Ladies and gentlemen, good day and welcome to Apollo Tubes Limited Q2 FY 2026 Investors Conference Call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Darshan Mehta from Axis Capital Limited. Thank you and over to you, sir.
Thank you, Swapna Lee. Good evening all. This is Darshan Mehta here, and I welcome you all on behalf of Axis Capital to APL Apollo Tubes Limited Q2 FY 2026 Results Conference Call. From the management side, we have Mr. Sanjay Gupta, Chairman and Managing Director, Mr. Ravi Gupta, Director, Mr. Deepak Goyal, Director of Operations, Mr. Anubhav Gupta, Chief Strategy Officer, and Mr. Chetan Khandelwal, CFO. I will now hand over the call to the management for their opening comments. Thank you and over to the team.
Thanks, Darshan, and thanks Axis Capital Limited for hosting us for our Q2 earnings call. Good evening, everyone, and thanks for attending the call today. We are glad to announce our all-time highest quarterly volume, EBITDA-packed financials for Q2 in a very challenging environment. Why I say challenging? As you all know, the businesses in India suffered from a heavy monsoon, extended monsoon, and especially the construction materials sector, which remained pretty weak because of low construction activity across the country. APL Apollo performed on two fronts, which is quite commendable. Number one is the sales volume recovery in Q2 versus Q1, which was supported by strong capacity utilization in our Raipur and Dubai plants. Secondly was the expansion in EBITDA margins, which took our EBITDA spread above INR 5,000 per ton for the quarter. This was on account of three main reasons.
Number one was the brand power of APL Apollo , which we are able to demonstrate in the EBITDA spreads of general category, which have almost doubled to INR 3,400 per ton in the last two to three quarters. The selling price for this product we increased in January of 2025, wherein we were brave enough to take a call that we need to increase our pricing by INR 2,000- INR 3,000 per ton, which we did, and the market has absorbed that over the last nine months, which is clearly visible from February to September financials of this calendar year. The second reason for margin expansion was the value-added product mix improvement, which is mainly coming from our Dubai and Raipur plants, where the EBITDA per ton for these plants is above INR 5,500- INR 6,000 per ton.
Lastly, the operating leverage gains, as the company is generating 850,000 ton-plus volume. There are a lot of costs which get optimized at all the fronts, which also aided our EBITDA spreads. Now, first half into the financial year of 2026, we are fairly confident that we will be able to meet our guidance, which we gave in the Q1 call, which was 10%- 15% volume growth and EBITDA spread of INR 4,600- INR 5,000 per ton. The second half normally is always better compared to H1. As the monsoons are over, there is a lot of certainty coming back on the global trade front as well. Given that, the second half should be better than H1, and if GDP of India surprises positively or performs better than expected, who knows, we may even do better than our guidance when we close the financial year.
Another positive we want to highlight is that India is seeing adequate clean supply in the last four to five months, which is good for downstream companies like APL Apollo , especially when we are the country's largest steel buyers. Our strategy to expand capacity in international markets and Eastern Indian markets remains intact, which gives us confidence that we will be able to grow our volume in double-digit over the next three to four years on a CAGR basis. Lastly, on the working capital front, our working capital days remain in single digit, in fact, zero as of September 2025, which boosted our ROCE upward of 32%- 33%. We believe that this is a sustainable ROCE number, which we will keep on throwing in years to come. That's all from our side. Happy to take questions now.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sukrit D. Patil from Eyesight Fint rade Private Limited. Please go ahead.
Good evening to the team. My question to Mr. Gupta is, as APL Apollo continues to scale volume, what strategic vision do you see driving the next phase beyond just growth towards deeper market leadership or ecosystem influence? Yes, sir.
Thank you. Gentlemen, sorry. Thank you, Sukrit. Sukrit, our strategy is very clear. Right now, we are close to a capacity of 5 million ton. In the next two or three years, we are going to build up the capacity of 7 million ton. Out of 7 million ton, there is 1 million ton capacity in Middle East. We are putting one more plant in Abu Dhabi. [Foreign language] capacity 1 million ton [Foreign language ] 6 million ton in India [Foreign language] 6 million ton [Foreign language] we are putting one plant in Godhapur and of a capacity of 2 lakh ton per annum. One plant in Siliguri capacity of 3 lakh ton per annum. Almost this 5 lakh ton and 5 lakh ton in Dubai.
It depends.
There are three. 7 lakh ton in Dubai and 5 lakh ton in East Market. This is totally new area for us. We don't see any challenge in this area. Number two is the existing setup. We are doing almost close to 3 million ton, and we are targeting to take this quantity to 5.5 million ton. In this, we have a lot of strategy [Foreign language] product mix we are developing, a lot of product mix, a lot of new types of products. Like recently, we started our 1,000, 1,000 square mil roofing. We are building some capsule roofing product also. We just need a tailwind [Foreign language] tailwind [Foreign language] , then we achieve this capacity very soon. Maybe [Foreign language] challenge I don't feel.
Okay. My second question too is to Mr. Khandelwal. I believe he got the calls today?
Yes.
Yes, sir. My question is in regards to margins, especially in a volatile input cost environment. Looking ahead, what internal levers or cost management plans do you see most important and or do you have in place?
We are working on the most on the three-front mode. One is the power. Power may help reduce the unit per ton also and the cost of unit also, both the area.
Some is on the freight factor [Foreign language] where we are substitute the like [Foreign language] transportation [Foreign language] area [Foreign language] area [Foreign language] because now we have all across the country we have plants [Foreign language] product [Foreign language] market [Foreign language] product [Foreign language] plant [Foreign language] meals [Foreign language] resupply [Foreign language] freight cost [Foreign language] like [Foreign language] quarter [Foreign language] INR 1,900 per ton [Foreign language] freight cost [Foreign language] we are targeting [Foreign language] quarter [Foreign language] INR 1,500 [Foreign language].
And number three on the front of the our salary cost [Foreign language] we are targeting [Foreign language] salary [Foreign language] 5 million ton [Foreign language] minimum wages [Foreign language] 5 million ton [Foreign language] achieve [Foreign language] cost [Foreign language] INR 950 [Foreign language] my target is to bring down to INR 600 per ton [Foreign language] INR 600 per ton [Foreign language]
Okay sir, thank you [Foreign language] guidance and [Foreign language] team [Foreign language] for the next Q3 [Foreign language] best of luck. Thank you, thank you.
Thank you. The next question comes from the line of Sneha Talreja from Nuvama. Please go ahead.
Hi, good evening team and many, many congratulations on a great set of numbers. Just a couple of questions from my end. Firstly, I wanted to understand the EBITDA per ton increase on a quarter-on-quarter basis while we understand ESOP costs is missing. If at all you all can quantify, what are the other reasons for your margin improvement?
Sneha, it's a mix of three things. One is the gross margin improvement, which is around INR 200 per ton. That's on account of our brand premiumization and improvement in value-added mix products, right? INR 200 per ton is coming from there. INR 200 per ton is coming from operating leverage benefits as we surpassed 850,000 tons of quarterly sales volume. INR 100 per ton was on account of lower expense, which we booked in quarter one for ESOP. In Q2, it was not there. This is the breakup of INR 500 per ton improvement in EBITDA.
An extension to your answer, Anubhav, you are also estimating your second half to be better. That means your operating leverage should further kick in. If this is a base level EBITDA per ton of 5,200, you're still guiding for a number of 4,600- 5,000 on the EBITDA per ton level on an annualized basis. Any reason why you would want to maintain that or not upgrade the EBITDA per ton number? I'm not asking for volume number because while I understand your environment is not such, but on the EBITDA per ton purely, where you have already hit 5,200 and assuming there's no one-off here.
Sneha, again, we have a lot of pressure. [Foreign language] guidelines [Foreign language] pressure [Foreign language] We don't want to increase our [Foreign language] guidelines [Foreign language] increase [Foreign language] This I am very sure [Foreign language] 10% [Foreign language] growth [Foreign language] almost 3.5+ million ton [Foreign language] volume [Foreign language] almost INR 1,700 crore [Foreign language] EBITDA target [Foreign language] beat [Foreign language] tailwind [Foreign language] God is great.
Perfect, sir. I think that answers just one or two more questions from my end. Firstly, on the demand front, are you seeing any improvement happening with respect to government KPIs? Any ongoing green shoots that you can see? Compared to other companies' results, we can make out that there is a market share gain at this point of time. Purely on the demand perspective, any green shoots even at this point of time where you can see? Secondly, with respect to spreads, just finishing it because your spread has further gone up between the primary and the secondary team, which doesn't seem to be impacting you at this point of time. How do we see the spread going and impacting you on ground in any way?
Sneha, first, the matter of demand. Demand [Foreign language] very frankly I am saying [Foreign language] demand [Foreign language] boost up [Foreign language] । But due to our brand leverage, due to our size, due to our systems, we are sustainable. [Foreign language] sustain [Foreign language] bullish [Foreign language] second half, first half [Foreign language] , is very bad. On the all three fronts, demand [Foreign language] , steel prices downward [Foreign language] extra steel capacity [Foreign language] entry [Foreign language] Number three, monsoon [Foreign language] Number four, [Foreign language] by chance [Foreign language] holidays [Foreign language] like Diwali, Durga Puja, whatever the holidays.
[Foreign language] middle of the week [Foreign language] beginning of the week [Foreign language] holiday [Foreign language] We are bullish on this front [Foreign language] demand create [Foreign language] then we are going to rock. I am just giving my guidance. I am just giving, sorry one minute, I am just giving my guidance with the existing [Foreign language] scenario [Foreign language] , like in this month also we are going to do 270, like 270, 275, 265, 270, 275 [Foreign language] From November, we are taking a target of 3.25 lakh ton per month. November and December [Foreign language] this quarter we are going to, [Foreign language] system [Foreign language] I think we hit 9 lakh ton.
[Foreign language] 9 lakh ton hit [Foreign language] margin [Foreign language] we are very sure [Foreign language] EBITDA [Foreign language]
Thank you, Sukrit. That flavor was really helpful. Lastly, sir, on the spread front, a primary and secondary cut, that has been inching up. Any way impacting us on growth?
Sneha, we have made some strategy on this point in this subject. Now, our APL Apollo brand is not going to talk with the secondary material. [Foreign language] talk [Foreign language] । We launch another our brand as a premium. [Foreign language] brand [Foreign language] 10,000 ton volume, 15,000 ton volume [Foreign language] strategy [Foreign language] Apollo brand [Foreign language] growth [Foreign language] like of premium [Foreign language] । Like [Foreign language] market [Foreign language] channel check [Foreign language] today Apollo is a higher than almost with all the other brands INR 3,000 minimum.
Maybe maximum INR 5,000 to INR 6,000 per ton Apollo product is costing in the market. [Foreign language] secondary [Foreign language] product [Foreign language] time [Foreign language] crisis [Foreign language] prices [Foreign language] low [Foreign language] they are like crying all over the India. [Foreign language] costing [Foreign language] Steel [Foreign language] capacity extra [Foreign language] steel prices [Foreign language] । I think this is a good signal for Apollo.
Perfect, sir. Thanks a lot, sir, for all the questions. All the best, team.
Thank you.
Thank you. The next question comes from the line of Agrim Kanungo from AK Investments. Please go ahead.
Hi, sir. Congratulations for a good set of numbers. I would like to ask that, as it was mentioned in the PPT, that we plan on spending INR 1,500 crore to expand the capacity. Just a question, how do we plan on financing this amount? Is it going to be through internal accruals or external sources?
100% will be funded from internal cash flows. If you look at our operating cash flow to EBITDA, that's like above 90%. This will help us to fund 100% of CapEx.
Okay. Just one brief follow-up. My main question is what's the long-term vision of the company, and what would be the projected EBITDA margins that we can expect over the next five years?
For five years, we are talking if everything is well, maybe we touch 10 million ton. Right now, we are preparing for 7 million ton. [Foreign language] we are going for outsourcing also and [Foreign language] capacity [Foreign language] when we cross 5 million ton. EBITDA margin, I don't think [Foreign language] 5 [Foreign language] maximum spread [Foreign language] INR 6,000 [Foreign language] [Foreign language] commit [Foreign language] INR 1,000 plus minus [Foreign language] . Don't know what is the scenario [Foreign language] .
Yeah, just one last question. What is the current capacity utilization across our different plants? Yeah, that's all.
70%. We are right now on 5 million ton capacity. We are going to do this year 3.5 million ton, so 70% capacity utilization we are running.
Okay. Yeah. Thank you, sir.
Thank you.
Thank you. The next question comes from the line of Aditya Welekar from Axis Securities . Please go ahead.
Yeah. Thanks for the opportunity. Sir, my question is with respect to the safeguard duty, which was proposed by government. With the 12% safeguard duty, the downside to the HRC prices is slightly now limited. Does that help us in means whatever we see, the inventory, destocking, restocking? With the volatility to the downside limited, will it help us going for because these safeguard duties for the next three years, this is a positive read-through for us. Is that understanding correct?
Yeah. 100% we have collected. Like right now, the HR coil for the month of October is close to INR 46,000 per ton landed in Gujarat or anywhere in the country. If we do any import with the duties, it costs us INR 52,000 or 53,000 per ton. This is not possible to import anything outside of the country. Import [Foreign language] , there is a steel capsule is more. [Foreign language] maybe [Foreign language] , 1,500 [Foreign language] restocking [Foreign language] first half [Foreign language] demand create [Foreign language]
Understood, sir. My next question is on the long term. You have touched that we may go up to 10 million ton capacity, and in the slides also, we have projected that the structural steel tube market will grow by 10% CAGR by 2030. What are these long-term demand drivers? Do we really foresee that this market will go up to that quantum by 2030, meaning consistent double-digit growth, 10% CAGR from FY 2024?
Market is already there. In India, there is a biggest problem. There is one secondary material, which is a very low-quality material. [Foreign language] low cost [Foreign language] people are [Foreign language] aware [Foreign language] brand [Foreign language] material [Foreign language] market [Foreign language] 10 million ton [Foreign language] maybe [Foreign language] growth [Foreign language]
That's good to hear, sir. Thank you. Thank you very much.
Thank you. The next question comes from the line of Kumar Swamya from Ambit Capital. Please go ahead.
Hi, sir. Good evening. Sir, a couple of questions from my side. Firstly, on the EBITDA per ton, in the general structure, we have seen EBITDA per ton move up from INR 2,700 to INR 3,400. If you could please help me understand what is driving it and how sustainable this is?
Bosses, right now, [Foreign language] call [Foreign language] from January 2025, we are total focusing on our brand leverage and the size leverage. We spread our margin or pricing from others. [Foreign language] margin increase [Foreign language] distribution network [Foreign language] distribution [Foreign language] develop [Foreign language] market [Foreign language] capture [Foreign language] sustainable [Foreign language]
Okay. We expect [Foreign language] INR 3 [Foreign language]
100% [Foreign language] , boss. [Foreign language] quarter [Foreign language] confidence level [Foreign language]
Got it. Got it. Sir, today what is the SDPM volume that we are doing within the general structure?
10,000- 15,000 tons per month.
Per month.
Yeah.
Okay. In this SDPM, what would be the EBITDA per ton that we usually make?
I think we are in almost nil, or maybe 500 minus.
Okay. Got it. On the blended basis, if we are doing 3,400, then that means the rest of the portfolio is sustainable.
Bosses, you can understood [Foreign language] today APL Apollo price [Foreign language] simple way [Foreign language] INR 54,000 [Foreign language] price [Foreign language] southwest [Foreign language] lowest price [Foreign language] SDPM [Foreign language] price [Foreign language] INR 49,000, INR 49,500 [Foreign language]
Okay. Sir, lastly, just a bookkeeping question. What is the Dubai capacity today and Raipur capacity as on today, sir?
Dubai capacity is almost 3 lakh ton per annum. [Foreign language] line [Foreign language] line [Foreign language] plant [Foreign language] capacity [Foreign language] 5 lakh ton per annum [Foreign language] plant [Foreign language] fully [Foreign language] booked [Foreign language] We are very bullish [Foreign language] Europe [Foreign language] and Antwerp [Foreign language] warehouse [Foreign language] plant [Foreign language] One in Liverpool and one in Antwerp. [Foreign language] margin [Foreign language] expand [Foreign language] Raipur [Foreign language] capacity [Foreign language] full order book [Foreign language] 1.2 million ton ABPL [Foreign language] 0.3 million ton [Foreign language] plant [Foreign language] Bengali [Foreign language] Total capacity of Raipur is 1.5 million ton.
Okay. Okay. And utilization at Raipur, sir?
70% [Foreign language]
Is Dubai similar? 70%, 75%?
Dubai [Foreign language] 80%, 85% [Foreign language]
Okay. Sir, just for our understanding, when we sell our products in Liverpool, say, same Europe, from the Liverpool and Antwerp warehouse, how is profitability in this market different from the Indian market?
We are already supplying from Dubai. If we open a warehouse there and make the service better, we think our EBITDA spread should increase by EUR 50.
Okay. EUR 50, no? Okay. Thank you, sir. That is all from my side. Thank you.
Thank you. The next question comes from the line of Omkar Gurglade from Shree Investments. Please go ahead.
Sir, [Foreign language] question [Foreign language] segment [Foreign language] grow [Foreign language] present [Foreign language] ? [Foreign language] chance [Foreign language] ? Pre-galvanized, rustproof products and pipes, sir?
[Foreign language] , I don't think pre-galvanized pipe [Foreign language] black pipe [Foreign language] quality [Foreign language] material [Foreign language] It's better [Foreign language] system [Foreign language] I never go to this secondary type of material. [Foreign language] secondary [Foreign language] 20 [Foreign language] market [Foreign language] secondary [Foreign language] replace [Foreign language] Secondary [Foreign language] boss [Foreign language] ?
Secondary [Foreign language] problem [Foreign language] problem [Foreign language] upper cap HR coil [Foreign language] fix [Foreign language] HR coil [Foreign language] HR coil [Foreign language] country [Foreign language] capacity [Foreign language] , [Foreign language] world [Foreign language] , [Foreign language] secondary [Foreign language] polluted item [Foreign language] sponge island [Foreign language] sponge [Foreign language] carbon [Foreign language] , [Foreign language] deep knowledge [Foreign language] Blast furnace [Foreign language] carbon [Foreign language] Europe [Foreign language] , Europe [Foreign language] electrical steel [Foreign language] scrap [Foreign language] EUR 100 [Foreign language] premium [Foreign language] environment friendly [Foreign language] secondary [Foreign language] environment friendly product [Foreign language] Number two, [Foreign language] players [Foreign language] , boss.
[Foreign language] costing [Foreign language] , I don't know. [Foreign language] dealers [Foreign language] । Secondary [Foreign language] , today Raipur [Foreign language] secondary [Foreign language] pipe [Foreign language] basic [Foreign language] INR 37,000, INR 37,500 [Foreign language] INR 3,000 thickness [Foreign language] extra [Foreign language] INR 40,000 [Foreign language] Raipur basic [Foreign language] INR 3,000 [Foreign language] freight [Foreign language] INR 43,000 [Foreign language] rate [Foreign language] HR coil already INR 45,000, INR 46,000 [Foreign language] margin [Foreign language] margin [Foreign language] INR 54,000 [Foreign language] problem [Foreign language] premium [Foreign language] problem [Foreign language]
[Foreign language] pre-galvanized [Foreign language] coil [Foreign language] secondary [Foreign language] ?
Sineh, pre-galvanized [Foreign language] secondary [Foreign language] . Pre-galvanized [Foreign language] black pipe.
Okay. [Foreign language] pre-galvanized [Foreign language] category [Foreign language] chance [Foreign language] ?
Who can [Foreign language] ? Mera concern [Foreign language] . [Foreign language] , sorry. Boss [Foreign language] . Main [Foreign language] comment [Foreign language] .
[Foreign language] , sir, [Foreign language] present [Foreign language] chance [Foreign language] ?
[Foreign language] main volume [Foreign language] , [Foreign language] pre-galvanized [Foreign language] pre-galvanized?
[Foreign language] ton [Foreign language] .
[Foreign language] ton [Foreign language] quarter [Foreign language] sale [Foreign language] ।
[Foreign language] code, [Foreign language] presentation [Foreign language] product breakup [Foreign language] , [Foreign language] cool guard pipe [Foreign language] , [Foreign language] pre-galvanized use [Foreign language] , rustproof।
Okay, [Foreign language] pre-galvanized [Foreign language]
Pre-galvanized, you are innovative, boss.
Tubes Limited [Foreign language] pre-galvanized
[Foreign language] secondary [Foreign language] , but [Foreign language] deep knowledge [Foreign language]
[Foreign language] , okay. [Foreign language] sir, thank you. [Foreign language] question [Foreign language] sir, [Foreign language] next 3-4 years [Foreign language] around double digit growth [Foreign language] Sir, [Foreign language] double digit [Foreign language] ? 15%-20% at least [Foreign language] expect [Foreign language] sales front [Foreign language] ?
10% [Foreign language] 15% [Foreign language] date [Foreign language] commit [Foreign language]
10%- 15% next 3-4 years [Foreign language] .
No, [Foreign language] 3-4 [Foreign language] , but [Foreign language] schedule [Foreign language] , [Foreign language] 10% [Foreign language] 15% [Foreign language] ।
You mean bare minimum, you are expecting at least this much, no matter what the situation is, as of now.
[Foreign language] , bare minimum [Foreign language] situation [Foreign language]
Okay. [Foreign language] EBITDA [Foreign language] INR 1,700 crore [Foreign language] 10% [Foreign language] 15% [Foreign language] volume [Foreign language]
[Foreign language]
[Foreign language] 10-15% volume growth [Foreign language] target [Foreign language] similar level [Foreign language] volume growth [Foreign language] ?
[Foreign language] tailwind [Foreign language] commit [Foreign language] , boss. [Foreign language] tailwind [Foreign language] 100% [Foreign language]
[Foreign language] volume [Foreign language] growth [Foreign language] , at least [Foreign language] margin [Foreign language] growth [Foreign language] , EBITDA [Foreign language] growth [Foreign language]
[Foreign language] deep [Foreign language] calculation [Foreign language] , but tailwind [Foreign language] language [Foreign language] , 9 lakh ton [Foreign language] target [Foreign language] Q3 [Foreign language] , 9.5 lakh ton [Foreign language] target [Foreign language] Q4 [Foreign language] INR 5,000 [Foreign language] EBITDA, [Foreign language] INR 450 crore, INR 450 crore, INR 900 crore [Foreign language] INR 800 crore [Foreign language] , [Foreign language] INR 1,700 crore [Foreign language].
[Foreign language] sir, INR 1,700 crore [Foreign language]?
[Foreign language]
[Foreign language] bare minimum volume growth expect [Foreign language] at least [Foreign language] level [Foreign language] EBITDA margin [Foreign language] sustain [Foreign language] ?
[Foregign language] . Maybe 6000 [Foreign language] , maybe [Foreign language] 4000 [Foreign language] .
No, but to answer your question, EBITDA growth should be higher than volume growth. [Foreign language] business model [Foreign language] .
That's what I was asking. The EBITDA growth should be higher than the volume growth?
Yes, yes, yes. [Foreign language] , boss. [Foreign language] volume growth 10%- 15%, [Foreign language] EBITDA growth 15%- 20% [Foreign language].
Okay, okay. All right, sir. Thank you very much.
Thank you.
Thank you. The next question comes from the line of Akshay Chheda from Canara Robeco Mutual Fund. Please go ahead.
Yeah. Sir, thank you for the opportunity. Sir, just sorry, but again on this EBITDA per ton only, sir, actually INR 300 of sequential improvement were taken because of the GP and because of the operating leverage and the ESOP absence. Sir, again on this GP per ton has also improved sequentially by INR 200. What defines that? Was there an element of inventory gain in this quarter? Sequentially the product mix was adverse. Sequentially, yes, the product mix is adverse. Even the ASP has declined sequentially. Still, there is an expansion in GP per ton. Was there any element of inventory gain or what justifies this, sir?
Akshay, in fact, there was some inventory loss only in this GP per ton which we are seeing because steel prices came down in the second quarter versus Q1. There is no inventory gain. In fact, there is some inventory loss, minuscule, not too much. Now, this GP per ton expanded because of our value-added mix portfolio. Raipur plant and Dubai plant, they both performed pretty well. The volume expansion came maximum from these two plants, and these two plants carry EBITDA per ton of INR 6,000. That helped the improvement in GP per ton. Plus, our general category product, which we are selling at a higher realization, where we got INR 3,400 per ton EBITDA versus INR 2,800 per ton in Q1.
Okay. Thank you. The next question comes from the line of Andrey Purushottam from Cogito Advisors. Please go ahead.
First of all, congratulations for an excellent performance with all the headwinds against you. Really well done. Thank you. My question, I just want to understand, Anubhav, from quarter to quarter, your realization per ton has come down, right, in line with what you also said that steel prices have come down. You also said that you took a price increase on your general category in January 2025. Does that mean that the increasing EBITDA per ton is also explained by a further drop and a more benign raw material price environment? That's why it has happened? I'm just trying to reconcile these numbers and get an explanation.
No, because, see, whatever steel price movement is there, it is like 100% pass-through, okay? The NSR increase or decrease is 100% linked to steel prices. For example, if you look at Q1 versus Q2, our NSR declined by INR 5,000 per ton, right? Our raw material cost also came down by a similar level, right? The only improvement in GP per ton is INR 200, correct? In our business model, you will see that steel prices drop or increase leads to the same decrease or increase in our NSR. Whatever gap is there, that is on account of our improvement or deterioration in GP per ton in that particular quarter.
Your improved profitability is for the reasons you spoke about earlier, the INR 500 per ton, INR 500 per ton improvement on account of operating leverage, no ESOP cost, and there was one more factor that you had mentioned. Of course, your slight change in value-added product mix. These are the essential explainers.
Yeah. Just to reiterate, three main factors: number one, brand premiumization, which you see improvement in EBITDA per ton in our general category. Number two is operating leverage gains as we do more and more volume. Number three is improving value-added mix portfolio, which is coming from our Raipur and Dubai plants.
Right. I just had one more question. This is a more general question. If we were to arrive at a deal with the U.S. on tariffs and tariffs were to come down to reasonable levels, let's say 20%, etc., how will that impact our business?
No impact as such because our international sales to the U.S. is taking place from Dubai plant. From India, it doesn't impact.
Okay. You don't see any real risks in the next 6 months to 12 months in this business, right?
Except further deterioration in GDP from existing levels.
Okay. As long as demand remains roughly at the same level as it is now, there is no significant downside that you see.
That's right.
Okay. Thanks. Thanks very much, Anubhav. Thank you.
Thank you. The next question comes from the line of Saurabh Patwa from ASK Investment Managers. Please go ahead.
Thanks a lot, sir, for this opportunity. I just wanted to have just a bit broader question on understanding on the EBITDA per ton trajectory. If I see the company from the last 10, 15 years' history, till pre-COVID, our margins used to be somewhere around like INR 3,000, INR 3,500 range. Post-COVID, I think as the capacity increased and our volume started to pick up significantly from close to 1.2 million to close to 2 million, our margins improved very sharply EBITDA per ton. Subsequently, I think while our capacity kept on increasing, I think the utilization level wasn't kept pace because the capacity addition was much faster. That's when the improvement, sort of the further improvement, could kick in in terms of operating leverage or gross margin improvement. Also, we got impacted by the macro environment in terms of realization, product mix at some quarters, etc.
How do you see, sir, things changing there? Because in this quarter, I see some from the commentary which you have highlighted so far, it appears that you believe that worst in terms of your macro would have been behind. The capacity utilization has reached a decent number, and the operating leverage should start kicking in much faster than it would have done in maybe the last two years or so. Is this a fair understanding, sir? Would be happy to have your thoughts on that, sir.
Saurabh, that's why we always demonstrate this confidence in our business model that it has the ability to generate EBITDA per ton of INR 6,000 per ton, right? We may not demonstrate this number throughout four quarters in a year, but on a blended basis portfolio, we always wish to have INR 6,000 per ton of EBITDA spread. Why we say so? Because if you look at, like you said, 10-year history, right? Before COVID, we were around INR 3,000 per ton, right? Between 2016 to 2020, our EBITDA spreads were around INR 3,000 per ton. If you look at our capacity expansion speed at that point of time, it was doubling every three years, right? We were expanding our capacities every three years. A lot of upfront costs used to come up, which used to depress our margins. Three years, continuously, there was demonetization.
There was a slowdown in GDP. Then COVID came, right? That put pressure on our capacities, and we had to downsell our product. We had to offer discounts to our channel partners. That's why EBITDA per ton couldn't go up. What has changed after COVID? One is that slowly, gradually, Apollo brand has started to become strong, right? We have lowered the discounts which we used to offer earlier. Now we are not doubling our capacity every three years, okay? Like earlier, we used to look for 25%- 30% volume growth. Now we are seeing mid double-digit volume growth. Now we are running, we are chasing profitability. We are chasing EBITDA per ton because that's what we have built our brand now, right? We have to leverage on that. Secondly, all the new capacity which is coming up, that's for markets where we are not present.
We don't have to go and offer discounts. Secondly, they are towards the value-added products, okay? That's why we are confident that the trajectory from INR 3,000- INR 5,000 per ton in the last six, seven years. In the next four, five years, definitely trajectory could be from INR 5,000- INR 6,000 per ton.
Thanks, sir. Thanks a lot, Anubhav, for detailed ones. Just quickly, last three years, the profit growth, which was slightly below what you would have envisaged, and despite a good revenue growth, do you think, do you assume, or do you firmly believe that things would not be the same in the coming next three years? Probably it should be much, much higher, right?
Definitely, Saurabh. Yeah, because last two, three years, we were ramping up our Dubai plant. We were ramping up our Raipur plant, right? There was some negative operating leverage coming from there. In FY 2025, quarter two, we took a hit of massive inventory loss, right?
Yeah, yeah.
Yeah. If we are assuming steel prices cannot fall again by INR 8,000 per ton from current levels, right, we may not see the same kind of inventory losses, right? Raipur and Dubai plants, which were our major capacity expansion in the last three or four years, are now stabilized. The utilization rates are above 70%. We will not have a negative operating leverage again for the new capacities coming up. That is why we are confident that EBITDA growth now will be superior than the volume growth.
Great. Great. Thanks a lot and all the best.
Thanks.
Thank you. The next question comes from the line of Nishita from Sapphire Capital. Please go ahead.
Hello.
Yes, ma'am. Please proceed.
Yes, I had a question. What is the split between the Dubai plant and the India plant currently?
The Dubai plant is contributing around 8% to the total volume.
Okay. Understood. I just wanted to understand. You mentioned that 9 lakh tons is your target for Q3, and around 9.2 lakh tons is the target for Q4 with the EBITDA per ton of around 5,000- 5,200. Is that correct?
That's right.
Okay. Okay. Understood. That is it for my side. Thank you.
If we missed by volume, then maybe our EBITDA margin goes up.
I'm sorry?
Because we are just. [Foreign language] volume [Foreign language] EBITDA [Foreign language] EBITDA margin [Foreign language]. We are not focusing on the volume. We are focusing on the margin.
Okay. Understood. Would you like to give any revenue guidance for FY 2026?
[Foreign language] market [Foreign language] , but [Foreign language] worst is over. [Foreign language] INR 850 [Foreign language] unit rates [Foreign language] cover up [Foreign language] margins [Foreign language] maintain [Foreign language].
Okay.
[Foreign language] focus [Foreign language] INR 450 crore [Foreign language] in quarter three and quarter four each. [Foreign language] beat [Foreign language].
Okay. In quarter three and quarter four, the target is to beat INR 450 crore of top line?
The bottom line.
Bottom line.
EBITDA margin, absolute EBITDA.
Okay. Okay. Absolute EBITDA. Understood. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address the questions from all the participants in the conference call, we request you to kindly limit the questions to per participant. Should you have a follow-up question, you may rejoin the queue. The next question comes from the line of Angad Saluja from UBS Securities India. Please go ahead.
Yeah. Hi. Thanks for taking my question. Sir, first question, you know, SG Premium launch, like, you know, how has the feedback been from the dealers on the launch? You know, what is the larger strategy here that we are, you know, sort of trying to achieve? First question is around that.
Angad sir. Angad.
Hi Angad. Angad, there is no logic because we have a spare capacity there. We have a spare raw material there. [Foreign language] distribution network [Foreign language] material premium [Foreign language] they need [Foreign language] competition [Foreign language] material [Foreign language] other brand [Foreign language]. We lost this brand [Foreign language].
Sir, dealers' feedback [Foreign language] there is no negative pushback or anything from a dealer's perspective?
[Foreign language] Apollo [Foreign language] . If anybody is lifting Apollo 10,000 ton, [Foreign language] 1,000 ton, 1,500 ton [Foreign language] Angad, [Foreign language] 10,000 ton, 5,000 ton, 15,000 ton, 20,000 ton [Foreign language] second competitor [Foreign language] total production structure [Foreign language]. I built up my system like that [Foreign language] 10%, 20% [Foreign language] .
[Foreign language]. This is the strategy.
Got it, sir. Got it. Thank you so much. Sir, the second question, you know end market demand [Foreign language] sir, you know any pocket [Foreign language] you know still demand is slightly stable [Foreign language] you know across the board you think is demand is challenging? Or you know you think [Foreign language] October [Foreign language] pick up [Foreign language] specific channel [Foreign language]? Like on the ground [Foreign language] on demand?
[Foreign language] clearly [Foreign language] steel downward trend [Foreign language] October [Foreign language] downward trend [Foreign language] at least [Foreign language] channel check [Foreign language] demand peak [Foreign language] , but right now [Foreign language] idea [Foreign language].
Right. Got it. Got it.
[Foreign language] history [Foreign language] Indian steel prices are less than import by INR 7,000, INR 8,000 per ton. Otherwise, India [Foreign language] import [Foreign language]
Got it, sir. I think that was all from my side. Thank you so much for taking my question.
Thank you. The next question comes from the line of Pallav Agarwal from Antique Stock Broking. Please go ahead.
Good evening, sir, and congratulations on a good set of numbers. I just had a question on this inventory. You know we have had a positive impact of change in inventory. Will any of this reverse in the coming quarters, or will there not be any impact in the second half?
Pallav, steel prices are down only, so there is no inventory gain in the first half.
No, I'm not talking about gain. I'm just talking about the accounts, you know, the change in inventory. About INR 150 crore of benefit is there, right? Either we have built up inventory or there's been a change in price. What has actually, you know, what has led to this amount, this inventory change?
Yes, finished goods stock is down, right? We have bought some raw material, right, which is what you see in the P&L.
Better inventory management.
Okay. You should not see any reversal of this in the next quarter?
No.
Okay. If you could just share, I think the capacity utilization you mentioned that Raipur has gone up, I think, on a blended basis. What was it in the previous quarters? Dubai is at 85%. What was this utilization maybe in Q1?
In Q1, Raipur was 55%. Right now it is around 65%. Dubai was 65% in Q1, and now it is touching 80% in Q2.
Okay. Okay. Okay. Thank you so much.
Thank you. The next question comes from the line of Sailesh Raja from B &K Securities . Please go ahead.
Thank you for the opportunity, sir. You just mentioned we are focusing more on EBITDA per ton than the volumes. In the same line, I just wanted to know, within general category, is it possible to share the volume mix between the products where EBITDA is below INR 2,000 per ton and those above INR 2,000 per ton? Has there been any change in this mix compared to last year, same quarter, or last quarter? What is our long-term strategy here?
That is already given in our presentation, no, the product mix with the EBITDA per ton breakup.
No, sir. Within general category, I'm asking. Within general category, we have reported around 3,200 in the first half.
Yeah.
Within that category, can you do the mix where EBITDA we might have reported below INR 2,000 per ton and above INR 2,000 per ton?
Boss, [Foreign language] category, general category [Foreign language]. [Foreign language] pricing [Foreign language] . When we increased our pricing, it was increased for the whole lot of general category.
Which starts from range 20?
20 square to 180 square, 180 square.
Okay sir, one more last question on our cash generation is very strong. Even after considering CapEx and dividend, I'm assuming 20% payout, we would be still generating an average of INR 400 crore per annum for the next three years. We would be sitting with INR 1,200 crore of excess cash. What is our strategy here? Is there any plan to increase dividend or buyback? Also, if you see our payable is INR 2,300 crore. Instead of holding cash and having, we have, I think, fixed deposit also. Instead of getting yield of around 4% or 5%, can we pay upfront and get more discount? What is our strategy here?
First, our strategy is to remove the liabilities from the book and get some more discount from the suppliers. Number two, we go for the CapEx, [Foreign language] capex [Foreign language] 7 million ton [Foreign language] declared [Foreign language] 10 million ton [Foreign language] 1.5 million ton capacity [Foreign language] 1.5 [Foreign language] outsourcing [Foreign language] 10 million ton [Foreign language] , it's good problem to solve. [Foreign language] dividend [Foreign language] buyback [Foreign language] , company [Foreign language] FD [Foreign language].
Okay. Okay, sir. Yeah, thank you.
Thank you. The next question comes from the line of Vikas Singh from ICICI Securities. Please go ahead.
Thank you for the opportunity. Congratulations on a very good set of numbers in a difficult time. Sir, my first question pertains to the fact that you said a lot of SRC capacity is coming in India. Will this facilitate you to gain more market share because of the price gap differential coming down, or is there still a legroom that you get, incremental discounts from the steel mills to fetch margins? Which should be the better way to utilize this opportunity?
Boss, both of the way [Foreign language] capacity India [Foreign language] , either [Foreign language] demand growth [Foreign language] capacity [Foreign language] ramp up [Foreign language] , this is good [Foreign language] maybe they hit the secondary to sell this type of material, [Foreign language] volume material between [Foreign language] secondary [Foreign language] hit [Foreign language]. Number two, we are the largest bank, [Foreign language] benefit [Foreign language] .
Is there more scope to get the benefit out of this overcapacity situation?
[Foreign language] focus [Foreign language] secondary [Foreign language] hit [Foreign language] Indian market [Foreign language] primary steel [Foreign language] . We are focusing on that.
Noted. Sir, my second question pertains to some of your competitors, basically, those smaller in size. I didn't see any volume growth because they didn't have the capacity. They are also primary producers now. Now, going forward, they would have the capacity, basically cumulatively about a million tons. How should we look at the primary competitive segment, competitive scenario? You are saying that you are focusing on profitability, but would grow the volume. Both can't go hand in hand, right? In case of since the demand is not that great, you yourself said.
Boss sir, [Foreign language] competitor [Foreign language] , to be very frank. [Foreign language] strategy [Foreign language] how to we have to do. [Foreign language] area [Foreign language] simple competitive item [Foreign language] capacity [Foreign language] capacity build up [Foreign language] new type of products, new type of area, [Foreign language] different types [Foreign language] build up [Foreign language] . I don't really want to compare [Foreign language] problem [Foreign language] . [Foreign language] cost [Foreign language] . I am the lowest cost producer in the world. [Foreign language] . Price war [Foreign lagugage] . Today [Foreign language] .
Noted, sir. Noted. Thank you for answering my question.
Thank you. The next question comes from the line of Adit from U.S. Securities. Please go ahead.
Yeah. Hi, sir. Thank you for taking my question and congratulations on a great set of numbers. Sir, we clearly understand that you all have been gaining market share. If you can throw some light in terms of the new users that have been coming up, is that also adding to your volume growth? If so, then which sectors? From where are you getting that incremental demand?
There are two areas where we are working on. Number one is new markets, like international markets we worked upon, right? Now we are going to work on Eastern markets. Eastern markets and international markets are giving us additional volume. In terms of new applications, yes, our products in the heavy construction with the launch of thousands, thousands of diac tube, and also some of the products for the renewable sector where we are able to sell for the structures. These are the two new applications which have come up and increased our sales volume.
Got it. Thank you, sir. Rest of the questions have been answered. Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference back to the management for closing comments. Over to you, sir.
Thank you, everyone. Thanks to Axis for hosting us. Look forward to seeing you next time. Thanks so much.
On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us today, and you may now disconnect your lines.