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"FAST FORWARD AT OUR COMPANY MEANS US$1 BN REVENUES BY 2015"
In the competitive business of steeltubes manufacturing and marketing, sustainable success is inevitably drawn from four key drivers.
Attractive scale, cutting–edge technology, wide portfoli and a dedicated team.
It is our conviction that when a company possesses these competences – as we do – the result is a fast–forwarding of prospects that makes it possible for players to be future–ready.
It is a measure of the deep prospects in India that despite the infrastructural slowdown of the last couple of years, the country continues to remain one of the most attractive global steel tube sector opportunities. This opportunity is based on a simple reality: that when a large country steps out of decades of underinvestment, a sharp increase in the country's appetite is bound to happen based on market growth at one level and demand sophistication at the other. The result is not just a linear increase in the size of the country's steeltubes market but a concurrent graduation to quality, benchmarked with demanding standards the world over. Inevitably, what was for long seen as a relatively vanilla steeltubes market, has broadened out to a multitude of sectors, products, grades and sizes.
There is another reason why the Indian market is creating global excitement: the sheer scale of the opportunity. India's per capita consumption of steeltubes compares quite weakly with the global per capita average. While this under–penetration indicates the extent of latent potential within the country on the one hand, the fact that the country's steel tubes market is growing at a faster pace than the global average indicates that India has possibly hit its inflection point in steel tubes consumption.
There is evidence to support this conviction. Just take one sector as an instance of the country's potential: with India rapidly urbanising and cities growing larger, there is a growing emphasis on the need to connect fringe areas with city centres. For decades, the conventional road network connected the dispersec points; with mass rapid transport emerging as the only feasible solution there is a growing preference for metro rail linkages across cities
That the country has embraced this form of transportation is evident: the upcoming metro railway services in Hyderabad Mumbai and Bengaluru, in addition to the increasing investments going into Delh and Kolkata, are part of a trend where metro services will eventually move dowr to Tier–ll Indian cities. This single downstream sector is expected to keep growing for the next few decades, growing the demand for steeltube products in a robust and sustainable way. APL Apollo Tubes revenues from this vertical are growing with the growing country's metro network; we see this proportion rising as the country increases its investments in its metro network and we continue to remair a preferred supplier for these projects.
At APL Apollo Tubes, the basis of optimism is that this significant impact on our financials is not only based on the growth coming out of one sector; the Company addressed the need of several new sectors during the year under review, each of which is going to invest significantly over the foreseeable future. As a result, even as shareholders are delighted with the 36.95% annual growth (compounded) in revenues over the five years leading to 2011–12, the reality is that this growth is barely indicative of the Company's true potential.
The staggering prospects facing our industry are not just on account of the significant growth from within; USA, Brazil Canada and some European countries imposed anti–dumping duties on Chinese tubes and pipes, creating an unprecedented international opportunity for Indian manufacturers.
It is this background which is creating an internal challenge at APL Apollo Tubes – expand capacity, broaden the product mix, raise operating efficiency to not just grow with the opportunity but to proactively emerge as the largest Indian steel tube manufacturer by 2015.
The Company is doubling its installed capacity from 500,000 TPA in 2011–12 to 1,000,000 TPA by 2015. The Company is investing in swing capacity to address diverse needs. These capacities are being dispersed across India to be able to respond to regional demand in the shortest time and competitive cost. The Company is plugging product gaps through innovation. The Company is not merely intending to address an existing demand but to create new markets. The Company is committed to grow its international presence through its Murbad facility (Western India). The Company is reinforcing its technology edge leading to superior efficiency.
At APL Apollo, the excitement is not just about what we expect to achieve in the future but also in what we accomplished in 2011–12. Despite a high cost of debt, delayed policy decisions and slowed infrastructure investments, the Company recorded impressive numbers:
1. Gross sales grew 55.95% over 2010–11
2. EBIDTA grew 26.19% over 2010–11
3. Net profit grew 13.83% over 2010–11
There were some sound reasons why APL Apollo Tubes countered the industry slowdown:
4. The Company continued to create products with applications beyond traditional sectors, extending its risk across a larger sectoral spread
5. The Companys nation–wide presence helped reach customers quicker than competitors
6. The Company invested in brand building, resulting in a consumer pull
7. The Company extended from retail to institutional sales
8. The Company leveraged its various certifications and client approvals to enhance project penetration
9. The Companys enhanced scale translated into superior economies of scale
10. The large scale translated into stronger negotiation with raw material suppliers
APL Apollo Tubes is investing in its capacities and capabilities to achieve US$1 bn revenue by 2015, enhancing value for all those who hold shares in the Company.