MANAGEMENT DISCUSSION ANALYSIS
Proposed merger of the Company
AS members are aware of, the Board of Directors of Company at its meeting held on
February 27, 2021, had approved a scheme of amalgamation of Shri Lakshmi Metal Udyog
Limited (the holding company) and the Company with APL Apollo Tubes Limited and their
respective shareholders and creditors, under Sections 230 to 232 of the Companies Act,
2013.
Requisite approvals/NOCs from the stock exchange, share holders, secured creditors and
the unsecured creditors of the Company have been received for the scheme. Similar
approvals have been received by the other transferor company and the transferee Company
also. The Scheme is now subject to sanction of the Honble NCLT, Delhi for which a final
date has been fixed by the NCLT. On the scheme being effective, the Company will get
dissolved and all its assets and liabilities will get transferred to the transferee
company.
The references in this report to the Company may be construed as references to the
businesses and the undertaking that will be continued to be carried out in the transferee
company post-merger.
An economic overview India rebounded with vigor - from 6.6% GDP contraction in FY21 to
8.7% GDP growth in FY22 - progress that has demonstrated Indias inherent resilience and
determined efforts to get back to winning ways despite the second wave that threatened to
derail progress once again.
The Governments push for inoculation and the mass vaccination drives across India
helped allay fears which provided the much-needed impetus to private consumption.
Also, increased capital expenditure from government on infrastructure and defense
boosted the fortunes for India Inc. As a result, 19 of 22 High Frequency economic
Indicators were higher than the pre-Covid levels. Industrial India reported a healthy
double-digit growth over the previous year, the services sectors grew by more than 8%
while the agriculture segment improved from 3.6% in FY21 to 3.9% in FY22.
New investment and capex announcements by the private sector saw a 145% year-on-year
rise in FY22 and 150% increase over FY20. New project announcements in the manufacturing
sector have improved significantly to Rs.6.2 trillion in FY22, a rise of 93.75%, as
against Rs.3.2 trillion in FY20.
Despite pandemic-related uncertainties, India remains a favourable destination for
foreign investment. In 2021, around 44% of 1,200 global business heads in developed
economies were planning to make first-time or additional investments in India. Gross
Foreign Direct Investment (FDI) inflows increased, from $82 billion in FY 2021 to $83.6
billion in FY 2022.
The close of FY22 was not as expected owing to heightened geo-political tensions which
are expected to cast a shadow on Indias economic prospects for FY23. In keeping with
these realities, the Reserve Bank of India has suggested that Indias GDP would grow by
about 7.2% in FY23 (a slight downward revision from its earlier estimate of 7.8%.
The sector and its prospects Apollo TriCoat is into home decor products. The Companys
business space is about crafting steel for niche applications primarily used in the
residential segment of the real estate sector.
A brief on the domestic steel sector: In FY22, Indias steel demand improved on the
back of continued economic recovery. Robust demand across the year from the infrastructure
and automobile sectors elevated steel consumption to the pre-covid level. India produced
about 118 Mn T crude steel in FY22, up from 104 MT in FY21 which is expected to increase
to 130 MT in FY23. On the consumption side, it is expected that India will consume about
7-8% more steel than it did in FY22; the export volume on the other hand should increase
to around 20% of the production in FY23 from around 12% in FY22 - owing to India
capitalizing on the vacuum created in the global steel trade by China.
To appreciate the prospects of the Company, it would be relevant to get an insight into
the prospects of the real estate sectors Residential real estate: Akin to other sectors,
the residential real estate market registered a handsome recovery in 2021 as home sales
and new launches improved significantly. This trend in the residential markets is expected
to continue in 2022 with sales likely to reach pre-Covid levels. With income levels rising
faster than rise in real estate prices, housing affordability is expected to remain steady
over the near-term which is expected to keep the real estate market buoyant.
(Source: https://economictimes.indiatimes.
com/industry/services/property-/-cstruction/ hdfc-chairman-deepak-parekh-sees-robust-
housing-demand-in-india-to-continue/ articleshow/89642390.cms)
Home renovation: Indians are renovating their homes faster than before. Covid-induced
lockdowns put more money in the hands of salaried Indians. Moreover, the work-from- home
trend has made the home (more particularly the drawing room/ study room) into a defacto
office.
This has necessitated the need for renovation. This is driving the demand for building
products.
High-rise buildings: High-rise buildings are the order of the day in metros and urban
cities. This is owing to the continuous migration to these cities and decreasing space. In
2021 of the approximate 1,178 new launches, high rises were 614 projects. The trend in
leveraging vertical creation is only expected to accelerate over the medium term.
(Source:
https://www.99acres.com/articles/how-covid-19-has-influenced-the-supply-of-high-rise-
projects.html)
Affordable housing: Housing for all was governments focus for a very long time. In
FY23 budget, Government of India allocated Rs.48,000 crore in the Indias flagship
affordable housing scheme - the Pradhan Mantri Awas Yojana (PMAY) across the urban and
rural categories.
The loan books for affordable housing finance companies are expected to grow by 17-20%
in FY23, owing to the factors like under-penetrated market, favourable demographic,
government thrust on affordable housing, favourable tax regime that support growth
outlook. According to the government sources, in 2022-23 alone, 8 million houses will be
completed for eligible beneficiaries of PMAY.
Commercial segment: Indias journey towards a sizable USD 5 trillion economy opens a
plethora of interesting growth opportunities for the commercial office market. According
to real estate consultant Cushman & Wakefield, the demand for office space may rise
14% this year to 60 million square feet across eight cities, mainly driven by strong
rebound in Indian economy and aggressive hiring plans in IT/ITeS sector as well as
start-ups.
About the Company
Apollo TriCoat Tubes Limited is one of Indias leading branded steel tube manufacturers
with manufacturing facilities at Malur; Karnataka and Dadri; Uttar Pradesh that house
cutting-edge technology and sophisticated equipment which churn out a basket of seven
products, all of which are pioneering in application for the Indian markets.
Operational performance
The Company reported a strong performance at the shopfloor and in the market place with
the growing awareness of its environment-friendly products. Order flow increased from the
second quarter of FY22 as India returned to normalcy after the second wave of the
pandemic.
At the shopfloor, the team continued to streamline its processes to improve
productivity and product quality. It also implemented small automation projects to reduce
operator fatigue and improve output. These factors helped in growing production levels to
an all time high.
Financial performance in line with the economic resurgence and sectoral uptick, demand
for the Companys products upped - it enabled the Company to report healthy business
growth. in FY22, the topline stood at Rs.27,321 mn against Rs.14,728 mn in FY21, EBITDA
increased from Rs.1,637mn in FY21 to Rs.2,086mn in FY22 and Net Profit grew by 33% from
Rs.1,050mn in FY21 to Rs.1,396mn in FY22.
Shareholders Fund stood at Rs.4,440 mn as on March 31, 2022, up from Rs.3,043mn as on
March 31, 2021, owing to increased ploughing of business surplus. The total borrowings
were at Rs.490mn as on March 31, 2022;
The Company reported a Net Cash amounting to Rs.148mn for FY22.
Internal Control & its adequacy
The internal control mechanism at Apollo TriCoat is structured to ensure complete
compliance of internal financial controls with various policies, practices and statutes in
accordance with its growth and complexity of operations.
The system assesses all aspects of risks associated with the Companys activities and
its corporate profile. it also covers scientific and development risks, partner interest
risks, and commercial and financial risks. internal auditors of the Company carry out
extensive audits throughout the year across all locations and functional areas and submit
their reports to the Audit Committee.
A legal compliance programme, supported by a robust online system, covers the
manufacturing units. it includes statutes such as industrial and labour laws, taxation
laws, corporate and securities laws, and health, safety and environmental regulations.
Human resource & Industrial relations
People have been the corner stone of Apollo TriCoats success. For they have been
instrumental in designing, developing and delivering pathbreaking products that have only
widened the market space.
Despite the multiple waves of the pandemic, two of which transpired in FY22, the team
stood up to the challenge and delivered its products as committed.
On its part, the Company took good care of its people needs - providing them with
opportunities to enhance their capability and perform better.
Training & Upskilling:
The Company continued to invest in people development. Aligned to its training
calendar, the HR team organised multi-disciplinary training sessions and engaging
workshops for enhancing its people skill sets.
Performance Management:
The HR team put in place a robust Performance Management System through the process of
MBO (management by objectives}. The team identified key responsibility areas (KRA) and
objectives of employees in the staff level (senior executives and above) aligned with the
organisations goals. The team periodically evaluates the performance of members against
the articulated KRAs.
Employee Engagement: The HR team made special efforts to celebrate Significant changes
(i.e. change of 25% or more as compared to the immediately previous financial years) in
Key Financial Ratios, along with explanation are as under:
|
FY22 |
FY21 |
% change |
Reason for change more than 25% |
| Stability Ratios |
|
|
|
|
| Debt equity Ratio (x) |
-0.03 |
0.2 |
n/a |
The company has net cash on books, resulting in negative debt/equity |
| Interest Coverage Ratio (x) |
38.7 |
15.4 |
152% |
Zero debt |
| Liquidity Ratios |
|
|
|
|
| Current Ratio (x) |
1.08 |
1.47 |
-26% |
Due to increase in trade payables |
| Debtor Turnover Ratio (days) |
5 |
3 |
73% |
Very slight increase in debtor days |
| Inventory Turnover Ratio (days) |
11 |
16 |
-30% |
Improved inventory management |
| Profitability Ratios |
|
|
|
|
| Operating Profit Margin (%) |
7.6 |
11.1 |
-31% |
EBlTDA/ton increased by 24% however, margins appears low due to high NSR |
| Net Profit Margin (%) |
5.1 |
7.1 |
-28% |
Net margin followed the EBITDA margin |
special days for Apollo TriCoat family members. The team organises birthday
celebrations for all Company employees. Other events like the International Womens Day
and Independence Day are also celebrated at the Company premises.
Bonding: Festivals were observed across the Companys various facilities to foster
employee connect.
The HR team has curated a reward and recognition programme with the objective of
motivating the employees.
Risk management
At Apollo TriCoat, the risk management framework is designed to make the business
success, sustainable. The Company has adopted a comprehensive and integrated risk
appraisal, mitigation and management process which is devised keeping in mind the
Managements growth aspiration and risk appetite. The risk mitigation measures of the
Company are placed periodically before the Board and its Committee for review.
Cautionary statement
In this annual report, we have disclosed forward-looking information to enable
investors to comprehend our prospects and take informed investment decisions. This report
and other statements - written and oral - that we periodically make, contain
forward-looking statements that set out anticipated results based on the managements
plans and assumptions.
We have tried wherever possible to identify such statements by using words such as
anticipates, estimates; expects, projects, intends, plans, believes, and words
of similar substance in connection with any discussion of future performance. We cannot
guarantee that these forwardlooking statements will be realised, although we believe we
have been prudent in our assumptions.
The achievement of results is subject to risks, uncertainties and even inaccurate
assumptions.
Should known or unknown risks or uncertainties materialise, or should underlying
assumptions prove inaccurate, actual results could vary materially from those anticipated,
estimated or projected. Readers should kindly bear this in mind.
We undertake no obligation to publicly update any forward-looking statements, whether
as a result of new information, future events or otherwise.
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