APL Apollo Tubes Ltd Management Discussions

INDIAN ECONOMY

In the fiscal year 2025, the Indian economy demonstrated unwavering resilience, attaining significant growth despite global trade tensions and geopolitical uncertainties, supported by strong domestic fundamentals.

The real GDP growth of India in fiscal year 2025 reached an impressive 6.5%, signifying the economys robust momentum and resilience in the face of global challenges. This strong performance, underpinned by a well-calibrated fiscal strategy, underscores the potential for sustained long-term growth through prudent investments in human capital development, which are expected to enhance economic prospects further while ensuring fiscal discipline.

From a capital perspective, public capex growth slowed to 0.8% year-on-year during April-February, partly due to the general elections and private sector capex moderated.

The Indian manufacturing sector capped FY25 with a stellar recovery, as evidenced by the HSBC PMI soaring to 58.1 in March 2025, an eight-month high and a significant leap from Februarys 56.3, well above its long-term average. This robust upswing, fueled by a surge in new orders and the fastest sales growth since July 2024, reflects strong demand, heightened customer interest and effective marketing efforts, driving increased production and signalling a vibrant close to the fiscal year.

The Indian manufacturing sectors strong momentum in FY25 was further emphasised by continued growth in new export orders, although at a moderated three-month pace, with significant contributions from Asia, Europe and the Middle East.

In the fiscal year 2025, Indias retail inflation, as assessed by the Consumer Price Index (CPI), attained a notable six-year low of 4.6%, emphasising the efficacy of the Reserve Bank of Indias pro-growth monetary policy in reconciling economic expansion with price stability. The year-on-year inflation rate for March 2025 decreased to an impressive 3.34%, denoting the lowest monthly rate since August 2019. This decline signifies sustained endeavours to uphold price stability while promoting growth.

The governments proactive initiatives have played a crucial role in this accomplishment, encompassing the strategic management of bu_er stocks for essential food commodities, periodic market interventions and subsidised retail distributions of staples such as rice, wheat _our, pulses and onions. Streamlined import duties, stricter anti-hoarding regulations and reduced Goods and Services Tax (GST) rates on necessities, in conjunction with targeted subsidies under programs such as the Pradhan Mantri Ujjwala Yojana and Pradhan Mantri Garib Kalyan Anna Yojana, have effectively mitigated the impact of price pressures on vulnerable households. This approach has ensured that the advantages of the low-inflation environment are equitably dispensed and has laid the foundation for sustained economic resilience.

For FY25, GST collections climbed 8.6% after refunds to C 19.56 trillion, bolstered by a 9.3% rise in net domestic sales revenue in March to C 1.38 trillion and a 10.1% annual increase, signalling robust domestic demand. Import-related IGST revenue grew modestly by 3.5% annually, with merchandise imports dropping 16% in February, reflecting the impact of Atma Nirbhar Bharats import substitution and production-linked incentive schemes. Gross collections reached C 22 trillion, up 9.4%, with C 2.52 trillion in refunds issued.

Concerns

The Reserve Bank of India (RBI) has expressed concerns regarding the increases in trade tariffs imposed by the United States, cautioning that these measures may restrain Indias exports and depress domestic demand, thereby potentially obstructing economic growth.

The imposition of reciprocal tariffs could diminish net external demand. At the same time, a global deceleration exacerbated by trade tensions poses a threat to domestic growth and export performance, notwithstanding Indias tari_ advantages. The uncertainties surrounding the effects of tariffs, the elasticities of export and import and the ongoing discussions concerning a Foreign Trade Agreement with the United States complicate economic assessments.

Furthermore, the volatility in global commodity prices, characterised by significant declines in energy and metals prices as well as erratic gold prices, further complicates Indias inflation outlook, despite a marked decrease in food inflation.

Outlook

Looking ahead to FY26, Indias GDP is projected to grow at a robust 6.5%, underpinned by resilient domestic demand despite anticipated strains from rising US tariffs and global pushback on globalisation impacting APAC economies. With expectations of a normal monsoon, soft commodity prices, particularly crude and cooling food inflation, alongside tax benefits from the FY26 budget and lower borrowing costs, discretionary consumption is poised to strengthen, reinforcing Indias economic momentum in a challenging global landscape.

Sources: (https://pib.gov.in/PressReleasePage.aspx?PRID=2113316#:~:text=Indias%20GDP%20is%20projected%20to,%2C%20trade%2C%20 and%20financial%20services.) (https://www.financialexpress.com/policy/economy-project-capex-intent-falls-to-a-3-year-low-in-fy25-3795834/#:~:text=Industries%20 Group%2C%20said.-,In%20FY25%2C%20public%20capex%20also%20slowed%20down%20considerably%2C%20partly%20due,missed%20 by%20a%20wide%20margin.) (https://www.business-standard.com/economy/news/india-s-gdp-growth-projected-at-6-4-for-fy25-6-5-for-fy26-ey-report-125033000160_1. html) (https://www.business-standard.com/pti-stories/national/s-p-cuts-india-s-fy26-gdp-growth-forecast-to-6-5-amid-global-strains-125032500566_1.html) (https://cfo.economictimes.indiatimes.com/news/economy/manufacturing-sector-marks-its-fastest-recovery-in-march-with-58-1-pmi/119895948#:~:text=Indias%20manufacturing%20sector%20ended%20the,is%20poised%20for%20continued%20growth.&text=The%20 Indian%20manufacturing%20sector%20closed,surpassing%20its%20long%2Dterm%20average.) (https://pib.gov.in/PressReleasePage.aspx?PRID=2122148 ) (https://www.livemint.com/news/india/gst-collection-march-deloitte-ey-gst-council-ministerial-panel-11743515354541.html) (https://economictimes.indiatimes.com/news/economy/indicators/us-tari_-hike-clouds-indias-export-outlook-add-pressure-on-domestic-demand-rbi/articleshow/120518300.cms?from=mdr)

INDIAN STRUCTURAL STEEL SPACE

Structural steel, engineered for high strength, durability and ductility, is a cornerstone of modern construction, ideal for creating load-bearing components like beams, columns and frames in high-rise buildings, bridges, airports and railway stations. Its high strength-to-weight ratio enables lighter, cost-e_ective structures, reducing material and labour costs while ensuring stability under extreme weather, seismic activity and fire hazards, making it a preferred choice for large-scale infrastructure projects.

Advantages and Sustainability

The versatility of structural steel allows architects and engineers to design innovative, complex structures, accommodating diverse architectural and functional needs. Its corrosion resistance and recyclability ensure long-lasting, low-maintenance buildings with an environmentally sustainable footprint. Additionally, steels prefabrication capabilities accelerate construction timelines, minimising disruptions and enhancing project efficiency, further solidifying its role in driving cost-e_ective and sustainable infrastructure development.

The Construction Sector - Yesterday & Tomorrow

Construction activities faced hurdles in FY25, with a muted 1.5% year-on-year growth in the first half due to the model code of conduct in Q1, an extended monsoon and a shift to milestone-based billing in Q2, particularly impacting road projects. However, the sector rebounded in the latter half, with operating income growth stabilising between 1–3%, setting a foundation for the anticipated recovery and steady performance in FY26, bolstered by sustained demand and operational efficiencies.

Indias construction sector is projected to see operating income growth of 8–10% in FY26, driven by robust order books and a low base from FY25. However, this reflects a slowdown from the 15% CAGR recorded over FY18–FY24, according to ICRA. With an order book-to-operating income ratio of 3.5 times as of March 31, 2025, the industry enjoys strong revenue visibility and growth prospects. Operating margins are expected to remain stable at 10.5–11% for FY25 and FY26, supported by improved execution momentum in the third and fourth quarters of FY25, despite earlier setbacks.

Structural Steel Market Poised for Growth

The Indian structural steel market is poised for steady growth in FY26, with domestic demand expected to rise by 9%-11% year-on-year, aligning with FY25s 10% growth and FY24s 12.4% surge, driven by sustained government infrastructure spending on roads, railways and ports, alongside stable growth in end-user industries. While demand growth is expected to match capacity additions, the global oversupply and high import threat, particularly from low-cost steel, may keep prices subdued. However, domestic players resilience, bolstered by low leverage and improved cost efficiency, will likely maintain stable credit metrics and steady operating cash flows despite debt-led capex.

Source: (https://www.nbmcw.com/news/india-ratings-maintains-neutral-outlook-for-steel-sector-in-fy26.html#:~:text=India%20 Ratings%20and%20Research%20(Ind,sheet%20and%20 improved%20cost%20e_ciency. ) (https://www.business-standard.com/industry/news/ construction-industry-expected-to-grow-by-8-10-in-fy26-says-icra-125041601140_1.html)

STRUCTURAL STEEL TUBES AND PIPES

Steel pipes and tubes are the preferred choice due to their high strength and low weight, making them ideal for construction applications. Furthermore, they demonstrate remarkable resilience and are capable of withstanding extreme heat, pressure, shock and vibrations.

Structural steel tubes are prevalent in the construction industry, serving as the foundation for significant infrastructure projects across the globe.

In India, structural steel tubes and pipes constitute a crucial element of the nations infrastructure and construction sectors, acting as the backbone for a diverse range of projects, including bridges, buildings and oil and gas pipelines.

The anticipated demand for structural steel tubes is projected to experience considerable growth in the coming years. Structural steel tubes are positioned to revolutionise the nations infrastructure development by serving as a vital input for transformative change.

A substantial portion of this growth is expected from the governments persistent emphasis on infrastructure development. The establishment of railway stations, metro services throughout the country and new aviation infrastructure, such as airports and logistics hubs, is forecasted to stimulate growth in the structural steel market over the next few years.

Moreover, the upsurge in the domestic real estate market, particularly the emerging trend of verticalisation for residential and commercial edi_ces, is likely to enhance the demand for structural steel. Additionally, the increasing popularity of pre-engineered buildings and design modifications in urban housing indicates favourable long-term demand for structural steel. The advantages of structural steel pipes over traditional construction methods have facilitated their heightened adoption in India, congruent with the nations aspiration to develop world-class infrastructure efficiently and sustainably.

1) Technology: The industrys incorporation of advanced manufacturing methodologies and the introduction of innovative products, including high-strength and corrosion-resistant pipes, will serve as the primary catalysts for the growth of Value-Added Products (VAP), thereby augmenting its proportion in the total volume sold. Moreover, utilising improved technology will generate numerous opportunities, culminating in expanding the Total Addressable Market.

2) Branded products in favour: The a_ordability of steel has increasingly tilted the market towards organised steel players, as the cost differential that once favoured unorganised suppliers continues to narrow. This shift empowers established companies to capture greater market share, driven by their ability to offer consistent quality, reliability and compliance with stringent standards, positioning them to capitalise on the growing demand for structural steel in Indias infrastructure and construction boom.

ABOUT APL APOLLO TUBES

APL Apollo Tubes is Indias foremost leader in the structural steel tube industry and it is celebrated for its pioneering innovation and market dominance. Offering a diverse portfolio of approximately 3,000 SKUS and holding multiple intellectual property rights, including designs and trademarks, the Company serves a broad spectrum of end-user industries with specialty and commodity products, reinforcing its reputation as an industry trailblazer.

With 11 advanced production facilities, APL Apollo ensures high-quality output, complemented by a nationwide distribution network of over 800 dealers. The Company enhances product awareness and adoption by actively engaging architects, construction consultants and fabricators. Headquartered in Delhi-NCR and led by Chairman and Managing Director Shri Sanjay Gupta and a skilled team, APL Apollo exports to over 30 countries. It is listed on the BSE and NSE, cementing its status as a dynamic global player.

OUR OPERATIONAL PERFORMANCE

In a year marred by steel price volatility and reduced government expenditure towards infrastructure creation, the Company increased sales volumes. This was primarily owing to the brand pull and aggressive marketing strategies that helped grow its market share.

The Company improved operational efficiencies at its manufacturing facilities. Additionally, it focused on reducing costs by optimising energy consumption, minimising

OUR FINANCIAL PERFORMANCE

APL Apollo reported a robust performance in FY25 despite challenging conditions. It saw a significant rise in sales volumes from 2.6 Mn Tons in FY24 to 3.2 Mn Tons in FY25, despite subdued demand, indicating an increased market share in the domestic market.

Revenue from Operations grew from C 181,118 Mn in FY24 to C 206,895 Mn in FY25. This growth was driven by higher sales volumes combined with a price increase in the fourth quarter of FY25.

EBITDA remained steady at C 11,990 Mn in FY25, consistent with the previous year. This was mainly due to soft steel prices that persisted throughout much of FY25, affecting overall profitability. Net profit also saw a slight improvement wastages and improving man-machine productivity. The Company recently integrated advanced digital technologies to optimise production scheduling and enable real-time oversight of plant activities.

The Raipur unit improved its capacity utilisation, rolling out larger volumes of value-added products, which were well accepted in the market. The Dubai unit also made a heartening contribution in bolstering business volumes.

from C 7,324 Mn in FY24 to C 7,570 Mn in FY25. The Company declared a dividend of 20% of profits for FY25, resulting in a total payout of C 1,526 Mn.

Shareholders Funds increased from C 36,046 as of March 31, 2024, to C 42,087 in FY25. Debt decreased substantially from the previous years level. Moreover, with a net cash as of March 31, 2025, at C3.1 Bn, APL Apollo emerged as a Zero-Net-Debt company.

The working capital cycle was zero days, highlighting the strength of the Companys operating model. Cash flow from operations improved from C 11,116 Mn in FY24 to C 12,133 Mn in FY25, reflecting a more solid and liquid enterprise.

Robust Asset Protection and Compliance

APL Apollos internal control system is meticulously designed to protect assets and ensure accurate and timely transaction authorisation, recording and reporting while complying with local statutory requirements and global best practices. This robust framework enables the Company to remain agile and competitive amidst evolving business dynamics, upholding compliance with the highest international standards.

Fostering a Performance-Driven Culture

APL Apollo prioritises a performance-oriented culture, empowering employees to excel and fostering accountability and ownership to drive sustainable, profitable growth. By cultivating an inclusive, collaborative and safe workplace, the Company ensures equal opportunities and actively engages employees as partners in its transformative journey, enhancing their contribution to organisational success.

Comprehensive Risk Management

The internal control mechanism diligently monitors and evaluates risks across all operational and corporate activities, encompassing development, partner, commercial and financial risks. Supervising manual and automated transaction approval processes ensures precision in accounting and financial operations, reinforcing APL Apollos commitment to operational excellence and risk mitigation.

Skill Development and Employee Growth

The Company invests in skill-building initiatives to prepare its workforce for future-ready, intelligent work practices, nurturing performance-focused leaders to unlock human potential. A stimulating work environment, frequent training programs, performance-linked incentives and nationwide benefits promote continuous learning and development, significantly contributing to APL Apollos expansion and maintaining a low attrition rate.

Proactive Risk Identification and Mitigation

APL Apollos robust risk management system proactively identifies, assesses and mitigates risks, enabling informed decision-making aligned with long-term objectives. This comprehensive approach minimises potential impacts, ensuring operational resilience and strategic clarity.

Strategic Alignment for Long-Term Success

By systematically addressing risks, APL Apollo strengthens its ability to navigate dynamic business challenges, fostering confidence in its strategic choices. This disciplined framework supports the Companys sustained growth and competitive edge in the structural steel industry.