Apar Industries

8/6/2019 Apar Industries

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Company Overview

Apar Industries Limited is a leading manufacturer of speciality oils and

conductors in India. Apar is the fifth largest manufacturer of transformer oils

and conductors in the world and the largest domestic manufacturer of

transformer oils with approx. 50 per cent market share. The company is the

dominant supplier in the power transformer sector (132 KV to 800 KV). Apar

is the second largest manufacturer of aluminium conductors in India with

market share of 22 per cent. In Sep08, Apar entered into power and telecom

cables business by acquiring 66 per cent equity stake in Uniflex Cables.

Key Business Highlights

Investments in Power Sector Opportunity for Apar

The investment in power transmission sector in the 11th five year plan is

estimated at Rs 1,400 billion providing an investment opportunity of Rs 315

billion in the conductor segment. Apar with a 25 per cent market share

stands to gain from the investment opportunity in the conductor segment.

Ongoing expansion in the power sector will drive the transformer oil growth

by 15 per cent. Apar is well positioned to take advantage of the emergingopportunities with a 50 per cent market share in transformer oil segment.

Cables business to break even in FY11

Uniflex expects sales of Rs 300 crores with exports of Rs 75 crores in FY11. To

cater to the domestic demand, Uniflex Cables plans to increase its capacity at

its Umergaon plant in Gujarat. Uniflex expects a cash break even level of

profitability in FY11.

Export market provides a huge opportunity

IEA estimates USD 6.1 trillion of investments in T&D sectors during 2005-

2030 (transmission USD1.8tn, distribution USD4.3tn). China and India are

expected to account for 40 per cent of that. Apar contributes half of Indias

total export of aluminium power conductors and enjoys approvals from

overseas utilities in strategic markets like Iran, Iraq, Middle East and Africa.

Rs 1083 crores order book in conductor business ensures revenue visibility

As on 1st April, 2010, Apar Industries had an order book position of Rs. 1083

crores in confirmed orders and Rs 286 crores in the pipeline. Approximately

75 per cent of these orders (confirmed and pipeline) will be executed in FY11

Key Risks

Aluminium and base oils are the two major raw materials of thecompany, any significant volatility in the price of crude oil and

aluminium can affect the profitability of the company.

Around 30 per cent of the business comes from the export markets;any significant change in currency valuation could affect the

profitability.

Delay in the orders / postponement of the order booked from thekey clients like Power Grid will adversely affect the companys sales.

Valuations

The stock is currently trading at a P/E multiple of 30.0x on its FY10 EPS of Rs.

7.6 and 2.7x EV/EBITDA multiple based on FY10 EBITDA of Rs. 153 crores.

uly 16, 2010

BSE Code 532259

BSE ID APARIND

High/Low 1Y (Rs.) 284 / 113

Avg. vol (3m) 13,388

Market Cap (Rs Cr) 735Net IB Debt (Rs Cr) (327)

Enterprise value(Rs Cr) 408

Shareholding % Mar-10 Jun-10

Promoters 62.15 62.15

MFs/ Fis/ Banks 13.64 14.84

FIIs 1.86 2.66

Public & Others 22.35 20.35

Stock Chart ( Relative to Sensex)

Stock Perfm.(%) 1M 6M 1Yr

Absolute (0.4) 21.8 93.0

Rel. to Sensex (2.5) 14.2 74.0

Financials (Rs.Cr) 03/08 03/09 03/10

Revenue 1,771 2,643 2,251

-o-y 17.2% 49.2% -14.8%

EBITDA 125 56 153

-o-y 17.1% -54.9% 171.4%

PAT 89 (5) 24

EPS (Dil.) 27.5 (1.7) 7.6

-o-y 85.4% PL LP

EBITDA Margin 7.1% 2.1% 6.8%

PAT Margin 5.0% -0.2% 1.1%

D/E(x) 0.35 0.58 0.57

P/E(x) 8.3x NA 30.0x

EV/EBITDA(x) 3.3x 7.2x 2.7xROCE 28.8% 9.4% 30.2%

ROE 31.2% NA 1.3%

50

100

150

200

250

23-Jul-09 23-Jan-10 23-Jul-10

Apar Sensex

nancial Year ends at March 31

Qtry Fin 06/09 09/09 12/09 03/10

Revenue 659 505 488 521

PAT (19) 24 22 22

EPS (5.7) 7.6 6.9 6.9

ll figures in Rs. crores except for per share datatry fig. shows standalone results

Speciality Oils & Elect. Equip.

CMP Rs. 227 Apar Industries Limited


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Apar Industries Ltd

Business Description

Incorporated in 1958, Apar Industries Limited is a leading manufacturer of speciality oils

and conductors in India. The manufacturing facilities are located in Rabale, Silvassa and

Nalagarh. Apar is the fifth largest manufacturer of transformer oils and conductors in the

world. In the domestic market, Apar is the largest manufacturer with approximately 50

per cent market share and is the dominant supplier in the power transformer sector (132

KV to 800 KV). Apar is the second largest manufacturer of aluminium conductors in Indiawith a market share of 22 per cent. In September 2008, Apar entered into the power and

telecom cables business by acquiring 66 per cent equity stake in Uniflex Cables for a total

consideration of Rs 84.5 crores. Apar derives about 75 per cent of its revenue from the

power sector on the basis of end use. Apars subsidiaries include Petroleum Specialties

Pvt. Limited, Quantum Apar Speciality Oil Pvt. Ltd, Uniflex Cables Limited and Marine

Cables & Wires Private Limited.

Revenue Composition

Apar has two main business segments: Transformer and speciality oils segment and

Conductor segment. Power and telecom cables business is operated through its

subsidiary - Uniflex Cables.

Break Up of Consolidated Gross Revenue in FY10

Power &

Telecom Cables

8%

Transformer Oi l

& Speciality

Oils

49%

Conductors

43%

Source: Annual Report

Apar derives 28 per cent of its total revenue from the export market.Apar contributes

half of Indias total export of aluminium power conductors and a significant proportion of

its domestic consumption.

Segment Product Domestic Market Export Market

Conductors 75% 25%

Transformers & Speciality Oils 69% 31%

Power / Telecom Cables 78% 22%

Total 72% 28%

Source: Annual Report

Apar is the fifth largest

manufacturer of

transformer oils and

conductors in the world

Transformer oil and

speciality oils segment

contributed 49 per cent

revenue in FY10


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Apar Industries Ltd

Transformer oil and specialty oils: Apar ventured into the specialty oils business in 1969

with technical know-how from Sun Oil Company (USA). This segment contributed 48.5

per cent of the companys revenue. The product portfolio includes transformer oils,

white oils and others (industrial lubricants, rubber processing and ink oils) contributing

50 per cent, 12 per cent and 38 per cent, respectively to the divisions revenue.Product %

sub-segApplication Purpose Prospects Customers

Transformer

Oil

50% Power &

distribution

transformers, which

account for 5 8%

of the total

transformer cost

Cooling; Critical

insulation

medium, used as

a diagnostic tool

to maintain

transformer

performance

Ongoing expansion

in the power sector

will drive the

transformer oil

growth by 15%

ABB,

Areva,

BHEL,

Siemens,

Crompton

Greaves,

EMCO etc

White Oil 12% Widely used in

Pharma products,

cosmetics & food

related applications

Serves as base

material

Robust growth in

healthcare products

and cosmetic and

polymer industries

Hindustan

Unilever,

Marico,

Dabur etc

Rubber

Process Oil

13% Manufacture of

rubber products(

automobile tyresand tubes, bicycle

tyres, tyre

retreading material,

belting, hoses and

battery containers)

Helps in blending

rubber with other

chemicals

Growing demand

from the tyres and

automobileindustries

CEAT,

MRF,

Apollo, JKTyre

Industrial

and

Automotive

lubricants

25% Used in

compressors,

refrigerators and

automobile engines

Provides

lubrication

between moving

machine pats;

provide cooling

effect

Increasing number

of OEM projects;

rising demand from

the automobile

industry, increasing

industrialisation

Escorts,

Kinetic and

Others

Source: Company & Annual Report

Aluminium Conductors: Apar manufactures a full range of AAC (All Alloy Conductors),

ACSR (Aluminium Conductors Steel Reinforced) and AAAC (All Aluminium Alloy

Conductors). Over the years, Apar has strengthened its product mix through a shift from

AAC and ACSRs to alloy based conductors. Major contribution to Apars segment revenue

comes from ACSR conductors which are more suited for river crossing, narrow valleys etc

Power Grid is the largest client of Apar for conductors.Apar enjoys approvals from all

overseas utilities, in strategic markets like Iran, Iraq, the Middle East and Africa, and

enjoys a preferred supplier status with them.

Product % sub-seg Application Purpose Outlook Customers

All Aluminium

Conductors

(AAC)

Distribution of

electricity

All Aluminium

Alloy Conductors

(AAAC)

35% - 40% Transmission

and distribution

of electricity

All Aluminium

Steel Reinforced

(ACSR)

60% - 65% Transmission

and distribution

of electricity

Mounted on

transmission

towers and

constitutes part of

the transmission

network that

delivers bulk power

from power

stations to load

centres and large

industrial

consumers

Fresh

investment

in

transmission

and

distribution

space will

drive the

demand for

conductors

Jyoti

Structures,

KEC Intl,

Kalpataru

Power, L&T,

NTPC, Power

Grid, SAE, ABB,

Energo Invest,

Ibedrolla,

Spain, S.A.,

Tata Power

and others.

Source: Company & Annual Report

Apar has reputedclientele like ABB,

Areva, BHEL and

Siemens for its

transformer oil product

category

Aluminium Conductors

Steel Reinforced (ACSR)

contributes more than

60 per cent revenue to

the aluminium

conductors category


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Apar Industries Ltd

Power/ Telecom Cables:

During FY08, Apar acquired a 66 per cent equity stake in Uniflex Cables, which

manufactures power and telecom cables for a total consideration of Rs 84.5 crores. It has

reflected goodwill to the extent of Rs 60 crores on consolidated balance sheet on account

of Uniflex acquisition as on FY09 and has charged impairment in FY 10. Uniflex reported a

turnover of Rs 180.7 crores with a net loss of Rs 22.6 crores in FY10. The manufacturing

facility is set up at Umbergaon, Gujarat and the products are marketed under the brandname of UNICAB. Around 22 per cent of Uniflexs total revenue comes from the export

market. The company primarily exports to Africa and the Middle-East.

Growth Drivers

Investments in Power Sector Opportunity for the conductor and transformer

oil business: The Aluminium conductors business has seen a significant growth in

the recent past which has been driven mainly by the power sector reforms,

aimed at expanding the generation capacity and strengthening the transmission

& distribution network. This growth is likely to be sustained given the large

investments proposed in the power sector.

According to the Central Electricity Authority (CEA), as of February 28, 2010,

Indias power generation systems had an installed capacity of around 157,229

MW. The current installed transmission capacity is only 13 per cent of the total

installed generation capacity. The Ministry of Power plans to establish an

integrated National Power Grid in the country by 2012 with close to 200,000 MW

generation capacities and 38,650 MW of inter-regional power transfer capacity.

Considering the current inter-regional power transfer capacity of 20,750 MW, the

corresponding investments in the transmission sector are expected to be

augmented. The overall investment in the power sector in the 11th five year plan

(across all the segments) is estimated at Rs 8,370 billion, out of which Rs 1,400

billion is planned to be spent on transmission schemes providing an opportunityof Rs 315 billion in the conductor segment.Apar with a 22 per cent market share

stands to gain from the investment opportunity in the conductor segment.

Transformer Oil: The 11th five year plan will generate a demand for 1,12,323 MVA

p.a. of transformers which will give rise to the demand for transformer oil. As per

Apars annual report FY09, the requirement of transformer oil stands at 1,10,000

KL p.a. This represents 60- 65 per cent of the transformer oil market accrued

from the OEM segment. Replacement demand is around 35 per cent of the total

demand for the transformer oil market. Apar is well positioned to take advantage

of the emerging opportunities with a 50 per cent market share in transformer oil

segment.

Focus on the value added products:Apar is focusing on the development of high

value products which is a high margin business. The Transformer oil segment has

received significant orders for its high oxidation stability grade products meeting

special application requirements of Extra High Voltage transformers, with ratings

of 400 KV to 800 KV from several global transformer majors. This segment is

expected to have a much higher demand in the years to come as the BRIC

The current installed

transmission capacity is

only 13 per cent of the

total installed

generation capacity

Focusing on Extra High

Voltage transformers

with ratings of 400 KV

to 800 KV

Investment in thepower sector in 11th

five-year plan is

estimated at Rs 8,370

billion, providing an

opportunity of Rs 315

billion in the conductor

segment.


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Apar Industries Ltd

countries, including India build high voltage transmission networks. Apar, is so far

the only Indian company to have this approval from global transformer OEMs.

Apar is focusing on developing high temperature conductors which can carry a

higher amount of current. The capacity to carry more current is being increased

by 25 per cent, 50 per cent and up to 100 per cent. At the moment, in India,

there is no significant demand for the conductors. With the government's focuson high-voltage transmission grid, the demand for high voltage conductors is

expected to witness a major push in the coming years.

Order book of Rs 1083 crores in conductor business ensures revenue visibility:As on 1st April, 2010, Apar Industries had an order book position of Rs. 1083

crores in confirmed orders and Rs 286 crores in the sales pipeline. Approximately

75 per cent of these orders (confirmed and prospect pipeline) will be executed in

FY11. Power Grid Corporation is the largest domestic customer with a Rs 500

crores order book (confirmed and orders in pipelines), while Adani Power is the

other significant client, with an order book of approx. Rs 300 crores. 2HFY10 had

lower order execution as there were delays/ re- schedulement of several orders

that had been booked. However, the postponement of the execution of these

orders will result in a substantially higher volume in FY11.

Current Order Book Position of Rs 1083 Crores

569

910

1093

975

834769

1083

775

154 185

635

287

378

315

0

200

400

600

800

1000

1200

1QFY09 2QFY09 3QFY09 4QFY09 1QFY10 2QFY09 4QFY09

Rs

.inCrores

Confirmed Orders Orders in Pipeline

Source: Company Financials

In 3QFY10, the order book position was Rs 1230 crores, which is not included in

the graph as the pipeline information is not available.

Cables business to break even in FY11: Uniflex expects sales of Rs 300 croreswith exports of Rs 75 crores in FY11 and Rs 1,000 crores in the next five years.

Over the next few months, Uniflex plans to launch a slew of products in the

domestic market, which it currently exports. To cater to the domestic demand,

Uniflex Cables plans to increase its capacity at its Umergaon plant in Gujarat.

Uniflex expects a cash break even level of profitability in FY11. The total domestic

cable market comprising both the organised and unorganised sectors is around

Rs 20,000 crores, with the organised sector valued at around Rs 5,000 crores.

75 per cent of the order

book will be executed in

FY11

Uniflex plans to launch

products in the

domestic market, which

it currently exports


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Apar Industries Ltd

Export market provides a huge opportunity for the company: Apar derives 28per cent of its total revenue from the export market. Apar contributes half of

Indias total export of aluminium power conductors and enjoys approvals from

overseas utilities in strategic markets like Iran, Iraq, the Middle East and Africa.

The company also exports its specialty oil through joint ventures in Australia,

South Africa and Turkey.

The International Energy Agency (IEA) estimates USD 6.1 trillion of investments in

T&D sectors during 2005-2030 (transmission USD1.8tn, distribution USD4.3tn).

China and India are expected to account for 40 per cent of this outlay.

USD 6.1 trillion of investments in T&D during 2005-2030

0

500

1,000

1,500

2,000

US$

Bn

Distribution 711 507 82 88 1258 383 158 193 274

Transmission 314 159 47 25 579 176 73 89 126

North

America Europe Japan Russia China IndiaMiddle

East AfricaLatin

America

Source: KEC International Corporate Presentation, IEA World Energy Outlook 2006

Considerable investments are being dedicated to widen the T&D network across

Africa, the Middle East and the ASEAN, which augurs favourably for Apar, since it

Apar contributes half of

Indias aluminium

power conductors

China and India will

account for 40 per cent

of an expected USD 6.1

trillion investment


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Apar Industries Ltd

already enjoys a presence in these global markets. This will enable the company

to strengthen its focus outside India.

New Business Initiatives

Evaluating electron beam technology for cable business: This is a newgeneration cable, which is being used in ships, in the design sector, in railroads

and will slowly be used for house wires and LV cables etc. The significant

property of Ebeam is its resistance to temperature and fires. The total number of

tenders for conventional cables has been reducing y-o-y, while those for EBEAM

cables are on the rise. The project will entail almost Rs 20 crores of capex. The

technology can be used beyond cables and can be used for various other

products by electron beam curing.

Independent testing laboratory: Apar has a NABL certification for its oil

laboratory which is on the same lines as CPRI or ERDA.It is the first in the private

sector to acquire this certification for specialty oils. In addition, Apar is also DSIR

(Department of Science and Industrial Research) accredited, which in turn affords

the company benefits in terms of the custom duties.The company is involved in

application work on transformer oils as well as industrial oils and is ken on third

party testing.

Key Risks

Highly volatile raw material prices: Aluminium and base oils are the two majorraw materials of the company. Prices of base oils are directly related to crude oil

prices, any significant volatility in the price of crude oil and aluminium can affect

the profitability of the company.

Foreign exchange fluctuation: Around 30 per cent of the business comes fromthe export markets; any significant change in currency valuation could affect the

profitability.

Delay in the orders / postponement of the order booked from key clients likePower Grid will adversely affect the companys sales.

The commodity cycle is

on an upward trend,

this may put some

pressure on margins

Adoption of Ebeam

technology will entail a

Rs 20 crore capex


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Apar Industries Ltd

ProfitabilityTotal Revenue declined by 14.8 per cent in FY10;

Apars consolidated total revenue grew at a CAGR of 19.3 per cent from Rs. 1,112 crores

in FY06 to Rs. 2 251 crores in FY10 driven by strong growth in the power sector. However,

the total revenue declined in FY10 by 14.8 per cent mainly due to reduction in raw

material prices of base oils and crude oil as well as reduction in the prices of aluminium

resulting in the consequent reduction in sale prices. Part of the decline was also due to

the lower sales volume of conductors in FY10.

Apars Consolidated Revenue and Growth

1511 17712643 2251

17.2%

35.9%

49.2%

-14.8%

-2000

-1000

0

1000

2000

3000

4000

5000

FY07 FY08 FY09 FY10

Rev

enue(Rs.inCrores)

-20%

-10%

0%

10%

20%

30%

40%

50%

Growth(%)

Total Revenue Growth (%)

Source: Company Financials & ICRA Online Research

Conductor business contributed 43 per cent of the total revenue in FY11. Conductor

business has grown at a CAGR of 22.4 per cent during FY06-FY10 on the back of power

sector reforms in India. However, FY10 witnessed a downturn in conductor sales and

volume by almost 31.5 per cent and 16.3 per cent, respectively, mainly due to lowerorder execution as there were delays/ re-scheduling of several booked orders. Some of

this is attributable to delayed financial closure (from FY09 crisis post Sept. 2008) or

project delays due to right-of-way-issues. However, the postponement of these orders

execution will result in substantially higher volume in FY11.

Conductor Business Performance

42 4957

9075

124112

140

115

140

0

20

40

60

80

100

120

140

160

FY06 FY07 FY08 FY09 FY10

Volume('

000MT)

0

20

40

60

80

100

120

140

160

Realisation(R

s'000/MT)

Conductor Volume Realisat ion


Revenue declined in

FY10 due to reduction

in raw material prices,

sale prices and lowervolume off-take of

conductors

Delays/ re-schedule of

FY10 orders will result

in higher growth in FY11


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Apar Industries Ltd

Transformer Oil & Specialty Oil business which forms almost half of the total revenue pie

performed better than the conductor business. Apar has recorded revenue CAGR of 20

per cent during FY06-09. Transformer Oil in particular forms around 42 per cent of this

segment and has posted gross sales at a CAGR of 15 per cent during FY06-FY10 with

volume growth of 10 per cent (CAGR). Realisation in FY10 was on account of lower raw

material prices of base oils and crude oil.

Transformer Oil Performance

7682

104 102111

39

60

404334

0

20

40

60

80

100

120


Volume('000MT)

0

20

40

60

80

100

120

Realisation(Rs'000/MT)

Transformer Oil Volume LHS Realisation RHS


Power and Cables business through Uniflex has posted revenue of Rs 180 crores in FY10

compared to Rs 128 crores in FY09. There have been significant signs of improvement in

volumes and the company targets revenue of Rs 275300 crores and cash level

profitability in FY11.

Margins improved in FY10 on back of economic recovery

Apar EBIDTA margins have been in the vicinity of 7 per cent during FY06 -10 except FY09

where the margins dropped due to the global crisis. Similarly EBIT margins are in therange of 6 6.5 per cent. In FY10, Conductors EBIT margins were at 6.1 per cent and

Transformer Oil & Speciality Oils EBIT margins were at around 10 per cent. In the case of

transformer oils, the sales mix improved, with high performance oils targeted at EHV

customers of 220 KV to 765 KV power transformers both in domestic and overseas

markets; this has led to better margins.

Margin trends

80107

125

56

153

71 97 111 13542

7.2% 7.1% 7.1% 6.8%

2.1%

6.0%

1.6%

6.3%6.4%6.4%

0

50

100

150

200


Rs.

inCrores

0%

2%

4%

6%

8%

Margins

EBITDA EBIT EBITDA Margin (%) EBIT Margin (%)


Consolidated margins

deteriorated in FY10due to higher other

expenses


10/16


11/16

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Apar Industries Ltd

Industry Overview

Power Sector

Indian power supply needs to grow at approximately more than 7 per cent annually to

keep pace with gross domestic product which is targetted at 8 per cent per annum.

(Source: Ministry of Power, April 2009). As of March, 2010, India faced an energy

shortage of approximately 9.5 per cent of total energy requirements and 13.8 per cent ofpeak demand requirements.

The average per capita consumption of electricity in India is estimated at 704 kWh during

2008-09. This is fairly low when compared to some of the developed and emerging

nations such US (~15,000 kWh) and China (~1,800 kWh). Moreover, the world average

stands at 2,300 kWh.

The Central Government has identified the power sector as a key focus area to promote

sustained industrial growth by embarking on an aggressive mission "Power for All" by

2012. According to the Integrated Energy Policy report issued by the Planning

Commission, India would require additional capacity of approximately 73-86 GW by2012, 159-190 GW by 2017 and 278341 GW by 2022, respectively, based on normative

parameters in order to sustain a 8-9 per cent GDP growth rate (Source: IEP, Expert

Committee on Power).

Power generation capacity planned during the XIth Plan

Year Hydro Thermal Nuclear Total % Achievement

2008 2,372 9,007 660 12,039 77%

2009 1,097 5,773 660 7,530 46%

2010 845 13,002 660 14,507 66%

2011 1,346 17,793 1,220 20,359

2012 9,967 14,118 180 24,265

XIIth Plan 15,627 59,693 3,380 78,700Source: Infaline Energy

According to the latest assessment of Central Electricity Authority, a capacity addition of

62,374 MW is likely to be achieved with a high level of certainty during 11th

five year Plan

period.

Out of nine sites identified by the CEA in consultation with the States for development of

Ultra Mega Power Projects (UMPPs), comprising of 765kV & 400kV Lines and Substations,

with a capacity of approximately 4,000 MW each, on a Build, Own, and Operate (BOO)

basis, four projects have been awarded and few more projects are likely to be brought to

the bidding stage.

The strengthening of the National Power Grid through high capacity AC EHV lines and 765

kV UHV AC lines/ HVDC lines has been envisaged by the Government of India to facilitate

transfer of power within and across the regions upto 38,650 MW by 2012.

Average per capita

consumption of

electricity in India is

estimated at 704 kWh

much lower than theworld average of 2,300

kWh

Capacity addition of

62,374 MW is likely to

be achieved during the

11th

five year plan

period.


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Apar Industries Ltd

Planned Inter Regional Capacity

Capacity in MWXth Plan,

Mar 2007

Existing,

Mar 2009

XIth Plan,

Mar 2012

Est. Addition

in XIIth PlanXIIth Plan

East-South 3,130 3,630 3,630 4,200 7,830

East North 3,430 6,330 12,130 5,900 18,030

East- West 1,790 2,990 6,490 10,500 16,990

East North East 1,260 1,260 2,860 0 2,860

North West 2,120 3,220 4,220 10,200 14,420

West South 1,720 1,720 2,720 6,300 9,020

North East

North/ West

0 0 6,000 0 6,000

Total (220kV & above) 13,450 19,150 38,050 37,100 75,150

132/110 kV links 600 600 600 0 600

Total 14,050 19,750 38,650 37,100 75,750

Source: CEA

GoI plans to focus on the creation of a national grid in a phased manner by adding over

95,000 ckm of transmission network by 2012.

Planned Transmission Lines

in ckmXth Plan,

Mar 2007

Existing,

Mar 2009

XIth Plan,

Mar 2012

Est. Addition in

XIIth Plan

765kV 2,184 3118 7,612 25,000 to 30,000

HVDC 500 kV 5,872 7172 7,478

HVDC 800/600 kV 0 3,600 5000

400 kV 75,722 89496 1,25,000 50,000

220 kV 1,14,629 122960 1,50,000 40,000

Total ckm 1,98,569 222746 2,93,852 155,000 to 180,000

Source: Presentation on Transmission System Requirement for the 12th

plan ( 20012-17) CEA

ConductorsThe conductor industry has seen good growth in India, on account of investments made

in the power transmission and distribution sectors. Power conductors are used in

transmission and distribution lines. With reforms in the power sector set to continue, a

lot of investments are expected to flow into the transmission and distribution segment.

Rs 315 billion opportunity for the conductor business

Source: Sterlite Technologies Annual Report 2009

With reforms at an

accelerated pace,conductor industry will

benefit


13/16

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Apar Industries Ltd

Sterlite Technologies and Apar Industries are major players in the conductor business

with market share of 30 per cent and around 22 per cent, respectively.

Transformer Oil

Transformer oil is a highly-refined mineral oil that is stable at high temperatures and has

excellent electrical insulating properties. It is used in oil-filled transformers, some types

of high voltage capacitors, fluorescent lamp ballasts, and some types of high voltageswitches and circuit breakers. Its functions are to insulate, suppress corona and arcing,

and to serve as a coolant. Demand for the transformer oil comes from the transformer

market.The transformer oil market can be divided into OEM and replacement demand.

However, as 60 per cent - 65 per cent of the revenue is acccured from the OEM market.

Apar is the largest player with 50 per cent market share in the transformer oil market

with a turnover of approx 1,31,000 KL in FY10.

Generally, 1 MW of power addition requires 7 MVA of transformer across generation,

transmission and distribution. A 62,374 MW capacity achievement in XIth plan, will

generate an additional demand for 87,323 MVA p.a. of transformers. A transformer has

a shelf life of around 25 to 30 years. Thus transformers that were installed in 1980-

1985 are likely to be replaced in the near future, which implies a replacement demand

of 25,000 MVA per annum.Thus the demand for transformers is pegged at 1,12,323 MVA

per annum. As per Apars annual report 2008-09, the requirement of transformer oil

stands at 1,10,000 KL p.a.

The requirement of

transformer oil stands

at 1,10,000 KL p.a.


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Apar Industries Ltd

Summary FinancialsProfit & Loss Statement

Particulars (Rs Crores) FY06 FY07 FY08 FY09 FY10

Total Revenue 1112.4 1511.4 1771.4 2643.2 2251.3

Growth (%) 35.9% 17.2% 49.2% -14.8%

Cost of Good Sold (849.6) (1203.1) (1394.6) (2248.8) (1736.5)

Gross Profit 262.7 308.3 376.8 394.4 514.8

Growth (%) 17.4% 22.2% 4.7% 30.5%

Employee Costs (13.8) (15.9) (18.9) (26.6) (34.0)

Other Expenditure (169.3) (185.7) (233.0) (311.4) (327.8)

EBITDA 79.6 106.7 124.9 56.4 153.0

Growth (%) 34.0% 17.1% -54.9% 171.4%

Depreciation (8.6) (10.0) (14.0) (14.7) (18.5)

EBIT Profit 71.0 96.7 110.9 41.7 134.5

Growth (%) 36.2% 14.7% -62.4% 222.9%

Net Interest expense (20.9) (32.4) (37.1) (41.2) (33.2)

Other Income(expense) 4.5 4.4 0.0 0.1 0.2

Exceptional Items (1.7) (3.8) (3.8) (1.7) (1.2)

PBT 52.8 64.8 70.0 (1.2) 100.4

Growth (%) 22.6% 8.1% PL LP

Income Tax (10.9) (16.7) (11.8) (2.3) (22.4)

Profit after Tax 41.9 48.1 58.3 (3.5) 78.0

Growth (%) 14.8% 21.2% PL LP

Extra Ordinary Items & Others 0.0 0.1 30.6 (1.8) (53.6)

Net Profit 41.9 48.2 88.9 (5.3) 24.4

Basic EPS 18.6 15.3 27.5 (1.7) 7.6

Diluted EPS 18.7 14.8 27.5 (1.7) 7.6

DPS 3.5 3.5 5.5 0.0 5.0

Equity Capital 20.8 32.3 32.3 32.3 32.3

Face value 10 10 10 10 10

Ratio Analysis

Particulars (Rs Crores) FY06 FY07 FY08 FY09 FY10

Margins

Gross Margin (%) 23.6% 20.4% 21.3% 14.9% 22.9%

EBITDA Margin (%) 7.2% 7.1% 7.1% 2.1% 6.8%

EBIT Margin (%) 6.4% 6.4% 6.3% 1.6% 6.0%Net Profit Margin (%) 3.8% 3.2% 5.0% -0.2% 1.1%

Valuation

EPS 18.7 14.8 27.5 (1.7) 7.6

BVPS 88.3 67.0 88.0 86.6 87.6

P/E (x) 12.2 15.3 8.3 NA 30.0

P/BV (x) 2.6 3.4 2.6 2.6 NA

EV/ EBITDA (x) 5.1 3.8 3.3 7.2 2.7

EV/ Sales (x) 0.4 0.3 0.2 0.2 0.2

Profitability

ROCE (%) 24.5% 27.7% 28.8% 9.4% 30.2%

RONW (%) 22.8% 22.2% 31.2% NA 1.3%

Solvency Ratio

Deb/ Equity Ratio (x) 0.57 0.61 0.35 0.58 0.57

Interest Cover (x) 3.4 3.0 3.0 1.0 4.1Turnover Ratio

Inventory T/o Days 99 73 69 52 83

Debtors T/o Days 84 77 79 62 75

Creditors T/o Days 184 140 187 175 232

Other Ratios

Dividend Payout (%) 35.0% 35.0% 55.0% 0.0% 50.0%

Dividend Yield (%) 1.5% 1.5% 2.4% 0.0% 2.2%


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Apar Industries Ltd

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Apar Industries

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