoyal@aplapollo.com Email: anubhav@aplapollo.com 70
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