Apollo Pipes Ventures into Strategic Investment, acquiring Majority Controlling Stake in Kisan Mouldings

Apollo Pipes Limited (Apollo) has entered into definitive agreements and acquired a majority controlling stake in Kisan Mouldings Limited ("KML"). Apollo announces its strategic move to solidify its presence in the Pipes and Fitting Industry in India.

Under the transaction, Apollo has secured its position through preferential issue allotment of 6,40,00,000 equity shares, at an issue price of Rs. 18.50 per share, having face value of Rs. 10 each. This strategic investment marks a pivotal moment for both Apollo and KML, showcasing a convergence of industry giants poised to redefine standards and drive unparalleled growth. Total investment for this strategic acquisition is Rs. 118.40 Crores.

The acquisition aligns seamlessly with Apollo's overarching strategy to fortify its foothold as a premier manufacturer in the Plastic Pipe Industry within India. By integrating KML into its portfolio, Apollo aims to expand its legacy while unlocking synergistic benefits that promise greater market penetration and entry into new end-user segments. Additionally, the acquisition will facilitate Apollo's geographical expansion, particularly in the Western and Central regions, further leveraging the esteemed "KML" network for accelerated growth.

Main benefits from this acquisition are:

- Apollo's strategic intent to unlock greater value in PVC pipes, Fittings, UV Resistant multi-layer water tank and allied products leveraging the experience and network of KML.

- Creating distribution channels across major markets in India - Network and platform for market penetration.

- KML enjoys a high brand equity with key stakeholders like farmers, architects, builders, interior designers and homeowners.

- Focus on faster expansion and to carve out a solid brand identity

KML brings an extensive range of high quality products, encompassing wide range of SKU's including Plastic Pipes and fittings for building and agricultural purposes and cost-effective PVC products, available in various designs, colors, and functionalities, to cater to diverse preferences and purposes. There is a wide dealer network with over 100 dealers and 10,000 retailers under KML.

Overall addressable market for Apollo

As per market estimates, the Indian Plastic Pipes Industry poised to reach a staggering market size of approximately INR 550 billion by FY 2026E with the organized market at ~65% and unorganized market at ~35%.

The pipe industry has grown at ~10% CAGR for the last 10 years and is expected to grow at 12-14% CAGR over the next few years. Robust demand is propelled from tier 1 and tier 2 cities alongside supportive governmental policies, with Apollo poised to harness this growth trajectory.

The domestic plastic pipes industry growth is pegged on the back of government's push on cleanliness and sanitation, building affordable houses, replacement and substitution demand. The demand is led by higher investments in Water supply & sanitation projects, substitution of metal pipes with polymer pipes and replacement demand.

Almost 50-55% of the industry demand comes from plumbing pipes which are used in residential/commercial real estate. Another 35% of the industry demand comes from agriculture which is dominated by regional unorganised players. The rest 5-10% of the industry demand comes from Infra/industrial projects.

Commenting on the Company's acquisition of KML, Mr. Sameer Gupta, Chairman & Managing Director, Apollo Pipes said, "We are excited to announce that we have acquired majority stake in KML to bring a strong West Indian brand under Apollo Umbrella. The transaction is a strategic and financial fit that will bring significant synergies and market opportunities. We continue to make strong inroads across cPVC, HDPE pipe and value-added product segment. KML brings lengthy experience of almost 35 years in the PVC industry and an extensive range of SKU's including Plastic Pipes & fittings for building and agricultural purposes and cost-effective PVC products, available in various designs, colors, and functionalities, to cater to diverse preferences and purposes.

We take note of the fact that KML generated revenue of Rs. 291 crores on TTM basis despite issues such as: 1) working capital finance, 2) lack of funds to modernize its plants and, 3) high operating costs and raw material procurement inefficiencies. We believe the existing management has done a commendable job to achieve these financials with such headwinds. The business can be scaled up to new heights quickly with Apollo's strength in financial management, raw material procurement and implementation of various systems and processes."

Shares of Apollo Pipes Limited was last trading in BSE at Rs. 643.50 as compared to the previous close of Rs. 650.50. The total number of shares traded during the day was 1203 in over 128 trades.

The stock hit an intraday high of Rs. 651.40 and intraday low of 641.80. The net turnover during the day was Rs. 777532.00.

Shares of KISAN MOULDINGS LTD. was last trading in BSE at Rs. 58.20 as compared to the previous close of Rs. 57.06. The total number of shares traded during the day was 24617 in over 49 trades.

The stock hit an intraday high of Rs. 58.20 and intraday low of 58.20. The net turnover during the day was Rs. 1432709.00.

Source : Equity Bulls

Keywords

ApolloPipes INE126J01016 StrategicInvestment ControllingStake KISANMOULDINGS INE017C01012