A primer on Apar Industries

“We had volume and profitable growth across all the three divisions as we reap the benefits of R&D, innovations and investments done over the past several years in line with the motto of the company to provide Tomorrow’s solutions today”

Kushal N Desai, Chairman and MD

Stock data

Ticker	APARINDS
Exchange	BSE and NSE
Industry	Capital Goods

Price Performance:

Last 5 days	+4.17%
YTD	+83.59%
Last 1 year	+261.66%

Company description:

Founded in  in 1958 by Mr. Dharmsinh D. Desai, Apar Industries is a market leader in India with a global presence. Contributing to India’s process of electrification it started from manufacturing power transmission cables to having three broad business segments, which are Conductors, Transformer and specialty oils (TSO), and Power/telecom Cables.

Business verticals:

1. Leader in Conductors:

It is amongst the largest global manufacturers (a pioneer in aluminum alloy rod & conductors). It supplies to all top 25 global turnkey operators and leading utilities. INR 343 crores of strategic Capex was undertaken over FY16-FY22 to launch several innovative solutions. Higher Value products contributed up to 49% in FY22 from 33% in FY21. FY22 Order inflow was INR 5,400 crore.

2. Leader in Specialty Oils:

Apar industries is the third largest global manufacturer of transformer oils and the tenth largest lubricant marketer in India. In the transformer oil segment it has a product offering of over 400 products with varied application in the industrial oil sub segment. Apar industries has a market share of 45% in this segment. It is also the fourth largest global manufacturer of transformer oils (Leading domestic player in auto lubes).

3. Pioneer in transformer oils in India:

The company holds 60% market share in power transformer oil & 40% in distribution transformer oil in India. They invested INR 229 crore during FY16-22 on higher-value products. 

4. Leader in Power and Telecom Cables:

It provides specialist technical services, cable design, etc. engaged in electrical and telecom cables as well as elastomer cables.The company is the leading player in cables (largest in cables for Renewable sector). The customers of the company includes – BSNL, Reliance Jio, etc. INR 309 crore has been invested over FY16-22 towards developing new-age solutions. Apar industries is the first Indian player to create guidance OFC for torpedoes & tether cables for surveillance systems.

Customers and Distribution Network:

It has multi-year relationships with Indian & global majors Alliances with ENI S.P.A (Italy) and CTC Global (USA)  In the conductor segment, the company enjoys long standing relationships with customers like PGCIL, Kalpataru Power Transmission Limited, KEC International Limited. Major clients in the cables segment include Adani Group, Tata Power, Larsen & Toubro Limited, BHEL and Sterlite Technologies Ltd. etc.

Orderbook:

As of April 2023, the company had a total order book of 5,124 crores in the conductors segment. 

Exports:

The company exports to over 100 countries like South East Asia, Middle East, Africa, South America, etc. It contributes to 53% of the revenue as of Q4FY23.

Manufacturing Capability:

The company has a total installed capacity of 5,42,000 KL of transformer oils and 1,80,000 MT of conductors as on March 31, 2022. The Hamriyah plant operated at 104% capacity utilization in FY22, up from 79% in FY21.

CAPEX:

In FY22, the company has incurred a total capex of INR 130 crores. Further, it has planned capital expenditure of INR 31 crore, majorly towards de-bottlenecking, capacity/ capability enhancement, productivity/cost reduction, and R&D.

Financials:

What we like:  

1. Focus on product premiumisation: 

Over a period of time company has undertaken a premiumisation exercise to reinvent its business segment from being low margin aluminum conductor company (~94% of segment revenue as on FY16) to product premiumisation with addition of copper conductors (for railways), CTC, HEC, OPGW wire (for power & Telecommunication), ACCC (Aluminum Conductor Composite Core- technology tie-up with CTC Global USA) and range of aluminum alloy rods (for special application), (high value products with better realization and EBITDA/MT). Incurred capex of ~Rs 4.3bn over FY16-23, mainly towards new product launches in premium products. Additional ~Rs1bn capex has been planned over next 18-24 months towards capacity expansion to meet increasing demand.

2. Exports driving demand for conventional conductors: 

Exports contribution has increased from ~40% in FY16 to ~51% in FY23, driven by increasing focus on expanding geographical footprint. Additionally, strong traction has been witnessed for conventional conductors in the last two-year from key markets such as the USA, owing to increased spending on revamping existing transmission lines. FY23 exports revenue grew 123% YoY driven by increasing demand for conventional conductors from the USA & Europe and higher realization in export markets.

3. Strong leadership across various industries:

1. Pioneer in transformer oils in India, 60% market share in power transformers and 40% market share in distribution transformer oil.
2. Only Indian company to win entire T-Oil supply to all major HVDC projects in India.
3. Launched best-in-class 99% biodegradable natural ester transformer oil.
4. Leading supplier to tractor OEMs, TAFE, Eicher, ITL, Escorts.
5. Leading domestic player for auto lubes.

Factors to consider:

1. A delay in the power distribution sector turnaround may impact the profitability of the company.
2. Exports may get impacted due to volatility in currencies
3. Speciality Oils are derivatives of crude hence any sharp price movement in crude can impact the company