Look at this business as evolving and mgmt guidance as a direction rather than hard numbers given that mega b2b distribution is relatively still in nascent stage in India
We need to also look at how mgmt has been able to pivot itself dynamically at various points in time during the year based on business dynamics. Few to list here:
solar structures segment was not part of original plan when they started FY25 but today it looks to be a significant potential area (especially from ebitda perspective) for future.
Initial sourcing was based on supplies through imports as well but once price volatility emerged in q2, they were nimble enough to limit their import dependencies
again realising that anti-dumping duties were getting introduced they used the cash, short term debt to secure supplies at pre-duties rates from Indian suppliers in March
TMT business was suppose to be contributing both to topline and bottom line. Given the mgmt’s capital prudence approach they converted it into royalty business, hence freeing up capital.
These are just few that I could recall and all this happened between July to March…and shows the ability of the management to think nimbly long-term and in capital efficient manner.
I have listened to the concall and pardon my words: The analysts asking the questions in the concall have never seemed to run a business or work in a Sales/Field position in a samll company. Can one predict war/seasonal fluctuations? Asking staright forward questions to Management “That why guidance on profit/sales was not met ?” dispays naiveity on the part of the analyst. If one want’s to invest in SG Mart type of business it is a call on Management’s pre-demonstrated ability to execute and scale up which they have already done with APL Apollo tubes. Disc- I have invested for the first time in any APL group company and have been a part of a small business so I can gauge that they are doing exteremely well. Customer acquisition is the top most challenging part of any business. If you can open 2257 unique customer IDs in 18 months, in the next 3 years you will reach 10,000!! .
25% price was paid at time of allotment,1:1 bonus was give, cost to warrant holders was Rs.250/-
Please note that most of QIP allotees are HNIs and Key Employees of APL Apollo group.
Summarizing my thoughts on SG mart here (some of these points I have covered earlier too across few posts):
Core thesis (What I like about their business?: Building a moat in a low-margin B2B distribution space by leveraging operational efficiency. IMO in such businesses, early mover who will achieve scale (given very low margins) and have high returns business model will be difficult to dislodge, hence creating long-term defensibility. Additionally few more notable points:
1. Tailwinds: Doubling of India’s steel production capacity by 2030 acts as a organic tailwind, providing a growth runway for SG mart for medium term.
2. Mgmt Quality: Mgmt has demonstrated quality by dynamically pivoting based on the business need multiple times during FY25:
Entered solar structures segment (not part of original plan) during mid-year FY25, which now offers meaningful EBITDA contribution potential.
Shifted sourcing strategy (from mix of imports and domestic sourcing) to only domestic sourcing in Q2 based on market conditions
Pre-empted anti-dumping duties by locking in domestic supply in Q4 end.
Recalibrated the TMT business model from full-fledged operations to a capital-light royalty structure, reflecting prudent capital discipline.
3. Margin Optics:
Low EBITDA margins are inherent in trading/distribution models and may appear deceptively weak.
SG Mart’s high capital turnover (~8–10x) could translate into intrinsic ROCE of 20–25% and steady-state ROE in the high teens, especially if the company continues its low-debt trajectory.
TAM looks massive - even at 7-8 mn tons of steel (i.e. 50k cr expected revenue in FY30), they will be dealing in only ~3% of domestic supply.
4. How am I tracking this business (if it breaks, then anti-thesis gets triggered):
Viewing guidance as directional rather than definitive (want to see needle moving, not too worried about accuracy of needle movement vis-a-vis guidance though), given that India’s B2B distribution business is evolving.
Mgmt should continue to demonstrate nimbleness and capital efficiency approach
Continuously harnessing supply chain efficiencies across their business lines and hence creating moat for themselves
Continuously evaluating optionalities (such as downstream distribution products, non-steel building material in future).
Fully agree on this part. In Q1 concall they said they will do 6500 cr topline. Ended with 5800 cr.. that’s a massive jump of more than 100%. Directionally they did good.
It seems directionally they are doing great. At 40 times ttm pe if they can grow at ebitda and pat level by 50-60% it’s quite good.
Cash flow will suffer if a company having 20-25% roce is growing at much faster rate than that. What we need to see is if they have enough cash on balance sheet for continuing the growth or not.
Disclosure: invested.
Substantial block/bulk deals of ~7%+ shares in Shankara Building today. APL Apollo Mart Ltd has a significant stake in it. We will know by evening or tomorrow details about the exchange of hands.
The last recent Bulk deal for Shankara Building Products Ltd. happened on May 16, 2025 on NSE. 1,000,000+ shares were sold by APL Apollo Mart at an average price of Rs 741.75.
Posting herein as it was talked about as competition for SG Mart at one point but promoters of SG Mart had clarified that they are more as a downstream player/customer than a direct competition. Let’s see what comes next.
During cnocall, Shankara’s promoter has clarified abt the margin they get from different models like channel, instn and D2C. Question was asked abt the sale by APL..
I doubt it. Someone named Rohan Gupta is now owning 6.06% of the share. I am guessing he is part of the promotor group but showing as public shareholder.
Entry into the renewable energy sector by launching the supply of
solar module mounting structures, under the brand APL Apollo SunSteel. In a significant
milestone, the company has already received confirmed orders amounting to Rs. 266 Cr
“We are receiving an encouraging response from IPPs and EPC contractors across the
country. The demand momentum validates our decision to diversify into the renewable space,”
said Shiv Bansal, Joint Managing Director of SG Mart. “Supported by SG Mart’s strength of
steel procurement, which is a raw material for solar structures, and pan-India distribution, we
are well positioned to scale this segment rapidly.”
