APL Apollo Tubes Limited — Q1 FY26 earnings call

Call held 24 Jul 2025

Management summary

APL Apollo Tubes reported a challenging Q1 FY26 with sales volume of 794,000 tons falling short of expectations due to macro slowdown, geopolitical tensions, and early monsoon. Despite a QoQ decline in EBITDA spread, gross spreads improved, driven by a better value-added product mix and de-commoditization strategy. The company revised its FY26 volume growth guidance to 10-15% but maintained EBITDA spread guidance of Rs. 4,600-5,000 per ton, while continuing its aggressive capacity expansion and ESG initiatives.

Highlights

  • Gross spreads increased by Rs. 400 per ton QoQ, driven by better value-added mix and de-commoditization strategy.

  • EBITDA spread guidance for FY26 maintained at Rs. 4,600-5,000 per ton, significantly higher than FY25's below Rs. 4,000 per ton.

  • Achieved 72% power consumption from renewable energy, demonstrating commitment to ESG goals and reducing power costs to 0.8% of product value.

  • Strategic capacity expansion underway in Eastern India, Dubai, and South India, along with new product lines (coated, heavy structural tubes) to reach 7 million tons by FY28.

  • Net cash position with prudent working capital days, expecting larger cash surplus by FY26 end, and aiming for a liability-free balance sheet.

Concerns

  • Q1 FY26 sales volume of 794,000 tons was below internal expectations, missing target by at least 5%.

  • EBITDA spread declined by Rs. 250 per ton QoQ, primarily due to lower volumes leading to negative operating leverage and a Rs. 100 per ton impact from one-time notional ESOP expense.

  • Volume growth guidance for FY26 revised downwards to 10-15% from 15-20% due to macro slowdown, geopolitical tensions, early monsoon, and softer money supply.

  • Geopolitical tensions (India-Pakistan war, Middle Eastern war) impacted northern state volumes and export volumes from Indian mills.

  • Softer money supply in the system is reducing buying power of dealers and stockists, impacting channel partners.

Key financials

  1. Sales Volume 7,94,000 tons -6.6%QoQ
  2. EBITDA Spread QoQ Change ₹-250/ton
  3. Gross Spreads QoQ Change ₹400/ton
  4. Value-added Products Share 61%
  5. Renewable Energy Power Share 72%
  6. Power Cost as % of Product Value 0.8%

What they filed

Q1 FY27: revenue up 8.5%, net profit up 11.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,774 5,433 5,509 5,170 5,206 +9%5,982 +10%6,269 +14%5,607 +8%
EBITDA138 346 414 372 447 +224%472 +36%511 +23%411 +10%
Net profit54 217 293 237 302 +459%310 +43%354 +21%263 +11%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

low confidence
Management mentioned a 'very good order book in Dubai plant' qualitatively, but did not provide a quantified overall order book for the company.

Source: Q&A

Capital allocation

high confidence
  • Capex Capex disclosed
    • Expansion in newer markets (Eastern India) 5,00,000 tons
    • Expansion in newer markets (Dubai) 2,00,000 tons
    • Expansion in newer markets (South India) 4,00,000 tons
    • Expansion of new products (coated capacity) 5,00,000 tons
    • Expansion of new products (heavy structural tubes) 1,00,000 tons
    • Plant for export sales from Indian mills (Bhuj, Gujarat) 5,00,000 tons
    • Capacity for Specialty Tubes 3,00,000 tons
    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 tons of newer plants where existing products are fully utilized and the capacity. Then, the 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 Bhuj, Gujarat area. And the plant will be majorly focused towards export sales and then it will also feed the Gujarat market for localization. And lastly, we are also working on putting up capacity for Specialty Tubes, wherein we believe that 300,000-400,000 ton of multiple product categories can be created over the next two to three years in non-structural space.
  • Debt Debt disclosed
    We are net cash and our working capital days remain prudent in single digit. By end of FY'26, we shall be sitting on much larger cash surplus what you see today. ... We are debt-free today, but we want to be liability-free.
  • M&A Shankara Divestment · Closed

    Achieved target of increasing APL Apollo product sales through Shankara (sales quadrupled), making the stake unnecessary.

    So, Anupam, when we invested in Shankara in March-April of 2022, the idea was to have a small stake to ensure that Shankara starts selling more of APL Apollo products. 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. So, we wanted Shankara to sell more of APL Apollo products. ... So, in last 3 years now, 3-3.5 years, the sales on Shankara counter has quadrupled. Now that we have achieved this target, there is no point of holding Shankara shares. Anyway, stake was below 10%. So, we sold whole 4.5% last year and the balance shares we sold in last quarter.
  • Liquidity Liquidity disclosed Company is net cash and expects a larger cash surplus by FY26 end, aiming for a liability-free balance sheet. Reduced current liabilities (payables/creditors) by Rs. 400-500 crores.
    We are net cash and our working capital days remain prudent in single digit. By end of FY'26, we shall be sitting on much larger cash surplus what you see today. ... our current liabilities, which are payables, creditors, are reduced by almost Rs. 400 crores-Rs. 500 crores.

Guidance & targets

Volume

  • Sales Volume Growth Volume · FY26 · Medium confidence 10-15%

    Previously 15-20% → 10-15%

    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%-15%, assuming the macro environment does not worsen from the current levels.

    — Anubhav Gupta

  • PEB Segment Growth Volume · next three, four years · High confidence 20-25%
    And our market share is 60%-70% in this segment. We expect growth to be 20%-25% for the next three, four years, particularly for this segment.

    — Anubhav Gupta

  • Sales Volume Growth Volume · FY27 · Medium confidence much higher than 15-20%
    then FY'27 growth could be much higher than 15%-20% because of the low base of FY'26.

    — Anubhav Gupta

Margin

  • EBITDA Spreads Margin · FY26 · High confidence Rs. 4,600 to Rs. 5,000 per ton

    From below Rs. 4,000 a ton (FY25) today

    For the full year, we are hopeful, we are confident that EBITDA spreads should be between Rs. 4,600 to Rs. 5,000 per ton, which is significantly higher than FY'25 EBITDA spreads of below Rs. 4,000 a ton.

    — Anubhav Gupta

  • EBITDA per ton Margin · FY27 · Low confidence better than FY26 close
    Next year, FY'27 will definitely be better than whatever we close in FY'26.

    — Anubhav Gupta

Capacity

  • Total Capacity Capacity · next 2-3 years · High confidence 7 million tons

    From 4.5-5 million tons today

    we continue to focus on our long-term capacity expansion plans and fill in the gaps where we believe that we can take our capacity from Rs. 4.5 million-Rs. 5 million ton to Rs. 7 million ton in the next two to three years.

    — Anubhav Gupta

  • Total Capacity Capacity · FY28 · High confidence 7 million tons
    Our ultimate goal with 7 million ton capacity which will be live by FY'28, we will be 70%-75% value-added.

    — Anubhav Gupta

ESG

  • Renewable Energy Contribution ESG · next 2-3 years · High confidence 80-85%

    From 72% today

    And we target to take this contribution from renewable energy to 80%-85% over the next two to three years.

    — Anubhav Gupta

Product Mix

  • Value-added Products Share Product Mix · FY28 · High confidence 70-75%

    From 61% today

    Our ultimate goal with 7 million ton capacity which will be live by FY'28, we will be 70%-75% value-added.

    — Anubhav Gupta

What to watch in Q2 FY26

FY26 Volume Growth Achievement

next quarter
Current Q1 FY26 sales volume 794,000 tons, below target
Target Progress towards 10-15% FY26 volume growth

Why it matters

Verifying if the revised volume guidance is achievable, especially with expected H2 recovery, is crucial for revenue growth.

So, we believe that the sales volume for full year should increase between 10%-15%, assuming the macro environment does not worsen from the current levels.

Risks & concerns

  • Macroeconomic Slowdown

    high

    Weak industrial production data (2-3% IAP growth) and softer Q1 FY26 GDP growth expectations are impacting demand.

    Management acknowledged

  • Geopolitical Tensions

    high

    India-Pakistan war and Middle Eastern war impacted northern state volumes and export volumes from Indian mills.

    Management acknowledged

  • Early Monsoon

    medium

    Early onset of monsoon in June halted construction activity, slowing ongoing and new projects.

    Management acknowledged

  • Softer Money Supply

    medium

    Reduced buying power of dealers and stockists due to money being stuck with agencies and EPC contractors.

    Management acknowledged

  • HRC Commissioning Delays

    low

    Delays in HRC capacity commissioning in India are keeping spreads higher, but management views such delays as normal for large projects and expects steel supply to increase in H2.

    Analyst downplayed

Q&A highlights

8 direct
Competition and Payables Direct
So, we are able to increase our margins by almost Rs. 1000 a ton in last six months. So, it's no more commodity, right? ... So, payable days are not related to the stress 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, right?

Clarifies the company's ability to maintain premium pricing despite competition and explains that reduced payables are due to cash generation, not dealer stress.

Asked by Amit Dixit

Employee Cost and ESOP Impact Direct
Right. So, that notional ESOP cost was Rs. 6 crore, right? So, going forward, you can assume Rs. 88 crores, Rs. 87 crores-Rs. 88 crores to be the sustainable quarterly employee cost. It should come around eventually Rs. 600 to Rs. 700 per ton, right? Right now, you would see it at Rs. 800-Rs. 900 a ton.

Quantifies the one-time ESOP expense and provides clarity on the sustainable employee cost per ton, which impacted current quarter EBITDA.

Asked by Amit Dixit

Confidence in Volume Guidance Direct
So, there are two-three areas, right, from where we will get the volume. Number one is our exports and Middle East, right... Number two is our two new product lines got started, right, which will contribute in the next seven to eight months. ... And thirdly, see, I mean, second half normally is always skewed over H1 for the construction material sector.

Details the specific drivers (exports, new products, H2 seasonality, retail recovery) management expects to achieve the revised volume guidance despite a soft Q1.

Asked by Vikas Singh

Capital Allocation for Excess Cash Direct
So, we have created four buckets, okay, of $25 each. Number one will go for serving tax... Second bucket will go into CAPEX... Third bucket of 25% is shareholder reward in form of dividend or buyback... 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 liabilities, right.

Provides a clear framework for how the company plans to utilize its cash generation, including significant allocation to growth and shareholder returns.

Asked by Vikas Singh

Dubai Market and HRC Commissioning Delays Direct
So, the mix, I mean, the run rate was same, right? It was supposed to go up in July, but because of the tension, which came from the geopolitical war, right, the run rate got a bit disturbed. So, overall, Dubai contributed 6% to our overall volumes. ... See, I mean, commissioning a steel plant is 5 to 6 years process, right? I mean, delay of 6 months, 1 year is very normal when projects at such large magnitude come online, right?

Offers insights into the impact of geopolitical events on export volumes and management's perspective on delays in HRC capacity commissioning.

Asked by Muskan

Premium Pricing and SG Brand Sustainability Direct
Now, the gap is Rs. 3,000 after we increase our pricing by Rs. 1,000 to Rs. 1,500 a ton. Adding to this, that HR coil tube pricing and Patra pricing will always, like, right now the gap is Rs. 8,000 to Rs. 10,000 a ton. ... So, we want to move our business model away from this and be consistent with the construction activity in the country.

Explains the company's strategy to maintain premium pricing and shift away from commoditized general sales by focusing on value-added products and brand positioning.

Asked by Muskan

General Structures Profitability and Dubai Contribution Direct
No, Anupam, it will be Rs. 2,400-Rs. 2,500 a ton. ... No, idea is to take it above Rs. 3,000 a ton. ... So, that will continue to grow at 5%-10%. If the gap reduces, then the 5 million tons from secondary will come to primary. And that's where we will get our incremental volume.

Clarifies the profitability of general structures in India, separate from Dubai, and outlines the strategic approach to volume growth based on the primary-secondary steel market gap.

Asked by Anupam Gupta

Inorganic Opportunities and Secondary Steel Direct
We are not going for the secondary any type of acquisition because secondary still is no future because their quality is very bad. Number two, their cost of production is very high. ... So, we are not going for the secondary at all. I am very clear in the two things. We are not going for steel making. We are not going for secondary.

Clearly states the company's firm stance against acquiring secondary steel businesses due to quality and cost concerns, reinforcing focus on primary steel and brand.

Asked by Sneha Talreja

2 min read 5 chapters

Detailed narrative

Q1 FY26 Performance and Macro Headwinds

APL Apollo Tubes reported a Q1 FY26 sales volume of 794,000 tons, which was below the company's internal target by at least 5%. This underperformance was attributed to a continued slowdown in the macro environment, evidenced by weak industrial production data (2-3% IAP growth) and softer Q1 FY26 GDP expectations. Geopolitical tensions, including the India-Pakistan war and the Middle Eastern conflict, also impacted northern state and export volumes. Additionally, an early monsoon halted construction activity, and a softer money supply reduced dealer buying power.

Strategic Focus on Margins and De-commoditization

Despite a QoQ decline in overall EBITDA spread by Rs. 250 per ton, gross spreads improved by Rs. 400 per ton, driven by a better value-added product mix. The company's strategy to de-commoditize its portfolio by adding products like heavy structural, coated, and rust-proof tubes is proving successful, allowing them to maintain a premium of Rs. 3,000 per ton over competitors in certain segments. The FY26 EBITDA spread guidance remains robust at Rs. 4,600-5,000 per ton, significantly higher than FY25's below Rs. 4,000 per ton, reflecting confidence in this strategy.

Capacity Expansion and New Market Entry

APL Apollo is aggressively pursuing long-term capacity expansion, aiming to increase total capacity from 4.5-5 million tons to 7 million tons in the next 2-3 years, with a target of 7 million tons by FY28. Key expansion areas include Eastern India (500,000 tons), Dubai (200,000 tons, targeting 1 million tons), South India (400,000 tons), and a new plant in Bhuj, Gujarat (500,000 tons) primarily for exports. The company is also adding 500,000 tons of coated capacity and 100,000 tons of heavy structural tubes, along with 300,000-400,000 tons for Specialty Tubes.

Capital Allocation and Financial Prudence

The company maintains a net cash position with prudent working capital days. Excess cash generation is allocated across four buckets: tax, 20-25% for CAPEX, 25% for shareholder rewards (dividends/buybacks), and 25% as a buffer for liabilities. Management aims to be liability-free and expects a larger cash surplus by FY26 end. They also reduced current liabilities (payables/creditors) by Rs. 400-500 crores, leveraging cash for early payments to secure discounts from steel mills.

Outlook and Growth Drivers

The FY26 volume growth guidance was revised downwards to 10-15% from 15-20% due to the soft H1, but management expects a strong second half driven by the end of monsoon, increased government spending, and recovery in retail and private infrastructure. They anticipate significant growth from new product lines (heavy structural and rust-proof tubes) and recovery in export markets. The company also projects 20-25% growth in the PEB segment for the next 3-4 years and expects FY27 growth to be much higher than 15-20% due to a lower base.

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