Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A/Stable/CRISIL A1’ ratings on the bank facilities of Apollo Pipes Ltd (APL). The rating on bank facilities worth Rs.10.2 crore has been withdrawn basis client request and receipt of the 'No objection certificates' from the respective banker. The withdrawal is in line with the policy of CRISIL Ratings’ on withdrawal of ratings.
The company witnessed revenue growth of 17% in fiscal 2023 driven by volume growth of ~24%, but realisations fell year-on-year owing to decline in polyvinyl chloride (PVC) resin prices. Sharp correction in PVC resin prices resulted in inventory loss in the second and third quarters of fiscal 2023, impacting profitability. As a result, earnings before interest, tax, depreciation, and amortisation (Ebitda) margin declined to 7.5% in fiscal 2023 from 12.1% in fiscal 2022. Revenue is expected to grow by 11-12% in fiscal 2024 supported by healthy demand, with Ebitda margin improving to 10-12%.
The financial risk profile was strong supported by healthy gearing and robust debt protection metrics, as indicated by interest coverage ratio above 7 times in fiscal 2023. Liquidity will be comfortable aided by higher cash accrual and moderate capital expenditure (capex). The company is in the process of adding 25,000 tonne capacity in fiscal 2024, which will be funded through a mix of equity infusion (warrants) of Rs 260 crore over the next 18 months and internal accrual.
The ratings continue to reflect the company’s established market position, increasing geographical diversity and strong financial risk profile. These strengths are partially offset by exposure to intense competition and susceptibility to fluctuations in raw material prices and foreign exchange (forex) rates. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of APL. |
Key Rating Drivers & Detailed Description Strengths: Established market position The promoters have experience of around two decades in the PVC pipes industry. Their expertise has helped the company navigate business cycles and establish the brand APL Apollo, which it shares with the APL Apollo group and is used by the flagship company, APL Apollo Tubes Ltd (‘CRISIL AA/Stable/CRISIL A1+’). APL has 450 dealers and over 150 distributors. Product portfolio is diverse and includes column pipes, unplasticised PVC and chlorinated PVC plumbing pipes and fittings, domestic and sewage pipes, and water tanks.
Strong financial risk profile Adjusted gearing was 0.1 time as on March 31, 2023. Debt protection metrics will be comfortable with interest coverage and net cash accrual to total debt ratios expected above 15 times and 1.2 times, respectively, in fiscal 2024, along with no major debt-funded capex.
Weaknesses: Susceptibility of profitability to fluctuations in raw material prices and forex rates The company is vulnerable to volatility in forex rates as it imports part of its raw material requirement while exports are minimal. Also, the price of resin is volatile and susceptible to change in global prices and regional demand-supply dynamics. The company also remains exposed to cyclicality in the PVC industry.
Exposure to intense competition The company remains under intense competitive pressure because of low product differentiation and high price sensitivity. Intense competition constrains scalability, as reflected in modest revenue of Rs 915 crore in fiscal 2023, bargaining power and profitability. |
Liquidity: Strong Cash accrual is expected at Rs 80-85 crore against nil term debt obligation in fiscal 2024. Cash and equivalent were healthy at Rs 34 crore as on March 31, 2023. Utilisation of fund-based limit was moderate at 56% during the six months through March 2023. Capex will be funded through a mix of internal accrual and equity infusion of Rs 260 crore. |
Outlook: Stable CRISIL Ratings believes APL will continue to benefit from increasing geographical presence and diversified product profile while maintaining a healthy financial risk profile. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company APL was incorporated in 2000 as Apollo Poly Pipes Pvt Ltd by Mr Sameer Gupta and Mr Vinay Gupta. The company was reconstituted as a public limited company with the current name in April 2009. APL manufactures pressure pipes (PVC, ring-fit and self-fit pipes), column pipes, casing pipes, plumbing pipes, soil-waste-rainwater pipes, fittings, and water tanks. It is part of the Sudesh group. Through a reverse merger with its holding company in November 2017, APL got listed on the Bombay Stock Exchange and the National Stock Exchange. |
Key Financial Indicators
*based on abridged financials | ||||||||||||||||||||||||
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Fully Interchangeable with non-fund-based facility to the extent of Rs 31 crore |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||
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Criteria Details
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