Apar Industries

Apar Industries is involved mainly in the power ancillary business - Conductors, Specialty Oils (mainly transformer oils) and Cables.

Conductor Segment
• CO generates 45% of revenues from conductors
• Apar has a market share of 23% in the domestic market
• One of the top five manufacturers of conductors in the world. Largest exporter of conductors from India.
• Estimated conductor market size in India is 7500 cr growing at 13%
• First turnkey project for High Temperature Low Sag (HTLS) conductors was successfully executed. It is a higher margin product compared to conventional conductors.
• Co is expecting a growth from 2% of revenues to 7.5% of revenues in FY16 in HTLS
• Co is expanding capacity by 30,000MT. Commercial production is to start by September 2016

Specialty Oils
• Domestic market share of 45% in transformer oils
• Fourth largest transformer oil manufacturer in the world and exports to 100 countries
• This segment is dependent on crude prices. Fall in prices depresses topline revenue.
• Shift in demand to 765KV & 1200KV transformers driving demand for higher voltage transformer oils
• Co has 2 manufacturing units - Rabale (222,000 KL) & Silvassa (220,000 KL)
• Co has setup a R&D center in Rabale
• Commissioning a new plant at Sharjah which will start production by Q3 FY17
• Tie-up with ENI of Italy from 2007 to produce auto lubricants

• Co has 2 manufacturing sites in Umbergaon & Khatalwada - Gujarat
• Domestic market sales is 78% and exports comprises of 22%
• Co moving away consciously from HT LT cables due to low margins and moving into Elastomeric & E-beam cables
• National Optical Fibre Network (NOFN) will create a network connecting all gram panchayats
• 3G & 4G rollout will also add to the requirements

Market Cap.: 1,767.58 Cr.
Current Price: 459.15
Book Value: 196.60
Stock P/E: 20.52
Dividend Yield: 0.76%
Face Value: 10.00
52 Week High/Low: 541.95 / 321.00
Dividend Payout Ratio: 28.14%
Debt to equity: 0.78
Price to book value: 2.34
Sales growth 5Years: 20.19%
Profit growth 5Years: -7.16%
OPM: 6.19%
NPM last year: 0.96%
Return on assets: 7.97%
Return on equity: 7.66%
Return on capital employed: 18.72%


  • A delay in power distribution sector turnaround may impact the profitability of the company.
  • Exports may get impacted due to volatility in currencies
  • Speciality Oils are derivatives of crude hence any sharp price movement in crude can impact the company

With a turnaround in the power distribution business and possible benefits from the UDAY scheme, all the segments are likely to benefit. Apar has a good potential to benefit from this trend.

Company website for Annual reports and Concall transcripts - www.apar.com/financials.php
Screener Financials - https://www.screener.in/company/APARINDS/

Disclosure:- I have a tracking position in this stock with the intent of adding based on future progress.


Thx. Any holding disclosures?

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Just to add my two cents.

I had been using Apar Transformer oil in our transformer manufacturing unit.

Apar is a respected name vis-a-vis its competitors, as far as product quality is concerned.

Discl. : Not invested yet.


Hi Abhishek/Mukesh,

Interesting pick. I would like to understand about the competitive advantage. What type of quality difference is there for the specialty oil it manufactures. What is the exact use of this oil. Please pardon me for not having the technical knowledge.


What is the existing capacity in conductors?

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Hello Abhishek,

Generally companies in conductor or oils do not differ much from each other and the only advantage that a player like Apar has is a long established relationship with clients and an ability to manage large tenders. Most of the time the tender bidding happens on a raw material + x% gross margin and the raw material price are pass through so as to avoid any impact of price movement. Although Apar does seem to be getting into certain niche areas:

a) Transformer oils for high end transformer i.e. 765 Kv range. I think Apar and Savita Oil are the only two here. 765 kV range has better margins.
b) Transformer oils for 800 kV DC transformers. This is again highly specialized transformer oil and as far as I know even Savita Oil does not have the technology.
c) Special high temperature thermal resistant conductor which are price at 15% to 20% opm levels.
d) Their niche in EBEAM Technology cables used in renewable, defence, railways etc.

Apar’s management is one of the most transparent that I have come across. All information around their capacity etc. are easily available in conf. call transcripts.


Frankly sire, looking at the financials and reading their con call and Annual reports, the only business which looks promising is their transformer oil business with very high margins. That business showed 2% volume growth which is quite less and I am hoping that that should increase with the UDAY scheme. Cable business is just 7% EBITA business(management aim) with ROCE (post tax) merely equalling the return you get from bank FD. Their conductor business orderbook has reduced and it looks to be a low margin business (they will increase from next year as per management).
Interest burden seems to very high (0.5*PBIT).
To invest in this company for substantial returns one needs to know a lot about the industry dynamics and one needs to have faith in what promotors are saying, otherwise I don’t see much of a reason to invest in this.
Would love to hear th reply from senior boarders.

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Apar is in a cyclical business and it important to understand that its dynamics will be very different. The calculation needs to be done for a cycle and not for individual years. The ROCE values in a cyclical downturn can be much lower and ROE gets a much bigger boost (leverage plays out) during cyclical upturns. The key monitorables in cyclical companies IMO are

a) Capacity Utilization: During cyclical downturns order booking itself is very difficult and companies start operating at extremely low OPMs. WIth cycle improvements the OPMs can shoot up significantly sometimes from 5% to 15%. Incase of Apar they have had an order booking in conductor business at around 5K OPM per tonne. This should move to 10K gradually when cyclical upturn happens. Their low margin orders were mostly exexcuted in last quarter.

b) Manageable financial stress: During cyclical downturn their is significant working capital stress. A lot of cyclical companies end up being duds if this is not managed properly. IMO APar has done a very good job of this.

c) Volume growth: These companies are highly sensitive to commodity prices. Sales figure do not accurately represent the growth that a company has achieved but volumes do. Volumes dip significantly during downturns. Apar has done well in retaining its volume and is on the verge of expanding its capacity in all three segments i.e. Conductors (new plant is being commissioned in Orissa later this year), Oil (New plant by a subsidiary in Middle east), and also expanding the capacity of cables to target around 800 crores in revenues.

d) Commodity prices: A rise in commodity prices is generally associated with a cyclical upturn. An increase in commodity prices result in much higher Capital turns (despite no extra production) combines with additional OPM to increase the ROE significantly. The increased working capital requirement due to increase raw material prices is easily compensated by shorter working capital cycle.

e) Interest rates: A cyclical upturn is generally associated with reducing interest rates, This is another factor which helps companies like Apar with their interest burden coming down significantly.

All the above factors magnify the returns and losses during cyclical upturns and downturns. It is important to realize how each of these factors improve/worsen with overall macro conditions.

Caution: Most of the time this Macro talk is just hand waving and understanding both the industry and company is extremely important before taking a decision.

Disc.: No holding currently. Tracking the stock closely and can take a position.


CONFERENCE CALL - from Capital Markets

Conductor volume to grow flat in FY17 but oil volume to grow 9-9.5%

Apar Industries held a conference call on May 26, 2016. In the conference call the company was represented by Kushal Desai – Managing Director; Chaitanya Desai – Managing Director and V C Diwadkar – CFO.

Key takeaways of the conference call

  • Conductor order book at Rs 1751 crore as on Mar 31, 2016 compared to Rs 1809 crore as on Dec 31, 2015. Export orders comprised 29% of order book. Cables Order book as on March 31, 2016 was up by 8% to reach Rs 199 crore as against Rs 184 crore in the corresponding previous year.

  • For FY17 expects Conductor volume close to last year volume of about 170000 tonnes and the EBITDA of Rs 8000-8500/tonne. Expects oil volume growth of 9-9.5% in FY17 and EBITDA of Rs 4000-4500/KL.

  • Target is 15% growth in cable business a shade less than Rs 800 crore is internal sales target for FY17 in cables business. A margin of 7.5-8.5% is expected for FY17 in case of cables business.

  • Conductor volumes for FY16 grew by 13% to reach 170,070 tonnes (compared to 150,557 tonnes in FY15).

  • The EBITDA (post forex adjustment) was Rs 9705/MT from Rs 4696/MT in Q4FY15. But the EBITDA (post forex adjustment) of conductors for FY16 was down by 1% to Rs 7606/MT from Rs 7698/MT in FY15. Lower EBITDA per MT in FY16 can be attributed to execution of low margin orders (picked up at a time of aggressive pricing) in H1FY16.

  • Of the FY16 conductor revenue, the share of PGCIL is 20%, 40% is accounted by exports and balance is accounted by EPC players as well as state Transcos.

  • HEC revenue up at 6.2% of overall Conductors’ revenue in FY16, from 1.1% in FY15, as the company grew its presence in the segment.

  • Conductor capacity utilization is 100% for FY16.

  • Specialty oils volumes for FY16, was up by 2.6% to 336526 KL from 328123 KL in FY15. Specialty oil volume for the quarter ended March 2016 was up by 3.4% at 89004 KL up from 86063 KL in Q4FY15, driven by rubber processing oil, auto lubricants and white oils.

  • Revenue of specialty oil for quarter and fiscal ended March 2016 was impacted on account of falling crude oil prices (lowering realizations) and sluggish market conditions. Export market impacted by delayed T&D orders from cash strapped commodity driven emerging economies. Domestic market depicting positive signs, however lacks consistency.

  • EBITDA (after forex adjustment) of specialty oils for the quarter ended March 2016, increased by 50% to reach Rs 4561/KL up from Rs 3048/KL in Q4FY15. Similarly EBITDA (after forex adjustment) for the year increased significantly to Rs 5407/KL (up from Rs 2722/KL in FY15), driven by lower base oil costs, sale of richer product mix, disciplined pricing and good client mix.

  • Specialty Oils: Setting up a port-based 100000 KL capacity plant at Hamriyah (Sharjah) at an investment of Rs 100 crore. This will add new opportunities like bulk exports and is strategically located in terms of proximity to customers.

  • Demand for transformer oil has to be good from distribution segment which sees strong funding from Deendayal Upadyay Grameen Vidyutikaran Yojna.

  • Of the total transformer oil sales about 25% is accounted by 400kv and special transformer types. About 35% is from products going to 220kv transformers and above.

  • The revenue of Elastomeric & power cables grew 68% and 24% respectively in FY16.

  • Optical Fibre cable segment has subdued demand as the off take from BSNL, BBNL and private telcos remains low. This is expected to continue in FY17 as well.

  • However the demand growth for Elastomeric and power cables will be driven by Railways, defence and renewable (wind and solar). The power sector with funding from uday, IDPS is expected to boost the demand for power cables.

  • Of the FY16 cables business sales of Rs 675 crore the share of Elastomeric & power cables is Rs 350 crore or 55%.

  • So given the expected muted OFC segment demand in FY17 and strong growth drivers for power/elastometric cables the mix is expected to change in current fiscal.

  • Apar with improving demand in power cables, is operating at full capacity and is planning a capex investment to cater to the increasing demand and further increase the profitability.

  • One time provisions/write-off of bad debts during the quarter and fiscal ended March 2016 was Rs 5 crore and that is towards legacy residual contracts execution issues. EBITDA margin excluding onetime write-off is at 7%.


Decent results


Q1 investor presentation - http://www.apar.com/pdf/financedata/Investors-update/2016-2017/Q1.pdf

Key points:

  • Conductor revenues subdued due to lower commodity prices
  • Specialty Oils and Lubes are likely to be impacted due to slow implementation of UDAY and increase in crude oil
  • Higher orders expected from renewable companies for cables
  • Automotive segment drove highest sales ever for Q1
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One of the things to note is segment asset increase in conductors. This is mainly due to delayed dispatches and the impact of which should be seen next quarter (also mentioned in the presentation). The other good part in increase in revenue from HEC conductors which are high margins. Although 12000+ EBITDA per MT does not look sustainable but I think they are executing well on their promise.


Q2 results - good results continue

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Q2 concall summary:

Strong growth in profitability is driven by increased focus on high value added products such as high efficiency conductors (HEC), Elastomeric cables and high end transformer oils which start yielding results.

Conductors order book as on Sep 30, 2016 stood at Rs 1524 crore compared to Rs 1606 crore as on June 30, 2016 in spite of shorter delivery cycle and Tariff based competitive bidding (TBCB). Export orders comprised 30% of current conductor order book.

Odisha conductor plant at Jharsuguda started production in Sep’16.

PGCIL/SEB approval process is underway by next quarter this approval will be in place.

Conductors – The Company has guided a conductor EBITDA of Rs 8500 per MT and the company has bettered that with a post forex adjusted EBITDA per MT of Rs 11463 in H1FY17, a jump of 89% from Rs 6079 crore in H1FY16. This was led by increased execution of HEC. Margin in H2FY17 is expected to be lower than H1FY17. Looking at planned execution of orders on hand the company expects the profitability for the full year has to be anywhere around Rs 10500/MT.
Conductor - post forex adjustment EBITDA per MT in Q2FY17 doubled to reach Rs 10944 from Rs 5422 in Q2FY16

Of the two existing conductor plant at Silvasa one has exhausted sales tax exemptions and the other plant currently has 2% GST exemption. Now with GST rollout that advantage goes off and only cost dynamics comes to play a crucial role. Given this market condition the new Jharsuguda plant which is closer to eastern and central market apart
from source of raw material will have better cost dynamics as far as catering to those regions.

EBITDA (post forex adjustment) of specialty oil was down by 6% to Rs 5775/KL in H1FY17 compared to Rs 6107/KL in H1FY16, on account of lower profitability in Transformer segment in domestic as well as exports market. Some price increase in automotive industrial products did not go through due to fluctuation in crude prices. Specialty oils margin in H2FY17 is expected to be impacted even though the company is taking various measures to manage pressure on margins. Considering whole year volume the specialty EBITDA margin is expected to average around Rs 5200/KL for full year.

Cables sales volume for H2FY17 is expected to be higher by 10% however the margin for second half is expected to be flat at H1FY17 levels.

Cables - Though the power cables segment is witnessing good demand, the prices are facing competitive pressure and thus there is no improvement in unit price and margin is expected going forward.

Cables - Increased ordering in Wind Mill and Solar & Defence segments led to strong performance in Elastomeric segment. However Optical Fibre cable segment continues to witness low demand

Conductors - HEC accounts for 15% of overall conductors’ revenue up from 5% in Q2FY16. Expects HEC to account for 12% of revenue in FY17. In next fiscal about 15% of revenue to come from HEC.

For the year the company is looking at a 10% growth in overall volume from three businesses. As far as profitability is concerned it is expecting 10-15% growth.

Some early T&D tenders started coming out from UDAY. We see positive results in couple of quarters from here.

Specialty oil -Sharjah Plant to be commissioned in Q3FY17


Earnings presentation127FC029_2530_47E0_86BC_75883EE02091_183113.pdf (1.6 MB)

recent order ( 4cr) awarded to Apar by power grid.

Disc: Not invested

Apar has won order from powergrid( 58crs)


Apar has received another order worth 60 cr from power grid on 06/01/2017.

Q3FY2017 Results - Excellent results on the back of margin improvement.



Management has guided that revenue degrew by little amount due to lower commodity prices and low volume growth. Also, facing some headwinds in the Spec. oil business and they got marginally hit post demonetization due to auto segment.

I am bullish on the management execution but usually keep neck out of this kind of business due to poor margins and competitive environment. Cable conductor business is too competitive and low margin.

However, they have a good product mix and excellent operational execution. Also, mgmt has focus on diversification and export order.

With continued focus on renewable, pick up in oil, T&D business I see Sales CAGR to improve and the management (Desai) has niot diluted their focus.

They have announced buyback at 650-660 and price is at 630…What is the good entry point to get into APAR? All good news looks to be priced in here.

If Seniors can help me guide here, that would be great.

PS: My father retired from APAR from a management position and he believes APAR should do well due to excellent management, govt focus on T&D and ambitious targets.

Recent Awards: Apar wins this honor for the Second time.The Honor is in the category for the “Solar Power Cable Company of the Year” in Rooftop Solar 2017.


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