APL Apollo Tubes Ltd

NSE:APLAPOLLO

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the APL Apollo Tubes Limited Q4 FY '22 Results Conference Call hosted by Ambit Capital Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Dhruv Jain from Ambit Capital Private Limited. Thank you, and over to you, sir.

[Dhruv Jain, analyst]

Thank you. Hello, everyone. Welcome to APL Apollo's 4Q FY '22 Earnings Call. From the management side today, we have with us Mr. Sanjay Gupta, Chairman and Managing Director; Mr. Deepak Goyal, Chief Financial Officer; Mr. Arun Agarwal, Chief Operating Officer; and Mr. Anubhav Gupta, the Chief Strategy Officer. Thank you, and over to you, sir, for your opening remarks.

[Anubhav Gupta, executive]

Thank you. So much for hosting us. Good afternoon, everyone. This is Anubhav Gupta. Thanks for dropping by. And I welcome everyone on behalf of APL Apollo management to our FY '22 earnings call. FY '22 has been a very eventful year. When we started the financial year, there was a second wave of corona, which hit the nation badly. And by the time we closed the year, there was a Russia-Ukraine war, which also kind of impacted the year in a big way.

But I'm very glad to share that we have ended FY '22 on a very high note, and we were able to make a perfect pyramid with the sales volume growth of 7%, EBITDA rising by 39% and PAT rising by 55%. The volumes were soft in the first 9 months, but we picked up very strongly in the Q4 with 27% Y-o-Y growth and closed FY '22 with the highest ever volume of 1.75 million tons. Our EBITDA per ton improved to INR 5,400 from INR 4,200 per ton. This was driven by value addition, brand premium and market pull, which we saw in the first half of FY '22.

And now we are confident that our margins going forward should be in the range of INR 4,500 to INR 5,500 per ton. Our value-added sales mix improved to 63% from 57%. We saw very good growth in our coated tubes and heavy structural tubes. This has been our thesis for the last 3, 4 years, where we have invested a lot of energy, time and money on value addition. And now we are seeing the benefits with the margin -- in form of margin improvement and improving sales mix.

And going forward, our focus to invest more into value-added products remain on a high note, and we'll talk about it as we talk about our outlook over the next 2, 3 years. The balance sheet got further firmed with cash flow generation of INR 6.5 billion. So our operating capital to EBITDA was 70%. This is quite good. When we see that the steel prices increased by 45%, so our company absorbed this increase in steel prices easily without stretching our balance sheet and cash flows. And this operating cash flow of INR 6.5 billion helped us to fund the CapEx in Raipur and some brownfield expansion, which made our full year CapEx of INR 6 billion. And there was also investment of INR 750 million in one of our distributors.

The net working capital days remains 7, which is, again, best in the industry, and we could sustain the working capital days at single digit. So our inventory management, our data collection, everything remains good and on track. The way we are guiding that our overall working capital cycle will remain in single digits.

Our ROCE improved to 34% from 26%. This shows the inherited strength of our business, the investments, the asset turnover, rising margins and low working capital that has resulted in high ROC of 34%, and now our endeavor is to sustain this ROC and improve it further once the Raipur plant gets in and start contributing in a big way.

At the same time, our ROE also touched 29%. So as we spread more assets, our ROE will also go beyond 30% going forward. So these were the main highlights for FY '22. Apart from that, there are some updates, which we'd like to talk. One is the Shankara investment, which we built into one of our largest distributors in month of March. So the rationale here was very simple, that we wanted to make our largest distributor to sell more of our products because we see there is a lot of scope to increase APL sales volume onto Shankara network and channel.

And this will lead to security in sales volume going forward for APL Apollo. And given that South is our largest market, it made a lot of sense for us. Then we could provide a ready platform to launch our upcoming value-added products which are mainly from Raipur. So that also jointly Shankara and APL Apollo will create the market for those new products and push through Shankara's existing network.

Third, the benefit is that we are getting is the better pricing policy in South Market over other market because our volumes are already secured by the largest distributor. So it is helping us to improve the pricing into that market. So we will see the overall positive impact on our earnings as well on our EBITDA margins.

As we are talking on Shankara, 2 things I'd like to make very clear is that we don't want to invest any more money in Shankara, right? So this is all what we wanted to do below 10%. And with that, we are achieving all the objectives which we had in our mind before getting into this deal. And secondly, there is no plan of APL Apollo to run Shankara or run any retail business kind of setup.

Our core business is manufacturing and distribution, this is what we are sticking to. And we expect this investments of INR 1.8 billion, out of which INR 750 million worth of shares have been bought from the promoters and rest of INR 1.1 billion will be infused in Shankara over the next 18 months through warrant conversion. So we expect this investment to be ROC accretive and EPS accretive from year 1 itself.

And we are already seeing results -- so what we can tell you is that results are already visible after the deal was closed. Now coming to the second update is our 11th plant, Raipur, which is in our 100% subsidiary of Apollo Building Products Limited. So that plant is also very important for the group because it's the largest facility with 1.5 million tons. In Q4, we have already started the production with small 400 tons of dispatch, but week on week that dispatch is rising, and we are very confident that 3Q onwards, we will see significant contribution from Raipur kicking in.

It's a mega plant with almost INR 8 billion to INR 9 billion of investment. We have spent 60% of it and 40% will be done, which is equivalent to INR 3 billion, that will be spent during this financial year.

The third update is on Tricoat merger. So all the necessary processes have been completed there. We expect the NCLT and the final court to formalize the decision within this month. So hopefully, when we meet next time over the investor call, we would come with a single entity, merged entity.

Fourth update is on Aalishaan app. And I'd like to share that we -- as our endeavor to reach near to the end consumer, we launched Aalishaan app in month of February. And the idea is that we promote the end application of steel tubes closer to the end customer. And so far, we have got 45,000 downloads from end consumers, and we have enrolled 25,000 fabricators from 110 cities.

So the idea is to create a network of fabricators who are actual influencers in our products so that ultimately they become the promoters of APL Apollo brand in front of the customers. This will help us improve our brand equity and also help us get more premium as we move forward.

Fifth is the update on Delhi hospital projects, which were started last year. So you could see some of the photographs in the presentation that we work at all the 6 sites which the contractor has got positioned. It's on track. And within 3 to 4 months, these kind of super structures of up to 0.5 million square foot of area has been erected. This is one of the fastest delivering projects in the country today.

And we have a very strong pipeline, which is building in, around 30, 40 projects. There are a lot of inquiries, we are doing a lot of design changes for -- in various projects. So we -- our thesis to build market for heavy structural tube is also going well. And once these projects are fully completed, this will further -- this will help us create more market for our heavy structural teams.

Apart from this, lastly, I'd like to touch base on our business strategy, which is revolving around 4 points. One is the continuous CapEx for value addition. Number two is the distribution announcement through investment into Shankara for the Southern market, and starting off the secondary sales for some of the Northern states where we started as pilot projects. Third is innovation where we continue to invest our resources into new innovative products into structural steel tubes, which are launched in India, not -- we are not -- for the first time being launched in India, but also globally. And fourth continuous efforts on the market creation because that's how we have grown at the CAGR of 19%, 20% over the last 10 years.

And given that we have a target of reaching 4 million tons of sales volume by FY '25, so we believe that these strategies will help us smoothen our journey, and we will be able to outperform expectations as we could do in FY '22. That's it from our side. Dhruv, we can start the Q&A. Thank you so much.

[Operator]

[Operator Instructions] We have the first question from the line of Sujit Jain from ASK Investment Managers.

[Sujit Jain, analyst]

Our compliments on a good set of numbers. I'm on Slide 36. If you can elaborate a little more on the 2 new plants in Kolkata and Dubai and as well as galvanized line to improve efficiency where you mentioned it may reduce zinc consumption by [INR 4 per steel to ton]. What kind of margin improvement that can bring in? And also some bit on the Hyderabad/Hosur backward integration value addition that you plan to do.

[Sanjay Gupta, executive]

Yes, Sujit, thank you very much. Sujit, if you see our numbers, I think they have described [indiscernible] plant by plant. Our 2 to 3 plants are in the low margin category, like one of the plant is Hyderabad and Hosur and a little bit Secunderabad plant, their margins are lower and my other plants margins are high. [Foreign Language] announcement, so a little bit investment for the value-added products backward integration. [Foreign Language].

[Operator]

The next question is from the line of Rahul Agarwal from InCred Capital.

[Rahul Agarwal, analyst]

Congratulations on the performance. Good to see increase in [indiscernible]. Sir, 2 questions from my side. Firstly, on the go-to-market for APL Raipur. Some volumes have gone through in fourth quarter, first half [Technical Difficulty].

[Operator]

We have the question from Mr. Bharat Shah from ASK Investment Managers right now.

[Bharat Shah, analyst]

Congratulations, once again, pretty remarkable performance of the business. On the Hosur, which is the specialty plant [indiscernible] category. I want to understand from you your sense of likely outcomes from that plant over a period of time. In terms of product portfolio, in terms of likely specialty areas, which are distinguishing. And in turn, the impact on the realization vis-à-vis the margins over a period of time.

[Anubhav Gupta, executive]

So if you see the Raipur plant, it has 3 main product categories, okay? One is the color-coated products. Second is the color-coated tubes and third is the heavy structural tubes, up to size of 500 and 500 square diameter. So coming to the product category one, which is color-coated products, that is an established market where a lot of companies are selling this product, but they make margins of up to 15% to 20%.

APL Apollo is already supplying tubes for adjacent products. So color-coated products become our adjacent products, which we can sell in the same channel, under the same brand and the end fabricator, the end user will be able to buy our products jointly. So we [indiscernible] into a solution category with color-coated products and tubes put together.

And for that, we did not spend much into distribution infrastructure because all the existing distributors of Apollo deal into this product. And given that the industry is working on high 15%, 20% EBITDA margin, so even for us also it is very much possible, given the Apollo branding that we will be able to achieve these kind of margins.

Number 2 and 3 products are highly innovative products like color-coated tubes. We have shown a photograph in our presentation also. And you can see that this square tube for the chemical tube. These products have not been introduced globally. Globally, there are color-coated tubes, but those are mainly circular, okay? And the application has been mainly like chemical transportation or gas transportation.

But we converted that into the square [indiscernible] tube which is having a load-bearing capability. And again, it is going to replace the conventional products like wood and aluminum, okay, in a big way. And it can be used inside the homes for various decor applications. And at the same time, it can be used in industrial sheds under pre-engineered buildings where the fabricators or contractors, they don't have the beautified products.

Right now, they're may be using either plain steel or maybe galvanized steel, right? So a lot of thought process, innovation have gone into this category to make this product possible. And now the efforts have already begun from our team to create the market, both at the trade level and at the OEM level. And again, these products can carry very high margin because of 2 reasons.

One, it is a highly specialized value-added product. So by default, they carry better margin. And second, because these kind of products are not available anywhere globally. We are able to make them -- create the market successfully. We can charge a very high premium for that.

Third product is heavy structural tube with size of 500 square diameter. So this is extension of our existing portfolio into heavy structural tube category, almost 4 -- almost 4 years ago, -- 5 years ago, we were the first one in India to put up 300x300 square diameter tube. At that point of time, the market was nonexistent. It took us 2 to 3 years to educate the construction industry that these kind of sections are available.

And now our mills are running at high capacity utilization. After we got the Delhi hospital projects, there has been a good demonstration that with help of structural steel tubes, one can finish the building quickly and at lower cost. So we are getting a lot of inquiries for high-rise buildings up to 15, 20, 30 floors. And even for larger span industrial sheds, warehouses. So for those products, we have to get into heavy structural tube with size up to 500 square diameter. You can look at the margin, what we are making in 300 square diameter, which is given in our presentation in the range of INR 7,000 per ton. And this 500 square diameter globally only 3, 4 companies produce that.

Okay. So with the introduction of these tubes, our margins should be more than what we are making on existing portfolio. So put together, all these 3 products have the potential of earning much, much more than what is being made today by Apollo, right? The whole objective is to create market and ramp up the production.

Our team is working 24/7 to do both jobs. And in terms of the overall return profile, if you see, I mean, we have been able to improve our ROC from 26% to 34%. And in that, almost INR 500 to INR 600 crores of INR 5 billion to INR 6 billion of CapEx has been done into Raipur, which is not yielding -- which has not yielded even $1 in FY '22. So as the plant ramps up, we are very hopeful that -- and confident that our return profile would improve significantly from what we could do in FY '22.

[Bharat Shah, analyst]

Can you talk about color-coated products in greater detail, the kind of products and what kind of possibilities exist?

[Anubhav Gupta, executive]

So color coated products, there are 3 main categories, okay? So one is color coated tubes. Second is color-coated door frames, okay? Because for that, you need some adjustment in the width of the sheet, what we have been able to achieve unlike anyone else. And third is for roofing. Roofing can be used at both locations at homes and industrials, right? So the idea is that right now, the market for overall color-coated products is very small because normally, we are being only used in roofing.

So we are -- we have innovative sizes and products which will expand the market beyond roofing. Roofing is existing market, but we want to -- we have made products for markets like door frames, for roofing in industrial sheds, which is called [indiscernible] for shutters, for ductings, we can send you some of our presentations Bharat, or you could go on our website also. You will see that how these products will be able to create markets into different categories, not only in one but in at least 20.

[Sanjay Gupta, executive]

Bharat, are you able to hear me?

[Operator]

Excuse me, this is the operator. We are moving on to the next question from the line of Mr. Rahul Agarwal from InCred Capital.

[Rahul Agarwal, analyst]

Congratulations on the performance and [indiscernible].

Sir, first question was on the market condition. Anubhav mentioned it in the previous answer, but I just wanted to understand more color if you could help me understand the go-to-market for the APL Raipur products. You explained the products, but what is really happening to get this 5 lakh ton volume go through this year? Could you help me understand that, please? That's the first question.

[Anubhav Gupta, executive]

So Rahul, again for the benefit of everyone. So this year, our target from Raipur is up to 300,000 ton to 400,000 ton of production and sales, right? And this will be mainly into the color-coated tubes. This segment has around capacity of 500,000 tons, okay? And this is what we have started in month of March, and we could see some dispatch also.

So color coated tubes will be used at 3 main areas, okay? And this will be bulk of it. Apart from that, we will be working on a lot of other applications in other markets. So number one is the purlins, which are used in the pre-engineered building structures.

Okay, today, if you see any warehouse or any industrial sheds, which has come up in the country, they use noncolored-coated products. They use either galvanized or non-galvanized products. Okay? So this product lacks the beauty of the shed from inside, okay?

Our products, our color-coated tubes can be used in place of purlins and they can replace the existing products, and how it will help the customer is by increasing the life. Because our color-coated tubes, first, they are galvanized, then they have aluminum coating and then they have the color coating. So the life of the product will increase by at least 15 years, right? And at a cost of what, maybe 10% or maybe 15%.

So this becomes a very strong value proposition for any fabricator, for any end consumer to switch to color-coated products, okay, instead of simple, galvanized products or plain products. Second, volume uptick will come from the heavy structural tubes. As you can see, the ramp up, the sales growth in our heavy structural tubes in last 4, 5 quarters, okay?

It is a function of our aggressive marketing -- aggressive market creation strategy to increase the volume in this category. We are today sitting on a very solid pipeline of projects where this heavy structural tube section need to be used, right? So we are waiting for this line to start in July, August.

And once it is there, I mean, we have ready demand from our distributors and from the construction company who will be happy to use these products on an immediate basis. And the third category is like what I said was color-coated products in the roofing segment where the market is already there, it is dominated by a few players in the country. With the launch of product from Apollo House, we can get some market immediately because the same channel, the same distribution channel will sell these products. right?

So selling 300,000, 400,000 tons shouldn't be much of a challenge if things remain as it is, right, from Raipur? And when the plant will be like fully functional from Q3, Q4 onwards, next year FY '24, the volume will ramp up to 700,000 tons to 1 million tons and then 1.5 million ton in March 25. So we don't see much, much of a challenge to achieve these numbers from Raipur project.

Because the work on marketing and the creation of the market has already begun, and we are already seeing results which are visible, Rahul. I mean, I'm sure when we meet again on -- during Q1 earnings call, we'll be able to share much more information with you, but the signs or trends are already visible.

[Rahul Agarwal, analyst]

Thanks for the detailed answer. Just one question with Sanjay ji. Sanjay ji, this Shankara transaction, just wanted to get your thoughts that could have we signed the same agreement with Shankara without getting into equity stake kind of deal with the company. Because I think it's been a long-standing relationship with Shankara. And how will things really changed after this transaction, only because we've invested money into the company. Any thoughts, sir?

[Sanjay Gupta, executive]

Shankara has a very good system and the distribution center for the South market. They have, I think, already 100-plus stores in the retail sector. And my South market is almost in my business plan this year for Apollo business plan is like almost 20 lakh tons. Out of 20 lakh tons, my plan for South is 7 lakh ton. [Foreign Language] last year, 5.8-odd or 5.9-odd lakh ton [Foreign Language] 1 lakh ton. This year, we are targeting Shankara to all products, tube is almost 2 lakh tons and 50,000 tons from new products. We are targeting 2.5 lakh tons from Shankara. Our visibility on [ Foreign Language]. So a lot of price congestion is there between the distributor to distributor.

[Foreign Language] Now, we are in the controlling stage, and we are controlling the market as well as the distributor [Foreign Language]. Our price increased by 1 INR kg extra in the South. [Foreign Language]. So I think this is good for the company.

[Operator]

[Operator Instructions] The next question is from the line of Pallav Agarwal from Antique Stock Broking.

[Pallav Agarwal, analyst]

So first question was on the, I think, our volume guidance. So I guess you mentioned something like INR 2 lakh or 2 million tons for FY '23. So is that something we will be again looking to maintain our 20% growth in volumes, which is a longer-term target for FY '23?

[Sanjay Gupta, executive]

Pallav, First of all, thank you for a very good question. Right now, on the volume side, [Foreign Language]. Steel prices come down to 60,000, 65,000. A lot of reports and a lot of [indiscernible] the market is also down. [Foreign Language] 10 lakh to 11 lakh tons, second half 12 lakh to 13 lakh ton of volume. So put together, we are taking a rate of 2.4 million tons for this year. [Foreign Language] We line up with our quantity also with the steel plants as per the 2.4 million tons.

In the month of April and May, there is no doubt too much pressure is there because our market is totally in the destocking mode. [Foreign Language] Right now, we are in not good position, but signals are very, very good for the long-term vision. [Foreign Language] So this is very good for the business. [Foreign Language] We are very, very nearby. [Foreign Language] We are very hopeful that future is very, very bright. [Foreign Language] 20% EBITDA growth, INR 1,200 crores. But internally, we are thinking a target of [Foreign Language] with a margin of INR 500 crores to INR 600 crores of EBITDA. [Foreign Language] INR 700 crores to INR 800 crores. If the time is good, maybe we cross INR 1400 crores. If the time is not so good, maybe this is close to INR 1200 crores.

[Pallav Agarwal, analyst]

Sure, sir. I think that is a very comprehensive answer. Just also so you mentioned that with prices coming down, you are more [indiscernible] down with the secondary scrap-based players. So at what steel price level or HRC, is it like right now, let's say, we had 72,000 do think that, say, 65,000 to 70,000 levels then the prices.

[Sanjay Gupta, executive]

Right now, the HR coil pricing is -- blended pricing is close to INR 75,000 in the month of April. April month raw material pricing is almost close to INR 75,000 with INR 1,000 plus/minus depending on our customer. This month I think the indication of the decrease of INR 3 to INR 4 per kg, price go to [INR 70 or INR 71 per kg]. Next month, I'm also seeing a decrease of INR 4, INR 5 per kg.

So I think the price would be -- today, in the international market is close to $800 FOB. So the prices close out to less than [Foreign Language] prices have come [Foreign Language] This is a very good future for the steel plants also with the consumers also. [Foreign Language] But I think it is better if price stabilizes between the range of INR 60 or INR 65, this is a very big portion for both the sides.

[Operator]

The next question is from the line of Abhijit Mitra from ICICI Securities.

[Abhijit Mitra, analyst]

Congrats on a good set of numbers. The question is on the CapEx. So clearly, you have upfronted the Raipur CapEx most contributed to almost completely 50% plus of the same. And that's probably taking to better-than-expected time line as well as volumes from the project also are concerned.

Now given the incremental INR 300 crores that has been announced to that incremental CapEx goes into in terms of adding your capacity and adding your ROC or maintaining your ROC and how to look at it essentially. Does that sort of support your EBITDA per tonne? Does that increase your EBITDA per tonne? Does that help maintain the ROC? Where in the overall equation does this kind of CapEx fits in? And will you see more scope for such CapEx going forward?

[Sanjay Gupta, executive]

Other than the Raipur CapEx, almost about INR 300 crores of CapEx. This is I think a point we increase our capacity by 0.5 million tonnes with the capacity almost 3 lakh tonnes to Dubai and 2 lakh tonnes to Kolkata. Other than this CapEx is valuable for the value additions, like if there is some value addition activity going on Hosur, so some value addition activity is going in Hyderabad plant. Some activity is going in our Dujana plant. So this a little bit activity in Sikandrabad and Murban also.

So all taken this CapEx plant INR 150 crores and cost improvement also. These might go in the -- 1 of my major investment is the concerning of cost. If you see my [indiscernible] clearly mentioned innovative galvanized lines to improve efficiency by INR 100 crores to help reduce zinc consumption by 4 kg steel per tonne. Whatever we are putting the products [Foreign Language] Because this plant and this technology is very old, almost 13, 14 years before I innovate this technology is a very less cost. [Foreign Language].

[Abhijit Mitra, analyst]

That's very comprehensive. That answers my question.

[Operator]

The next question is from the line of Shaleen Kumar from UBS.

[Shaleen Kumar, analyst]

And congratulations on a very good set of numbers, sir. [Foreign Language] Energy prices have also rallied. [Foreign Language]

[Sanjay Gupta, executive]

[Foreign Language]

[Shaleen Kumar, analyst]

[Foreign Language]

[Sanjay Gupta, executive]

[Foreign Language] Today, Indian market is almost 110 million tonnes. Out of 110 million tonnes, 7 million tonnes is almost structural tubes. [Foreign Language]

[Shaleen Kumar, analyst]

[Foreign Language]

[Sanjay Gupta, executive]

[Foreign Language]

[Operator]

The next question is from the line of Ankush Agarwal from Search Capital.

[Unknown Analyst]

[Foreign Language]

[Sanjay Gupta, executive]

[Foreign Language]

[Unknown Analyst]

[Foreign Language]

[Sanjay Gupta, executive]

[Foreign Language]

[Anubhav Gupta, executive]

In FY '17, we used to have 44 days of inventory. So we have all that. We have already rationalized and worked hard to bring this down to 23, 24 day level.

[Unknown Analyst]

[Foreign Language]

[Sanjay Gupta, executive]

[Foreign Language]

[Unknown Analyst]

[Foreign Language]

[Anubhav Gupta, executive]

Sorry, come again?

[Unknown Analyst]

We have mentioned something about secondary sales on the presentation in 8 states that you have started on pilot basis. Can you clarify something on that?

[Anubhav Gupta, executive]

Right. So this is in the distribution strategy because this is right now one of the core pillars over the next 3, 4 years. So one is that we are straightening our South market by joining hands and with Shankara. Second is what we have observed in other B2C franchisee business models is that there has been a lot of focus on the secondary sales, right, reaching to the retailer of our distributors, the retail counter, which are distributors in Southern states.

So we are -- so we have created a team who is going and promoting Apollo brand at the retailer counter level. So from primary, we are -- we have created this pilot project to work on the secondary model also. So right now, we have launched it in 7 states. Once we see the benefits, then this can be replicated on pan-India business.

[Unknown Analyst]

So Apollo will sell directly to the retailers and not super distributors on this channel.

[Anubhav Gupta, executive]

No, no. Apollo will promote its product. The sales will happen through the distributor.

[Unknown Analyst]

Okay. Okay. It's just for the marketing effort.

[Anubhav Gupta, executive]

Yes, right.

[Unknown Analyst]

Okay. Lastly, sir, just a small one. We have talked a lot about market formation. So anything specifically if the HRC prices remain quite high. Will that upset market creation for our new products from the Raipur plant?

[Anubhav Gupta, executive]

See, I mean, today, when steel prices are at all-time high -- I mean Raipur, there are 2 products. One is heavy structural; second is color coated, right? So let's talk about heavy structural first. So at steel price peaking out at INR 75 per kilo, the cost differential versus RCC is INR 250 per square foot, okay, at the construction level.

So this is like 3% to 4% of the overall project cost. And then the TMT prices which is called rebar, the cement prices have also risen, right? So the delta used to be INR 250 and it is still like INR 250 per square foot because all building material products are going up, okay? So in fact, if prices come down, that delta will come down in favor of tubular consumption.

Second, on steel, for color-coated steel, there is no other alternative, right? So for roofing, for cladding, for walls, for doorframe, you have to buy steel only. right? So that has no substitute. Steel is the only product in the color coated category, which is used. So for that, the contractors have to use that. All they can do is they can delay their purchases by a few weeks in anticipation if prices are coming down.

But if prices don't come down, if they have to finish their project, they have to buy steel.

[Unknown Analyst]

Just a small clarity in terms of color-coated products. So are we price competitive when it comes to someone buying non-color [indiscernible] coloring it and then fitting it versus supplying a color coated product directly since you are doing it in bulk. Is that competitive?

[Sanjay Gupta, executive]

[Foreign Language] Nobody is able to take the [indiscernible] of color. [Foreign Language]

[Operator]

The next question is from the line of Anupam Gupta from IIFL Capital.

[Anupam Gupta, analyst]

Just 2 questions. Firstly, the Dubai CapEx of 2 lakh tonnes. What is the rationale behind it? And is the exports getting into as a target as well apart from the India operations, which you do.

[Sanjay Gupta, executive]

[Foreign Language]

[Anupam Gupta, analyst]

[Foreign Language] Dubai potentially, if you find it well [Foreign Language] what will be your aspiration?

[Sanjay Gupta, executive]

[Foreign Language]

[Anupam Gupta, analyst]

But if the response is you are ready to expand that further also.

[Sanjay Gupta, executive]

[Foreign Language]

[Anubhav Gupta, executive]

And sir, second question is on the new product innovation and the market creation which you do. So you allocate that you have a lot of patents that you have at this point of time, and this patents have been increasing all through the year. So if you were to -- can you give me a share of the volume which has come from the patents, let's say, in FY '22 versus FY '21 versus FY '20 volume?

[Sanjay Gupta, executive]

[Foreign Language]

[Operator]

The next question is from the line of Bhavin [indiscernible] from Trust Family Office.

[Unknown Analyst]

Congratulations on excellent set of numbers. I have just 1 question regarding general products. As you can see that EBITDA per tonne from this product is below INR 2,000, but the contribution still stands stronger in the overall scheme of things.

So I was just wondering, as we plan to gradually transition towards value-added products, how do you plan to deal with this segment in particular?

[Anubhav Gupta, executive]

So if you see this general category, it used to contribute 60% in FY '18 fiscal, which is down to 37% by fiscal '22. okay? So we have already decommoditized our portfolio in a big way. And going forward, with our Raipur plant starting contributing first. Second, the value addition, what we're going to do in Hyderabad and Hosur plant, right? And the other small value addition, which we will do in other facilities, then our heavy structural tube moving to Dubai, and that again is a high-margin product.

So overall, this mix will go down to 20%, 25% in next 2, 3 years from 33% today. Okay. So our strategy is to keep on decommoditizing our portfolio year-on-year, as you are seeing. And this volume will remain constant at around 1 million tonnes when we will be producing 4 million to 4.5 million, 5 million tonnes of sales volume, the general categories volume will restrict to 1 million tonnes, right? So that will remain because it's a very -- we have ready facilities, ready distribution, our SKU range gets completed. So once this -- as a mix, it goes below 20%, then it won't impact our EBITDA per tonne on a quarterly or yearly basis.

[Unknown Analyst]

Okay. So is this transpires, assuming around 25% contribution from commoditized products. So how much EBITDA per tonne are we looking in the long run?

[Anubhav Gupta, executive]

So see, I mean, today, if you see this year, we closed at INR 5,200, INR 5,300 per tonne, right? So from the existing capacity, our focus is to sustain this number around INR 5,000 per tonne. And we -- and the incremental revenue, which will come from Raipur that will bring EBITDA of like INR 6,000 to INR 7,000 per tonne. So blended basis, we should be inching towards INR 5,500, INR 6,000 per tonne slowly and gradually.

[Operator]

The next question is from the line of Rajiv Mehra from Sanctum.

[Unknown Analyst]

Yes. Congratulations on a great set of numbers. Most of my questions have been answered. Just wanted to clarify a couple of things. You've said that FY '25, you're looking at touching volumes of around 4 million tonnes. And I think you've already given the breakup of markets. Just wanted to say the structural tube market currently stands at 7 million which should grow to 60 million in the next 3 years. Am I -- did I hear that correct, sir?

[Sanjay Gupta, executive]

Yes, maybe possibly India steel concerns can go to 110 million to 200 million tonnes.

[Unknown Analyst]

110 million to 200 million tonnes

[Sanjay Gupta, executive]

110 million to 200 million tonnes, that the industry and the governments are saying.

[Unknown Analyst]

Got it. Got it. And so as your -- these capacities are coming online and as your value product value-added products are increasing, currently from a 55% market share overall, what market share would you be inching towards would it be around close to 60% to 65%. And as your EBITDA per tonne moves up, which ideally you are trying to reach in the blended region of INR 5,500 to INR 6,000. If we compare it with your peer group, blended EBITDA margins, which right now stand at around 7%. But globally, a few peer group companies are in the higher range. Can we reach closer to, say, 9%, 9.5% EBITDA margin over the next couple of years, sir?

[Anubhav Gupta, executive]

So coming to point number one, okay, which is regarding the 55% market share. See, I mean, we don't look at market share based on like what we sold and what the market size. This is a function of 2 things. One is in the segment, which is highly competitive, what is our market share and in the category, which is monopolistic, which is bulk of our business right? Whenever we launch a new product, whenever we innovate, we start with -- we begin with 100% market share. Okay. And that market share remains with us for next 2, 3 years before competition start putting up or popping our capacity, right?

And then again, after 3 years, we have another product which will come, and we will have 100% market share to begin with. So our sales growth is not confined with our market share today, which is at 55%-- how we want to grow is that we create a totally new market, totally new segment. We create demand there, and we take 100% market share for at least 3 years. right?

It's my monopolistic innovative products, keep on going, my market share could be 60%, 70%, and I can still grow. If I'm able to increase the market with my innovative products. So given that in 3, 4, 5 years, the competition increases in any product category. So we can sustain between 50% to 60% easily and still achieve the high growth, which we are targeting.

And secondly, on margins, like we responded to the earlier caller that -- I mean we are at INR 5,500 per tonne range in terms of EBITDA with the commencement of Raipur plant, which is definitely a high-margin product, on overall basis, we would like to gradually increase to INR 6,000, INR 6,500 kind of levels in the next 2, 3 years and see how -- what the innovative products or what value addition we are able to do in the next 2, 3 years, where we can grow, where we can take our EBITDA to. So the immediate target is to reach to INR 6,000, INR 7,000 in the next 3, 4 years.

[Unknown Analyst]

Got It. Just one last question. Just wanted to -- I mean, you've already touched upon this point, but just wanted to reaffirm what you were saying that in case of the steel prices move up, say, by another 10%, 15%. How much sensitivity will be impacting your margins or the volume going ahead? And how would that play out even in the same case if it goes down by, say, 15%.

[Anubhav Gupta, executive]

See in last 2 years, steel prices have moved from INR 35 per kg to INR 75 per kg. In last 2 years, you can see our profitability in terms of EBITDA, net profit, debt reduction, cash flow generation, working capital reduction. So we have been able to -- and why only 2 years, right? You look at our 10-year history, steel prices have moved from like any level to any level, right?

Steel has been very, very volatile commodity. But if you look at our consistency in terms of volume growth, which has been 18%, 19% CAGR; you look at our EBITDA growth, which has been 25% CAGR, you look at our PAT growth, which has been 26%, 27% CAGR. If you look at our constant consistent ROC improvement, right? You look at our ROE improvement, you look at our cash flow generation, you look at our working capital enhancement. So I guess, I mean, as a group, we have demonstrated our capabilities to grow profitably in any cycle, whether up cycle or down cycle in steel, right? So I mean, we are not -- I mean there could be impact of few weeks or a few months. But on an annualized basis, on a consistent basis, you will see -- you will keep on seeing the consistency in our numbers.

[Operator]

Ladies and gentlemen, the management will be taking one last question. It is from the line of Mr. Bharat Shah from ASK Investment Managers. Can we proceed?

[Anubhav Gupta, executive]

Moderator, we can continue with the call after we Bharat questions, we can take more questions.

[Operator]

Sure, sir.

[Bharat Shah, analyst]

I was just trying to raise a question maybe the line got shifted. Apart the numbers and improving profitability, introducing specialty products. And the size of opportunity with the growing steel capacity inevitably poised it and improving percentage of structural steel tube as a percentage of steel.

If you Lay down your reason is to have you seen this unfolding scenario or APL Apollo? And what is it that you are most passionate about? What is it that excites you the most? When you look at next 5 years or 10 years in this journey, what are some of the things that really drives you as an entrepreneurial?

[Sanjay Gupta, executive]

Today's market survey is changing very fast. [Foreign Language]

[Bharat Shah, analyst]

[Foreign Language]

[Sanjay Gupta, executive]

[Foreign Language]

[Operator]

As there are no further questions. I would now like to hand the conference over to the management for closing comments.

[Anubhav Gupta, executive]

Thanks, AMBIT team for hosting us today for our earnings call. And I'd like to thank everyone who was present on this call on behalf of APL Apollo team for dropping by. And if there are any further questions, you could reach out to the Investor Relations team. Thank you so much.

[Operator]

On behalf of AMBIT Capital Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.