Dear Shareholders,
It is an excellent time to share this communique as the Company has
sustained its growth momentum in a year rife with challenges from unexpected quarters.
This growth demonstrates the resilience and robustness of our Company's business
model in surmounting all kinds of odds and emerging ever so stronger. Our sales volumes
crossed the 2 Mn mark – a goal which remained elusive for quite some years. We
reached a sales volume of 2.3 Mn in a year when the environment was not conducive to
volume growth.
Revenue, EBITDA and Net Profit increased by 24%, 8% and 4%,
respectively, which is very commendable considering the inflationary headwinds and other
negatives that prevailed during the year. EBITDA per tonne stood at C4,481 in FY23 against
C5,386 in FY22, which is owing to our Raipur facility, the most demonstrative milestone of
our journey.
The Raipur facility
It is with great pride that I mention that we started the commercial
operations of our Raipur facility, which rolled out approx 167K tonnes of
super-value-added products in FY23, and are novel innovations for the Indian market.
The team went above and beyond to create markets for these innovative
products by traveling nationwide to engage with diverse categories of product influencers,
thus creating a demand pull for the products as they rolled out of our Raipur facility.
But since this is a new facility in its first year of commercial
operations, we staggered our production. As a result, the average utilization of the
Raipur facility was about 16.7%, which weighed down profits and profitability. Our ROCE
was 29.2% in FY23 against 34.6% in FY22. If we exclude Raipur from the equation, our ROCE
would be 37% for FY23. This showcases the relevance of our products and the resilience of
our all-weather business model.
I am very excited and hopeful about the Raipur facility. Our market
creation efforts have already yielded good results as more orders await in the pipeline.
This success is mainly owing to the creation of large and pin code-defining structures
deploying our tubular technology. These are work-in-progress as I speak.
I am confident that the demand for our heavy sections will surge in the
current year (FY24). My confidence stems from the Government's resolve to create
world-class infrastructure in India, evidenced in the Union Budget 2024 proposals.
The Government has been particularly aggressive in allocating funds in
two segments – railways, and water infrastructure. Interestingly, we initiated our
engagement with relevant authorities in these sectors since the start of FY23. Further,
the Government continues to invest in building airports across Tier 2 and Tier 3 cities to
strengthen air connectivity and expand and modernise existing airports in urban India.
Across the world, airports of today use tubular technology. Being the first movers in this
space with demonstrated capabilities, we feel confident about securing larger volumes of
business from the infrastructure creation thrust in India.
What is particularly heartening is that the Raipur facility, because of
its super-value-added product basket, will play a pivotal role in scaling the EBITDA per
tonne for the organisation. I am confident about achieving optimum utilisation of our
first greenfield unit in the next 12-18 months. When that happens, it will catapult APL
Apollo into a leadership position among global peers.
With Raipur expected to ramp up utilisation, we will be set to increase
cash flow into the business with an aim to attain a zero-debt position.
Our investment in Shankara Building continues to yield satisfying
results for the group. Our sales volume through their channel was up 168% in FY23 against
the previous year. Now that the Raipur products have gone online, we are increasingly
confident that Shankara will become our vital/exclusive partner to promote and push our
value-added products through its platform.
Reducing our carbon footprint
APL Apollo has always been a responsible organisation with
environmental consciousness enshrined embedded into its core values. Hence every business
decision is evaluated from this ethical perspective before being implemented.
This philosophy is evident in our technologies and products which have
made a critical difference in saving precious natural resources and has placed APL Apollo
firmly in the nation's circular economy. Even as we scaled our operations, we have
intensified our efforts in reducing our carbon footprint – two very conflicting
aspirations in our business space. I am delighted that we have successfully reconciled
these opposing forces to create a unique organisation that stands as a beacon of
possibilities and ethical value.
I would also like to foreground that our efforts towards responsible
operations and a Green Earth have earned us a higher ranking. In the DJSI FY2022 score, we
stood at the 80th percentile in the peer industry comprising global companies, and our
score reached a high of 29 points above the industry average of 22. In the earlier rating,
we stood at the 56th percentile. This is a considerable jump and we are happy with our
progress.
But we still have considerable ground to cover to emerge as a leader
from an ESG perspective as well. We have drawn up a comprehensive plan towards our goal. I
am confident that my team, whom I am incredibly proud of, will work together to achieve
this benchmark.
Only when this happens, I would consider APL Apollo as a leader in the
true sense – a leader in the business space, a leader in innovation and responsible
practices.
Future plans
My goal is very clear – getting to a 5 MnT capacity by 2025. For
this, we are setting up operating facilities in Kolkata and Dubai. Moreover, we will be
implementing major de-bottlenecking initiatives at all our existing plants. I estimate
that we will need an investment of about C400 crore to reach the our goal.
From an EBITDA per tonne matrix, we should touch an average blended
EBITDA per tonne of C6,000/- by FY25. But that will depend on several factors, some of
which will be beyond our control. So, it is more of an aspiration rather than a target.
I have no doubts that India has become one of the most
enabling/empowering countries for entrepreneurs. The prospects and potential for the
future are extremely bright. In India, I see an increasing zeal to finally reclaim our
former economic stature and our position as a pivotal force in global affairs. I am
confident that APL Apollo will play an important role in creating a Greater and Greener
nation that the world will look up to.
I thank my colleagues on the Board, my fellow shareholders, my team,
and all other stakeholders for believing in us and partnering with us in this exhilarating
journey so far.
I am particularly optimistic that as our business drivers take deeper
root within, the quality of our business will evolve, translating into even better
financial outcomes and stakeholder value.
Our best has just begun.
Sanjay Gupta
Chairman and Managing Director