Apar Industries Ltd (APARINDS) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day and welcome to the
Moderator: Ladies and gentlemen, good day, and welcome to the Apar Industries Limited Q2 FY '27 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. I now hand the conference over to Mr. Ambesh Tiwari from Asential Technologies. Thank you, and over to you, sir.
Ambesh Tiwari (Asential Technologies): Thank you. Good afternoon, everyone, and welcome you all to the H1 and Q2 FY '27 earnings call for Apar Industries. To discuss the business performance and outlook, we have from the management side, Mr. Kushal Desai, Chairman and Managing Director; Mr. Chaitanya Desai, Managing Director; and the CFO, Mr. Ramesh Iyer. I would now pass on to Mr. Kushal Desai for the opening remarks. Thank you, and over to you, sir.
Kushal Desai (Apar Industries Ltd): Thank you, Ambesh, and good afternoon, everyone. We are very glad to have you all with us for the Apar Industries Q2 FY '27 earnings call. In terms of format, I'll start off first with the consolidated performance, then take you through some recent industry updates, and post that run through each of the individual division's performance. At the end of this, we can open up for questions. Our consolidated revenue for second quarter FY '27 came in at 6,931 crores, which is higher than the previous year same period by 21.3%. And compared to the sequential quarter, it is higher by 5.2%. Domestic revenues grew 34.3%. And exports, however, degrew by 3.3%. I did want to point out specifically here that we had approximately 800 crores of conductors and cables which are in transit and have been sold to customers on a DDP basis. Some of the product has remained in transit given the shipping timelines and the availability of containers that got pushed out to being a little bit later in the quarter. All of this product is actually scheduled to be sold in the US markets. As a result, the US revenue shows lower by 29.7% compared to the second quarter of last year. However, the order books remain at a very strong level at the end of this quarter. And with the realization of this DDP amount, you will find that by Q3, the situation the picture will look a little bit different. All our businesses have delivered strong EBITDA margin year-on-year, with the biggest driver coming from the oil division. The EBITDA after open period forex adjustment rose 57.8% year-on-year to 787 crores, and the margin improved by 270 basis points to 11.4% from 8.7% a year ago. On the back of the strong EBITDA margin improvement, coupled with improved financial leverage, our overall net profits have risen year-on-year by 77.8% to 447 crores. PAT margin improved to 6.5%, which is an increase of 209 basis points compared to the previous year. If you now consider the first half of FY '27, there has been a healthy growth, with this being the highest-ever half-yearly revenue and profit. The revenue for H1 grew 25% to 13,522 crores.
Kushal Desai (Apar Industries Ltd): spoken about earlier. The exports proportion in overall revenue stands at 27.6%. The US revenue is down by 21.5% year-on-year based on whatever I explained earlier of the 800 crores in transit. The EBITDA post open period Forex grew 60.2% to 1,602 crores with EBITDA margins of 11.8% in the first half FY27 versus 9.2% in the first half FY26. Our profit after tax for the half year grew 77.7% to reach 500 to reach 915 crores. The PAT margin has also improved by 200 basis points. I will now cover some of the key industrial industry highlights. During the first half of the year, India added approximately 8,775 circuit kilometers of transmission lines, which is up 153% year-on-year. In terms of transformation capacity, about 6,71,815 MVA got added during this period, which is up 52% year-on-year. In September 2026, the center has approved intrastate transmission systems to evacuate up to 135 gigawatts of renewable energy by FY33, representing an addition of approximately 51,126 circuit kilometers of transmission lines and transformation capacity of 2,28,903 MVA. This is essentially the third green transmission corridor, which has been announced. And the investment expected is to the tune of about 1.86 trillion rupees. There have also been two other important announcements from CEA of setting a 10 to 15% thermal margin limit for transmission lines versus the standard. So if a transmission line is the standard operating temperature for example is 70°, then this limit would apply to 10 to 15% on 70°, which keeps the upper limit at about 80° on which the line can operate and mandating an N-1 reliability in terms of the architecture of the transmission network. So given these two important changes, we expect that there will be an acceleration of reconductoring of lines taking place, especially in sections of the network where the electricity demand is growing. When you look at some of the major programs outside India, in the US, there has been the announcement of the SPARK Program, which is the speed to power through accelerated reconductoring and other key excuse me, advanced technologies and upgrades, which was announced in September 2026 by the Department of Energy, where they have listed specifically 31 projects in 26 states with a capital allocation of approximately $1.9 billion of federal funding. This is expected to unlock 23 gigawatts of transmission capacity and will cover reconductoring and rebuilding of about 1500 miles of transmission line and grid-enhancing technologies of about 21,000 miles. Coming to the segmental highlights, I'd like to now take you through, you know, each of the division's performances. So, if you look at the conductor division, overall revenue for the quarter has grown 21.1% to 3,753 crores. This is led largely by the increase in the prices of commodities and underlying metals. Volume for the quarter dipped by 9.2% over the same period last year. Domestic revenue is up 22% versus Q2 FY26 and 8% versus Q1 FY27. Our exports increased by 18.3% versus last year and 29.5% versus Q1 FY27. Overall, exports constituted
Kushal Desai (Apar Industries Ltd): % of the mix for the quarter and 24.2% in the first half. But on a sequential quarter, it has improved from 20.5% to 23.6%. The US revenues for conductors grew by 12.2% in this quarter. The premium mix stands at 39.4% in Q2 FY27 compared to about 45.3% in Q2 FY26. The EBITDA post open period forex grew 11.3% to reach 276 crores. The EBITDA margin improved on the back of execution of higher margin orders during the quarter. Where the EBITDA per metric ton comes in at 48,241 rupees per metric ton compared to 39,363 per metric ton a year earlier. On a half year basis, revenue is up 20.5% to reach 7,092 crores, whereas overall sales volume is lower by 8% compared to last year. Domestic revenue and export revenue have grown by 20.7% and 20% respectively. The US revenue is down 8.4%. The EBITDA post forex is higher than the same period last year by almost 12.6%. So, EBITDA per metric ton is at 50,739 per metric ton versus 41,421 per metric ton a year ago. So, H1 witnessed a volume de-growth, as I mentioned, of around 9.2% as there continues to be delay in manufacturing clearances, as well as awarding of new conductor orders from customers and especially TBCB awardees. As you can imagine that there has been a significant commodity inflation in the form of the price of both copper and aluminum on LME, a higher premium like MJP, for example, on aluminum is the highest it has been in the last four years, and there's also been a sharp increase in steel for manufacturing of the towers. This is the second consecutive quarter in which we have seen this trend. However, it is important to keep in mind that TBCB orders have an execution period of not exceeding 36 months with extremely stringent penalties on delays. Hence, there is only a finite timeline in which some of this can be postponed. It is also interesting to note that this past quarter, execution of existing contracts has been at a high. As I mentioned in my earlier part of the opening remarks, in exports, international freight rates had gone up very sharply in Q2. And there was also a very heavy demand and divergence of containers for China along the Europe and US freight lane. As we move into Q3, however, this freight trend has already started showing signs of reversal. And as a consequence, we should see a better situation in this quarter. What is also interesting to note is that the order book at the moment is at an all-time high of 12,025 crores as of September 30th. The order book consists of new orders received during the second quarter of FY27 to the extent of 4,725 crores, which is higher than the same period last year by 82%. The order book includes several prestigious and new type of orders from utilities in the UK and the US of about 3,000 crores. This includes the first Z-shaped conductor order from Scandinavia, which is actually very resistant in high wind conditions, and this is for evacuation from an offshore wind farm off the coast of Scandinavia. We've also received a new set of HTLS orders from overseas markets, which include countries in Africa, South America, and Europe. On the OPGW front, we received our single largest order, and the first of its kind with a 48 fiber OPGW from KPTCL, Karnataka Power and Transmission Corporation Limited, of about 960 crores using
Kushal Desai (Apar Industries Ltd): a new communication technology, which is IP MPLS or you know, it stands for the internet protocol multi-protocol switching system that improves not only the speed, but also the security of data transfer. We also received our first OPGW order with 144 fiber in it from a customer in Central America. This is an extremely important strategic milestone because higher OPGW fiber count is going to be the order of the day with the data centers coming in and the amount of transmission of data exponentially likely to increase. Approximately 25% of this 12,025 crore order book will be staggered over 2 to 3 months, with the rest of the order book likely to be executed in a period of less than 18 months. It is also an expectation that the second half will see much more aggressive execution in transmission lines and we're gearing up for the higher volumes in H2. To sum up, the structural demand drivers remain intact, and it's only a matter of time when the flow order execution will take place to catch up to the final delivery schedule of the transmission project. Coming to the oil division. Revenue for the quarter came in at 1,819 crores, which is up 35.6% year-on-year, 6.7% sequentially, led by higher realization on the back of higher base oil prices. The operating revenue continues to receive to be extremely challenging and volatile, characterized by record refining margin spreads. This is having an overall impact on the business, especially considering that the value of billing has almost doubled on a on a unit basis, and so it is more prudent to actually limit the sales to whatever is the maximum exposure limit setup and limited by the number of days of outstanding, given the fact that clients today have to pay double the cost of what they were paying earlier and the fact that it is not easy to get double the financial limit. So, considering this prudence in terms of how much we would be willing to bill to customers and what exposures we would be ready to take, we see that the overall volume is down to 128,590 kl for the quarter, which is about 20% lower than the same period previous year. Our business out of the Hamriyah plant has substantially reduced because of the logistics of bringing products in and out. Some of that export has been transferred actually to India and we continue to execute those orders from India. Exports as a proportion in the oil business is currently at 37%, compared to 43% a year ago and 36.4% last quarter. EBITDA post foreign exchange grew to grew by 185% to reach 299 crores. The EBITDA margin stands at 23,262 crores per kl in the second quarter FY 23, versus 6,517 kl a year ago. Half yearly on a half yearly basis, revenue has reached 3,525 crores, growing at 35.3% versus last year. Volumes for the same period have fallen by 16.9%, export has grown 23.5% year-on-year, and the export mix stands at 36.7% in the second half of FY 23 in the first half of FY 23. Since the inception of the Middle East conflict, we have changed our operating philosophy to focus on executing higher margin orders with customers who have been consistently buying from Apar and ensuring that they receive consistent quality with uninterrupted supply. This has led to a reduction of spot buying of base oils and the reduction of sales to customers who are significantly more price sensitive, have an erratic purchase pattern or where we feel that there are limitations in terms of cash flow, and by following this, the margins have increased even though the
Kushal Desai (Apar Industries Ltd): margins have dropped to some extent. But we have protected ourselves quite significantly in such a volatile environment. Now, moving to the cable division, revenues reached 1,875 crores, which is representing a growth of 22.1%. Copper is about 30% of the overall revenue mix, as compared to 20% a year ago. Copper prices are up by almost 50% and aluminum prices have gone up by almost 35% during the quarter. Consequently, the metal prices, along with volume, has led to about a 35 to 40% increase in the sales value. However, our US sales number degrew by 50% over last year, which brought the overall growth down to 22%. This quarter, we, as I mentioned earlier, have an unusually high value of cables, which are amounting to over 440 crores which are in transit, for which the sales revenue could not be recognized as the incoterms are on a DDP basis. The incremental excess transit value, that is a transit value of the 440 crores minus what existed at the beginning of the quarter, represents almost 20% of the sales value. Considering this number, it will put the entire manufacturing dispatch and the lower recognized US and overall Q2 revenues in the right perspective. If you look at the domestic business, there the revenues have come, increased by 71.4% in cables and 14.1% sequentially. Exports came down to 45.2% and it's down 29.8% compared to the first quarter. The export mix stands at 19% of Q2 FY27 compared to 42.3% in the last year. The EBITDA margins have improved by 80 basis points to 11%. Moving to the half yearly performance, revenue has grown 25.7% year-on-year. Domestic revenue is up 65.8%, but the export revenues are down by around 30.2%. The EBITDA post forex stands at 401 crores, representing a year-on-year growth of 34.2%. The EBITDA margin stands at 10.8%, which is 70 basis points higher than last year. The cable order book also remains very strong at 3,000 crores of orders compared to 1,653 crores. And bulk of these orders are expected to be executed before the end of the year. We have also received almost 1,000 crores of orders from Google Data Center in the US and Amazon's largest data center, which is coming up in India. During the quarter, we successfully completed another round of QIP, raising 2,500 crores. The proceeds of this will be deployed towards improving working capital and strengthening the balance sheet, thereby enhancing our financial flexibility and supporting our future growth initiatives. As a consequence of this fundraise, our rating has been improved by one notch from AA- to AA, which is an important development to help us access larger finance limits and and also rationalize borrowing costs. So, in conclusion, in spite of a challenging operating environment, business momentum is still strong, as reflected by the order books of our conductor, cable and oil divisions. The data center CapEx cycle is still building up both overseas and in India. We also see freight rates, which had sharply increased to Europe and LatAm, starting to ease, making exports to these geographies more feasible. The medium to long-term trend remains intact and could, in fact, accelerate in the months to come. At this stage, we are confident of our performance during FY27. I would like to conclude my opening remarks with this. Once again, thank you all for joining this call. Before we open the floor to questions, I'd like to extend a warm greeting to all of you and your families for the upcoming festival season. So, with that, we would be happy to start taking questions.
Moderator: Thank you
Moderator: much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Nitin Arora from Axis Mutual Fund. Please go ahead.
Nitin Arora (Axis Mutual Fund): Hi. Thank you, sir, for the opportunity, and a strong set of order book. Just first thing on the profitability, on the aluminium side, because first half itself is pretty strong, averaging 48 to 50,000. How we are thinking about this year profitability, because your guidance has been around 40,000, for this year. And also, if you can just articulate apart from your guidance thing, the premiumization, because the order book which you, the few orders which you spoke about looks like a very premium, end of the market which is it coming from. So I know you guide every year, for that particular year, your EBITDA per ton for aluminium. But directionally, if you can tell us a little bit that given if my understanding is correct, ideally, the profitability should improve, or rather, you know, how we should think about it. So that's the first question.
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