APL Apollo Tubes Limited (NSE: APLAPOLLO) Q1 2026 Earnings Call dated Jul. 24, 2025
Corporate Participants:
Unidentified Speaker
Chetan Khandelwal — Chief Financial Officer
Sanjay Gupta — Chairman and Managing Director
Analysts:
Unidentified Participant
Amit Dixit — Analyst
Muskan Rastogi — Analyst
Pallav Agarwal — Analyst
Sneha Talreja — Analyst
Presentation:
operator
Ram Sam. It. Ram It. It. It.
operator
Ladies and gentlemen, good day and welcome to APL Apollo Tube’s earnings Conference call hosted by MK Global Financial Services. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call please signal an operator by pressing Star and zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Lahoti, MQ Global Financial Services thank you and over to you sir.
Unidentified Speaker
Thanks Avirath Good evening everyone.
Unidentified Speaker
I would like to welcome the management.
Unidentified Speaker
Of APL Apollo and thank them for this opportunity we have with us today Mr. Sanjay Gupta, Chairman and MD Deepak Goyal, Director Operations Anubhav Gupta, Chief Strategy Officer and Chetan Khandelwal Chief Financial Officer I shall now hand over the call to the management for the opening remarks. Over to you.
Sanjay Gupta — Chairman and Managing Director
Thanks Amit. Thanks MK Global for hosting AP Lepolo for its 401 FY26 earnings call. I welcome all the participants and thanks to all the participants for dropping by. One performance for APL Apollo Tubes was definitely below our expectations. The sales volume should have been higher by at least 5% but there were various reasons why we could not achieve the target set by ourselves. Number one reason is the continued slowdown in the macro environment which is evident from the weak industrial production data from the government side as we know that for April and May the IP growth was mere 2 to 3% and the expectations for quarter one IFR 26 GDP growth is also a bit on softer side.
Reason number two which resulted in loss of volume was the elevated geopolitical tensions which hit our volumes in two ways. Number one, India Pakistan war which impacted Northern state volumes for almost one week and then in the last 20 days of July the Middle Eastern war between Israel and Iran it led to lower volumes in the Middle Eastern market and it hit our export volumes also from Indian mills. The reason is the early onset of monsoon wherein the construction activity got halted Whether it were ongoing projects or the commencement of new projects everything gets slowed down because no one was expecting that the monsoon should start or would hit the country within June month itself.
And lastly what we are witnessing is the softer money supply in the system which is leading to the reduction in the buying power of our dealers and stockists because their money is also stuck with the agencies and EPC contractors who are working on the government projects. So what we are seeing is that the buying power of our channel Partners has gone down a bit coming to the EBITDA spreads for the quarter one. Of course they are up YOY significantly but on QQ basis they are down by like 250 rupees a ton. And the reason for that is of course lower volume which led to negative operating leverage.
And 100 rupees per ton is impact from the one time notional expense led to ESOP which increased our employee cost. Coming to the ongoing quarter, things remain sluggish as compared to quarter one. But we do believe that the second half of FY26 should be pretty promising. By that time the monsoons will get over and the government spends would also turn into the actual money supply, into the system which will increase the buying power of our channel partners at the start of the year. During Q4FY25 earnings call we had guided for 15 to 20% volume growth for FY26.
However, we believe this is slightly unlikely given the softer start to the first half. So we believe that the sales volume for full year should increase between 10 to 15% assuming the macro environment does not worsen from the current levels. As you know that APL Apollo started its brand premium strategy in January of 2025 wherein we are focusing on maintaining EBITDA spreads. So what we believe is that once the demand environment comes back or it recovers, ATL Polo is ready with its capacity, its product line, its distribution network, its brand pool. So volumes will come on its own.
There is no point chasing volume at the cost of EBITDA spreads. So that’s why we are not into the push strategy as of now. We are. Our focus is to continue to generate higher EBITDA spreads and elevate our APL Apollo brand in the customer’s mind. And thankfully we are pretty successful now. It’s been seven months. We started this, we implemented this strategy and it is going fine so far for the full year. We are hopeful, we are confident that EBITDA spreads should be between 4,600 to 5,000 rupees per ton which is significantly higher than FY25 EBITDA spreads of below 4,000 rupees a ton.
Now in the midst of this economic slowdown, we continue to focus on our long term capacity extension plan and fill in the gaps where we believe that we can take our capacity from 4 and a half 5 million ton to 7 million ton in the next two to three years. So there are like four areas where we are working. Number one is expansion in the newer markets which are Eastern India and Dubai market. So in Eastern India we are putting up two plants with capacity of 500,000 tons in Dubai. We are expanding capacity by further 200,000 tons in South India also we are coming up with 400,000 ton of plant where existing products are fully utilized.
The capacity then second area we are focusing on is the expansion of new products wherein we are adding 500,000 ton of coated capacity and 100,000 ton of heavy structural tubes. The third area which we are focusing is on export sales from Indian mills. So that’s why we are planning to set up a plant in Gujarat area. And the plant will be majorly focused towards export sales and then it will also feed the Gujarat markets for localization. And lastly we are also working on putting up capacity for specialty tubes wherein we believe that three 400,000 ton of multiple product categories can be created over the next two to three years in non structural space.
On balance sheet front we are net cash and and our working capital days remain prudent in single digit. By end of FY 2006 we shall be sitting on much larger cash surplus what you see today. And lastly proud to tell you that we have achieved. Our plants have achieved 72% of power consumption based on renewable energy which states our heavy commitments to our ESG goals. And we target to take this contribution from renewable energy to 80 85% over the next 23 years. And this not only helps us in meeting our ESG targets but also reduces the overall power cost for the complete which right now is 0.8% of the product value.
It continues to go down and it aligns with our cost optimization strategy. Amit, that’s all from our side. We are open to take questions now.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question please press STAR and one once it touches on telephone. If you wish to remove yourself from the question queue you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue as the first question is from the line of Amit Dixit from Goldman Sachs. Please go ahead.
Amit Dixit
Yeah.
Amit Dixit
Hi, good evening everyone and thanks for the opportunity. Just a couple of questions from my side. The first one is regarding, you know the slowdown that you mentioned in your opening remarks appears to be transient but how is the competition building up particularly from your peers and in the general structure category, if you can highlight that and do you see this or this payables build up largely because possibly because of because of your cash Strain on your, on your dealers essentially. So do you see it going away in H2? So just wanted your thoughts around the same.
Sanjay Gupta
So see, I mean if you look at our general category, okay, we mentioned the general category because earlier we were making ebitda spreads below 2000 rupees a ton, right. Now it’s been two quarters that the beta spreads are near about 2800 rupees a ton.
Sanjay Gupta
Right.
Sanjay Gupta
So we are able to increase our margins by almost 1000 rupees a ton in last six months. So it’s no more commodity, right? Because, and you can see that the volume also it has not declined in last six months. So the market has absorbed this price hike, right? I mean, and in next few quarters you will see that this general doesn’t remain general, okay? Because everything is making superior margins. So, so, so this suggests that there is no competition in this space even when we have increased our pricing. And this general also takes account of products manufactured in Dubai, right? Because this is as per the highest.
Correct. And in at the same size you also make 4,500 thousand rupees per 10 EBITDA spread.
Sanjay Gupta
Right?
Sanjay Gupta
So I think, I mean as a strategy of decommoditization, we are pretty much on track. And whatever we are producing in range of 50 by 50 to 100 by 100 mm range.
Sanjay Gupta
Right.
Sanjay Gupta
APL Apollo has created its own niche, own brand in this segment. The competition is playing almost now 3,000 rupees per ton below pricing levels.
Sanjay Gupta
Right.
Sanjay Gupta
So we don’t feel the heat from the competitors at this price point. And on second question, you talked about payable days, right?
Amit Dixit
Yes.
Sanjay Gupta
So payable days are not related to these threats at the dealer level. If you see our receivable days, it remains unchanged quarter on quarter basis. Creditors of course have come down because we generated cash.
Sanjay Gupta
Right.
Sanjay Gupta
So we just kind of like, you know, paid two steel mills in advance.
Sanjay Gupta
Right.
Sanjay Gupta
And we did get some benefit also on, on cash purchases.
Amit Dixit
Okay, fine. The second question is essentially on the employee costs. So you mentioned that there was the one time impact of esu so possible to quantify that. And what could be the sustainable employee cost? Also, is there any element of dealer incentives in the other expenses?
Sanjay Gupta
Right.
Sanjay Gupta
So that notional ESOP cost was 6 crore rupees.
Sanjay Gupta
Right.
Sanjay Gupta
So the going forward you can assume 88 crores. 87. 88 crores to be the sustainable, sustainable quarterly employee. It should come around eventually. Six to seven hundred rupees per ton.
Sanjay Gupta
Right. Right.
Sanjay Gupta
Now you would see it at 800, 900 rupees a ton. But the absolute employee cost will not, will not go up from current level. And it will settle. It will settle around 6, 700 rupees a ton.
Amit Dixit
Okay? Okay. And dealer incentives, any element in this quarter?
Sanjay Gupta
No. No. So no discounting, nothing.
Amit Dixit
Okay. Thanks a lot and all the best.
operator
Thank you. The next question is from the line of Vikas Singh from ICICI Securities. Please go.
Unidentified Participant
Thank you for the opportunity. So my first question regarding your 10 to 15% volume guidance. Even if you look at currently since the last year, second half was heavy, our asking rate is still closer to 900kp or more. So. And you talked about the slowdown which usually takes time to reverse. So just wanted to understand then which are the pockets. From there we are generating this confidence of meeting that 15% kind of revolving guidance.
Sanjay Gupta
There are two, three areas, right? From where we did get the volume. Number one is our exports and Middle east which slightly got impacted in month of July due to the war, right? So that volume will recover in quarter two. We have already started seeing that from July, right? That is one big pocket where we are getting incremental volumes. Number two is our two new product lines got started, right? Which will contribute in the next seven to eight months. Number one is the 1000 by 1000 heavy structural tube, right? With capacity of almost 100,000 tons.
And second in rust proof tubes, right? That also 300,000 ton of capacity has come up that will give incremental volume. Because we are already running short of capacities in that segment. And thirdly, see, I mean second half normally is always over H1 for the construction material sector, right? Assuming that we are over with monsoon by August, September, right? It will give a very good Runway for projects to take off, right? In the third quarter. And in Q4 we focus areas from the government side. Whether it is Indian Railways where a lot of our product is blind or whether it is aviation.
Again, a lot of our products go there, right? Healthcare infrastructure, right? And then private real estate. Private infrastructure which comprises of warehousing new factories from the corporates, right? So we expect a lot of activity within the economy to pick up, right? And we are present in all these segments. And lastly, which has not done well for last two years now because is the retail side, right? Which comprises almost 50, 60% of our sales. I’m talking about independent homes right now with inflation coming down and interest rates coming down, at some point discretionary spending will also take off, right? And people will go for home renovation, home improvement, right? And our distribution network, our product portfolio, our innovation, our innovative products, everything will fall into place.
We see pickup in that segment also. So I guess, I guess there are multiple levers because which can give this asking run rate over the next three quarters. Of course second quarter will remain soft, right? As far as July is concerned. But yes, unit will come last six months of the financial year assuming macro does not worsen from here, right? Macro doesn’t worsen from here.
Unidentified Participant
Noted, noted. My second question pertains to our capital allocation. This has come in the past as well. Our CapEx requirement and working capital requirement is far below than the cash we are generating. So how should we look at the excess cash in terms of dividends you would distribute or what would we do with that cash? If you could just throw some light on the capital allocation.
Sanjay Gupta
So Amit, so there are two things, right? One is that if I generate hundred dollars of EBITDA, okay my operating cash flow will be similar, right? $9,500. So we have created four buckets, okay of $25 each. Number one will go for serving tax which will go to the government first bucket, second bucket will go into CapEx. We are a growth oriented company, right? We are looking for newer geographies, newer areas, newer products, right? So 20, 25% of our cash flow we want to spend on CAPEX. Third bucket of 25% is shareholder reward in form of dividend or buyback, right? It will depend on the board and shareholder approvals, right? But yes, we do want to distribute more dividends or go for buyback, right? And the last bucket which is 25% that is we are keeping as a buffer which gets added onto our balance sheet and we repay our liability, right? So if you see that in Q1 also our current liabilities which are payable spriters are reduced by almost 400500 crore rupees, right? So as we generate more cash, you want to have our balance sheet as totally liability free.
We are debt free today but we want to be liability free and maybe we buy steel on scale cash and look for some discounts from the P M. Understood.
Unidentified Participant
If I may just ask one more question. See our sequential. If you see our value added product sales has jumped 3 percentage points and general has also relatively done pretty well. Still our EBITDA percent was on on the lower side. In fact we have maintained that we have a low fixed cost kind of the thing. We are lean production. So what else we are missing basically if you could just give us some more color on that.
Sanjay Gupta
So because I mean the quarter on quarter ebitda decline was 180 rupees per ton. Okay. Now out of this employee cost is Almost higher by 300 rupees a ton on QQ basis. So actually because of better value added mix, right. Our EBITDA spread increased by 100 rupees a ton. If you look at my gross spreads, they also increased at by like 400 rupees a ton.
Sanjay Gupta
Right.
Sanjay Gupta
So if you deduct this 100 rupees per ton of GSOP expense, right. Which is notional one time. And also the reversal in the employee cost which happen in two.
Sanjay Gupta
Right.
Sanjay Gupta
So. So my improving gross spreads, right. They are because of my improving product mix and our strategy of project quantization coming into play.
Amit Dixit
Notice. Thank you for answering the question. And all the best.
operator
Thank you. The next question is from the line of Muskan from BNK securities. Please go ahead.
Unidentified Participant
Hi sir. Thank you for the opportunity. So the first question is in Middle east your sales were at an average of 17,000 per metric than last quarter. So what is the monthly average sales from Dubai plants now? And how is the demand and pricing situation in Dubai?
Sanjay Gupta
So the mix, I mean the run rate was same, right? It was supposed to go up in July. But because of the 10 tension which came from the geopolitical war.
Sanjay Gupta
Right.
Sanjay Gupta
A bit disturbed. So overall Dubai contributed 6% to our overall volumes.
Unidentified Participant
Okay. Okay. And how is the demand and pricing situation in Dubai.
Sanjay Gupta
Now? It’s back on track. Things are pretty stable now. And. And the utilization rates are going up.
Unidentified Participant
Okay, sir. So there has been some delays in commissioning of the HRC capacities in India. Which is one of the reasons to keep. That is keeping the steads higher. And when do you expect this to ease out?
Sanjay Gupta
I didn’t get your question coming.
Unidentified Participant
There has been. There has been some delays in commissioning of the HRC capacities in India which is one of the reasons that is keeping the spread higher between HRC and petra. So when do you expect the to ease out?
Sanjay Gupta
See, I mean commissioning a steel plant is five to six years process, right? I mean delay of six months, one year is very normal when projects at such large magnitude come online.
Sanjay Gupta
Right.
Sanjay Gupta
So we expect that in second half steel supply should increase.
Sanjay Gupta
Right?
Sanjay Gupta
And then depending on like what’s the pricing strategy from the steel mills, we’ll see how spreads behave. But I mean when APL Apollo decided to change its strategy to elevate its brand in January 2025. So we were pretty sure that, I mean now, I mean our general segment should not fight with the Patra.
Sanjay Gupta
Right.
Sanjay Gupta
And we are confident that within the same segment we can demonstrate the desired volume growth.
Unidentified Participant
Okay, from the last call you mentioned you are charging some premium over premium over general products. So what is the current premium that you are charged that you are charging over Patra players in general products? And if there is continued increase in spreads between HRC and Patra and also introduction of HG brand, do you expect the EBITDA per metric fund for general products to sustain?
Sanjay Gupta
Okay, so coming to first question that we earlier when we increase our prices before that we were selling or I would say our competitors who make HR coil based structural steel tubes, they were selling thousand to fifteen hundred rupees per ton below APL Apollo pricing. Okay? Now the gap is three thousand rupees after we increase our pricing by one thousand to three hundred rupees a ton, right? Adding to this that Azure coil tube pricing and Patra pricing will always like you know, right now the gap is eight to ten thousand rupees a ton, right? And with us with Apollo increasing its selling price by 1500 2000.
So for so that is 10,000 rupees per ton. And with competition against Katra could be 8,000 rupees a ton, right? So again see, I mean as a strategy whether to add products, whether to utilize capacity, right. Our business model is to switch away from that general sales, right. Which can impact volume or which suffer because of this gap which is between Patra and HR poi. We want to move our business model away from from this and be consistent with the construction activity in the country.
Unidentified Participant
One last question. The Elgin Mart has won orders of solar module mounting structures under APL Apollo sunscreen. How is this product different from the products that Apollo is trying to cater to solar industry? Could you please talk about the order vents in solar?
Sanjay Gupta
They are very different, right? What Apollo does for solar sector is the manufacturing of top tubes, right. Or our flat steel which goes into solar mounted structures, right? That’s like pure manufacturing. What SGMart is doing is mild processing profiling of solar structures. So both are very, very different products and they don’t. And they have very different applications.
Unidentified Participant
Thank you so much.
operator
Thank you. The next question is from the line of Pallavagarwal from antique stockbroking. Please go ahead.
Pallav Agarwal
Yeah. Good evening sir. HRC prices, you know, softening a little from the month of June. So do we expect any destocking at a distributor level?
Sanjay Gupta
It’s been almost one and a half years that dealers have been destocking early and right from October 2023 when we started seeing the decline in steel prices in India. Except that 23000 rupees per ton uptake which came in March, April 2025 after. After the tariffs were imposed. Okay. Dealers have been sitting light only like you know, since October 2023. So it’s not that now that steel prices are again coming off to 3000 rupees at times that we will see massive restocking because dealers are anyway sitting light on inventory since for last 18 months now consistently.
Pallav Agarwal
Okay.
Pallav Agarwal
Also you know, you mentioned, you know this payables we have reduced. So how does the, you know, the pricing work with this media team is like do they give some credit period or you know, they insist on you know, upfront cash payments. So if you could just explain that broadly.
Sanjay Gupta
So Pallav, this is a bit sensitive matter but what I can tell you is that. What I can tell you is that we have been getting credit from our supplier.
Sanjay Gupta
Right.
Sanjay Gupta
As you would see greater days of 25, 30 days throughout in our balance sheet. Now with surplus cash coming in our books we want to reduce some current liabilities and see if we can get some extra discounts which we are. But Quantum is a bit sensitive to discuss.
Pallav Agarwal
Sure. Okay.
Pallav Agarwal
Yeah.
Pallav Agarwal
Thank you.
operator
Thank you. The next question is from the line of Sneha Talrecha from Nirvama. Please go ahead.
Sneha Talreja
Good evening sir and thanks a lot for the opportunity. Just couple of questions from my end. We of course enter to edge to demand revival and we always do that.
Sneha Talreja
In the building material space.
Sneha Talreja
But what’s the real change that we’re expecting and how confident are we for that demand pick up especially on the infrastructure part as well.
Sanjay Gupta
So Sneha, two three factors which give us confidence. Number one is like the critical infrastructure from the government side whether it is railways, aviation. Okay. These two sectors have not seen any slowdown in the funding roadways of course, but we don’t supply to roadways except some foot over bridges where our products go for NHI projects.
Sanjay Gupta
Right.
Sanjay Gupta
But the critical infrastructure remains the procedure for the government.
Sanjay Gupta
Right.
Sanjay Gupta
So that gives us a lot of confidence. Then second, private infrastructure whether it is warehousing and corporate expanding which are putting up factories. So our structural skill tubes go in both the segments.
Sanjay Gupta
Right.
Sanjay Gupta
Then another category in private infrastructure is commercial. Whether it is like large developers, organized developers, adding more a grade B grade office space, data centers which are coming up.
Sanjay Gupta
Right.
Sanjay Gupta
It requires a lot of steel, structural steel tubes. Then the third segment which we see as sunlight area is solar. Right. So whether it is stock tubes or our flat steel which is going in this segment, we are getting good traction from here as well, so yeah, mix of these segments. Sneha, we believe that second half could be significantly better than first half.
Sneha Talreja
Understood.
Sneha Talreja
So secondly, on the, you know, the primary and the secondary field gap I clearly recall that you’re telling that you know things actually worsen when gap hits 10 odd rupees until 8 odd rupees. Probably you will see we are almost at that level now. Are you seeing, you know, demand moving back on the general structure side to if yes or if you know what is the structured way of dealing with this volatility. Because whenever we see gap reducing we of course see great amount of volume uptake for your company. But then it always reverses whenever the gap extends.
You know, what is the structural way of looking at this gap?
Sanjay Gupta
Susneha, addressing the second part first.
Sanjay Gupta
Right.
Sanjay Gupta
As a strategy we are decommoditizing our portfolio. So that means we add products such as heavy substrate tubes, light substrate tubes, coated products.
Sanjay Gupta
Right.
Chetan Khandelwal
Pregal rust proof products and galvanized products.
Chetan Khandelwal
Right.
Chetan Khandelwal
So these are all which don’t get impacted for. From whatever is happening between primary and secondary. Because the inability of secondary steel to produce such products. Second, moving or increasing sales in Dubai and export markets. Right there also you don’t get impacted from. From primary secondary. Sanjay, you want to add to this? Yeah.
Sanjay Gupta
You have to see there are two type of market in India. One is the primary speed steel market in India and number two the secondary steel market of India. When the gap is more what we are doing, we are. We are doing well. But when the gap is narrow. So then we eaten the market of also the secondary market also then this is. We have another. We said 20, 30, 40%. We can take any type of growth. But if there is a gap between the secondary and primary is too much then we. Our growth is near about 15% depending on the market.
Sneha Talreja
Understood? Understood. So I think this change in strategy as for the gap changes, I think that’s likely to continue even ahead.
Sanjay Gupta
Yeah.
Sanjay Gupta
When the gap is narrow then we also. Then again we go for killing the PETRA material. But when the gap is too much, [Foreign Speech] when the gap is nailed down by 4 or 5,000.
Sanjay Gupta
Almost.
Sneha Talreja
Understood, sir. Understood. That was quite helpful. Thanks. Thanks a lot team and all the best.
operator
Thank you. Participants, we would like to remind that you may press Sharon1 to ask a question. The next question is from the line of Anupam Gupta from IFL Capital. Please go ahead.
Unidentified Participant
Yeah.
Unidentified Participant
Thanks for the opportunity, sir. First question is on the sale in Shankara which you have done in the quarter. Can you just give your thoughts on why that same happen?
Chetan Khandelwal
So Anupam, when we had invested in Shankara, right. In March, April of 2022 the idea was to have a small stake, right? To ensure that Shankara starts selling more of AP Lepolo products.
Chetan Khandelwal
Right?
Chetan Khandelwal
At that point of time our market share on Shankara counter was like 20, 25%. Whereas all our distributors of large size were selling 80, 90% of Apollo products.
Chetan Khandelwal
Right?
Chetan Khandelwal
So we wanted Shankra to sell more of APL Apollo products.
Chetan Khandelwal
Right?
Chetan Khandelwal
And we identified that the company needed some capital which we infused.
Chetan Khandelwal
Right?
Chetan Khandelwal
And there was this understanding that with this infusion of capital Shankara will start selling more of AP Lepolo products. So in last three years, now three, three and a half years the sales on Shankara counter has quadrupled. Okay. Now that we have achieved this target there is no point of holding Shankara shares. And this stake was below 10%. So we sold 4.4.5% last year and the balance shares we sold in last quarter. So yes, I mean now the dependence between Shankara and Apollo is high on both of the sides.
Chetan Khandelwal
Right?
Chetan Khandelwal
So there is no benefit or advantage of Apollo holding shares of Shankara.
Unidentified Participant
Okay. And second question is on the general structures, profitability. You mentioned that this 2,700, 800 which you’re achieving also has the benefits from Dubai. Which is. If we assume Dubai is selling almost entirely of general success it is a meaningful contribution coming from there. If you exclude that the India profitability of general success would be. Would not be 2800. Would be closer to what 20 to 2300. If I. If my calculation is correct it will be.
Chetan Khandelwal
No, it will be 24, 2500 rupees.
Unidentified Participant
Okay. Okay. Do you. Are you comfortable with that level or that again comes at risk as this gap is increasing.
Chetan Khandelwal
No idea is to take it above 3,000 rupees a ton.
Unidentified Participant
And will that be doable? If let’s say this, the Gap vs. Patra continues to expand which you said is right now at 10 rupees.
Chetan Khandelwal
That’s what Sanjay explained. Know that that the primary steel market is. Is different, right? Which is like 5 million tonnes. And secondary steel market is another 5 million tonnes. So 5 million ton market will out of that. Say the general segment is 40% out of that 5 million ton.
Chetan Khandelwal
Right?
Chetan Khandelwal
So that will continue to grow at 5 to 10%. If the gap reduces then the 5 million ton from secondary will come to primary.
Chetan Khandelwal
Right?
Chetan Khandelwal
And that’s where we will get our incremental volume. But since we don’t know when this is going to happen so there is no point building a business model around it.
Chetan Khandelwal
Right?
Chetan Khandelwal
What we focus is on the primary structural steel 2 market, which right now is 5 million tonnes, right? And out of that almost like 3 million tonnes is commodity general and 2, 2.5 million tonnes is value added. So yes, I mean that’s how we build our sales strategy.
Unidentified Participant
Understand? And one last question. On the profitability guidance which you gave 4,600 to 5,000 last time you had said it is somewhere around 4,900 or so achievable with 20% volume growth. So the 45,000 is understandable. You have increased the range because of lower volume growth. But let’s say, does this include the benefit which you are trying to accrue by having lower payable days? Because lower payable days also impacts your ROE in that sense. But does this range include the benefits from better margins due to lower payable days?
Chetan Khandelwal
Of course, yes. But it was just like in the last month of July, only like we could have such cash to lower our payable days. So yes, we are talking to our supplier. We are talking about supplier, right? And if we see the benefit, then yes, we’ll continue with the strategy. If we don’t see the benefit, then the surplus funds will generate 6, 7% of fixed deposit rate.
Unidentified Participant
Right? Okay. Okay. And one last question, sorry. On employee cost, you said the ESOP cost is notional, but your note says that esop, no ESOP was granted so far. So has this ESOP which you have approved in today’s board meeting, the notion cost for that has been booked entirely or will it recur in the following quarter?
Chetan Khandelwal
No, no. So today board meeting approval is separate. This was for the. The previous ESOP which were issued like a year back, year and a half back, they got approved and they’re getting converted. So that’s why this no split.
Unidentified Participant
So what you have announced today that will have additional cost in the following quarter.
Chetan Khandelwal
This is just an approval. We have not decided how much what ESOP will be given. I don’t think in next 12 months we’ll be issuing any ESOPs. And next 12 months anyways, the. The next 12 months and ESOP will be issued. So there is no cost which is expected in next one, two years. And yes, just to add to your previous question, on the return profile, like you said that if credit days come down, right, tables go down. So our roc. Our return profile will look low. So I think that is the strength of our business model, right? That if we generate cash and we are able to lower our payables and since we churn our inventory 15 times in a year.
Chetan Khandelwal
Right.
Chetan Khandelwal
With 20, 25 years of inventory that means I’m churning my inventory 15 times in a year. And whatever cash discount we get.
Chetan Khandelwal
Right.
Chetan Khandelwal
From our suppliers.
Chetan Khandelwal
Right.
Chetan Khandelwal
So it should give. We are sure that it will give more return compared to the money lying in the fixed deposit.
Chetan Khandelwal
Right?
Chetan Khandelwal
So we are very ROC focused company Anupam.
Chetan Khandelwal
Right.
Chetan Khandelwal
So whatever we will do, we will ensure that it is ROC accretive.
Chetan Khandelwal
Right?
Chetan Khandelwal
Optically it may look a bit low, right. If you include cans. But if you look at gross ROC where you take working capital as inventory plus debtors and you remove debtors.
Chetan Khandelwal
Right?
Chetan Khandelwal
So that’s how we look at our business model.
Unidentified Participant
Sure. Okay. Perfect. Thank you.
operator
Thank you. The next question is from the line of Akshay from AK Investment. Please go ahead.
Unidentified Participant
Hello sir.
Unidentified Participant
Am I audible?
Chetan Khandelwal
Please go ahead.
Unidentified Participant
Yeah. Yeah.
Unidentified Participant
Thank you.
Unidentified Participant
Sir.
Unidentified Participant
My first question is there are lots of traction in sectors like data center, solar, electronics manufacturing, consumer behaviors. And these players are doing very heavy capex. So do we supply in any of these sectors? And over the next two to three years how much volume growth do we see from these emerging sectors?
Chetan Khandelwal
So if you talk to the large fabrication companies in India, some are listed also, right? These companies are called pre engineered building companies. PV companies who take contracts from all these corporates who are expanding massively.
Chetan Khandelwal
Right.
Chetan Khandelwal
And by only such companies even Aplo Polo is putting up four plants.
Chetan Khandelwal
Right?
Chetan Khandelwal
So yes, Indian corporate is expanding. And they are putting up lot of new facilities, new plants. So yes. So these large PV companies they do take lot of hollow seal sections, lot of structural steel tubes from APL Apollo. And our market share is 60, 70% in this segment. We expect the growth to be 20, 25% for the next three, four years. Particularly for this segment.
Chetan Khandelwal
And.
Chetan Khandelwal
And that’s why on this conviction we introduced 1000 x 1000 mm diameter type which obviously we are first in India and second in the world to be able to produce such an spu.
Unidentified Participant
Okay, sir. And sir, what is the current capacity utilization in our Rifur and Dubai plant?
Chetan Khandelwal
So Dubai plant is around 60% plus and rifle is tagged below 50%.
Unidentified Participant
Okay. And sir, earlier we said that we are supplying the our steel tube to Indian Railways. So which are. Which are the use cases in Indian Railways?
Unidentified Participant
Can you please justify
Chetan Khandelwal
Indian Railways?
Chetan Khandelwal
All the modernization of railway station which is taking place, right? Maximum railway stations are coming on steam. And that’s where we are supplying. We have given list in our presentation also almost 20, 30 railway stations where we are Supplying our products which are under modernization.
Unidentified Participant
Okay, sir.
Unidentified Participant
Okay.
Unidentified Participant
Thank you so much.
operator
Thank you. The next question is from the line of Ardik from Whitewale. Please go ahead.
Unidentified Participant
Yep. Hi. Thank you for taking the question. First question is why is your EBITDA cap lower in this quarter compared to last quarter? And the second question is, last quarter you mentioned that you want to reach ROIC of 35% next what next year and 45% next year. Will it be achievable seeing that trade tables increase? Thank you.
Chetan Khandelwal
So EBITDA spread decline on QP basis is mainly because of increase in the employee cost per ton by 300 rupees per ton. Okay, so employee cost goes up as the volume declined, right? In Q4 we did 850,000 tonnes. In Q1 we did 794,000 tonnes. So employee cost goes up, which is negative operating leverage. And second was like I mentioned, was the esop. ESOP expense, which is notional and one time, right? So if you exclude that we will be at similar EBITDA spread, what we achieved in Q4. Coming to the second question, I mean payable days, See, I think as in, I mean if you sell businessmen what we believe is the real roc, which is based on gross working capital.
Chetan Khandelwal
Right?
Chetan Khandelwal
Because creditors also be considered as liability which we have to repay, right? Like you have liability in form of borrowing from banks. Same way we consider current liabilities. Something which you have to pay to our steel suppliers no matter what. Correct? So. So yes, I mean optically, 35% will not look on paper if we reduce our payable to zero.
Chetan Khandelwal
Right?
Chetan Khandelwal
But like I said, that will depend on like how much discounts we are getting by making cash payments, right? It’s too early to comment on that. And if at all like you know, our investors should shareholder board suggest that no ROC should be 35%. So we can always go back to taking credit again from the fuel suppliers, right? So I think it’s something which the shareholders and board have to take decision right along with the management. Like what is good for the company, whether to show optically 35% rock or to generate more cash. If we are able to churn our inventory by 15 times in a year and generate more return than a fixed deposit return of 6,7%.
Unidentified Participant
Yeah, but fixed upon instead of fixed deposit. You always have the opportunity to reinvest, right? Isn’t that always the goal away? Instead of the fixed deposit which I mentioned, you always have the opportunity to reinvest back in the business. So how is that not a case.
Chetan Khandelwal
So 25% of our cash flow, we are investing in adding capacities anyway. And if there is more opportunity. So yes, I mean, we will spend on increasing capacities or it could be some inorganic growth opportunities, whatever comes our way.
Unidentified Participant
Thank you.
operator
Thank you. Participants who wish to ask questions can press star and one. Now the next question is from the line of Neil Shah from Investment Advisors Private Limited. Please go ahead.
Unidentified Participant
Hello.
Unidentified Participant
Thank you for the opportunity. So I would just make a repeat on one of the previous questions. So can I know our spread guidance for the current year and also the revenue guidance and the volume growth guidance.
Chetan Khandelwal
You’ll have to come again. There’s an echo on your voice.
Unidentified Participant
Hello, am I audible?
Chetan Khandelwal
Go ahead.
Unidentified Participant
Yeah, so can I just know the.
Unidentified Participant
EBITDA spread guidance and the volume growth guidance for this year?
Chetan Khandelwal
Volume growth guidance is 10 to 15% for the full year and EBITDA spread guidance is 5,000 rupees per ton for the full year.
Unidentified Participant
Okay, thank you. And what about the top line?
Chetan Khandelwal
Top line will depend on how do you.
Unidentified Participant
How do you expect the prices to move?
Chetan Khandelwal
I mean, that’s difficult to answer because that’s not in our control. So we don’t work on like how prices move. What we want to protect is our EBITDA spreads, no matter how feedback will behave.
Unidentified Participant
All right, thank you. That’s it. From my side.
operator
Thank you. The next question is from the line of Andre Parishwetta from Cogito Advisors. Please go ahead.
Unidentified Participant
Yeah, I noticed that your value added products were about 61% versus 56 or 58 the previous quarter. What I wanted to know is that if, let’s say, if you make a constant volume projection, what is the sensitivity to every percentage increase of value to added product to your EBITDA per ton? So let’s say if it goes from 61 to 62, what is the incremental debit card that you get and is.
Unidentified Participant
There any.
Unidentified Participant
Outlook that you have for your value added mix proportion?
Chetan Khandelwal
So, Andre, I guess if you want to see the real benefit of improving sales mix.
Chetan Khandelwal
Right.
Chetan Khandelwal
You should look at the gross spreads. Okay. Now, In Q, in Q1, our mix improved versus Q4 last year.
Chetan Khandelwal
Right.
Chetan Khandelwal
And you can see that our gross spreads also improved by 400 rupees per ton. But that did not translate in 400 rupees per ton. Yes, my gross spreads, right. It did not translate into EBITDA spread.
Chetan Khandelwal
Improvement because my volumes were lower.
Chetan Khandelwal
So there was negative operating leverage came into play.
Chetan Khandelwal
Right.
Chetan Khandelwal
And secondly, this ESOP port, which was notional right? Now if I remove that, then I mean EBITDA should have been much higher compared to Q4 last year. Now coming to the sensitivity, it is tough to say because APL Apollo has has like 5000 plus stu.
Chetan Khandelwal
Right?
Chetan Khandelwal
Out of those 60% are value added. Now within value added also we have products which generate 4,000 rupees per ton. And then we have products which may generate 15,000 rupees per ton. EBITDA also, right? So depending on which segment does well in which quarter.
Chetan Khandelwal
Right?
Chetan Khandelwal
That’s how the spreads will improve. But one thing I can tell you is as I was saying, mix continue to improve. Our spreads will also improve in the. In the. In the similar phase.
Unidentified Participant
So would you be able to guide us what this 61% could do for the entire year?
Chetan Khandelwal
So I think it should remain at similar levels. Our ultimate goal with 7 million ton capacity which will be live by FY28, we will be 70, 75% value added.
Unidentified Participant
Okay, thank you.
Unidentified Participant
Thanks.
Unidentified Participant
Thanks.
operator
Thank you. The next question is from the line Ashwita Dixit from Systematics. Please go ahead.
Unidentified Participant
Hi. Thank you for the opportunity. Just wanted to. I joined a little late so. Not sure if you addressed this before I joined but volume guidance for the year is now 1050 which was 20% last quarter. So any reason behind this revision?
Chetan Khandelwal
Shweta? Yes, earlier guidance was 15 to 20% growth for the full year. Now it is 10 to 15%. The reason for. The reason for downward revision are like number one, slow optic in H1. Right? Because of macro slowdown. If you look at the government data like index of industrial production, GDP protection, GDP growth projections, right? Everything is like kind of on softer side which is also impacted the demand for our product. Second monsoons which came a bit early in month of June, right? So June month got hit badly. Then third was the geopolitical tension which we saw in April when India park war was there.
And then in June Iran Israel war started.
Chetan Khandelwal
Right?
Chetan Khandelwal
So that also led to some volume loss. And also if you look at the money supply in the system, that’s also a bit slow. So our dealers, talking channel partners, they don’t have too much of money rotation going on, right? And this is not only for our sector. You look at the other construction material, other consumer related channel partners, they will have the same issues, right? So that’s why we kind of revised down our guidance from 15 20% to 10 to 15% because of the slower offtake in H1.
Unidentified Participant
Understood. And any potential revision if we see a second half to be stronger than we expect then. Or is this the final Guidance that we could get at least as of now seen.
Chetan Khandelwal
No. Why not?
Unidentified Participant
Are you also including your view that.
Unidentified Participant
Second half may should be better? So does this include your view on the second half being stronger or There could be an upside to this number.
Chetan Khandelwal
I mean we would love to have upside to this number. As far as we are concerned, we are ready with our capacity. We are ready with our product line, we are ready with our distribution network. We are ready with all the working capital which is required to fund this growth.
Chetan Khandelwal
Right.
Chetan Khandelwal
Our brand pool is there in the market. It’s just that some external pull comes in.
Chetan Khandelwal
Right.
Chetan Khandelwal
And then. Yes, I mean if environment suggest. If environment supports.
Chetan Khandelwal
Right.
Chetan Khandelwal
The growth can be better than 10 to 15% for the full year. Nothing stops us from achieving higher growth.
Unidentified Participant
One last question. If I could squeeze in one more. You said by 28 you’ll be ready with a 6.8 million tonnes. That’s the production capacity and that the sales number could likely be 5.8 million tons.
Chetan Khandelwal
So.
Chetan Khandelwal
So see, it will depend on what is the volume growth we actually achieve in FY26 and then FY27, FY28, how they pan out. When we say 6.8 million ton capacity, that is salable capacity. That means we can produce and sell that 6.8 million tons from our plants. So this is a salable capacity.
Unidentified Participant
Thank you.
operator
Thank you. The next question is from the line of Snehat Alreja from Nirvama Wealth. Please go ahead.
Sneha Talreja
Hi team. Thanks a lot for the follow up. Just two questions from my end. One is you said you are open to inorganic opportunities. That would be the case. What sort of opportunity in which area that would be? Can we see anything on the secondary pipes also to target that particular market specifically? That’s one. Secondly, could you speak on more export opportunities leaving apart the Dubai part of it which you’re already doing and which all geographies you know can be viable for us.
Chetan Khandelwal
Hi Singhad. Good evening. We are not going for the secondary any type of acquisition because secondary still is no future because quality is very bad. Number two, their cost of production is very high. But the industry India there is still scarcity so they are providing. So I am not a reason. We are going for the secondary stream because then we demolish our brand also or the secondary business is not getting old hand. When the SR choir and we are secondary price.
Chetan Khandelwal
Go to narrow then the.
Chetan Khandelwal
Secondary business is wipe off. If you see the last 30, 40 years in history due to steel they are surviving. I don’t think this is A future, a good future. So we are not going for the secondary at all. I am very very clear in the two things. We are not going for steel making, we are not going first. Secondary number two, the export opportunity. Yeah. There is a very very good chances for the export. We have a very good order book in Dubai plants now we are also putting a plant in Bhuj for only one focusing.
Chetan Khandelwal
Export is very less.
Chetan Khandelwal
Right now. If you see the. In the last 10 days there is a big change in the Indian steel industry. Today India is lower than the Chinese steel prices. China is almost increased by steel in the last 10 years.
Chetan Khandelwal
12, 13%.
Chetan Khandelwal
And India has decreased almost 1500 rupees per ton this month. So India, I am very bullish. India’s export, this is also in my focus. But right now the things are not good for us. So we are maintaining our margin going for a little bit 10, 15% growth. We are consending on that tier three. But margin compromise, we are not wanting to grow this time because the geopolitical or economy is not doing well. We are very confident we may be back on track in the addressing more 20, 30% whatever volume growth. Because we are ready with every sense exporter we are no doubt we are big vision in the future.
In the 7 million ton capity we are targeting to take the Dubai 1 million ton and India maybe 0.5 million ton come 3 to 5 million ton in the future. So export we are very very okay. And secondly there’s no question we know this is not a.
Sneha Talreja
That’s really, really helpful. So thanks. Thanks a lot and all the best. Once again.
operator
Thank you. The next question is from the line of Aditya Velikat from Access Securities. Please go ahead.
Unidentified Participant
Yeah, thanks for the opportunity. So just focusing on FY27. So if we just keep aside the factors which are not in our control like a geopolitical scenario and all. So you have guided previously that we will grow by 15 to 20% again in FY27 over FY26. So are we putting any, any kind of market penetration or SKU addition, new product development which gives us some visibility over that growth in FY27.
Chetan Khandelwal
Yes, of course. See I mean assuming we close FY26 at 10 to 15. Right. And everything in terms of macro, in terms of geopolitical, in terms of global trade war, all these things settle down along with Indian consumption starts to revise. Right. Then FY27 growth could be much higher than 15, 20% because of the low base of FY26.
Chetan Khandelwal
Right.
Chetan Khandelwal
Like and like we said that in terms of capacity, in terms of distribution network, in terms of new products which we launched in last one to two years, new product pipeline which is there in next two years, the new segments like renewable energy, like heavy construction, where we are adding more products and we are becoming more aggressive, we are penetrating deeper into these industries.
Chetan Khandelwal
Right?
Chetan Khandelwal
So Yes, I mean FY27 could be much higher than 15, 20%.
Chetan Khandelwal
And EBITDA per ton trajectory in that financial year. Can we assume it will be north of 5,000 rupees per ton?
Chetan Khandelwal
See, our ultimate goal is to achieve 5,500 to 6,000 rupees per ton. Right? And this and on the business model, what we have built for 7 million ton capacity and sales volume eventually, right? This pretty much fits into it. Okay, now the question is that FY26, we are saying between 4600 to 5000. Let’s see how second half pans out.
Chetan Khandelwal
Right.
Chetan Khandelwal
If volumes grow faster than what we expect because of operating leverage benefits, it could be near about 5,000 also. Right. But very difficult to say right now because of the uncertainty. What we have seen in the first four months of the current financial year, next year FY27 will definitely be better than whatever we close in FY26.
Unidentified Participant
Fair enough, sir.
Unidentified Participant
Thank you.
Unidentified Participant
Thanks a lot.
operator
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for the day. I now hand the conference over to the management support. Closing comments.
Sanjay Gupta
Thanks everyone for joining by. I look forward to see you over the next results. Earnings fall. Thank you so much.
operator
Thank you. On behalf of MK Global Financial Services. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.