Ladies and gentlemen, good day and welcome to the APAR Industries Limited earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there'll 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 and then zero on your touch-tone phone. I now hand the conference over to Mr. Ambesh Tiwari from Essential Technologies. Thank you, and over to you.
Thank you. Good afternoon, everyone. This is Ambesh Tiwari from Essential Technologies. I welcome you all for the Q3 FY 2025 earnings call for APAR Industries. To discuss the business performance and outlook, we have from the management side, Mr. Kushal Desai, Chairman and Managing Director, Mr. Chaitanya Desai, Managing Director, and the CFO, Mr. Ramesh Iyer. I would now pass on the mic to Mr. Kushal Desai for the opening remarks. Thank you, and over to you, sir.
Yeah, thank you, Ambesh. Good afternoon, everyone, and welcome to the APAR Industries Q3 FY 2025 earnings call. I would like to start by giving an overview of our performance and then follow that up with a short industry update. Post that, I can cover the segmental performance of each of the individual businesses and then open up the floor to questions. So in Q3 FY 2025, the consolidated revenue came in at INR 4,716 crores, which is up 17.7% year-on-year.
This was due to a strong volume growth in the domestic business with a continued focus on T&D, renewables, and business from the railways. Domestic revenue grew 31.8% versus last year. Exports contributed 33.5% to the overall revenue, which is lower than what it was in the same period the previous year. The number was at 40.7%. Compared to Q2 FY 2025, exports have grown in Q3 FY 2025 by 14.3%.
EBITDA, however, is down by 7.1% year-on-year to INR 401 crores, with the EBITDA margin coming in at 8.5%. Profit after tax came in at INR 175 crores, which is lower by 19.7% versus Q3 FY 2024. The profit after tax margin is at 3.7% compared to 5.4% in the same quarter previous year. Now, looking at figures for the first nine months compared to the previous year's period, consolidated revenue came in at INR 13,371 crores, which is an all-time high for a nine-month period. It is up 14.3% year-on-year. Domestic revenue in the first nine months was higher by 44.8% versus the previous period, and the export mix is 33.4% versus 47% a year ago.
Fundamentally, the domestic business has grown relative to exports, and the export business had been affected to some extent due to a slowdown in order booking from some of the territories, as well as challenges that had come up on the freight front. Both of these factors seem to be dissipating to some extent, with the freight due to the Red Sea issues starting to now cool down to some extent and export booking starting to improve. If you look at the EBITDA post-forex, that came in at INR 1,198 crores, which is up 2% compared to the previous year. PAT for the nine-month period has come in at INR 571 crores, which is 3% lower than the same period previous year.
In terms of some of the key industry highlights, the Ministry of New and Renewable Energy has reported that there has been remarkable progress in India's renewable energy sector, highlighting significant achievements between December 2023 and December 2024, where the total solar energy installed capacity amounted to 24.54 GWs, representing a year-on-year growth of 33.5%.
So as of December 2024, the total installed solar energy capacity stands at 97.86 gigawatts. Wind energy has also contributed to this expansion with an addition of 3.42 GWs installed in the year 2024, increasing the total amount of wind capacity at 48.16 GWs with a growth of 7.64%. Our expectation is that the wind capacity will grow at a faster pace as we run through the calendar year 2025 and 2026.
On the transmission lines and substation side, according to the statistics released by CEA, the total quantum of transmission lines added for 220 kV and above stood at 5,960 circuit kilometers during the April to December period, which is barely 50% of the planned addition of 11,720 circuit kilometers. For the entire FY 2025, the planned addition came in at 15,253 circuit kilometers, which is only about 30% of the actual addition that was planned.
Regarding the substation addition, according to the CEA statistics, the total transformer capacity added during the nine-month period stood at 46,325 MVA against a planned addition of 70,905 MVA. So this showed only meeting 65% of the target. Having said that, a number of new tenders have been finalized, and in some cases, some of the tenders did not get finalized and went for re-tendering because the budget values were lower than the quoted values.
Given what has happened with the depreciation of the rupee and the movement in the price of copper, aluminum, and various other commodities, these tenders, which have been refloated, are likely to get finalized at higher numbers in the months to come. Coming to the individual business performance, I'd like to start with the conductor business.
So in Q3 FY 2025, our revenue grew by 23.4% year-on-year, led by a growth in the domestic market. Volumes were overall up by 19%. Exports contributed to 25% of the total revenue, as opposed to 40% in the period a year ago. The premium product mix contribution came in at 37.4%. The EBITDA post-open period forex came in at 29,593 per metric ton, as against 41,500 in the same period previous year. The order book, however, stands at a healthy INR 7,600 crores.
New orders received during the quarter were INR 3,077 crores, which is 62.3% higher than the same period previous year. Our copper business, which includes copper conductors, copper transposed conductors for transformers, and bus bars, is up 31% in the nine-month period over the same period previous year. The U.S. business, in terms of billing, has increased in Q3 relative to Q2 by about 8.5%, and we see that this trend has now reversed.
On a nine-month basis, revenue for the conductor business grew 17.2%, and the volume is 8.5% higher than last year. The export mix came in at 24%. The premium products in that mix stand at 39%. Coming to the oil business vertical, revenue from the operations did grow by 0.6% year-on-year, but that was largely because of the value of the base oils during this period. Volume has grown by 4.8%.
The transformer oil volume was higher by 6.3% versus last year on a global basis, but was over 18% higher in terms of the domestic growth. Automotive oil grew by 13.5%, largely on the back of an increase in the OEM business. The industrial lubricant part of the business grew 13.8%. The export mix remains healthy in the oil business at 43.8% of the overall revenue.
The EBITDA per kL came in at INR 6,364 per kL. If you look at the nine-month comparison, revenue is up 5.8%, reaching INR 3,836 crores, with a volume growth of 7.2%. The transformer oil revenues year-on-year are up 16.6%. Export has contributed 44.7% of the overall revenue. The EBITDA per kL stands at INR 6,240 per kL, as opposed to INR 6,257 in the same period last year.
Coming to our cable business, revenue in Q3 FY 2025 posted a strong revenue growth of 37% to reach INR 1,266 crores on the back of strong domestic demand. Continued government CAPEX in transmission, distribution, renewables, infrastructure, and railways has led to continuing strong demand in the domestic market. Domestic revenue was up 30.4% in Q3 FY 2025. Export was 34% of the mix, as against 30.6% in Q3 FY24. EBITDA post-forex recorded a year-on-year growth of 14.2% to reach INR 122 crores.
The EBITDA margin, however, was 2% lower than Q3 FY 2024. The pending order remains reasonably strong at INR 1,550 crores. Essentially, both for the cable and conductor business, the exports, which were more profitable, have been replaced with domestic business, which in absolute terms has been profitable, but in relative terms, is less profitable than the export. Looking at the nine-month period, revenues have grown 27.5%.
The domestic business grew by 51.9% for the cables division. Export mix stands at 32%, as opposed to 43% from a year ago. The EBITDA post-forex grew 10.6% to reach INR 348 crores. On one hand, we are seeing increased competition in the export market, especially from Chinese producers in territories where there is a level playing field for Chinese exporters, and that includes Australia, some parts of Africa, and Latin America, whereas their presence in the United States has been still limited.
Overall, even though U.S. sales are lower than what we would have liked, the period-on-period sales have increased, and I think the trend seems to have got reversed. We are hopeful that the export demand will improve. We clearly see that freight costs are starting to soften, which would also help in terms of the competitiveness of our landed cost. The phase of energy transition still remains intact.
The fundamentals we see have not really changed, and we are optimistic that we will be able to continue to reap the benefits as this business grows based on our strong execution capabilities and strategic initiatives that we have taken on innovation and product differentiation. In addition to this, we have also increased our approvals and presence in the U.S. market, which just for cables remains close to a $20 billion market per annum, and as these approvals increase, especially for utilities, we have an ability to place both conductors and cables at the same customer.
We have a detailed corporate presentation in the investor section of our website. I would encourage you to please go through that to get a better perspective and a much more detailed perspective on the company, its activities, and strategy. So with this, I'd like to come to the end of my comments and would be happy to take questions.
Thank you. We will now begin the question-answer session. Participants who wish to ask a question may press star and one on your touchtone 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'll wait for a moment while the question queue assembles. We have the first question from the line of Amit from PL Capital. Please go ahead.
Hi sir. Thanks for taking my question. My first question is on the U.S. markets. You did highlight that there was some recovery, and we have been taking more approvals for cables as well to expand and cross-sell in the market. My perspective is if you could highlight on how the view on the U.S. now post the change in regime there, and is the opportunity size remained the same for us in terms of re-conductoring all of the opportunities which we are building in. That's my first question.
Okay. So the change in government and the change in policy based on some of the statements the president has made generally, there's nothing specific that's come about with respect to India. I guess only time will tell in terms of where that finally settles down. There are a couple of fundamental facts which are there. One is that electrification in the United States is continuing to increase. They have a certain level of dependence on import.
It's almost like a 50/50, where about 50% of the product that the U.S. market needs is manufactured in the U.S. and close to 50% is imported. Given the time that it takes to set up a facility in the U.S., get all the permitting, etc., etc., and with the ability to actually source manpower to run these facilities where unemployment is at still a record low, it may not be very practical to. So if the demand remains there, I guess there will be an import component that will continue.
So at least as of today, we remain committed to working on that market. There are many renewable energy assets that are continuing to be stranded in the absence of evacuation capability. There are still a lot of data centers coming up which require connectivity. So I think time will tell, but at least as of today, we have not seen any signs where the business should just suddenly turn on its head.
Right. Second question on the premium products. I was just checking on absolute basis. The premium product sales have grown by kind of mid-single digit, I think 2,600 for the first nine months versus 2,450. So is it right understanding that this is getting impacted because of the exports market? Because what we understand, I think last time we discussed, there was more growth for premium products happening in the domestic market, and domestic markets are actually doing pretty strong for us. So what should one understand on the premium product sales getting soft and quarter on quarter?
Yeah. So there has been the copper side of the business, as I mentioned, has been quite strong. If you take a nine-month period, it's actually up 31%. Some of the conductor tenders and other infrastructure like substation, various things have gone into retendering simply because our budget was set up based on some historical costs, and the costs have gone up with respect to copper, aluminum, steel, and various other components.
So the finalization of some of those tenders has actually not been at the same pace as one would have liked. So some of them have gone back into a retendering mode. As I mentioned in my opening comments, my sense is that as you get into Q4 and then into FY 2026, you'll start seeing awards of those tenders taking place because the business is right there. The lines need to be put up. This adjustment process has to take place in terms of the budges that are being allocated against some of these projects. on this. This is impacting some of the HTLS projects as well.
Right.
Yeah.
Lastly, on conductor EBITDA per ton, do you have any thoughts now on 29,500 EBITDA per ton which we have been guiding? And second, on cables margins which are keeping very low from past two, three quarters versus FY 2024 and 2023, if you could give some perspective on these two elements. That's my last question. Yeah.
Yeah. So on the conductor margins, we continue to have the same guidance as we have been saying earlier, about 28,500. And that too, typically, we look at these margins on an annual basis. This particular quarter, the margins have been low, primarily due to the premium products that got executed in this quarter have been lower than the earlier quarter. At the same time, there is a mix change happening in terms of the geographies where we have been selling.
There has been less execution of sale of products in North America, compensated with some other geographies where the margins have been lower as compared to North America, due to which the margins have been lower in this particular quarter. On a YTD basis, we look at it, it's close to about mid-30,000, but this particular quarter has been affected due to mix change as well as the premium product that has got executed.
On the cable margins, well, the domestic market continues to be competitive, and price competition is there that we can see. We are also working on various cost optimization strategies so that once the scale of the business achieves the growth, then we'll be able to get some cost reductions over there. Given the current state, the market is competitive. That has affected the margins of this quarter. In addition to that, the U.S. business is picking up. Once we see U.S. business going up in quarters to come, we can see the availability of margins on the upward trend.
Thank you, sir. Thanks for answering my question.
Thank you. We have the next question from the line of Nitin Arora from Axis Mutual Fund. Please go ahead.
Thanks, Kushal, for taking my question. Thank you, Ramesh. Just carrying on with what Amit was asking on the profitability, we understand the premium mix was lower, but just a little bit direction-wise because competition has also increased, which you highlighted three, four quarters back in the export market as well, the Chinese competition except U.S.
Does that also look like that this is something, a new normal of kind of a profitability one should work with, or do you think once the premium mix starts coming back, we should again start going towards 35-37 where we were delivering? And second, on the cable profitability, our top line is not that heavy, and we have started talking about optimization and cost optimizations and competition, which I think was not the commentary about two quarters back because all the other cable companies are pretty heavy in terms of revenues and all and capacities. And I think we guided for a double-digit margin in this year. So if you can throw some light, what has significantly changed because of size compared to the industry is still very less, and we are talking about competition. These two aspects, please. Thank you.
Okay. So looking at the relative size of the cable business, one quarter ago, if you take the first half because the first half results have been declared for all the cable companies, APAR's today is the fifth largest after Polycab, KEI, Havells, RR Kabel. So we've gone ahead of Finolex. We've had a 37% growth in this quarter over the previous quarter, which would clearly bring us to that number five position.
What has fundamentally happened is that the mix has moved for both conductor and cable at the moment more towards the domestic side where the order books have been stronger. So the margins have been lower relative to the U.S. and some of the export markets. If you take the nine-month margin for cables, we are at 9.6%. So we are just a little bit away from the double-digit period.
But clearly, the domestic market does not give us the same profitability as some of the overseas markets does, where there is a premium for the quality of product that is produced relative to what the Indian market offers. As the U.S. business and some of the export business increases, I would see definitely a little bit of an upward bias coming on the margin. But what Ramesh is talking about in terms of cost is that we have a number of initiatives to improve the efficiencies which are there. So we have a very strong Industry 4.0 program that is running. In our cable business, for example, all the machines, over 400 machines will get hooked up to the platform by the end of March.
You'll start seeing all that data coming out in the first quarter of FY 2026, which actually gives you live 24/7 data on pretty much every rotating machine or every running machine that we have in the division to then start working on pinpointed productivity programs, etc. Some of those cost initiatives are also there, which should help expand the EBITDA, and they are essential given the fact that the domestic market does remain competitive. I think the benefits that you will reap if you continue our target is to continue to grow 25% a year, year on year. When you start executing INR 1,200 crores-INR 1,500 crores - sorry, INR 3,000 crores-INR 5,000 crores a year to INR 6,000 crores a year in terms of revenue - then it is a good base on which to run these programs to actually reap the benefit.
Getting it. Kushal, just on the near term, sorry for asking a little near term because your numbers are becoming quite volatile quarter by quarter, and we understand there is a mixed issue with respect to U.S. coming back or not. But generally, the sense which you're getting now post the new regime coming in, are the inquiries level increasing both at the cable and at the conductor division, which you think can rebound, or do you think it will take at least two, three, four quarters, and then we'll see? I mean, just to understand your confidence on both these segments.
Okay. So I think the new regime having come in, Mr. Trump has taken office only a week ago. So I guess the dust really needs to settle on that front. The inquiry levels are continuing. In fact, they have been increasing with time. There was a much bigger lull and a greater worry one year ago compared to what it is today, and as I said, if electrification grows in the United States, then there is no option but for a certain amount of import to come in because local production is able to cater to only 50% of that of the current demand.
Got it. Thank you. Very helpful. All the best.
Thank you.
We have the next question on the line of Natasha Jain from Phillip Capital. Please go ahead.
Thank you for the opportunity. So my first question is in continuation to what the last participant had asked. In terms of U.S., can you, first of all, give us any broader sense as to how the margin differentiates between geography, India included, compared to what we get in U.S. for cables? Any broad sense would do.
So usually, you would end up getting 3%-5% plus differential for a like-to-like product for the same application because the U.S. specifications are far more stringent. And all products need, for example, if you're marketing any electrical product in the United States, you need a UL approval. So the UL approval itself is a fairly stringent process to get the mark.
Then post that, the process is similar to the U.S. FDA where samples are drawn from the field and tested. So you have to continue to deliver the kind of quality of product which has been delivered at the time of the initial approval. And that's something that's relatively not so easy compared to whatever happens in India where you don't have the same kind of scrutiny that takes place. So essentially, for companies like us, where we believe that we are at the upper end of the pack in terms of the quality of product that we deliver, a market like the U.S. or Europe helps us get a premium relative to the Indian market.
Understood. So is it fair to say that India, in terms of cables, would be the lowest margin compared to all other geographies and U.S. on the other extreme end?
India is not the lowest because in India, we do sell a lot of specialized products as well. So we supply to the Indian Railways. We supply to the Indian Defense. If you look at a typical low-voltage cable in India, then it's about as cheap as you can get anywhere in the world. So our Indian product mix also is the richest product mix in terms of specification of products that are being sold because we sell a lot of elastomeric and renewables and railways and defense and all these other products. But on a like-to-like basis, if you take a low-voltage cable in India versus a low-voltage cable in the U.S. or in Australia, then the Indian product is definitely cheaper.
Understood. And, sir, another question again relating to exports. Now, you just mentioned in your opening comments that 50% of the demand for U.S. is still imported, and it's a big market. And also, there are not a lot of Chinese players because of tariffs, etc. So just trying to understand then what is the problem? Why is U.S. export not picking up if it's sitting at a most favorable position given Chinese players are not there in the U.S.? So please throw some color on that.
So the U.S. market for us has started, it has already turned the corner. So as I mentioned in my commentary that for cables, there is an 8.5% sequential growth between Q2 and Q3, and we expect Q4 to be higher than Q3. So the market is definitely starting to, so the excess stock which was there, etc., that's all pretty much behind us. And the inquiry flow also has started increasing. So it's not that we are not seeing any inquiries and not seeing demand.
Got it. So we can again say that de-inventorization has pretty much happened in the U.S.
Yes. Yeah, yeah.
In addition to that, where we are optimistic in the years to come is that we have been working on approvals from utilities because finally, if it's a distributor or XYZ, the significant product is bought by U.S. utilities. So we've been working on utility approvals all through this period. We've actually increased our manpower and infrastructure in the U.S. to service the market. So I think over the periods to come in, we should see increased business.
Got it. And so my next question is on the domestic side. Now, if I see the governmental CapEx has slowed down, a lot of your peers have also made that comment. We've seen that in the numbers. So my question is more on the near term, say maybe a year's time frame. Do you think the slowdown in the governmental CapEx can seep into the power and transmission? And this in combination with the fact that a lot of your peers are coming live with capacities this year for cables and huge capacities. So are we at a risk where there can be slightly overcapacity versus low CapEx spend and therefore low demand on the governmental power and transmission side?
So as I mentioned in my opening comments that the catch-up that is required compared to the plan is also because of the whole tendering mechanism. So if you take historical costs when copper and aluminum and all that, and if you take the rupee value of that because it's a dollar value multiplied by the exchange rate, all the budgets have - the bids have come in higher than the budget. So as a consequence, many tenders have gone into re-tendering. And that's one of the reasons why there has been a slowdown in terms of award as well as execution taking place. So our sense is that that pace is going to pick up because those lines are required, that business is required.
It's not only just conductors and cables. There is a shortage of transformers, for example, of certain sizes. There is a shortage of certain types of switchgear and other equipment required in the substation. So as all that starts coming through, then you'll have the whole chain getting the order flow for the execution to take place.
So we can expect the re-ten dering happening probably in FY 2026, first quarter onwards, right?
It's already happening now also. Many of them are going in for re-tender, and we have to adjust the prices upward simply because of the increase in the cost which has taken place.
Got it. Got it. And so last question, if I may. I know your wires portfolio is quite small at this point, but can you just throw some color as to how you're growing there because it's one of the fastest growth category products? In combination, do you think at an industry level we're sitting at overcapacity for wires versus the demand? That's all. Thank you so much.
In the wire segment, capacity is not really the bottleneck. It's very easy and relatively not that expensive to add capacity to manufacture house wires. It's a very simple product relatively to make. The key is in terms of your ability to distribute and market the product. We've grown in t
hat wire category. We have grown about 46% in the nine months, FY 2025 versus FY 2024. We've increased our distributor points by 67%. Our retail count has almost doubled as compared to last year. We are now present in 18 states, and there's a lot of product awareness and demos that happen. So we are bullish about this particular segment in the wires, cables business, and we are hopeful for growth going forward as well.
So that segment itself for us, because of having a relatively lower base compared to some of the other—we sell a very—in terms of performance, we sell a wire that's right at the top of the spectrum. And as Ramesh said, the distribution, etc., is all growing. That business will be a 300+ crore business for us this year. In addition to that, we've also started setting up a B2B distribution business.
So this is just wires. In addition to that, you have light-duty cables also which are sold through a distributor setup. So together, those two pieces will well exceed 350 crores this year and will continue to grow. Now, if you see it in the overall context, this year we will cross INR 5,000 crores in the cable business. So it's still a small percentage of the total, but on an absolute basis, it'll continue to grow.
Understood. So thank you so much and all the very best.
Yeah. Thank you. Thank you.
We have the next question on the line of Maulik Patel from Equirus Securities. Please go ahead.
Yeah. Hi, Kushal . Thanks for the opportunity. On the conductor side, you always guided that the margin will be in the range of around INR 25,000-INR 30,000 for a medium to long term. And after many quarters, it has come down. But at the same time, your order book has grown very handsomely. So the current order book, what you have, it's relatively will further and increase your margin from the current level, or it is still at an, as you mentioned, the competitive intensity from China has gone up. So the margin will now probably stabilize at this 25,000, 30,000 kind of range.
Yeah. So as we have been guiding earlier also, Maulik, for this conductor division, we need to see margins on a 12-month basis because what happens that in the quarter, the margin gets affected with what you have billed and executed in that particular quarter. And as I said, this quarter had a mixture of low-premium products. It had a mix change from North America to some of the other geographies. And a mix of things has all come in this particular quarter. And so you saw the margins being lower.
At the same time, we are seeing increase in price competitiveness also in the domestic market. There is price competition over there. In terms of the order book also, if you see, there is about 20% of the orders that actually gets executed after FY 2020, one year later from now. So it's a mix of current orders that will get executed in the next six months as well as something that gets executed after one year. The blended margins could be anywhere between 30,000-35,000 per metric ton. But that will not only be the entire part of it. We'll have some orders also coming up during the quarter, and that will get executed in the same quarter as well. So the final EBITDA will really depend on the mix of products getting executed from the pending order book as well as the new orders coming in during the quarter.
Got it. And just one bookkeeping question. What's the acceptance currently?
Our interest-bearing acceptance is about INR 2,500 crores, and the total LC is about INR 3,300 crores.
So acceptance has come down significantly in the quarter-on-quarter basis because I understand that earlier, the run rate was used to be around INR 4,000 crore rupees or so.
Yes. So we have been optimizing our working capital on that front. And the cash that has been generated in the business, we have been using to make cash purchases or to reduce the level of acceptance. And that is also helping us in terms of overall working capital cycle.
Your interest cost has not come down. The quarter-on-quarter, the interest cost has gone up. If the acceptance has come down from INR 4,000 crore- INR 2,500 crore rupees, the interest cost should have gone down.
Yes. So this quarter, the interest cost has actually gone up because of two reasons. One is that there is an increase in exchange rate from. It's been touching about INR 85 per $1. And because of that, to some part of the increase in exchange rate gets reclassified to finance cost as per the way our accounting standards are there. In addition to that, when we discount some of our receivables, there's an increase in interest cost. So these two factors account for higher interest cost in this particular quarter.
I think you mentioned that the exchange rate fluctuation. So are you shifting your acceptance and converting into the LC, which is from the local banks?
We have domestic LCs as well as import LCs. To the extent of revaluation of the import LCs, some part of that exchange rate change can form part of the finance cost. And therefore, we see some finance cost has gone up, especially in this quarter because we have this import LC revaluation affected in this finance cost.
Last question. Is that long-term and short-term debt for this December end? Sorry, I didn't get you. Debt, the borrowings at the end of this December?
The short-term debt is about INR 120 crore. The long-term debt is about INR 330 crore. Substantial decrease.
If I look at combined from long-term, short-term plus acceptance, which was around INR 4,000 crore at the end of September. And now you mentioned that it's 2,500+ 500 and INR 2,500 crore of acceptance and INR 500 crore of borrowing. So it's INR 3,000 crore only. So you paid back around INR 1,000 crore in this quarter. Am I right?
The interest-bearing is INR 2,500 crore, and the total LC is INR 3,300 crore. That's how the number comes up.
Okay. So, okay. I think that acceptance number is also including the non-interest-bearing component, correct? Oh, got it. Thank you. And just one more question. What's the CapEx you have done so far and the outlook for the next year if you have probably finished the budget for the FY 2026?
CapEx is till nine months, given about INR 270 crores. And the budget, of course, is underway. So we are going to be finalizing it in the next month or so.
Great. Thanks.
Thank you. We have the next question on the line of Levin Shah from Motilal Oswal. Please go ahead.
Hi, sir. Thanks for the opportunity. My question is again on the U.S. market. So when we see this quarter's numbers, like YoY, the numbers are flat, and sequentially, the U.S. revenues overall for the company have grown by 8.5%. So when we look at margins, there has been a big drop both in cable and conductor. You explained some of it, but despite U.S. recovering quarter on quarter, the margins have gone down substantially. So can you help us explain what's impacting the margins despite U.S. improving?
So in the short term, there was an impact on freight for shipments that went to the U.S. because suddenly you had this Red Sea issue, and freight rates in the short term had really shot up. Since the deliveries were partly on DDP basis, there was higher freight that was incurred, not only for the U.S., but for anything that otherwise would have gone through the Red Sea.
So there were some of those factors that did come in. Now, as I mentioned in my opening remarks, that has started also turning around. And with this truce that's happened in the Middle East, etc., I think that will also settle down over some period of time. Plus, you've got to keep in mind that the domestic business also had gone up. So when you say U.S. has gone up sequentially, overall exports had not increased over the same period previous year.
Yeah. Sir, I was more comparing it with previous quarters. So Q2, the U.S. share would have been lower versus Q3. Despite that, the Q2 margins.
So the U.S. business was picking up, but the overall export business has not gone up substantially quarter on quarter.
Sure. Just on the U.S. market per se, because that's our largest export market, excluding the shipping cost, if you were to look at contribution or gross margins on product like to like, has that gone down significantly due to competitive intensity, or that has been intact?
No. So there has been some erosion in the margin, but it's not a huge erosion in the margin. That competitiveness has been there, but it's still better than what we would have got in the domestic market or even compared to many export markets, especially in areas where the UL approvals are not held by multiple competitors.
Right. So sir, will it be fair to say that once the U.S. market recovers beginning Q4, we should obviously I understand that officially our guidance stays on the conductor margins, but we should see margin improvement because the U.S. market will also pick up and the shipping issue is also behind now.
Well, our target is to get up to 11%-12%. And so every effort is being made in that direction.
Sure. And this 11%-12% is the blended margins, right, we are talking?
Cable division as well. Cable division as well.
Yeah. Okay. And on the conductor part, sir, with the US market improving, that segment should also see improvement in margins, right, sequentially?
Yeah. We have been guiding the number earlier, and we continue with that guidance. There's no change in our guidance as what we have said earlier. Of course, with some tailwinds and with U.S. mix improving, it can be better. But we also need to see how the domestic market margins pan out during that period. But we continue with the guidance that we have shared earlier.
So there are two, three fundamental things which one can keep in mind, especially in the near-term in this sort of a business where it is more difficult to predict than something which is in the medium to longer term. So a few fundamental changes have happened. One is that the base category of conductor has moved in India from ACSR to AL59. So that's one big change that has happened. Second thing that has happened in the short term is that many tenders have gone back for reevaluation and refloating because the bids that came in exceeded the budgets on those tenders.
So the premium product side has got a little bit slowed down. The third thing is that there is a clear case that re-conductoring to increase capacity going from point A to point B is far faster and better to do than setting up a brand new line. And that's something that the CEA and the Government of India also understands and a more comprehensive policy in that direction is being looked at. Number four is that renewable energy assets are continuing to grow.
You see wind has grown in single digit, not double digit in terms of the additions. But going forward, there is a lot of wind capacity that's actually coming on stream. That, again, has a consequent impact on the business that APAR gets because we have a very good market share on the wind side. So all of these things are pointing towards a better medium to longer-term position, even in the domestic market.
Sure. That was helpful. Sir, and my last question is again on the U.S. market. So what we have seen is post the new government there, they have put on hold the IRA benefits that were to be given to the new renewable assets that were being put up. So how much of our revenue stands to impact due to this IRA regulation change in the U.S. market?
Sir, I think it's just too early to sit and make a call on that. I think with a little bit of time passing by, the picture will get clearer. However, we have to keep in mind that some of these renewable assets generate power also very competitively in terms of cost. And if the cost of hydrocarbons, like you've seen the Brent and all of this also going up, it's making renewables more competitive. So some of these things have been put on hold, but there is no judgment that has been passing that it should be canceled or any such thing. So I think before reacting immediately, some more time needs to pass by for clarity to prevail. Having said that, electrical requirements are going up and not down.
Sure. So what I was trying to understand is how much of our cable segment because I understand conductor segment may not be impacted with this IRA going away if at all that happens. But how much of the cable segment revenue today would be related to this IRA-related CapEx?
So we have a full mix of cables going in there, right? We have medium voltage cables going in there. We have photovoltaic or PV cables, which are for renewables. We have cables that go into building and other infrastructure. So there's a whole range of cables. If you go to the APAR website, you will see all the UL approvals in there. And you will see all the different applications which they go into. So it's not all focused only around renewables.
Sure. Sure. Yeah. Thank you, sir. Thanks a lot for the question.
Thank you. We have the next question on the line of Prerak Gandhi. Please go ahead.
Yes. Hello, sir. Congratulations on the numbers. And thank you for taking the question. So first of all, the thing is that you were bullish on the wind sector comparative to the solar, despite solar being targeted at 300 GWs for the year FY 2030. So why do we see a faster growth in wind sector comparative to the solar sector? And secondly, sir, with Trump coming in, U.S. will be pushing for more indigenous operators, right? So do we see a loss of market share over there in the near future, or at least in the medium term?
Okay. So let me answer both your questions one by one. I didn't say that I'm expecting a slowdown in the solar side. The solar side is continuing to grow. Wind has grown only single digit year on year. And we see that the wind capacity getting added in India is going to increase. So you will see another dimension of growth coming in. As the windmills increase, the cable business that is catering to windmills should also increase. And here, whatever growth happens, APAR tends to gain because we have a very significant share in that segment. So I just wanted to clarify that part. As far as the second question was pertaining to?
U.S. indigenous operators. Trump coming in.
Yeah. So that, I think we already answered that it's just a matter of time before which we'll get to know the clarity. Our market share in the U.S. is very minuscule. If you see $20 billion of cables being imported, we are not even at 1% of that. We are at 1% of the import taking place. So there's a huge room to grow. As long as there is a need for the cable and it can't be produced locally, there is a potential for us to sell there.
Understood. And sir, just a last question. Sir, the government, as per the CAG report, we have seen that the CapEx cycle has been very slow. So do we expect the CapEx, which is left in this past six months, and the CapEx which will be announced in the budget, do we see an extension push towards the CapEx in the next nine months or next fiscal year?
Actually, in our conductor business, we have been seeing good order flow. And we anticipate that in future also based on already orders which have been placed at the apex level and then to the EPC community. Those orders, either from the developers or from the EPC companies, will keep us going for the whole next financial year. And even beyond that, we see a good flow of orders. So yeah, as we explained, that the market has moved from one variety of conductor to another. So we see that business continuing in terms of strong demand in the local market.
Perfect. Thanks a lot, sir, and all the best.
Thank you. We have the next question on the line of Nikhil from Kizuna Wealth. Please go ahead.
Yeah. Hi. Thank you for giving me the opportunity. Sir, I have one question. We said that Chinese players are entering the market where they have a fair position, like the markets in Australia, Africa, and Latin America. So what is APAR's strategy to compete with them in those markets? And sir, my second question is, in the export markets, our inquiries are increasing, and our order inflows are also increasing. Is there any kind of execution delays happening there because our export mix is going down?
With regard to the Chinese having the advantage currently in certain geographies, it's on account of their cheaper raw materials that they have in China because the government of China has made certain changes in their taxation and support to the various industries in China, which is enabling the Chinese conductor manufacturer or cable manufacturer to get Chinese aluminum at a much cheaper price compared to the rest of the world.
And that is helping them. So we have seen these cycles in the past come and go. Over a period of time, these are not sustainable because definitely, if the price of the aluminum in China is kept at a lower number, then it means the Chinese aluminum producer is suffering as opposed to getting a fair price compared to the rest of the world. So we don't think this may continue for long, but till it continues on, we feel it is better not to participate just for the sake of competing and incurring losses. It's better to divert our capacity to the next best realization market, which is the Indian market. So this is the strategy we have taken for now.
Yes, sir. Understood. Sir, my second question was, our export inquiries are increasing, and our order inflows are also increasing in export because our order inflows are like 31%, and our total order inflow was 67% up. So I'm asking that, is there any kind of delay in execution? Is there any kind of regulation problem going on there in the execution of export orders or something like that?
So some of the markets, they have staggered delivery requirement. And generally, in some of those countries, especially in the U.S., the procedures are more cumbersome in terms of actually starting the work on the ground compared to in India. India is one of the fastest for actually putting out the transmission lines. So yes, some delays have happened. But now things are sort of looking more clear in terms of orders on hand and also in terms of the execution.
Okay, sir. Thank you.
Thank you. We have the next question on the line of Mayank Bhandari from AMSEC. Please go ahead.
Yeah. Thanks for the opportunity, sir. My first question is on the revenue growth. You have shown 23% in the conductor business and 17% in the nine-month period. If I were to understand the forex impact in this, what would be the forex impact in the growth, top-line growth for this?
It's difficult to put numbers exactly on the forex impact on the growth number because the top-line actually gets driven by your commodity prices, aluminum price, exchange rates, and also the volume growth, and also the mix of the product that goes into. In some of the export markets, it also depends on whether the selling price is including freight, whether it is a CIF contract, DDP contract, or an FOB contract. So it's a mixture of many things that goes into the value growth numbers. So it is difficult to separately identify which part has contributed to what. And therefore, we look at more volume numbers than the value numbers for this purpose.
So sir, 19% of volume growth and 23% of value growth, the differential of 4% includes product mix and other factors you mentioned.
Various other factors, yes, as I mentioned, yes.
So, product mix has ideally deteriorated this quarter?
As I said, it's tough to put that number because it depends, as I said, product mix, export-domestic ratio, and within export, also CIF, DDP contracts, FOB contracts. The price of aluminum and metals also, that has also changed quarter on quarter. So it's a mixed bag of various things that gets into the sales value growth.
Similar to the EBITDA post open period forex that you show of 29,593. So is there any number which is like pre-open forex period?
We have been sharing that earlier, but now consistently, we have been using the post-open period forex number. It's the correct number to look at. Because that's the number we have been consistently using it, and it gives a proper representation for the business as well.
Okay. So I think for the other segments also, it is not possible to give breakdown in the volume and value.
Because the same reason applies for all the divisions.
Okay. Okay. Thank you, sir.
Thank you. We have the next question from the line of S Karlekar from HSBC. Please go ahead.
Yeah. Hi. Thank you for the opportunity. Sir, you highlighted $20 billion U.S. cable imports as a large opportunity. So may I ask how much of that is really addressable considering the product portfolio that APAR has and the certification that you already have?
So in terms of the addressable products which we have, it is catering to over 50% of the market. In terms of the means, the categories that we have UL approval for is almost 50% of the U.S. market.
Okay. So broadly, more than $10 billion is? 50% of $20 billion number, right?
Yeah. That is the gross opportunities that are out there.
Right. And sir, you also highlighted that in the meantime, when the market was weak in the U.S., you have been seeking approvals from the end customers such as utilities. May I ask how far have you reached in that journey in terms of whether you're in early stage or mid stage?
So I'd still say that we are in early stage simply because the number of utilities in the U.S. is a very large number. There are over 300 utilities in the U.S., of which about 25-30 of them are very large in size. And the rest of them then, because it's a regional-based system. But the approval flow is continuing. We are continuing to appoint more and more manufacturing reps, make presentations to utilities and customers, etc. So the approval base is growing.
Sir, my third and last question is that you highlighted rate tendering of orders because of the quoted price coming higher than the budgeted price. Is that specific to Power Grid, or is that a phenomenon across other state departments, central departments, and PSUs?
Yeah. It is across various state utilities also and Power Grid also.
Understood, sir. Thank you for answering my question in all the various ways.
Okay. Thank you.
Thank you. We have the next question from the line of Aman Soni from Invest Analytics. Please go ahead.
Hello.
Yes, Mr. Soni, go ahead with the question.
Could you provide insights on the anticipated capital expenditure allocation for the power sector in the upcoming financial budgets, especially? Is there any indication of potential reduction in the government CapEx for the sector?
I think I wouldn't be in a position to just answer that straight. But the fact that the government has been pushing for more renewable energy and more power assets to be added, I would not think that the budgets would be lower than what for FY 2026 would be lower than what they are for FY 2025. In any case, not all of it is funded by the government because there are tariff-based competitive bidding.
So depending on who wins the business, then that is funded by the concerned developer. So as long as the projects happen, irrespective of who wins the business, government-promoted company or otherwise, the growth should happen. And a lot of it is driven by renewable energy, where again, a lot of the developers are non-government concerned.
Okay. Thank you.
Thank you.
Thank you. We have the next question from the line of Amit from PL Capital. Please go ahead.
Thanks. Just a couple of more questions. One on domestic side. We have seen quite a strong growth, and as you highlighted, the key reasons also. Wanted to understand which part of domestic side you're facing competition. Is it premium products, conventional products, AL59? And any sense on what was the mix in the first nine months, conventional versus AL59 versus premium in the domestic market?
Yeah. So we have converted most of the ACSR products into the AL59 products now. So that mix has completely been changed. It's a much more superior product than the traditional ACSR product.
This is all under conventional.
Yeah. But it's still part of the conventional, but it's on the higher end of the conventional product.
And as far as the competition is concerned, currently, the market is much larger than the new supplies which are coming in in the form of new entrants. But just that the overall structure in the Indian market does not allow very high margins compared to some of the other markets outside. So the profitability difference is more on account of the product mix and geography mix as opposed to competition level.
Right. Possible to share what was the contribution in the domestic market from AL59 for nine months?
We don't share that product-level details, Amit, for confidentiality purposes.
Gotcha. So last question on if possible for us to share the U.S. sales contribution segment-wise or overall company level.
We decided to improve the sequentially, but the specific of that mix, we don't share it out. But quarter on quarter, it is improved by 8.5%.
Yeah. Thank you.
Thank you so much. Thank you. We have the next question from the line of Vimox Shah from Goyam Labdhi Fintech. Please go ahead.
Yes, sir. Thank you for the provided opportunity. So I wanted to know that what are the trends that you are observing for the cooling solution in the data center and how we are positioning to meet this need? Basically, what are the opportunities you see in this sector?
So far, cooling solutions in data centers are still at an early stage. Most of the data centers are still using air. So basically, use cold air to take away the heat. And air is the worst conductor that's out there. Liquid-based cooling can be significantly better. But when you're looking at such strong SLAs and such high uptime, it is not easy for you to try out a liquid solution versus the air cooling solution.
So even though we have products in place, we've also developed products, we've not yet been able to get it tested out at a test site. That's why you don't hear us talking much about our because the product is actually fundamentally quite similar to a transformer. The whole difficulty is not in producing a product, but is in getting a test site to test the product out.
Okay. So are they looking to test into that segment actively, or?
We are constantly in touch, but we haven't yet had any breakthrough on that front. However, having said that, we are supplying cables to the data centers. And in that, we have all the big names. So we have supplied to AWS, which is Amazon in India. We have supplied Microsoft. We have supplied Google. We have supplied Adani. So we have supplied all of these people and continue to bid on their cable business. But we haven't had a chance of yet being able to get a test site for testing out our liquid cooling solution.
Okay. Okay. My second question was like, what are your growth expectations for the domestic market compared to the international market for the upcoming financial year?
We have given a mixed guidance for both the domestic and global market put together. And that's what we continue to hold even now, which is cable division top-line growth of 25% on value terms, conductor division about 10% on volume terms, and oil division about 5%-8% on volume terms. It's a blended of both domestic and export market. And depending on where the margins are higher, you may see domestic mix going higher or export mix going higher. And also, depending on external factors like U.S. demand, etc., the mix during the period may keep on changing as you go ahead.
Okay. Okay. Thank you. Yeah. That's it.
Thank you.
Thank you. We have the next question from the line of Pratik Lambe, who is an individual investor. Please go ahead.
Yeah. Hello, Kushal sir. Thank you for the opportunity at this end of the call. I just had one question on the industry front, basically the power transmission industry in India. You alluded to your comments and also in your response to one of the participants that basically the slowdown in execution in the power transmission space is one of the reasons that you alluded to was due to the shortfall or the shortages of the components such as the transformers or the other things.
So is that the main reason or any other key factors that you could associate with that slowdown? Because I understand that there has been a significant growth in the tendering activity as compared to last financial year, but it hasn't happened on the ground. So could you give some color on that or any other additional reasons for that?
Yeah. So let's look. So there are various aspects to look at. One is that the CEA has declared their plans. These are the time frames in which they want to have addition. So when you compare versus what they've declared and what they themselves have declared in terms of achievement, there is a big gap, which is what I had brought up in the opening comments. Second thing is tenders have been floated, but there's a delay in their finalization.
In some cases, tenders have just recently been finalized, so the execution is to take place. In some cases, tenders have gone for retendering because they've had to fix the budgetary price quote or the price level. So the reason for bringing all of this up is that there is significant pent-up demand. There were questions that people were asking on the call that, "Do you see government spending going down? Will business come up in the next few years like it has come up in the past?" So I think these are all hints towards what we feel is that the business is not going to slow down. There is the pent-up demand which is there in place compared to whatever the CEA themselves have identified that they should have executed. They're running at 50% for this transmission line side.
And if you look at the substation side, they're at 65% or whatever numbers that they themselves have declared. So there is going to be a catch-up going forward. And there are some capacity increases taking place, but I think they'll get absorbed against this increased demand that is going to happen.
Okay. But even Kushal sir, that 5,000 number that we have done in this nine-month period, it's still very low as compared to 2024. Around 14,000 some circuit kilometers were added in the last financial year. But in the nine months, we are only at 5,000, leave aside the target. So of course, maybe election would have been one of the reasons, but there are some serious challenges faced at the execution level, I understand.
So actually, the execution level, especially for conductors, India is actually one of the best in the world. A typical line from the time it's been awarded. It actually runs in about three to four years. A full line comes up versus 10+ years in the United States and something even longer than that in Europe. Now, when you see a commissioned line, so it could be they don't.
This commentary is not carrying what stage of completion is there for the gap. But our sense is that this tendering is going to continue to take place, and the government is very aware of the total amount of electricity that needs to be moved. A lot of new generation. You heard also the record amount of solar that's been awarded and is being generated. A lot of that is actually Gujarat, Rajasthan, and in remote places, so you need evacuation lines that will bring the power in. So bottom line, I think at this stage is that business is not going to subside in the domestic market. Looks like there is a good amount of steam for the next few years to come.
All right, sir. Thank you. Thank you so much for your response.
Thank you. The next question comes from the line of Piyush Arora from SYC Research. Please go ahead.
Yes, sir. Just a question. Just on the overall EBITDA margins of the company, do you think Q3 was the absolute bottom and we could see it basically moving up over the next financial year?
Yeah. So as I said, we continue to hold the guidances that we have given in the past. And for the kind of product line that we have, it is better to see these margins on a 12-month basis rather than on a quarter-on-quarter basis.
Okay, sir. That was my question.
Next question.
Thank you. The next question comes from the line of Hardik from an individual investor. Please go ahead.
Hello.
Yes, Hardik, your line is unmuted. Please proceed with your question.
Yeah. My question is, this quarter, the other expenses have increased by INR 50 crores. Any light you can throw on it?
That happens because of the terms of shipment. In some cases, the selling and general administration cost goes up depending on whether it is FOB contract or CIF contract, the freight cost, the processing cost. And generally, the selling, general, and administration overrides changes depending on the product mix and the kind of sales that happen. So that's the reason you see that swing happening.
Is it a recurring one for the next quarter, or is it just one? Sorry? Swing for the other quarters, coming quarters, or is it a one-time expense?
No, it's better we measure based on the EBITDA because that takes into account all these factors. Typically, other expenses can go up and down, and most of it is already priced to the customers. However, the EBITDA margins and EBITDA percentage that we use takes into account all these kind of permutations and combinations, so that's a better way to judge the results.
Actually, what would be the overall growth rate for the coming year?
We have shared the guidances earlier. I've repeated also in the call, so we continue to hold those guidances.
Hardik, sir, you have any further questions?
Thank you. That's all. Thank you.
As there are no further questions from the participants, I now hand the conference over to Mr. Kushal Desai for closing comments.
I'd like to take this opportunity to thank everyone for having taken out the time to attend our Q3 earnings call. Just in conclusion, I'd like to mention that the fundamental premise of electrification increasing and the electrical infrastructure increasing not only in India but in most parts of the world as the energy transition takes place.
There is really nothing that has changed this fundamental premise. APAR continues to remain focused in terms of growing the premium products in the domestic market as well as looking at growing the export markets. A market of specific focus for us has been the U.S. market, and we believe that the fundamental steps there have to be taken, have to be done irrespective of whatever the policy is, which is to focus on getting utility approvals and building your credentials with respect to a larger customer base in that market.
50% of cables are imported into the United States, and that equation cannot change in a big hurry as long as the demand exists. In the Indian market, we are seeing growth in the renewable side, both in terms of solar. Our expectation is that wind assets will get added at a faster pace going forward. We continue to grow our business in the infra space, especially with respect to railways, defense, and these sectors as well.
As Ramesh has guided, all businesses are still looking at growing year on year, and even if there may be some short-term changes that happen because of certain events or because there is a movement in terms of freight or foreign exchange rates, etc., etc., if these businesses are looked at over a 12-month or a longer period, I think the fundamental premise still remains the same.
In addition to that, we've been running a number of programs to improve productivity and alluded to Industry 4.0 for the cable business, which is at a fairly advanced stage. Once we start reaping the benefits of that, there will be a much more rapid implementation that happens in the conductor business where a certain portion of equipment is actually common. And so productivity will also help drive some of the margins. So we still remain fairly optimistic and don't believe that there are any fundamental changes that have happened. So I'd like to leave you with that thought. And once again, thank you for joining our Q3 earnings call.
Thank you. On behalf of APAR Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.