SG Mart

SG Mart, a new venture from the APL Apollo group, aims to become India's largest trading company, focusing initially on steel. The company addresses gaps in the unorganized steel sector by acting as a large-scale distributor for manufacturers. It operates through three main revenue streams: B2B metal trading, B2B service centers for processed steel, and B2C distribution of non-steel pipe construction products under the APL Apollo brand. The long-term vision is to achieve ₹50,000 crores in revenue and ₹1,500 crores in EBITDA by 2030.

For Q1 FY25, SG Mart reported a revenue of ₹1,150 crores. This was a sequential decline from Q4 FY24's ₹1,300 crores, attributed to factors like elections and raw material shortages. Despite the revenue dip, volumes increased significantly, exceeding 300,000 tons in Q1 FY25 compared to 200,000-225,000 tons in Q4 FY24. The EBITDA margin for the quarter was around 2.5%, with a non-recurring^📎 brand expense of ₹5-6 crores impacting profitability.

In Q1 FY25, metal trading contributed ₹500-600 crores to revenue, while the service center business added ₹400 crores, and the distribution business accounted for ₹200 crores. Metal trading focuses on products like HR coils and zinc, with margins of 1.5-2% and a quick working capital cycle of 0-10 days, yielding 30-40% ROC. The distribution business, leveraging the APL Apollo brand for non-steel pipe products, has already reached 30,000 tons per month, with blended margins of 2.5-3%.

SG Mart plans to establish a network of 101 service centers by 2030, with 99 in India and 2 internationally. Currently, two service centers are operational, processing 10,000-12,000 tons per month, with two more expected in 2-3 months. Each service center requires a capex of ₹20-25 crores and a net working capital of ₹5 crores. Management projects each center to generate ₹350 crores in annual revenue and ₹12-15 crores in EBITDA, achieving a 30-35% ROC.

The company provided robust guidance, targeting ₹7,000-8,000 crores in revenue for FY25, increasing to ₹13,000-14,000 crores in FY26 and ₹18,000-20,000 crores in FY27. By 2030, the aim is to achieve ₹50,000 crores in revenue with a 2.5% EBITDA margin, translating to ₹1,500 crores EBITDA on a capital employment base of ₹4,500-5,000 crores. The business is equity-funded, with minimal interest costs, ensuring that the 2.5% EBITDA largely flows to PBT.

Management addressed inventory risk, a key concern for commodity trading, by implementing strategies like back-to-back sales for metal trading (0-10 days inventory) and leveraging higher margins in service centers (15-25 days inventory). They noted the absence of a national-level organized player in the steel trading and service center space, positioning SG Mart to capitalize on the highly fragmented and unorganized market. The company aims to connect manufacturers with distributors, improving efficiency and offering lower costs through bulk buying.