apar industries
TRANSCRIPT
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Company Overview
Apar Industries Limited is a leading manufacturer of speciality oils and
conductors in India. Apar is the fifth largest manufacturer of transformer oils
and conductors in the world and the largest domestic manufacturer of
transformer oils with approx. 50 per cent market share. The company is the
dominant supplier in the power transformer sector (132 KV to 800 KV). Apar
is the second largest manufacturer of aluminium conductors in India with
market share of 22 per cent. In Sep08, Apar entered into power and telecom
cables business by acquiring 66 per cent equity stake in Uniflex Cables.
Key Business Highlights
Investments in Power Sector Opportunity for Apar
The investment in power transmission sector in the 11th five year plan is
estimated at Rs 1,400 billion providing an investment opportunity of Rs 315
billion in the conductor segment. Apar with a 25 per cent market share
stands to gain from the investment opportunity in the conductor segment.
Ongoing expansion in the power sector will drive the transformer oil growth
by 15 per cent. Apar is well positioned to take advantage of the emergingopportunities with a 50 per cent market share in transformer oil segment.
Cables business to break even in FY11
Uniflex expects sales of Rs 300 crores with exports of Rs 75 crores in FY11. To
cater to the domestic demand, Uniflex Cables plans to increase its capacity at
its Umergaon plant in Gujarat. Uniflex expects a cash break even level of
profitability in FY11.
Export market provides a huge opportunity
IEA estimates USD 6.1 trillion of investments in T&D sectors during 2005-
2030 (transmission USD1.8tn, distribution USD4.3tn). China and India are
expected to account for 40 per cent of that. Apar contributes half of Indias
total export of aluminium power conductors and enjoys approvals from
overseas utilities in strategic markets like Iran, Iraq, Middle East and Africa.
Rs 1083 crores order book in conductor business ensures revenue visibility
As on 1st April, 2010, Apar Industries had an order book position of Rs. 1083
crores in confirmed orders and Rs 286 crores in the pipeline. Approximately
75 per cent of these orders (confirmed and pipeline) will be executed in FY11
Key Risks
Aluminium and base oils are the two major raw materials of thecompany, any significant volatility in the price of crude oil and
aluminium can affect the profitability of the company.
Around 30 per cent of the business comes from the export markets;any significant change in currency valuation could affect the
profitability.
Delay in the orders / postponement of the order booked from thekey clients like Power Grid will adversely affect the companys sales.
Valuations
The stock is currently trading at a P/E multiple of 30.0x on its FY10 EPS of Rs.
7.6 and 2.7x EV/EBITDA multiple based on FY10 EBITDA of Rs. 153 crores.
uly 16, 2010
BSE Code 532259
BSE ID APARIND
High/Low 1Y (Rs.) 284 / 113
Avg. vol (3m) 13,388
Market Cap (Rs Cr) 735Net IB Debt (Rs Cr) (327)
Enterprise value(Rs Cr) 408
Shareholding % Mar-10 Jun-10
Promoters 62.15 62.15
MFs/ Fis/ Banks 13.64 14.84
FIIs 1.86 2.66
Public & Others 22.35 20.35
Stock Chart ( Relative to Sensex)
Stock Perfm.(%) 1M 6M 1Yr
Absolute (0.4) 21.8 93.0
Rel. to Sensex (2.5) 14.2 74.0
Financials (Rs.Cr) 03/08 03/09 03/10
Revenue 1,771 2,643 2,251
-o-y 17.2% 49.2% -14.8%
EBITDA 125 56 153
-o-y 17.1% -54.9% 171.4%
PAT 89 (5) 24
EPS (Dil.) 27.5 (1.7) 7.6
-o-y 85.4% PL LP
EBITDA Margin 7.1% 2.1% 6.8%
PAT Margin 5.0% -0.2% 1.1%
D/E(x) 0.35 0.58 0.57
P/E(x) 8.3x NA 30.0x
EV/EBITDA(x) 3.3x 7.2x 2.7xROCE 28.8% 9.4% 30.2%
ROE 31.2% NA 1.3%
50
100
150
200
250
23-Jul-09 23-Jan-10 23-Jul-10
Apar Sensex
nancial Year ends at March 31
Qtry Fin 06/09 09/09 12/09 03/10
Revenue 659 505 488 521
PAT (19) 24 22 22
EPS (5.7) 7.6 6.9 6.9
ll figures in Rs. crores except for per share datatry fig. shows standalone results
Speciality Oils & Elect. Equip.
CMP Rs. 227 Apar Industries Limited
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Apar Industries Ltd
Business Description
Incorporated in 1958, Apar Industries Limited is a leading manufacturer of speciality oils
and conductors in India. The manufacturing facilities are located in Rabale, Silvassa and
Nalagarh. Apar is the fifth largest manufacturer of transformer oils and conductors in the
world. In the domestic market, Apar is the largest manufacturer with approximately 50
per cent market share and is the dominant supplier in the power transformer sector (132
KV to 800 KV). Apar is the second largest manufacturer of aluminium conductors in Indiawith a market share of 22 per cent. In September 2008, Apar entered into the power and
telecom cables business by acquiring 66 per cent equity stake in Uniflex Cables for a total
consideration of Rs 84.5 crores. Apar derives about 75 per cent of its revenue from the
power sector on the basis of end use. Apars subsidiaries include Petroleum Specialties
Pvt. Limited, Quantum Apar Speciality Oil Pvt. Ltd, Uniflex Cables Limited and Marine
Cables & Wires Private Limited.
Revenue Composition
Apar has two main business segments: Transformer and speciality oils segment and
Conductor segment. Power and telecom cables business is operated through its
subsidiary - Uniflex Cables.
Break Up of Consolidated Gross Revenue in FY10
Power &
Telecom Cables
8%
Transformer Oi l
& Speciality
Oils
49%
Conductors
43%
Source: Annual Report
Apar derives 28 per cent of its total revenue from the export market.Apar contributes
half of Indias total export of aluminium power conductors and a significant proportion of
its domestic consumption.
Segment Product Domestic Market Export Market
Conductors 75% 25%
Transformers & Speciality Oils 69% 31%
Power / Telecom Cables 78% 22%
Total 72% 28%
Source: Annual Report
Apar is the fifth largest
manufacturer of
transformer oils and
conductors in the world
Transformer oil and
speciality oils segment
contributed 49 per cent
revenue in FY10
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Apar Industries Ltd
Transformer oil and specialty oils: Apar ventured into the specialty oils business in 1969
with technical know-how from Sun Oil Company (USA). This segment contributed 48.5
per cent of the companys revenue. The product portfolio includes transformer oils,
white oils and others (industrial lubricants, rubber processing and ink oils) contributing
50 per cent, 12 per cent and 38 per cent, respectively to the divisions revenue.Product %
sub-segApplication Purpose Prospects Customers
Transformer
Oil
50% Power &
distribution
transformers, which
account for 5 8%
of the total
transformer cost
Cooling; Critical
insulation
medium, used as
a diagnostic tool
to maintain
transformer
performance
Ongoing expansion
in the power sector
will drive the
transformer oil
growth by 15%
ABB,
Areva,
BHEL,
Siemens,
Crompton
Greaves,
EMCO etc
White Oil 12% Widely used in
Pharma products,
cosmetics & food
related applications
Serves as base
material
Robust growth in
healthcare products
and cosmetic and
polymer industries
Hindustan
Unilever,
Marico,
Dabur etc
Rubber
Process Oil
13% Manufacture of
rubber products(
automobile tyresand tubes, bicycle
tyres, tyre
retreading material,
belting, hoses and
battery containers)
Helps in blending
rubber with other
chemicals
Growing demand
from the tyres and
automobileindustries
CEAT,
MRF,
Apollo, JKTyre
Industrial
and
Automotive
lubricants
25% Used in
compressors,
refrigerators and
automobile engines
Provides
lubrication
between moving
machine pats;
provide cooling
effect
Increasing number
of OEM projects;
rising demand from
the automobile
industry, increasing
industrialisation
Escorts,
Kinetic and
Others
Source: Company & Annual Report
Aluminium Conductors: Apar manufactures a full range of AAC (All Alloy Conductors),
ACSR (Aluminium Conductors Steel Reinforced) and AAAC (All Aluminium Alloy
Conductors). Over the years, Apar has strengthened its product mix through a shift from
AAC and ACSRs to alloy based conductors. Major contribution to Apars segment revenue
comes from ACSR conductors which are more suited for river crossing, narrow valleys etc
Power Grid is the largest client of Apar for conductors.Apar enjoys approvals from all
overseas utilities, in strategic markets like Iran, Iraq, the Middle East and Africa, and
enjoys a preferred supplier status with them.
Product % sub-seg Application Purpose Outlook Customers
All Aluminium
Conductors
(AAC)
Distribution of
electricity
All Aluminium
Alloy Conductors
(AAAC)
35% - 40% Transmission
and distribution
of electricity
All Aluminium
Steel Reinforced
(ACSR)
60% - 65% Transmission
and distribution
of electricity
Mounted on
transmission
towers and
constitutes part of
the transmission
network that
delivers bulk power
from power
stations to load
centres and large
industrial
consumers
Fresh
investment
in
transmission
and
distribution
space will
drive the
demand for
conductors
Jyoti
Structures,
KEC Intl,
Kalpataru
Power, L&T,
NTPC, Power
Grid, SAE, ABB,
Energo Invest,
Ibedrolla,
Spain, S.A.,
Tata Power
and others.
Source: Company & Annual Report
Apar has reputedclientele like ABB,
Areva, BHEL and
Siemens for its
transformer oil product
category
Aluminium Conductors
Steel Reinforced (ACSR)
contributes more than
60 per cent revenue to
the aluminium
conductors category
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Apar Industries Ltd
Power/ Telecom Cables:
During FY08, Apar acquired a 66 per cent equity stake in Uniflex Cables, which
manufactures power and telecom cables for a total consideration of Rs 84.5 crores. It has
reflected goodwill to the extent of Rs 60 crores on consolidated balance sheet on account
of Uniflex acquisition as on FY09 and has charged impairment in FY 10. Uniflex reported a
turnover of Rs 180.7 crores with a net loss of Rs 22.6 crores in FY10. The manufacturing
facility is set up at Umbergaon, Gujarat and the products are marketed under the brandname of UNICAB. Around 22 per cent of Uniflexs total revenue comes from the export
market. The company primarily exports to Africa and the Middle-East.
Growth Drivers
Investments in Power Sector Opportunity for the conductor and transformer
oil business: The Aluminium conductors business has seen a significant growth in
the recent past which has been driven mainly by the power sector reforms,
aimed at expanding the generation capacity and strengthening the transmission
& distribution network. This growth is likely to be sustained given the large
investments proposed in the power sector.
According to the Central Electricity Authority (CEA), as of February 28, 2010,
Indias power generation systems had an installed capacity of around 157,229
MW. The current installed transmission capacity is only 13 per cent of the total
installed generation capacity. The Ministry of Power plans to establish an
integrated National Power Grid in the country by 2012 with close to 200,000 MW
generation capacities and 38,650 MW of inter-regional power transfer capacity.
Considering the current inter-regional power transfer capacity of 20,750 MW, the
corresponding investments in the transmission sector are expected to be
augmented. The overall investment in the power sector in the 11th five year plan
(across all the segments) is estimated at Rs 8,370 billion, out of which Rs 1,400
billion is planned to be spent on transmission schemes providing an opportunityof Rs 315 billion in the conductor segment.Apar with a 22 per cent market share
stands to gain from the investment opportunity in the conductor segment.
Transformer Oil: The 11th five year plan will generate a demand for 1,12,323 MVA
p.a. of transformers which will give rise to the demand for transformer oil. As per
Apars annual report FY09, the requirement of transformer oil stands at 1,10,000
KL p.a. This represents 60- 65 per cent of the transformer oil market accrued
from the OEM segment. Replacement demand is around 35 per cent of the total
demand for the transformer oil market. Apar is well positioned to take advantage
of the emerging opportunities with a 50 per cent market share in transformer oil
segment.
Focus on the value added products:Apar is focusing on the development of high
value products which is a high margin business. The Transformer oil segment has
received significant orders for its high oxidation stability grade products meeting
special application requirements of Extra High Voltage transformers, with ratings
of 400 KV to 800 KV from several global transformer majors. This segment is
expected to have a much higher demand in the years to come as the BRIC
The current installed
transmission capacity is
only 13 per cent of the
total installed
generation capacity
Focusing on Extra High
Voltage transformers
with ratings of 400 KV
to 800 KV
Investment in thepower sector in 11th
five-year plan is
estimated at Rs 8,370
billion, providing an
opportunity of Rs 315
billion in the conductor
segment.
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Apar Industries Ltd
countries, including India build high voltage transmission networks. Apar, is so far
the only Indian company to have this approval from global transformer OEMs.
Apar is focusing on developing high temperature conductors which can carry a
higher amount of current. The capacity to carry more current is being increased
by 25 per cent, 50 per cent and up to 100 per cent. At the moment, in India,
there is no significant demand for the conductors. With the government's focuson high-voltage transmission grid, the demand for high voltage conductors is
expected to witness a major push in the coming years.
Order book of Rs 1083 crores in conductor business ensures revenue visibility:As on 1st April, 2010, Apar Industries had an order book position of Rs. 1083
crores in confirmed orders and Rs 286 crores in the sales pipeline. Approximately
75 per cent of these orders (confirmed and prospect pipeline) will be executed in
FY11. Power Grid Corporation is the largest domestic customer with a Rs 500
crores order book (confirmed and orders in pipelines), while Adani Power is the
other significant client, with an order book of approx. Rs 300 crores. 2HFY10 had
lower order execution as there were delays/ re- schedulement of several orders
that had been booked. However, the postponement of the execution of these
orders will result in a substantially higher volume in FY11.
Current Order Book Position of Rs 1083 Crores
569
910
1093
975
834769
1083
775
154 185
635
287
378
315
0
200
400
600
800
1000
1200
1QFY09 2QFY09 3QFY09 4QFY09 1QFY10 2QFY09 4QFY09
Rs
.inCrores
Confirmed Orders Orders in Pipeline
Source: Company Financials
In 3QFY10, the order book position was Rs 1230 crores, which is not included in
the graph as the pipeline information is not available.
Cables business to break even in FY11: Uniflex expects sales of Rs 300 croreswith exports of Rs 75 crores in FY11 and Rs 1,000 crores in the next five years.
Over the next few months, Uniflex plans to launch a slew of products in the
domestic market, which it currently exports. To cater to the domestic demand,
Uniflex Cables plans to increase its capacity at its Umergaon plant in Gujarat.
Uniflex expects a cash break even level of profitability in FY11. The total domestic
cable market comprising both the organised and unorganised sectors is around
Rs 20,000 crores, with the organised sector valued at around Rs 5,000 crores.
75 per cent of the order
book will be executed in
FY11
Uniflex plans to launch
products in the
domestic market, which
it currently exports
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Apar Industries Ltd
Export market provides a huge opportunity for the company: Apar derives 28per cent of its total revenue from the export market. Apar contributes half of
Indias total export of aluminium power conductors and enjoys approvals from
overseas utilities in strategic markets like Iran, Iraq, the Middle East and Africa.
The company also exports its specialty oil through joint ventures in Australia,
South Africa and Turkey.
The International Energy Agency (IEA) estimates USD 6.1 trillion of investments in
T&D sectors during 2005-2030 (transmission USD1.8tn, distribution USD4.3tn).
China and India are expected to account for 40 per cent of this outlay.
USD 6.1 trillion of investments in T&D during 2005-2030
0
500
1,000
1,500
2,000
US$
Bn
Distribution 711 507 82 88 1258 383 158 193 274
Transmission 314 159 47 25 579 176 73 89 126
North
America Europe Japan Russia China IndiaMiddle
East AfricaLatin
America
Source: KEC International Corporate Presentation, IEA World Energy Outlook 2006
Considerable investments are being dedicated to widen the T&D network across
Africa, the Middle East and the ASEAN, which augurs favourably for Apar, since it
Apar contributes half of
Indias aluminium
power conductors
China and India will
account for 40 per cent
of an expected USD 6.1
trillion investment
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Apar Industries Ltd
already enjoys a presence in these global markets. This will enable the company
to strengthen its focus outside India.
New Business Initiatives
Evaluating electron beam technology for cable business: This is a newgeneration cable, which is being used in ships, in the design sector, in railroads
and will slowly be used for house wires and LV cables etc. The significant
property of Ebeam is its resistance to temperature and fires. The total number of
tenders for conventional cables has been reducing y-o-y, while those for EBEAM
cables are on the rise. The project will entail almost Rs 20 crores of capex. The
technology can be used beyond cables and can be used for various other
products by electron beam curing.
Independent testing laboratory: Apar has a NABL certification for its oil
laboratory which is on the same lines as CPRI or ERDA.It is the first in the private
sector to acquire this certification for specialty oils. In addition, Apar is also DSIR
(Department of Science and Industrial Research) accredited, which in turn affords
the company benefits in terms of the custom duties.The company is involved in
application work on transformer oils as well as industrial oils and is ken on third
party testing.
Key Risks
Highly volatile raw material prices: Aluminium and base oils are the two majorraw materials of the company. Prices of base oils are directly related to crude oil
prices, any significant volatility in the price of crude oil and aluminium can affect
the profitability of the company.
Foreign exchange fluctuation: Around 30 per cent of the business comes fromthe export markets; any significant change in currency valuation could affect the
profitability.
Delay in the orders / postponement of the order booked from key clients likePower Grid will adversely affect the companys sales.
The commodity cycle is
on an upward trend,
this may put some
pressure on margins
Adoption of Ebeam
technology will entail a
Rs 20 crore capex
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Apar Industries Ltd
ProfitabilityTotal Revenue declined by 14.8 per cent in FY10;
Apars consolidated total revenue grew at a CAGR of 19.3 per cent from Rs. 1,112 crores
in FY06 to Rs. 2 251 crores in FY10 driven by strong growth in the power sector. However,
the total revenue declined in FY10 by 14.8 per cent mainly due to reduction in raw
material prices of base oils and crude oil as well as reduction in the prices of aluminium
resulting in the consequent reduction in sale prices. Part of the decline was also due to
the lower sales volume of conductors in FY10.
Apars Consolidated Revenue and Growth
1511 17712643 2251
17.2%
35.9%
49.2%
-14.8%
-2000
-1000
0
1000
2000
3000
4000
5000
FY07 FY08 FY09 FY10
Rev
enue(Rs.inCrores)
-20%
-10%
0%
10%
20%
30%
40%
50%
Growth(%)
Total Revenue Growth (%)
Source: Company Financials & ICRA Online Research
Conductor business contributed 43 per cent of the total revenue in FY11. Conductor
business has grown at a CAGR of 22.4 per cent during FY06-FY10 on the back of power
sector reforms in India. However, FY10 witnessed a downturn in conductor sales and
volume by almost 31.5 per cent and 16.3 per cent, respectively, mainly due to lowerorder execution as there were delays/ re-scheduling of several booked orders. Some of
this is attributable to delayed financial closure (from FY09 crisis post Sept. 2008) or
project delays due to right-of-way-issues. However, the postponement of these orders
execution will result in substantially higher volume in FY11.
Conductor Business Performance
42 4957
9075
124112
140
115
140
0
20
40
60
80
100
120
140
160
FY06 FY07 FY08 FY09 FY10
Volume('
000MT)
0
20
40
60
80
100
120
140
160
Realisation(R
s'000/MT)
Conductor Volume Realisat ion
Source: Company Financials & ICRA Online Research
Revenue declined in
FY10 due to reduction
in raw material prices,
sale prices and lowervolume off-take of
conductors
Delays/ re-schedule of
FY10 orders will result
in higher growth in FY11
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Apar Industries Ltd
Transformer Oil & Specialty Oil business which forms almost half of the total revenue pie
performed better than the conductor business. Apar has recorded revenue CAGR of 20
per cent during FY06-09. Transformer Oil in particular forms around 42 per cent of this
segment and has posted gross sales at a CAGR of 15 per cent during FY06-FY10 with
volume growth of 10 per cent (CAGR). Realisation in FY10 was on account of lower raw
material prices of base oils and crude oil.
Transformer Oil Performance
7682
104 102111
39
60
404334
0
20
40
60
80
100
120
FY06 FY07 FY08 FY09 FY10
Volume('000MT)
0
20
40
60
80
100
120
Realisation(Rs'000/MT)
Transformer Oil Volume LHS Realisation RHS
Source: Company Financials & ICRA Online Research
Power and Cables business through Uniflex has posted revenue of Rs 180 crores in FY10
compared to Rs 128 crores in FY09. There have been significant signs of improvement in
volumes and the company targets revenue of Rs 275300 crores and cash level
profitability in FY11.
Margins improved in FY10 on back of economic recovery
Apar EBIDTA margins have been in the vicinity of 7 per cent during FY06 -10 except FY09
where the margins dropped due to the global crisis. Similarly EBIT margins are in therange of 6 6.5 per cent. In FY10, Conductors EBIT margins were at 6.1 per cent and
Transformer Oil & Speciality Oils EBIT margins were at around 10 per cent. In the case of
transformer oils, the sales mix improved, with high performance oils targeted at EHV
customers of 220 KV to 765 KV power transformers both in domestic and overseas
markets; this has led to better margins.
Margin trends
80107
125
56
153
71 97 111 13542
7.2% 7.1% 7.1% 6.8%
2.1%
6.0%
1.6%
6.3%6.4%6.4%
0
50
100
150
200
FY06 FY07 FY08 FY09 FY10
Rs.
inCrores
0%
2%
4%
6%
8%
Margins
EBITDA EBIT EBITDA Margin (%) EBIT Margin (%)
Source: Company Financials & ICRA Online Research
Consolidated margins
deteriorated in FY10due to higher other
expenses
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Apar Industries Ltd
Industry Overview
Power Sector
Indian power supply needs to grow at approximately more than 7 per cent annually to
keep pace with gross domestic product which is targetted at 8 per cent per annum.
(Source: Ministry of Power, April 2009). As of March, 2010, India faced an energy
shortage of approximately 9.5 per cent of total energy requirements and 13.8 per cent ofpeak demand requirements.
The average per capita consumption of electricity in India is estimated at 704 kWh during
2008-09. This is fairly low when compared to some of the developed and emerging
nations such US (~15,000 kWh) and China (~1,800 kWh). Moreover, the world average
stands at 2,300 kWh.
The Central Government has identified the power sector as a key focus area to promote
sustained industrial growth by embarking on an aggressive mission "Power for All" by
2012. According to the Integrated Energy Policy report issued by the Planning
Commission, India would require additional capacity of approximately 73-86 GW by2012, 159-190 GW by 2017 and 278341 GW by 2022, respectively, based on normative
parameters in order to sustain a 8-9 per cent GDP growth rate (Source: IEP, Expert
Committee on Power).
Power generation capacity planned during the XIth Plan
Year Hydro Thermal Nuclear Total % Achievement
2008 2,372 9,007 660 12,039 77%
2009 1,097 5,773 660 7,530 46%
2010 845 13,002 660 14,507 66%
2011 1,346 17,793 1,220 20,359
2012 9,967 14,118 180 24,265
XIIth Plan 15,627 59,693 3,380 78,700Source: Infaline Energy
According to the latest assessment of Central Electricity Authority, a capacity addition of
62,374 MW is likely to be achieved with a high level of certainty during 11th
five year Plan
period.
Out of nine sites identified by the CEA in consultation with the States for development of
Ultra Mega Power Projects (UMPPs), comprising of 765kV & 400kV Lines and Substations,
with a capacity of approximately 4,000 MW each, on a Build, Own, and Operate (BOO)
basis, four projects have been awarded and few more projects are likely to be brought to
the bidding stage.
The strengthening of the National Power Grid through high capacity AC EHV lines and 765
kV UHV AC lines/ HVDC lines has been envisaged by the Government of India to facilitate
transfer of power within and across the regions upto 38,650 MW by 2012.
Average per capita
consumption of
electricity in India is
estimated at 704 kWh
much lower than theworld average of 2,300
kWh
Capacity addition of
62,374 MW is likely to
be achieved during the
11th
five year plan
period.
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Apar Industries Ltd
Planned Inter Regional Capacity
Capacity in MWXth Plan,
Mar 2007
Existing,
Mar 2009
XIth Plan,
Mar 2012
Est. Addition
in XIIth PlanXIIth Plan
East-South 3,130 3,630 3,630 4,200 7,830
East North 3,430 6,330 12,130 5,900 18,030
East- West 1,790 2,990 6,490 10,500 16,990
East North East 1,260 1,260 2,860 0 2,860
North West 2,120 3,220 4,220 10,200 14,420
West South 1,720 1,720 2,720 6,300 9,020
North East
North/ West
0 0 6,000 0 6,000
Total (220kV & above) 13,450 19,150 38,050 37,100 75,150
132/110 kV links 600 600 600 0 600
Total 14,050 19,750 38,650 37,100 75,750
Source: CEA
GoI plans to focus on the creation of a national grid in a phased manner by adding over
95,000 ckm of transmission network by 2012.
Planned Transmission Lines
in ckmXth Plan,
Mar 2007
Existing,
Mar 2009
XIth Plan,
Mar 2012
Est. Addition in
XIIth Plan
765kV 2,184 3118 7,612 25,000 to 30,000
HVDC 500 kV 5,872 7172 7,478
HVDC 800/600 kV 0 3,600 5000
400 kV 75,722 89496 1,25,000 50,000
220 kV 1,14,629 122960 1,50,000 40,000
Total ckm 1,98,569 222746 2,93,852 155,000 to 180,000
Source: Presentation on Transmission System Requirement for the 12th
plan ( 20012-17) CEA
ConductorsThe conductor industry has seen good growth in India, on account of investments made
in the power transmission and distribution sectors. Power conductors are used in
transmission and distribution lines. With reforms in the power sector set to continue, a
lot of investments are expected to flow into the transmission and distribution segment.
Rs 315 billion opportunity for the conductor business
Source: Sterlite Technologies Annual Report 2009
With reforms at an
accelerated pace,conductor industry will
benefit
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Apar Industries Ltd
Sterlite Technologies and Apar Industries are major players in the conductor business
with market share of 30 per cent and around 22 per cent, respectively.
Transformer Oil
Transformer oil is a highly-refined mineral oil that is stable at high temperatures and has
excellent electrical insulating properties. It is used in oil-filled transformers, some types
of high voltage capacitors, fluorescent lamp ballasts, and some types of high voltageswitches and circuit breakers. Its functions are to insulate, suppress corona and arcing,
and to serve as a coolant. Demand for the transformer oil comes from the transformer
market.The transformer oil market can be divided into OEM and replacement demand.
However, as 60 per cent - 65 per cent of the revenue is acccured from the OEM market.
Apar is the largest player with 50 per cent market share in the transformer oil market
with a turnover of approx 1,31,000 KL in FY10.
Generally, 1 MW of power addition requires 7 MVA of transformer across generation,
transmission and distribution. A 62,374 MW capacity achievement in XIth plan, will
generate an additional demand for 87,323 MVA p.a. of transformers. A transformer has
a shelf life of around 25 to 30 years. Thus transformers that were installed in 1980-
1985 are likely to be replaced in the near future, which implies a replacement demand
of 25,000 MVA per annum.Thus the demand for transformers is pegged at 1,12,323 MVA
per annum. As per Apars annual report 2008-09, the requirement of transformer oil
stands at 1,10,000 KL p.a.
The requirement of
transformer oil stands
at 1,10,000 KL p.a.
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Summary FinancialsProfit & Loss Statement
Particulars (Rs Crores) FY06 FY07 FY08 FY09 FY10
Total Revenue 1112.4 1511.4 1771.4 2643.2 2251.3
Growth (%) 35.9% 17.2% 49.2% -14.8%
Cost of Good Sold (849.6) (1203.1) (1394.6) (2248.8) (1736.5)
Gross Profit 262.7 308.3 376.8 394.4 514.8
Growth (%) 17.4% 22.2% 4.7% 30.5%
Employee Costs (13.8) (15.9) (18.9) (26.6) (34.0)
Other Expenditure (169.3) (185.7) (233.0) (311.4) (327.8)
EBITDA 79.6 106.7 124.9 56.4 153.0
Growth (%) 34.0% 17.1% -54.9% 171.4%
Depreciation (8.6) (10.0) (14.0) (14.7) (18.5)
EBIT Profit 71.0 96.7 110.9 41.7 134.5
Growth (%) 36.2% 14.7% -62.4% 222.9%
Net Interest expense (20.9) (32.4) (37.1) (41.2) (33.2)
Other Income(expense) 4.5 4.4 0.0 0.1 0.2
Exceptional Items (1.7) (3.8) (3.8) (1.7) (1.2)
PBT 52.8 64.8 70.0 (1.2) 100.4
Growth (%) 22.6% 8.1% PL LP
Income Tax (10.9) (16.7) (11.8) (2.3) (22.4)
Profit after Tax 41.9 48.1 58.3 (3.5) 78.0
Growth (%) 14.8% 21.2% PL LP
Extra Ordinary Items & Others 0.0 0.1 30.6 (1.8) (53.6)
Net Profit 41.9 48.2 88.9 (5.3) 24.4
Basic EPS 18.6 15.3 27.5 (1.7) 7.6
Diluted EPS 18.7 14.8 27.5 (1.7) 7.6
DPS 3.5 3.5 5.5 0.0 5.0
Equity Capital 20.8 32.3 32.3 32.3 32.3
Face value 10 10 10 10 10
Ratio Analysis
Particulars (Rs Crores) FY06 FY07 FY08 FY09 FY10
Margins
Gross Margin (%) 23.6% 20.4% 21.3% 14.9% 22.9%
EBITDA Margin (%) 7.2% 7.1% 7.1% 2.1% 6.8%
EBIT Margin (%) 6.4% 6.4% 6.3% 1.6% 6.0%Net Profit Margin (%) 3.8% 3.2% 5.0% -0.2% 1.1%
Valuation
EPS 18.7 14.8 27.5 (1.7) 7.6
BVPS 88.3 67.0 88.0 86.6 87.6
P/E (x) 12.2 15.3 8.3 NA 30.0
P/BV (x) 2.6 3.4 2.6 2.6 NA
EV/ EBITDA (x) 5.1 3.8 3.3 7.2 2.7
EV/ Sales (x) 0.4 0.3 0.2 0.2 0.2
Profitability
ROCE (%) 24.5% 27.7% 28.8% 9.4% 30.2%
RONW (%) 22.8% 22.2% 31.2% NA 1.3%
Solvency Ratio
Deb/ Equity Ratio (x) 0.57 0.61 0.35 0.58 0.57
Interest Cover (x) 3.4 3.0 3.0 1.0 4.1Turnover Ratio
Inventory T/o Days 99 73 69 52 83
Debtors T/o Days 84 77 79 62 75
Creditors T/o Days 184 140 187 175 232
Other Ratios
Dividend Payout (%) 35.0% 35.0% 55.0% 0.0% 50.0%
Dividend Yield (%) 1.5% 1.5% 2.4% 0.0% 2.2%
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