APL Apollo Tubes Limited (APLAPOLLO) Q3 FY23 Earnings Concall Transcript

APL Apollo Tubes Limited (NSE:APLAPOLLO) Q3 FY23 Earnings Concall dated Feb. 02, 2023.

Corporate Participants:

Anubhav Gupta — Chief Strategy Officer

Sanjay Gupta — Chairman and Managing Director

Analysts:

Amit Puri — Asian Markets Securities — Analyst

Garvit Goyal — Nvest Research — Analyst

Rahul Agrawal — InCred Capital — Analyst

Sujit Jain — ASK Investments — Analyst

Madhav Marda — Fidelity — Analyst

Akshay Chheda — Canara Robeco Mutual Fund — Analyst

Lavanya T — UBS — Analyst

Anupam Gupta — IIFL Securities — Analyst

Pallav Agarwal — Antique Stock Broking — Analyst

Mitul Shah — Reliance Securities — Analyst

Rahul Jain — Systematics — Analyst

Alisha Mahawla — Envision Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the APL Apollo Tubes Q3 FY’23 Conference Call hosted by Asian Market Securities Limited. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on-date of this call. These statements are not the guarantees of future performance and include risks and uncertainties that are difficult to predict. Actual results may differ from such expectations, projections, etc., whether expressed or implied. Participants are requested to exercise caution when referring to such statements in remarks. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Suraj Sonalkar, Asian Markets Securities. Thank you and over to you. It appears the line of Mr. Suraj has been disconnected. Mr. Amit Puri [Phonetic] would you like to take the handover.

Amit Puri — Asian Markets Securities — Analyst

Thanks. Ladies and gentlemen, welcome for joining the call. The management is represented by Mr. Sanjay Gupta, CMD; Mr. Deepak Goyal, CFO; CEO, Mr. Arun Agarwal; and Anubhav Gupta, Chief Strategy Officer.

Thanks, management team for giving us the opportunity to host the call. After opening remarks by management, we shall Q&A. Please, go ahead, sir.

Anubhav Gupta — Chief Strategy Officer

Thanks, [Indecipherable] Thanks, Asian Market Securities for hosting us, and thanks to all the participants who have joined on our Q3 FY’23 Earnings Call. I welcome you all.

I am very glad to share that APL Apollo Tubes so has reported highest-ever quarterly sales volume, EBITDA and net profit in last quarter, Q3 FY’23. At the same time. I’m also glad to share that we are testing our peak capacity now consistently by doing monthly volume of about 230,000 tonnes per month. Hence, we are in process of expanding some capacity in plants through debottlenecking, apart from all the expansion which is happening in Raipur and Dubai and Calcutta. So we have — we have further expanded our expansion plans beyond 4 million tonnes, which we will talk going-forward.

Coming to some of the highlights in the last quarter. Number one is the Raipur update. All three complexes are now fully operational. We can tell you that — we can tell you that 1 million tonne of Raipur capacity is on-stream now the current run-rate is 30% utilization as per current month rate. Last year, we did 46,000 ton, which was around 25% utilization rate. You must have seen that the Q3 EBITDA per ton in Raipur was around 3,000 per tonne with the 25% utilization. So as the utilization levels ensures further, the margin spreads will ensure to the expected levels beyond INR5,000 per tonne.

In terms of product from Raipur, we launched two products. One is 500 square in the heavy structural segment and second is coated products for new roofing application. Now that Raipur plant is coming on-stream, we are becoming equally aggressive in the market creation for these products because these are highly innovative and being launched for the first time in India or globally.

So coming to the heavy structural side, we have now some more reputed projects where the work has started on tubular construction, which is in-line with our aggressive plans to create market for our heavy structural tubes. In yesterday budget, there were two segments where government was quite aggressive in terms of increased allocation for funds, which are railways and water infrastructure. Again, I can tell you that we had already had identified these segments earlier and we were focusing on these our segments, both railways and water infrastructure for the last six months. And today, we have got 10 railway stations where our design team is working to convert the design on tubes in upcoming railway stations, out of 25, 30 railway stations which had been awarded, and there are 100 more which are coming over the next two to three years.

In the Water Infrastructure segment, we have successfully demonstrated a sample of a tubular structure in Uttar Pradesh, where almost 200,000 liters of water over a tank storage on a 20 meter height staging has been demonstrated. So if the government approves that, it could provide huge opportunity for our heavy structural segment.

The third update I want to give you is the super value-added products where we are again focusing very aggressively. We are always inspired by our global peers who make EBITDA of INR16,000 per tonne outside India versus APL Apollo’s current EBITDA INR4,500 to INR5,000 rupees per tonne. So we always aspire to achieve a higher spreads, and to achieve this we are now focusing to increase sale of super value-added products in our portfolio, which can fetch us the net selling realization of INR80,000 per tonne, with EBITDA margin of 20% plus. So this implies EBITDA spread of INR18 to INR20,000 per tonne on some of the products. Of course, Raipur products are capable of producing these spreads and also within APL Apollo where we have monopoly in the structural and chemical side. We are we are trying to promote such products. And I can tell you that in January the the momentum was pretty good for such products.

The fourth update I want to highlight is our partnership with the Shankara Building. Our association with Shankara continues to yield greater results for the group. Our sales volume through Shankara channel is up 170% Y-o-Y in the first-nine months of FY 23. And now that the Raipur products are coming online, we are now more confident that Shankara will become our stronger partner to promote and to push our value-added products through its platform.

Coming to the quarterly results update. One concern investors have shown last quarter when our EBITDA spreads were below INR4,000 per tonne, we were pretty sure that we will bounce back sharply in Q3 and we did that with EBITDA spread over INR4,500 in the third quarter. This was on the back of two reasons. One was, of course, the channel destocking stop after the global commodity prices stabilized from month of September-October, and of course, the Raipur plant which had a negative operating leverage in Q2, now it turned into positive operating leverage with INR3,000 rupees per tonne EBITDA. So going forward with Raipur plant ramping up, the EBITDA spreads should should improve further versus what we are seeing in Q3.

Coming to operating cash flow, the performance remain strong with with INR6 billion of operating cash flow, which was equivalent to 85% of nine months EBITDA. The working capital remained in single-digit, now it’s been the 11th quarter where we have been able to maintain our working capital in single-digit. And now this has become the practice for us which remains best in the building material sector.

Out of the operating cash flow of INR6 billion, we spent INR5 billion on capex and rest INR1 billion was spent on dividend payments and investment in Shankara. So free cash flow was still negative. But going forward with Raipur capex coming to hand, we will have good amount of free cash flow generation, which will will make our debt zero nd there’ll be cash surplus on the balance sheet.

Our nine months ROC was at 29%, which is slightly lower than FY22, but this was because of investment of INR8 which is sitting in books for the Raipur, which is yet to yield results. So if we exclude Raipur, our ROC is above 37%. So we are confident that we will be hitting 35% ROC as the Raipur plant ramps-up over the next one to two years.

Coming on the guidance and future plans, we maintain our FY’23 sales volume of about 2.2 million tonnes with with with 4 million tonne hitting in FY ’25. The capacity, however, should be around 4.5 to 5 million tonne by FY24, which will be coming from Dubai, Calcutta, debottlenecking at existing APL plants, and Raipur becoming fully operationalized. And any capex which should be there of around INR5 million to INR6 million, which will be fully-funded from internal cash flows. So this gives us volume visibility beyond FY’25, wherein we’ll be hitting 5 million tonnes sales volume by FY’26.

So that’s it from our side and we’ll be happy to take questions. Thank you so much.

Operator

We begin the Q&A session, sir.

Sanjay Gupta — Chairman and Managing Director

Yes, go ahead, please.

Questions and Answers:

Operator

[Operator Instructions] We have the first question from the line of Garvit Goyal from Nvest Research. please go-ahead.

Garvit Goyal — Nvest Research — Analyst

Hello, good evening, sir.

Sanjay Gupta — Chairman and Managing Director

Please go-ahead.

Garvit Goyal — Nvest Research — Analyst

So basically in yesterday budget you also mentioned that local chances is on the infra side, so basically I wish to know how APL Apollo as a company i is going to be benefited out of this increased capital outlay along with the new airport and the air connectivity and stuff. So how do you think your entire product basket or the new new value-added products that you are bringing in, specifically that will cater to these get capex plana, sir.

Anubhav Gupta — Chief Strategy Officer

So if you look at the current sales mix of APL Apollo, right, 50% of our sales come from the residential segment, 25% comes from the commercial/institutional segment and 25% comes from the infrastructure segment, right, which is airports and railway stations, bullet trains, metro stations, etc., right. So if we decode yesterday’s budget, right?. There was lot of impetus on transportation infrastructure, right, which includes roadways and railways. Now in railways we have high-speed railways, bullet trains where our tubes are used anyways, right. But now what we are trying to do is we’re trying to increase the application in infrastructure by converting the structural design on tubes. So I did mention about railway stations, right. India has — the Indian government has awarded around 50 railway stations in the last one year, okay, a different cities, and 100 more yet to come.

So right now we have already approached the contractors and the architects who got those railway station, and today we are designing almost 10 to 15 or invitations, right. And we are able to demonstrate, we are able to prove that by using tubular construction they can reduce the time and they can also reduce some costs, right. So one registration we should we should start in next two to three months. And basis that, there will be like new orders coming from different contractors doing railway stations.

In airports, I mean you look at any new airport which has come up in last five years, any which you’ll see, Apollo will be at least 60%, 70% of that market share, right. Any new airport comes, All the roofing, all the ceilings are all on tubular truss. So, Apollo has been supplying material whether it is Bangalore, Hyderabad, Delhi, any new airport which has come up in last five years.

Then another focus area was water in infrastructure, right. So lot of government, state governments are focusing on sanitation and drinking water distribution. For that they require water tanks of up to 2 lakh to 3 lakh liter at the height of 20, 25 meter staging. So, this requires very strong structure, right. RCC, which is conventionally used, it takes around four to five months, okay, for creating a structure versus like what we could demonstrate in Uttar Pradesh last month was like three day job, right. It’s a prefabricated tubular structure which comes on site and by using 10 people –10 laborer’s you can erect a structure in three days, right. So we have already shown some photographs on our Twitter account, I’ll request you to visit that.

So, all this impetus on on infrastructure is going to help for APL Apollo in long-term. And given that 25%, 30% percent of our portfolio right now is coming directly from infrastructure, so we are pretty bullish on what Indian government has been doing so far and what it intends to do over the next two to three years.

Garvit Goyal — Nvest Research — Analyst

And that was very much deep. So secondly, sir, basically from the Raipur products you are entering into one slide was during your presentation that was hinting about the realizations at global level and you also mentioned in your speech about that. So how do you think this Raipur facility — basically I want to get a overview picture, means how you think that overall realizations likely to increase or likely to shape up in next two-three years on account of these super value-added products you mentioned, Sir.

Anubhav Gupta — Chief Strategy Officer

So see, I mean if you look at our product portfolio again, right, there are like three segments which are like value-added for us. One is heavy structural where we make EBITDA of 7000, 7,500 per tonne consistently. Second segment is is Apollo Z, which is which is pre-galvanized tubes. There also we make EBITDA spread of 6,000, 7,000 per tonne consistently.

Now Raipur products are extension of these products, right. So heavy structure what we are doing currently is 300 square, right. Now 300 square Gives us 7,000 per tonne and just imagine 5,000 square which is coming from Raipur, it’s the only product available in India, third mill globally, right. So the EBITDA spread has to be higher than 7,000 per tonne what we are making today, right. And it’s for more high-rise, more complex structures, right. So there we can command better premiums.

Now second is Apollo Z, which is like zinc-coated tubes, right. Now in Raipur we we are coming out with products which are combination of zinc and aluminum, we call them are alu-zinc, right. So it’s again a premium product, more premium product than Apollo Z. In Apollo Z We are making 7,000 per tonne spread. So in alu-zinc, we have to make superior margins, right. So again, I mean, being done for the first time in the world, not only in India. So we already have a strong foundation of product portfolio where we are making 7,000 per tonne EBITDA spreads consistently and with more innovation, right, and monopolistic products, the EBITDA spread should should be higher. So that’s what we say that, I mean, we should also have some products in the portfolio which should give us like 15%, 20% EBITDA margin, 15,000 per ton EBITDA spreads.

Garvit Goyal — Nvest Research — Analyst

And sir, you mentioned this 7,000, 6,000 EBITDA, but then just for clarification, these are called the super value-added products.

Anubhav Gupta — Chief Strategy Officer

6,000, 7,000, we are already making. You have the table in our presentation where there are these products where we have been making such margin for last four, five years now.

Garvit Goyal — Nvest Research — Analyst

And will you tell me please what will be the product mix or what is the share of total revenues of these products, sir.

Anubhav Gupta — Chief Strategy Officer

So right now the value-added products contribute around 65% to our portfolio, right, and 35% are general where the super value-added coming up, the general products will go down to 25% to 30%.

Garvit Goyal — Nvest Research — Analyst

Okay, that’s all from my side, sir. Thank you very much and all the best.

Operator

Thank you. We have the next question from the line of Rahul Agarwal from InCred Capital, please go ahead.

Rahul Agrawal — InCred Capital — Analyst

Yeah, hi, thank you, and good evening. Good to see some recovery in the overall in Raipur margins. I had three questions. Firstly on the raw material to Sanjay ji. So, APL in my sense is already the largest customer of HRC in India and now you would need another 1.5 million tonne for Raipur. Any thoughts on this in terms of discussions with suppliers? Could there be a problem in sourcing HRC enough or is this question irrelevant? That’s the first question.

Sanjay Gupta — Chairman and Managing Director

Good evening, Rahul. Rahaul, we have already tie-up for almost 2.5 million tonne with our steel plants. Now, I think we next year we are targeting for the volume of 3 million tonne. So we need 20%, 25% more material. I don’t think this is a big issue because lot of capacity is coming in India in the next few quarters, like one line is coming of 5 million tonne in JSPL, one line is coming 5 million tons for in Bellary with JSW, and NBCU is also going to start with a capacity of 3 million tonne, and Tata Steel also increasing the capacity of 2 million ton, MNS is also increasing their capacity by 2 million tonne. So I think almost 20 million tonne capacity is coming against. Right now today capacity is 50 million tonne in one year time in the next three-four quarters. So I don’t think raw material supply issue for us.

Rahul Agrawal — InCred Capital — Analyst

Got it, sir. Sir, secondly on the Raipur, just two questions there. Ramp-up of that volume for fourth quarter and next year, could you help with some direction and when does the balance 0.5 million tonne comes on stream?

Sanjay Gupta — Chairman and Managing Director

Yeah, next year we are targeting for Raipur for almost 0.6 million tonne. For Q4, we are targeting more than 1 lakh tonne. And we are targeting — and from APL we are targeting 2.4 million tonne from APL and 0.6 million tonne from Raipur and maybe 0.1 million tonne from Dubai and 0.1 million tonne from Kolkata. Total we are targeting our business plan of next year is 3.2 million tonne.

Rahul Agrawal — InCred Capital — Analyst

Got it, sir. Anubhav, when does the 0.5 million tonne balance start at Raipur.

Sanjay Gupta — Chairman and Managing Director

Next year, Rahul.

Anubhav Gupta — Chief Strategy Officer

FY 25.

Sanjay Gupta — Chairman and Managing Director

Capacity is already started, Rahul. But the problem is this is all new types of products and we are taking very good margins. So we don’t want to spoil the margin, because if you see our track record, after Corona we are only one forcing for the volume. Every year we are taking growth 13%, 14%. After Corona we are conducting — for last two years our growth in almost zero, but our EBITDA margin grew almost double. Now in next one year — this year we are 100% focusing on our growth of volume, likely close to 2.3 million tonne this year against 1.6 or 1.7 million tonne last year. So this our focusing – we focus on growth. Now next year again we came back on to the margin. So when you go for the growth, you have sacrifice the margin [Foreign Speech] you can manage your margin [Foreign Speech] how can we increase our margin from INR5,000 to INR6,000 per tonne.

Rahul Agrawal — InCred Capital — Analyst

Got it, sir. And lastly on the general structure, the profitability, the margins there have been very volatile. Where does this number settle down? [Foreign Speech]

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech] because this margin is dependent on the secondary market. Like December, January [Foreign Speech] We are focusing on our –right now we have almost order book 500 [Foreign Speech] so I think this takes 15, 20 days to [Foreign Speech] EBITDA margin almost INR20,000 [Foreign Speech] EBITDA margin INR12,000 per tonne [Foreign Speech] So our total focus is how do we take the Raipur margin from INR3,000, INR4,000 to INR7,000 to INR8,000 per tonne.

Rahul Agrawal — InCred Capital — Analyst

Thank you so much for answering my questions, sir. Best wishes for 2023.

Sanjay Gupta — Chairman and Managing Director

Thank you, Rahul.

Operator

Thank you. Thank you. We have the next question from the line of Sujit Jain from ASK Investments. Please go ahead. Sujit, can you hear us.

Sujit Jain — ASK Investments — Analyst

What would be the fixed costs in Raipur plant and when you say 25% utilization, what kind of capacity will come on stream because then that, but my calculation lead us to 8 lakh tonne capacity that would have been operational.

Sanjay Gupta — Chairman and Managing Director

Sujit, Raipur fixed cost is almost close to INR5 crores per month.

Sujit Jain — ASK Investments — Analyst

Okay, so INR6 crores per annum, okay.

Anubhav Gupta — Chief Strategy Officer

Yeah, so when we say that like we did 46,000 tonne in Q3, right, and EBITDA spread was around 3,000 per tonne, so, on a capacity of 1 million tonne right? So that’s length 25% utilization, and those rates have already going up month-on month. And for Q4 we expect around 100,000 tonne, so which will be 40% utilization rate, right. So the EBITDA spread should be further inching up from 3,000 per tonne to, like above 4,000 per tonne levels.

Sujit Jain — ASK Investments — Analyst

And you just spoke about, we see new lines. These will be supe value-added product lines. So, Raipur would be super value-added, the three divisions basically, right?

Anubhav Gupta — Chief Strategy Officer

Yes, and plus there are some products what we identified from existing Apollo portfolio, right, where where we see that if we are able to create market and incentivize our distributors, right, there we could get extra margin.

Sujit Jain — ASK Investments — Analyst

So just to understand anything about 2,000 is value-added. And then what threshold when it crosses you call it?

Anubhav Gupta — Chief Strategy Officer

So generally 2,000 okay. Value-add is 4,000 and super value-added 15,000 per tonne basis.

Sujit Jain — ASK Investments — Analyst

Okay. And Sanjay ji just spoke about division one — I mean the two new divisions in Raipur. The residential, basically the wider and thinner sheets, there one can expect close to INR12,000 per ton kind of a OP and solar dusting, etc., INR15,000 per tonne price.

Sanjay Gupta — Chairman and Managing Director

Some of our product is close to INR15,000 per tonne, some of our products is is close to INr12,000, some is INR7,000, INR8000, some is INR5,000 per tonne. We are not manufacturing anything less than INR4,000 per tonne less than in Raipur plant. So I think we can achieve. with average of INR8,000 — about INR8,000 per tonne in Raipur plant.

Anubhav Gupta — Chief Strategy Officer

So, Sujit what happens is that within the roofing sheet segment, right, there are SKUs, right. There are multiple colors, there are multiple sizes. In some sizes, we may be INR12,000, INR13,000 per ton. In some sizes we may get INR600, V7,000 per tonne. So on an average Raipur the target is to hit above INR7,000 per ton.

Sujit Jain — ASK Investments — Analyst

And the capEx that we spoke about, or moving from 4 to 4.5 million tonnes in FY 24 in terms of capacity. How much capacity will come in Dubai and how much would be in Kolkata?

Sanjay Gupta — Chairman and Managing Director

Sujit, right now the APL is — our aiming APL 3.2 million tonne. And after 100% when we finish our bottlenecking of the plant and 1.2 for Raipur ABL, 0.3 million tonne for Dubai, and 2.3 million tonne for Kolkata.

Sujit Jain — ASK Investments — Analyst

Right. So to sell roughly 3 lakh tonnes of higher which is the third-line or third division in Raipur, how much square footage in terms of construction that is needed to be basically tapped into.

Sanjay Gupta — Chairman and Managing Director

Raipur, total our construction is is almost close to 20 lakh square foot [Foreign Speech]

Anubhav Gupta — Chief Strategy Officer

So, Sujit, the math is around 6 kg, right, to sell three to sell 300,000 ton we will need 180 million square foot to be built, which which equals around 150 buildings of 0.5 million square foot each.

Sujit Jain — ASK Investments — Analyst

Okay, sure. Thank you.

Sanjay Gupta — Chairman and Managing Director

Thank you.

Operator

Thank you. We have the next question from the line of Madhav Marda from Fidelity. Please go ahead.

Madhav Marda — Fidelity — Analyst

Yeah, hi sir, good evening. Thank you so much for your time once again. Just wanted to understand, given that it’s good to see that you are announcing more debottlenecking at our existing facility. So is it that we are seeing more for lakh new applications such as this water tanks becoming a new end-market for us, which is helping us expand capacity at existing locations, but are we gaining share from competitors. What is helping us sort of — giving that positivity to add more capacity which is obviously good to see?

Anubhav Gupta — Chief Strategy Officer

So, I think Madhav, it is mix of both, right. So one is that, yes, we are gaining market share — secondary market scenario is also favorable for primary, right. Then we are deepening our distribution system, right. Our products like chowkhats and planks, there the sales are going up as those products were launched just before COVID, and for one to two years we were not able to market those products as per like the aggressive plan, but now the markets have opened up, so lot of promotional activities have started, right.

And then, yes, new applications where we are again working very hard to to replace structural steel tubes, right, against wooden structures, against angles and channels, right, against rebars, against concrete. So all these factors are playing role here, right. And the reason that why the nine months sales have been so strong, and we have been hitting — we have been to 20,000 ton of monthly volume. So yes, I mean, now it’s the time we believe that whatever we can squeeze in our existing assets right through the bottling bottlenecking, etc., we think that 3, 3.2 million tonne from 2.6 million tons at 10 plants, right. We have got 46 mills, right. So o this much of debottlenecking is possible.

Madhav Marda — Fidelity — Analyst

Understood. And our EBITDA per ton outlook for FY’24, ’25 stays in that roughly INR5,000 range as Raipur kicks in or how should we think about margins going ahead?

Anubhav Gupta — Chief Strategy Officer

Yeah, for the first nine months we are at around 4,200, right. Next year our target is INR5,000 per tonne. Like we said that next year the focus will be on margin recovery. And assuming that Raipur is able to deliver INR6,000, INR7,00, INR8,000 per ton, right, almost 1 million tonne of sales will be coming from there and and incremental sales through debottlenecking capacity, right. So that will also be more margin-accretive. So I guess as a group we want our EBITDA spread to hit INR6,000 per tonne. Now this happens in FY’25, FY’26, I mean difficult to say, but INR5,000 per ton is minimum, like you know, we will be doing with all the sales volume targets what we highlighted.

Madhav Marda — Fidelity — Analyst

Got it. And just last question from my side. Our capex outlook for FY’24, have you already got a budget in place? How much wie’l be spending for capex?

Sanjay Gupta — Chairman and Managing Director

For 5 million tonne capacity we need another around INR400 crore of capex.

Madhav Marda — Fidelity — Analyst

Well, that’s it, that’s that’s all the.

Anubhav Gupta — Chief Strategy Officer

So that should be equal to like our 30% of this year EBITDA, nine months — 40% of nine months EBITDA.

Madhav Marda — Fidelity — Analyst

So this is obviously because it’s debottlenecking so we don’t need to invest too much to expand capacity?

Sanjay Gupta — Chairman and Managing Director

Yes. Because there is only two new plants, Dubai and Calcutta, otherwise all the all the debottlenecking we are going to do.

Madhav Marda — Fidelity — Analyst

Understood. Okay, thank you so much.

Sanjay Gupta — Chairman and Managing Director

Thank you.

Operator

Thank you. We have the next question on line of Akshay from Canara Robeco Mutual Fund. Please go ahead.

Akshay Chheda — Canara Robeco Mutual Fund — Analyst

Yes, so thank you for the opportunity. So I just wanted to understand this EBITDA per tonne movement. So if I see Q2 FY23,EBITDA per tonne was around…

Operator

Akshay, your audio is a bit low, if you could kindly go off the speaker phone and come closer to the mic.

Akshay Chheda — Canara Robeco Mutual Fund — Analyst

Hello.

Anubhav Gupta — Chief Strategy Officer

Yeah. This is better.

Akshay Chheda — Canara Robeco Mutual Fund — Analyst

Yeah, so if I see the EBITDA per tonne in Q2 was INR3,850, and then in the presentation you had mentioned that INR300 was because of the adverse product mix, INR100 was the Raipur hit and then INR300 rupees or the incremental sweetener that you have to pass it on to the channels. So in Q3, if I assume that INR300 of sweeteners that we have to pass, that was out, and even we were turning profitable in Raipur. So that was around INR400 rupees. So INR3,800 plus INR400, that is INR4,200, but at least the product mix sequentially has not improved that much. So then what explains that incremental INR300 EBITDA that the company has done.

Anubhav Gupta — Chief Strategy Officer

So that incremental INR250, INR300 is the demand, right. When when when the channel started restocking, right, and there is good demand scenario and Apollo being the largest player, right. So there is like some short supply in the market. Then then you try to increase the pricing, right, and that also explains the dominant power of APL Apollo being the market leader that when market trends are favorable we can command premium. So that INR200, INR250 per tonne of effect was due to favorable market conditions. Aand that was across our products, right. That was across products.

Akshay Chheda — Canara Robeco Mutual Fund — Analyst

Okay, and how do you see the demand shaping in Q4. I mean [Technical Issues]

Sanjay Gupta — Chairman and Managing Director

Q4, we are targeting almost close to 7 lakh tonne of volume. Already we have done in month of January 2.5 lakh tonne.

Akshay Chheda — Canara Robeco Mutual Fund — Analyst

Okay, okay. So yeah, that’s it from my side. Thank you.

Operator

Thank you. We have the next from the line of Lavanya T from UBS. Please go ahead.

Lavanya T — UBS — Analyst

Hi sir, thanks for the opportunity. So I just wanted to understand this, the new opportunities like the water Infrastructure and all, for all of these products that design is being done by APL or the contractors or the subcontractors are increasing their ability in this space.

Anubhav Gupta — Chief Strategy Officer

So, so again, it could be either of the ways, right. So one is that obviously, Apollo takes the initiative, right. No contractor will be willing to spend time and energy on on designing anything on something new, right. And APL Apollo design team takes the initiative, right, where we offer the design for free of cost to the contractors and and if they feel that yes there is a saving, then they go ahead.

Second is that we may help the consultants of contractors or their design team — in-house design teams wherein our team goes and sits with them and then we can jointly design it, right. So it would be either the ways, but initiative is always taken by APL Apollo.

Lavanya T — UBS — Analyst

Okay, okay, got it. So I just wanted to check this because if the contractors they start building this ability, that would be much more helpful for APL to serve more number of buildings, like just you have highlighted like our target, we need 150 buildings of 0.5 square foot, so I just wanted to check that And I just missed your point on 18,000 to 20,000, the super valued products. What is the share that you are looking out of these products in next, like FY’24-’25.

Anubhav Gupta — Chief Strategy Officer

At least 10%.

Lavanya T — UBS — Analyst

Okay. So these are largely the products which are being served from Raipur and few in the existing portfolio of APL.

Sanjay Gupta — Chairman and Managing Director

So out of 4 million in FY’25, yes at least 0.5 million tonne should be coming above of 18,000 per tonne.

Lavanya T — UBS — Analyst

Got it, got it. Thank you. Thank you so much for the opportunity. All the rest.

Operator

Thank you. We have the next question from the line of Anupam Gupta from IIFL Securities. Please go ahead.

Anupam Gupta — IIFL Securities — Analyst

Hi, sir. I have a few questions. Firstly, on this quarter we see that realizations per se are up close to about 5.5, 6,000 per tonne, whereas, obviously the HRC prices were down Q-on-Q on an average basis. So what drove this higher realizations for us?

Anubhav Gupta — Chief Strategy Officer

So, Anupam. So, one is that, yes, NSR is up 5,000 per tonne. But if you look at the raw material price also, for us it was 62,000 versus 57,000 per tonnne. So even raw material price for us is up by INR5,000 per tonne.

Anupam Gupta — IIFL Securities — Analyst

But what drove that difference, because otherwise if you see HRC price on an average were down during the quarter versus the previous quarter.

Anubhav Gupta — Chief Strategy Officer

If you look at the average, right, you can’t take from like 31st October to 31st December, right. That’s not the right criteria, you need to take the average, right. Steel companies they lowered the price on month wise basis. So the average buying or average selling is what you see in our numbers. And that would be for for the steel companies also the NSR.

Anupam Gupta — IIFL Securities — Analyst

At least steel companies have reported a decline in NSR except one company, but broadly, so that’s why the big difference. That’s why that portion was coming, that average days [Indecipherable] have reported a decline for their HSR.

Sanjay Gupta — Chairman and Managing Director

We have a lot of product mix [Foreign Speech] mainly in downstream products [Foreign Speech]

Anupam Gupta — IIFL Securities — Analyst

Okay. Understand, sir. Second question is on the capacity [Foreign Speech] You said Raipur would be 1.2 million tonne, whereas if I recall right, Raipur was supposed to be 1.5 million tonne. So, why is it now 1.2?

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech] my all the lines can go up to 6,000 minimum. [Foreign Speech] we are committing — our capacity is 1.2 [Foreign Speech] This month we have done in APL 2.6 [Foreign Speech] 2.25 — 2.25 x 12 [Foreign Speech] this mill can produce 25,000, 30,000 tonne easily.

Anupam Gupta — IIFL Securities — Analyst

Okay, okay, understand, sir. [Foreign Speech] you have 1 million tonne is what is commissioned at this point of time and balance [Foreign Speech]Is that what I heard, is that right?

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech] so we are getting the certification from the departments [Foreign Speech] market volatility is too high [Foreign Speech] so we are still targeting 2.4 million [Foreign Speech]

Anupam Gupta — IIFL Securities — Analyst

Okay. Sure, sir. Also second [Foreign Speech] of that 1.2 billion [Foreign Speech] what is the breakup between, let’s say the tubes, the sheets and the other value-added, the super value-added products which you are saying in terms volume.

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech] Thickness from, 0.23 to 40 mm thickness, and 10 square to 1000 square dia. and roofing sheets and solar seets [Foreign Speech]

Anupam Gupta — IIFL Securities — Analyst

Okay, okay, understan. And, sir, one question if we look at this quarter [Foreign Speech] you have already exceeded 1 million tonnes of run-rate [Foreign Speech] which is almost equivalent to what is your capacity is. What is the plan. Incrementally, will you add more capacity in general structures or will you let go of that market share or not?

Sanjay Gupta — Chairman and Managing Director

No-no, we are not going to increase the capacity in this sector. Now we are only focusing on the value-added product. Right now [Foreign Speech]

Anupam Gupta — IIFL Securities — Analyst

Okay, so I believe the way to look at it [Foreign Speech]profitability should be on the lower side even though you’ll not lose market share.

Sanjay Gupta — Chairman and Managing Director

I think [Foreign Speech]

Anupam Gupta — IIFL Securities — Analyst

Okay. Okay, understand. And just one last question, sir, if you can give capex total plan for FY’23, ’24 and ’25, the total absolute number.

Sanjay Gupta — Chairman and Managing Director

For 5 million tonne, I require INR400 crore, plus-minus 5%. If our EBITDA margins are good in this year, then maybe we go in one year for this capex. If slightly business is sluggish, then we will go for two year capex plan for this, depending on the cash flow.

Anupam Gupta — IIFL Securities — Analyst

[Foreign Speech]

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech]

Anupam Gupta — IIFL Securities — Analyst

Okay, okay. Understand, sir. Thanks, sir.

Operator

Thank you. We have the next question from the line of Pallavi Agarwal from Antique Stock Broking. Please go ahead.

Pallav Agarwal — Antique Stock Broking — Analyst

Yeah, hello. This is Pallav Agarwal. So, my question was on — if I look at this quarter numbers, this purchase of stock on an absolute number has gone up, so is this saving part of the job work that you were mentioning you may probably getting the lower-end products converter from outside and purchasing there?

Sanjay Gupta — Chairman and Managing Director

Pallav, if you see the bump of October and November, market is on the downward trend, sales are very low. We have committed with steel plants [Foreign Speech] and with the long-term associated [Foreign Speech] that time we exit the material from [Foreign Speech] because trading is not our portfolio.

Pallav Agarwal — Antique Stock Broking — Analyst

[Foreign Speech]

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech]

Pallav Agarwal — Antique Stock Broking — Analyst

[Foreign Speech] So I’m guessing that’s why there’s a disconnect.

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech]

Pallav Agarwal — Antique Stock Broking — Analyst

[Foreign Speech]

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech]

Pallav Agarwal — Antique Stock Broking — Analyst

[Foreign Speech] So if you can just give us, you know [Foreign Speech]if you give us some idea of the traded volumes then maybe..

Anubhav Gupta — Chief Strategy Officer

Pallav, we will come back to you on this.

Pallav Agarwal — Antique Stock Broking — Analyst

Sure sir.

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech]

Pallav Agarwal — Antique Stock Broking — Analyst

[Foreign Speech]

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech]

Pallav Agarwal — Antique Stock Broking — Analyst

That I’ll take offline. Just also on this coated products. So I I look at JSW steel coated products performance [Foreign Speech] may be about six-seven quarters back, but since steel prices have been going down, they have been taking a lot of NRV losses, net inventory provision losses [Foreign Speech] they actually reporting a loss. So, I understand that’s a totally different segment. But — so just little [Foreign Speech] ultimately are going in the coated products, that is what our focus area is. So if you can just explain why we are different compared to them, so that’ll help.

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech] we compromise with the volume [Foreign Speech]

Pallav Agarwal — Antique Stock Broking — Analyst

Sure, sir. Sir, also just you know, I mean, in the general structure [Foreign Speech] so doe it now make sense to probably maybe acquire a smaller scrap based player to cater to that [Foreign Speech] and maybe the spreads over there can improve.

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech]from the brand Apollo [Foreign Speech] We can’t go into the [Foreign Speech] material, because the [Foreign Speech] but we are taking more EBITDA margins. So [Foreign Speech] but if you see the patla costing, patla is close to 52, 000, 53,000 per ton. [Foreign Speech] This is a matter of time [Foreign Speech] I don’t think[Foreign Speech] is going to survive more than one year or six months. Like last quarter, [Foreign Speech] but we have no raw material [Foreign Speech] but I don’t believe in the [Foreign Speech] material and this is not a long-term business. This is a opportunity business [Foreign Speech]

Pallav Agarwal — Antique Stock Broking — Analyst

Sure, sir. Fair enough. Sir, lastly just on you [Foreign Speech] our focus area is increasing over there because are some of the government tenders at very attractive margins compared to normal distribution business.

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech] why we don’t do.

Pallav Agarwal — Antique Stock Broking — Analyst

Right, so on payment terms, as you said payment terms also are…

Sanjay Gupta — Chairman and Managing Director

[Foreign Speech] so we stay away from these type of businesses.

Pallav Agarwal — Antique Stock Broking — Analyst

Sure, sir. Thank you so much for answering all the questions and all the best.

Operator

Thank you. We have the next question from the line of Mitul Shah from Reliance Securities. Please go ahead.

Mitul Shah — Reliance Securities — Analyst

Sir, thank you for the opportunity and congratulations for a very strong performance on operating margins. So, first question is again on EBITDA per ton for general structure is, you already highlighted in detail, but there is a big jump of nearly INR900 per tonne on Q-on-Q basis despite volume being low. So, sir want to understand out of this INR900 how much would be related to the pricing and how much is the raw material coming down? Because you also highlighted that raw material in general has gone up. So is it like more than INR900 we have comprising only.

Sanjay Gupta — Chairman and Managing Director

I’m earlier saying [Foreign Speech] with the primary one is with the secondary. [Foreign Speech] we are selling 75 to secondary [Foreign Speech] Now this gap is come down to INR3,000, INR4,000 per tonne [Foreign Speech] we are able to sell material on our prices.

Mitul Shah — Reliance Securities — Analyst

Okay, sir. So primary it is pricing power. The second question is on this railway modernization and airport related where we mentioned nearly 25%, 30% is coming from this infrastructure segment. So, sir, for this nine months how much would have been roughly from this railway modernization?

Anubhav Gupta — Chief Strategy Officer

See, I mean there are regular — there is a regular business which keeps on coming, which has been coming for last many years. What I highlighted was this new opportunity where these railway stations are being redeveloped, right. So railway stations have been awarded in last six months to 12 months. The work will start for them. Right now they are in all the approval stage, right. The work — the actual work will start from FY’24, right. So that’s when you see our volume contribution will be coming from next year. This year nine months whatever has happened, this is on regular business where our tubes have been — are being used anyways. But now we are — what we are saying is the whole railway station will be developed on tubes. And maybe three months down the line we will be able to share with you the railway station which is going to be constructed 100% on tubes in South India.

Mitul Shah — Reliance Securities — Analyst

Then on that, follow-up is that, how much would be per railway station in terms of either quantity or revenue potential?

Anubhav Gupta — Chief Strategy Officer

Typically a railway station has three structures, okay. One is called the Concourse building. Now Concourse building is the building, which is coming on above the railway tracks, right. There the railways is using it for shopping area, for office space, etc., etc. So that is on an average, say 400,000, 500,000 square foot. Then there could be additional office blocks, right. Now in some cases it is there, in some cases it is not there.

Then there is foot over bridge, FOB, right. They are mainly on steel, so that we are promoting on tubes. And third is the canopy for railway station for railway tracks. So put together, like one railway station could generate tube demand of around 3,000 tonnes.

Mitul Shah — Reliance Securities — Analyst

Okay. And sir, lastly on this margin side. Again, this being a kind of a government projects only. So directionally how one should look at margins from this projects, railway or airport?

Anubhav Gupta — Chief Strategy Officer

So again, this is part of our heavy structural tubes, Mitul, right, where we have been generating 7,000 per tonne EBITDA spread for many quarters now. So that’s the minimum you can take. And as these structures are complex where our 500 square, 1,000 square products will be used, there the margin will be in double-digits.

Mitul Shah — Reliance Securities — Analyst

Sir, in airport as we stated that nearly 60%, 65% is Apollo share, APL Apollo. Similarly, any number for railway based on past one or two-year?

Anubhav Gupta — Chief Strategy Officer

So railway whatever — see railway stations are yet to start like I said, but the metro stations, right, the Cochin metro, the Delhi Metro, the Mumbai Metro, wherever tubes have been used, Apollo market-share will be at least 60%, 70% percent.

Mitul Shah — Reliance Securities — Analyst

Thank you, and all the best.

Sanjay Gupta — Chairman and Managing Director

Thank you.

Operator

[Operator Instructions] We have the next question from the line of Rahul Jain from Systematics. Please go ahead.

Rahul Jain — Systematics — Analyst

Yeah, hi, thanks for taking my question. Sir, on the, last year we were little bit stronger on the tubular steel segment, where hospitals we had identified many such segments. So what is the progress on that and what kind — and where is this classified in our product classification segment and in terms of volume?

Anubhav Gupta — Chief Strategy Officer

So Rahul, so that comes under our heavy structural segment, one. Second, with the proof-of-concept of Delhi’s six hospitals, right, last year, now we have got approve — we have got approval with India’s largest private hospital chain, which is coming up with its five new greenfield projects. One hospital work has already started in Mumbai. Maybe like one month down the line we can send you over the site and you can have look with your own eyes. Then there is a housing project from Military Engineering Services, which is arm of Indian military. They are they are doing a housing project in New Delhi, right. It’s all tubular. One month down the line you can come and have a look, right. And now we have got buildings in Kathmandu, which is a new convention center which is coming up. One-two months down the line the work will start there. There is a university campus in Greater Noida, which is now being constructed over tubes.

So there has been good success for us in promotion of tubular construction, right. And with these new segments coming from railway stations and water tanks, etc., this we believe, I mean whatever the plans we had set for ourselves we are going to achieve those.

Rahul Jain — Systematics — Analyst

Yeah, thanks. That was very elaborate. And also we have given a number of 220, what kind of conversion do we expect and do we also get any kind of a service fee for within these kind of ideation and things like that?

Anubhav Gupta — Chief Strategy Officer

Right now we are offering these design free of cost.

Rahul Jain — Systematics — Analyst

Right, sir. Sir, also on Apollo Mart, any new progress on that and it seems to integrated with Shankara or [Technical Issues] have plans on that.

Anubhav Gupta — Chief Strategy Officer

Rahul, so we are very happy with the current arrangement with Shankara, right. Like I already told you the sales are up 170% in the first nine months, and we see more growth coming in the coming quarters based on new products from Raipur, right. So nothing on that front. Apollo mart, I mean we are still evaluating because the business is low-margin, right, high working capital intensive. So, we will be very prudent to allocate any capital at that front, right. Because, Apollo, we have learned hard to to come to like 35 40 percent kind of ROC level. So anything which we do new, right, it has to match those expectations, right. So unless it does that, we’re not going to go ahead. So it is still under evaluation mode.

Rahul Jain — Systematics — Analyst

That was very elaborate. Thanks.

Operator

Thank you. We have the next question from the line of Sujit Jain from ASK Investments. Please go ahead.

Rahul Jain — Systematics — Analyst

Anubhav, just to get the cash-flow…

Operator

Your audio is not very clear, request you to kindly go off the speaker phone.

Sujit Jain — ASK Investments — Analyst

Yeah, it’s a good now.

Operator

It’s still coming little hazy. If you will come much more closer to the microphone.

Sujit Jain — ASK Investments — Analyst

So basically I’m looking for cash-flow bridge. INR25 crores is what negative figure. And in Shankara you would have invested INR75 crores buying the promoters stake and then after that there is a preferential allotment. So how much went in 2022?

Anubhav Gupta — Chief Strategy Officer

Right. So INR75 crore went in FY22 and and warrant 25% money is this INR25 crores.

Sujit Jain — ASK Investments — Analyst

Okay, and the next tranche will be going when?

Anubhav Gupta — Chief Strategy Officer

So 18 months from the deal in Feb-March, so September this year.

Sujit Jain — ASK Investments — Analyst

September this year. And just to get this math right, perhaps you will require far higher volume in terms of square footage for higher dia mill, basically Raipur third-line. At 6 kg per square feet, probably that number works out to 3 times what you spoke 180 million of structural.

Anubhav Gupta — Chief Strategy Officer

That was my mistake, that was miscalculation. So yeah, so it should be it should be [Speech Overlap] 50 million square foot.

Sujit Jain — ASK Investments — Analyst

50 crore square feet.

Anubhav Gupta — Chief Strategy Officer

50 million, 5 crore square-foot. Just divide 3 lakh tons in 2000 kg divided by 6.

Sujit Jain — ASK Investments — Analyst

Right, right. Perfect, sir, thanks.

Operator

Thank you. We have the next question from the line of Alisha Mahawla from Envision Capital. Please go-ahead.

Alisha Mahawla — Envision Capital — Analyst

Hi sir, good evening. Thank you for the opportunity. Just wanted to know is there any inventory gain or loss in this quarter?

Anubhav Gupta — Chief Strategy Officer

No, Alisha. Maybe like INR10, INR20 per tonne, that’s about it.

Alisha Mahawla — Envision Capital — Analyst

And this quarter, Q2?

Anubhav Gupta — Chief Strategy Officer

Again, see, I mean, we have been highlighting that we work on a very limited inventory levels. So, I mean, steel prices, like in nine months are down by INR20,000 a tonne, right. And if you go with that math, I mean the inventory losses would have been INR200, INR300 massive, right. But there is no such booking, right. So our business is clear that we hold minimum inventory levels, right. Turnaround time is 20, 25 days. So any sharp increase or decrease in fuel prices shouldn’t impact us for more than like INR40, INR50 per ton.

Alisha Mahawla — Envision Capital — Analyst

Okay. And I just want to know when is the Dubai and Kolkata capacity coming on stream?

Anubhav Gupta — Chief Strategy Officer

So, like we have already guided that 100-K should come in FY24, right. So this mid year Dubai will start and end-of-the year Calcutta will start, and we will have like four-five months of Dubai plant operational and two-three months of Kolkata planned operational in FY24.

Alisha Mahawla — Envision Capital — Analyst

And just one last question, what products will we will making in Dubai and Kolkata?

Anubhav Gupta — Chief Strategy Officer

So, Dubai, the total capacity is 300,000 tonnes. In Kolkata, the total capacity will be around 200,000 tonness. The products will mirror like what APL Apollo right now is doing.

Alisha Mahawla — Envision Capital — Analyst

Okay sure. Thank you.

Operator

Thank you. That was the last question. I would now like to hand it over to the management for closing comments.

Anubhav Gupta — Chief Strategy Officer

Thanks, everyone, for joining us. It was a real pleasure to be here, and we hope we have been able to address all questions except from Antique Broking, which we will take up post this call. Thank you so much. Have a good day, bye.

Operator

[Operator Closing Remarks]