Despite a challenging FY’25 for the PVC pipe industry, Apollo Pipes Limited is making bold strategic moves that signal confidence in its growth trajectory. Here’s why this pipe manufacturer is positioning itself for significant expansion in the coming years:
1.Countering Industry Headwinds with Aggressive Volume Growth
While the overall PVC piping industry declined by approximately 5% in FY’25, Apollo Pipes achieved an impressive 23% volume growth. This remarkable performance came despite significant challenges:
- Slowdown in private real estate development
- Reduced government infrastructure spending
- Frequent PVC resin price fluctuations causing channel destocking
“FY’25 was amongst the most tough years for the PVC pipe industry,” acknowledged Sameer Gupta, CMD of Apollo Pipes, during the company’s recent earnings call. Yet the company still delivered its best-ever quarterly revenue of INR 315 crores in Q4 FY’25, demonstrating resilience and execution capability.
2.Strategic Geographic Expansion Through the Varanasi Plant
Apollo Pipes is strategically expanding its manufacturing footprint with a new plant in Varanasi scheduled to commence operations in the second half of FY’26. This facility represents a significant growth opportunity for multiple reasons:
- Enhanced access to underserved markets in Central and Eastern India
- Reduced logistics costs for serving these regions
- Ability to capture market share where Apollo Pipes’ current Raipur plant is capacity-constrained
“Our existing plant in Raipur is very, very small plant,” explained Anubhav Gupta, Group CSO of Apollo Pipes. “The kind of network what we have built in those markets, they require much more product from Apollo, which we are not able to service today.”
3.Bold Investment in Revolutionary oPVC Technology
Apollo Pipes has positioned itself among the first movers in the oriented PVC (oPVC) pipe segment, making substantial investments that now represent approximately 15% of the company’s total capital employed:
- Installation of three oPVC production lines, all operational by fiscal year-end
- Targeting a potential INR 7,000-8,000 crore annual market opportunity
- Higher margins compared to traditional PVC products
- Cost advantages of 30-40% versus traditional ductile iron pipes for water infrastructure
“This product has the opportunity to go and get installed in the existing lines, which is kind of replacement demand,” noted Anubhav Gupta, highlighting the significant growth potential beyond new infrastructure projects.
4. Diversification Through Window Profile Segment Launch
Apollo Pipes is set to launch its Window Profile product segment in June 2025, representing a strategic diversification beyond its core piping business:
- INR 60 crores investment (80-85% already completed)
- Targeting the growing market for alternatives to wooden door and window frames
- Leveraging existing distribution networks and manufacturing expertise
- Addressing both premium and affordable housing segments
“Users are looking for alternate options in terms of quality, cost, durability, and maintenance,” explained management, pointing to a significant market opportunity where Apollo Pipes’ sister company already sells 300,000 steel door frames monthly.
5.Strengthening Western India Presence Through Kisan Integration
The acquisition and ongoing integration of Kisan Mouldings represents a key strategic move for Apollo Pipes to strengthen its presence in Western India:
- Turned EBITDA positive immediately after acquisition (from negative to 3-4% margins)
- Targeting 5% EBITDA margins in FY’26 and 8-9% margins within 2-3 years
- Significant capacity headroom (currently utilizing only 20,000 tons of 50,000-60,000 ton capacity)
- Strategic fit with Apollo Pipes’ geographic expansion plans
“We believe that in FY’26, these margins could inch up to around 5%. And in FY’27, there will be further improvement of 200, 250 bps,” shared Anubhav Gupta regarding Kisan’s profitability trajectory.
6. Financial Discipline Supporting Ambitious Growth Plans
Despite significant capital expenditure over two consecutive years, Apollo Pipes has maintained impressive financial discipline:
- Net cash position of INR 46 crores at consolidated level
- Working capital cycle managed at 36 days
- Operating cash flow to EBITDA ratio of 65%
- INR 110 crores equity infusion from an Omani fund (INR 28 crores already received)
- Capacity increase from current 232,000 tons to 260,000 tons by FY’26 end
This financial strength enables Apollo Pipes to fund its INR 100 crores residual capex for FY’26 entirely through internal cash flows, while maintaining flexibility for future opportunities.
7.Confidence in Long-Term Margin and Return Profile
Apollo Pipes management has expressed clear confidence in the company’s ability to significantly improve its return metrics despite current pressures:
- Targeting 25% Return on Capital Employed (ROCE) within 2-3 years
- Projecting EBITDA margin expansion from current 8.5% to 10-12%
- Anticipating INR 2,500 crores revenue on INR 850 crores capital employed
- Expecting EBITDA of INR 250-300 crores in 2-3 years
“We are confident of achieving 25% ROCE in next 2 years as we increase our sales volume at 25% CAGR with margin improvement,” asserted Sameer Gupta, highlighting management’s optimistic outlook despite near-term industry challenges.
Bottom Line: For investors watching Apollo Pipes, these seven strategic initiatives clearly demonstrate why the company remains bullish on its future prospects despite navigating through one of the toughest years for the PVC pipe industry. With multiple growth drivers, geographical expansion, and product diversification, Apollo Pipes appears positioned to potentially outperform the broader industry in the coming years.
Disclaimer: I am not a SEBI-registered investment advisor. The information provided in this blog is for educational and informational purposes only and should not be considered as financial advice. Please consult a qualified professional before making any investment decisions.