Apollo Pipes

FY25 proved to be a challenging year for the PVC pipe industry, which experienced an overall decline of approximately 5%. This downturn was primarily driven by a slowdown in private real estate and government infrastructure spending, compounded by frequent fluctuations in PVC resin prices that led to continuous destocking by channel partners. Despite these headwinds, Apollo Pipes managed to achieve a 23% volume growth in FY25, though its EBITDA remained flat at INR95 crores, with margins impacted by aggressive sales strategies and a slow ramp-up at its Western plant.

Apollo Pipes reported its best-ever quarterly revenue in Q4 FY25, reaching INR315 crores. The company maintained a strong financial position, ending the year with a net cash balance of INR46 crores, despite incurring INR166 crores in capex during FY25 (down from INR250 crores in the previous year). Working capital management remained prudent, with a cycle of 36 days, contributing to an operating cash flow to EBITDA ratio of 65%. Additionally, the company secured an equity infusion of INR110 crores from an Omani fund, with INR28 crores already received in April, earmarked for a greenfield plant in South India and other corporate needs.

The company has laid a solid foundation for 20-25% volume growth in FY26, underpinned by three key revenue drivers. These include the new oPVC product segment, the Window Profile product segment (launching June 2025), and the upcoming Varanasi plant (starting H2 FY26). The Varanasi plant is expected to significantly boost market share in Central and East India, while oPVC, with an estimated annual Total Addressable Market (TAM) of INR7,000-8,000 crores, is projected to contribute 5% to revenue in the next 2-3 years and offer superior margins.

Apollo Pipes' total capacity has increased to 232,000 tons and is targeted to reach 260,000 tons by the end of FY26, with a residual capex of INR100 crores funded through internal cash flows. The company aims to improve its EBITDA margin from the current 8% to 10-11% in the next two years. For Kisan, acquired in the past, margins are expected to improve from 3-4% in FY25 to 5% in FY26 and 6-7% in the subsequent two years, driven by operating leverage and product mix improvements as volumes ramp up from 20,000 tons in FY25 towards 35,000-40,000 tons by FY27.

Despite a currently depressed return profile (ROE, ROCE) due to low capacity utilization and ongoing capex, management expressed confidence in achieving a 25% ROCE within the next two years, supported by increased sales volumes and margin improvements. The company anticipates a recovery in the macro environment, particularly in real estate and construction activity, post-monsoons in H2 FY26, which is expected to further support its growth trajectory and enable it to surpass its 20-25% volume growth guidance.