| APL Infrastructure Private Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings reaffirmed | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long-term bank facilities of APL Infrastructure Private Limited (APL Infrastructure) to ‘Positive’ from ‘Stable’ and reaffirmed the rating at ‘CRISIL AA’. The short-term rating has been reaffirmed at ‘CRISIL A1+’.
The outlook revision factors in the healthy scale-up of APL Apollo driven by strong volume growth. APL Apollo continues to be the market leader in the ERW pipes segment with a current capacity of 41 lacs MTPA and revenue of Rs 16,000 Crore in fiscal 2023.
The ratings reflect APL Infrastructure’s healthy financial flexibility on account of its shareholding in APL Apollo Tubes Ltd (APL Apollo; ‘CRISIL AA/Positive/CRISIL A1+’), which has an established market position in the electric resistance welded (ERW) pipes segment. The ratings take comfort from the robust market position of its strongest operating company, APL Apollo, and the intent of the promoters to maintain a conservative financial policy. They have extended support to group companies/ subsidiaries and maintained healthy debt cover (market value of investments/debt cap) over the medium term. These strengths are partially offset by exposure to market-related risks on shares held in APL Apollo and limited operations in the company, with high dependance on the dividend from APL Apollo.
APL Infrastructure’s total stake in APL Apollo stands 28.13%, translating into a market value of Rs 10,300 crore as on June 28, 2023. Market value of the stake is healthy compared to its total debt cap of around Rs 1,160 crore (Rs 160 crore as on March 31, 2023, and corporate guarantee of Rs 1,000 crore provided to its group company- SG Finserve Limited- Rated CRISIL AA(CE)/ Positive/ CRISIL A1+) leading to a cover of 9 times.
Any fall in the cover due to decline in the market value of its stake in APL Apollo or increase in debt exposure (including on-balance sheet or off-balance sheet debt), will remain key rating sensitivity factors. |
Analytical Approach CRISIL Ratings has followed the holding company approach for analyzing the credit risk profile of APL Infrastructure, based on its equity stake in its key operating company, APL Apollo. For the purpose of this analysis, CRISIL Ratings has included the consolidated debt of the company and expected debt addition. For computation of cover, debt cap of Rs 1,160 crore (including on-balance sheet and off-balance sheet exposure) has been considered against the market value of the company's 28.13% stake in APL Apollo.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
Healthy financial flexibility resultant from the market value of 28.13% stake held in APL Apollo as on June 28, 2023. As on June 28, 2023, the market value of APL Infrastructure’s stake in APL Apollo was at about Rs 10,300 crore. As compared to this, the company had limited debt of Rs 1,160 crore in its books as on March 31, 2023. APL Infrastructure has extended support of Rs 1,000 crore to its subsidiaries, which it is not expected to extend over the medium term. Any drastic increase in the debt will remain a key monitorable.
APL Infrastructure holds 28.13% stake in APL Apollo, which has an established presence in the domestic ERW pipes segment. APL Apollo enjoys a dominant share of over 50% in the structural steel pipes segment in the domestic market (the second-largest player has a market share of about 10%).
In the fiscal 2023, APL Apollo registered revenue growth of ~24%, primarily driven by 30% volume growth. Earnings before interest, tax, depreciation, and amortisation (EBITDA) per tonne improved to ~Rs 4500 for fiscal 2023.
The APL Apollo group has been in business for over 30 years with strong brand recognition. Healthy brand equity, extensive distribution network and wide product portfolio will help sustain a strong market position over the medium term. APL Apollo paid out a dividend of ~Rs 30 crore in 2023. Going forward, its dividend income will remain a key monitorable.
Weakness:
Exposure to market-related risks may persist, as financial flexibility in terms of cover available will depend on prevailing market sentiments and share prices. Any increase in systemic risks leading to a sharp fall in the share prices of APL Apollo is a key rating sensitivity factor.
Furthermore, the company has limited operations supported by dividend income or trading in steel. However, the only debt availed by the company right now is loan against property. |
Liquidity: Strong APL Infrastructure enjoys healthy financial flexibility from its stake in APL Apollo (valued at Rs 10,300 crore as on June 28, 2023) leading to a healthy cover of 9 times over its outstanding debt exposure.
The company has debt of Rs 1,160 crore (including both on-balance sheet and off-balance sheet items). Healthy cover gives sufficient financial flexibility to refinance the debt obligation. Furthermore, APL Infrastructure had unencumbered cash and equivalent of Rs 4 crore as on March 31, 2023. |
Outlook Positive APL Infrastructure will continue to benefit from its healthy financial flexibility on account of its 28.13% holding in APL Apollo. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Operating since 2006, APL Infrastructure is a holding company with limited operations in the APL Group. The company derives the majority of its business from trading of shares and steel pipes, as well as dividend from subsidiaries and rental income.
APL Infrastructure is a part of the APL Apollo group. The APL group has been in business for over 30 years. |
Key Financial Indicators*
*Provisional |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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