Speciality Oils & Elect. Equip. CMP Rs.

227
July 16, 2010
BSE Code BSE ID High/Low 1Y (Rs.) Avg. vol (3m) Market Cap (Rs Cr) Net IB Debt (Rs Cr) Enterprise value(Rs Cr) Shareholding % Promoters MFs/ Fis/ Banks FIIs Public & Others Stock Chart ( Relative to Sensex) Mar-10 62.15 13.64 1.86 22.35 532259 APARIND 284 / 113 13,388 735 (327) 408 Jun-10 62.15 14.84 2.66 20.35

Apar Industries Limited Company Overview

Apar Industries Limited is a leading manufacturer of speciality oils and conductors in India. Apar is the fifth largest manufacturer of transformer oils and conductors in the world and the largest domestic manufacturer of transformer oils with approx. 50 per cent market share. The company is the dominant supplier in the power transformer sector (132 KV to 800 KV). Apar is the second largest manufacturer of aluminium conductors in India with market share of 22 per cent. In Sep08, Apar entered into power and telecom cables business by acquiring 66 per cent equity stake in Uniflex Cables.

Key Business Highlights

Investments in Power Sector Opportunity for Apar The investment in power transmission sector in the 11th five year plan is estimated at Rs 1,400 billion providing an investment opportunity of Rs 315 billion in the conductor segment. Apar with a 25 per cent market share stands to gain from the investment opportunity in the conductor segment. Ongoing expansion in the power sector will drive the transformer oil growth by 15 per cent. Apar is well positioned to take advantage of the emerging opportunities with a 50 per cent market share in transformer oil segment. Cables business to break even in FY11 Uniflex expects sales of Rs 300 crores with exports of Rs 75 crores in FY11. To cater to the domestic demand, Uniflex Cables plans to increase its capacity at its Umergaon plant in Gujarat. Uniflex expects a cash break even level of profitability in FY11. Export market provides a huge opportunity IEA estimates USD 6.1 trillion of investments in T&D sectors during 20052030 (transmission USD1.8tn, distribution USD4.3tn). China and India are expected to account for 40 per cent of that. Apar contributes half of Indias total export of aluminium power conductors and enjoys approvals from overseas utilities in strategic markets like Iran, Iraq, Middle East and Africa. Rs 1083 crores order book in conductor business ensures revenue visibility As on 1st April, 2010, Apar Industries had an order book position of Rs. 1083 crores in confirmed orders and Rs 286 crores in the pipeline. Approximately 75 per cent of these orders (confirmed and pipeline) will be executed in FY11. Key Risks Aluminium and base oils are the two major raw materials of the company, any significant volatility in the price of crude oil and aluminium can affect the profitability of the company. Around 30 per cent of the business comes from the export markets; any significant change in currency valuation could affect the profitability. Delay in the orders / postponement of the order booked from the key clients like Power Grid will adversely affect the companys sales.

250 200 150 100 50 23-Jul-09 23-Jan-10 Apar 23-Jul-10 Sensex

Stock Perfm.(%) Absolute Rel. to Sensex Financials (Rs.Cr) Revenue y-o-y EBITDA y-o-y PAT EPS (Dil.) y-o-y EBITDA Margin PAT Margin D/E(x) P/E(x) EV/EBITDA(x) ROCE ROE

1M (0.4) (2.5) 03/08 1,771 17.2% 125 17.1% 89 27.5 85.4% 7.1% 5.0% 0.35 8.3x 3.3x 28.8% 31.2%

6M 21.8 14.2 03/09 2,643 49.2% 56 -54.9% (5) (1.7) PL 2.1% -0.2% 0.58 NA 7.2x 9.4% NA
12/09 488 22

1Yr 93.0 74.0 03/10 2,251 -14.8% 153 171.4% 24 7.6 LP 6.8% 1.1% 0.57 30.0x 2.7x 30.2% 1.3%
03/10 521 22 6.9

Financial Year ends at March 31 Qtry Fin 06/09 09/09

Revenue PAT 659 (19) 505 24

EPS (5.7) 7.6 6.9 All figures in Rs. crores except for per share data Qtry fig. shows standalone results

Valuations The stock is currently trading at a P/E multiple of 30.0x on its FY10 EPS of Rs. 7.6 and 2.7x EV/EBITDA multiple based on FY10 EBITDA of Rs. 153 crores.

Apar Industries Ltd

Business Description
Apar is the fifth largest manufacturer of transformer oils and conductors in the world

Incorporated in 1958, Apar Industries Limited is a leading manufacturer of speciality oils and conductors in India. The manufacturing facilities are located in Rabale, Silvassa and Nalagarh. Apar is the fifth largest manufacturer of transformer oils and conductors in the world. In the domestic market, Apar is the largest manufacturer with approximately 50 per cent market share and is the dominant supplier in the power transformer sector (132 KV to 800 KV). Apar is the second largest manufacturer of aluminium conductors in India with a market share of 22 per cent. In September 2008, Apar entered into the power and telecom cables business by acquiring 66 per cent equity stake in Uniflex Cables for a total consideration of Rs 84.5 crores. Apar derives about 75 per cent of its revenue from the power sector on the basis of end use. Apars subsidiaries include Petroleum Specialties Pvt. Limited, Quantum Apar Speciality Oil Pvt. Ltd, Uniflex Cables Limited and Marine Cables & Wires Private Limited.

Revenue Composition
Apar has two main business segments: Transformer and speciality oils segment and Conductor segment. Power and telecom cables business is operated through its subsidiary - Uniflex Cables. Break Up of Consolidated Gross Revenue in FY10
Transformer oil and speciality oils segment contributed 49 per cent revenue in FY10
Power & Telecom Cables 8%

Transformer Oil & Speciality Oils 49% Conductors 43%

Source: Annual Report

Apar derives 28 per cent of its total revenue from the export market. Apar contributes half of Indias total export of aluminium power conductors and a significant proportion of its domestic consumption.
Segment Product Conductors Transformers & Speciality Oils Power / Telecom Cables Total
Source: Annual Report

Domestic Market 75% 69% 78% 72%

Export Market 25% 31% 22% 28%

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Apar Industries Ltd

Transformer oil and specialty oils: Apar ventured into the specialty oils business in 1969 with technical know-how from Sun Oil Company (USA). This segment contributed 48.5 per cent of the companys revenue. The product portfolio includes transformer oils, white oils and others (industrial lubricants, rubber processing and ink oils) contributing 50 per cent, 12 per cent and 38 per cent, respectively to the divisions revenue.
Product

Apar has reputed clientele like ABB, Areva, BHEL and Siemens for its transformer oil product category

Transformer Oil

% sub-seg 50%

Application Power & distribution transformers, which account for 5 8% of the total transformer cost Widely used in Pharma products, cosmetics & food related applications Manufacture of rubber products( automobile tyres and tubes, bicycle tyres, tyre retreading material, belting, hoses and battery containers) Used in compressors, refrigerators and automobile engines

Purpose Cooling; Critical insulation medium, used as a diagnostic tool to maintain transformer performance Serves as base material

Prospects Ongoing expansion in the power sector will drive the transformer oil growth by 15%

Customers ABB, Areva, BHEL, Siemens, Crompton Greaves, EMCO etc Hindustan Unilever, Marico, Dabur etc CEAT, MRF, Apollo, JK Tyre

White Oil

12%

Rubber Process Oil

13%

Helps in blending rubber with other chemicals

Robust growth in healthcare products and cosmetic and polymer industries Growing demand from the tyres and automobile industries

Industrial and Automotive lubricants

25%

Provides lubrication between moving machine pats; provide cooling effect

Increasing number of OEM projects; rising demand from the automobile industry, increasing industrialisation

Escorts, Kinetic and Others

Source: Company & Annual Report

Aluminium Conductors Steel Reinforced (ACSR) contributes more than 60 per cent revenue to the aluminium conductors category

Aluminium Conductors: Apar manufactures a full range of AAC (All Alloy Conductors), ACSR (Aluminium Conductors Steel Reinforced) and AAAC (All Aluminium Alloy Conductors). Over the years, Apar has strengthened its product mix through a shift from AAC and ACSRs to alloy based conductors. Major contribution to Apars segment revenue comes from ACSR conductors which are more suited for river crossing, narrow valleys etc. Power Grid is the largest client of Apar for conductors. Apar enjoys approvals from all overseas utilities, in strategic markets like Iran, Iraq, the Middle East and Africa, and enjoys a preferred supplier status with them.
Product All Aluminium Conductors (AAC) All Aluminium Alloy Conductors (AAAC) All Aluminium Steel Reinforced (ACSR) % sub-seg Application Distribution of electricity Transmission and distribution of electricity Transmission and distribution of electricity Purpose Mounted on transmission towers and constitutes part of the transmission network that delivers bulk power from power stations to load centres and large industrial consumers Outlook Fresh investment in transmission and distribution space will drive the demand for conductors Customers Jyoti Structures, KEC Intl, Kalpataru Power, L&T, NTPC, Power Grid, SAE, ABB, Energo Invest, Ibedrolla, Spain, S.A., Tata Power and others.

35% - 40%

60% - 65%

Source: Company & Annual Report

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Apar Industries Ltd

Power/ Telecom Cables: During FY08, Apar acquired a 66 per cent equity stake in Uniflex Cables, which manufactures power and telecom cables for a total consideration of Rs 84.5 crores. It has reflected goodwill to the extent of Rs 60 crores on consolidated balance sheet on account of Uniflex acquisition as on FY09 and has charged impairment in FY 10. Uniflex reported a turnover of Rs 180.7 crores with a net loss of Rs 22.6 crores in FY10. The manufacturing facility is set up at Umbergaon, Gujarat and the products are marketed under the brand name of UNICAB. Around 22 per cent of Uniflexs total revenue comes from the export market. The company primarily exports to Africa and the Middle-East.

Growth Drivers
Investments in Power Sector Opportunity for the conductor and transformer oil business: The Aluminium conductors business has seen a significant growth in the recent past which has been driven mainly by the power sector reforms, aimed at expanding the generation capacity and strengthening the transmission & distribution network. This growth is likely to be sustained given the large investments proposed in the power sector. According to the Central Electricity Authority (CEA), as of February 28, 2010, Indias power generation systems had an installed capacity of around 157,229 MW. The current installed transmission capacity is only 13 per cent of the total installed generation capacity. The Ministry of Power plans to establish an integrated National Power Grid in the country by 2012 with close to 200,000 MW generation capacities and 38,650 MW of inter-regional power transfer capacity. Considering the current inter-regional power transfer capacity of 20,750 MW, the corresponding investments in the transmission sector are expected to be augmented. The overall investment in the power sector in the 11th five year plan (across all the segments) is estimated at Rs 8,370 billion, out of which Rs 1,400 billion is planned to be spent on transmission schemes providing an opportunity of Rs 315 billion in the conductor segment. Apar with a 22 per cent market share stands to gain from the investment opportunity in the conductor segment. Transformer Oil: The 11th five year plan will generate a demand for 1,12,323 MVA p.a. of transformers which will give rise to the demand for transformer oil. As per Apars annual report FY09, the requirement of transformer oil stands at 1,10,000 KL p.a. This represents 60- 65 per cent of the transformer oil market accrued from the OEM segment. Replacement demand is around 35 per cent of the total demand for the transformer oil market. Apar is well positioned to take advantage of the emerging opportunities with a 50 per cent market share in transformer oil segment.
Focusing on Extra High Voltage transformers with ratings of 400 KV to 800 KV

The current installed transmission capacity is only 13 per cent of the total installed generation capacity

Investment in the power sector in 11th five-year plan is estimated at Rs 8,370 billion, providing an opportunity of Rs 315 billion in the conductor segment.

Focus on the value added products: Apar is focusing on the development of high value products which is a high margin business. The Transformer oil segment has received significant orders for its high oxidation stability grade products meeting special application requirements of Extra High Voltage transformers, with ratings of 400 KV to 800 KV from several global transformer majors. This segment is expected to have a much higher demand in the years to come as the BRIC

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Apar Industries Ltd

countries, including India build high voltage transmission networks. Apar, is so far the only Indian company to have this approval from global transformer OEMs. Apar is focusing on developing high temperature conductors which can carry a higher amount of current. The capacity to carry more current is being increased by 25 per cent, 50 per cent and up to 100 per cent. At the moment, in India, there is no significant demand for the conductors. With the government's focus on high-voltage transmission grid, the demand for high voltage conductors is expected to witness a major push in the coming years. Order book of Rs 1083 crores in conductor business ensures revenue visibility: As on 1st April, 2010, Apar Industries had an order book position of Rs. 1083 crores in confirmed orders and Rs 286 crores in the sales pipeline. Approximately 75 per cent of these orders (confirmed and prospect pipeline) will be executed in FY11. Power Grid Corporation is the largest domestic customer with a Rs 500 crores order book (confirmed and orders in pipelines), while Adani Power is the other significant client, with an order book of approx. Rs 300 crores. 2HFY10 had lower order execution as there were delays/ re- schedulement of several orders that had been booked. However, the postponement of the execution of these orders will result in a substantially higher volume in FY11. Current Order Book Position of Rs 1083 Crores
1200 1000
Rs. in Crores

75 per cent of the order book will be executed in FY11

1093 910 775 569 635 378 975 834 769

1083

800 600 400 200 0

315 154 185

287

1QFY09

2QFY09

3QFY09

4QFY09

1QFY10

2QFY09

4QFY09

Confirmed Orders

Orders in Pipeline

Source: Company Financials

In 3QFY10, the order book position was Rs 1230 crores, which is not included in the graph as the pipeline information is not available.
Uniflex plans to launch products in the domestic market, which it currently exports

Cables business to break even in FY11: Uniflex expects sales of Rs 300 crores with exports of Rs 75 crores in FY11 and Rs 1,000 crores in the next five years. Over the next few months, Uniflex plans to launch a slew of products in the domestic market, which it currently exports. To cater to the domestic demand, Uniflex Cables plans to increase its capacity at its Umergaon plant in Gujarat. Uniflex expects a cash break even level of profitability in FY11. The total domestic cable market comprising both the organised and unorganised sectors is around Rs 20,000 crores, with the organised sector valued at around Rs 5,000 crores.

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Apar Industries Ltd

Apar contributes half of Indias aluminium power conductors

Export market provides a huge opportunity for the company: Apar derives 28 per cent of its total revenue from the export market. Apar contributes half of Indias total export of aluminium power conductors and enjoys approvals from overseas utilities in strategic markets like Iran, Iraq, the Middle East and Africa. The company also exports its specialty oil through joint ventures in Australia, South Africa and Turkey.

China and India will account for 40 per cent of an expected USD 6.1 trillion investment

The International Energy Agency (IEA) estimates USD 6.1 trillion of investments in T&D sectors during 2005-2030 (transmission USD1.8tn, distribution USD4.3tn). China and India are expected to account for 40 per cent of this outlay. USD 6.1 trillion of investments in T&D during 2005-2030
2,000 1,500
US$ Bn

1,000 500 0

North Europe America 711 314 507 159

Japan 82 47

Russia 88 25

China 1258 579

India 383 176

Middle East 158 73

Africa 193 89

Latin America 274 126

Distribution Transmission

Source: KEC International Corporate Presentation, IEA World Energy Outlook 2006

Considerable investments are being dedicated to widen the T&D network across Africa, the Middle East and the ASEAN, which augurs favourably for Apar, since it

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Apar Industries Ltd

already enjoys a presence in these global markets. This will enable the company to strengthen its focus outside India.

New Business Initiatives

Adoption of Ebeam technology will entail a Rs 20 crore capex

Evaluating electron beam technology for cable business: This is a new generation cable, which is being used in ships, in the design sector, in railroads and will slowly be used for house wires and LV cables etc. The significant property of Ebeam is its resistance to temperature and fires. The total number of tenders for conventional cables has been reducing y-o-y, while those for EBEAM cables are on the rise. The project will entail almost Rs 20 crores of capex. The technology can be used beyond cables and can be used for various other products by electron beam curing. Independent testing laboratory: Apar has a NABL certification for its oil laboratory which is on the same lines as CPRI or ERDA. It is the first in the private sector to acquire this certification for specialty oils. In addition, Apar is also DSIR (Department of Science and Industrial Research) accredited, which in turn affords the company benefits in terms of the custom duties. The company is involved in application work on transformer oils as well as industrial oils and is ken on third party testing.

Key Risks
Highly volatile raw material prices: Aluminium and base oils are the two major raw materials of the company. Prices of base oils are directly related to crude oil prices, any significant volatility in the price of crude oil and aluminium can affect the profitability of the company. Foreign exchange fluctuation: Around 30 per cent of the business comes from the export markets; any significant change in currency valuation could affect the profitability. Delay in the orders / postponement of the order booked from key clients like Power Grid will adversely affect the companys sales.

The commodity cycle is on an upward trend, this may put some pressure on margins

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Apar Industries Ltd

Profitability
Revenue declined in FY10 due to reduction in raw material prices, sale prices and lower volume off-take of conductors

Total Revenue declined by 14.8 per cent in FY10; Apars consolidated total revenue grew at a CAGR of 19.3 per cent from Rs. 1,112 crores in FY06 to Rs. 2 251 crores in FY10 driven by strong growth in the power sector. However, the total revenue declined in FY10 by 14.8 per cent mainly due to reduction in raw material prices of base oils and crude oil as well as reduction in the prices of aluminium resulting in the consequent reduction in sale prices. Part of the decline was also due to the lower sales volume of conductors in FY10. Apars Consolidated Revenue and Growth
5000
Revenue (Rs. in Crores)

49.2% 35.9% 17.2% 1511 1771 2643 2251

50% 40%
Growth (%)
Realisation (Rs '000 / MT)

4000 3000 2000 1000 0 -1000 -2000

30% 20% 10% 0% -14.8% -10% -20% FY07 FY08 Total Revenue FY09 Growth (%) FY10

Source: Company Financials & ICRA Online Research

Delays/ re-schedule of FY10 orders will result in higher growth in FY11

Conductor business contributed 43 per cent of the total revenue in FY11. Conductor business has grown at a CAGR of 22.4 per cent during FY06-FY10 on the back of power sector reforms in India. However, FY10 witnessed a downturn in conductor sales and volume by almost 31.5 per cent and 16.3 per cent, respectively, mainly due to lower order execution as there were delays/ re-scheduling of several booked orders. Some of this is attributable to delayed financial closure (from FY09 crisis post Sept. 2008) or project delays due to right-of-way-issues. However, the postponement of these orders execution will result in substantially higher volume in FY11. Conductor Business Performance
160 140
Volume ('000 MT)

140 124 112

140 115

160 140 120 100 80 60

120 100 80 60 40 20 0

90 42 FY06 49 57

75

40 20 0

FY07 FY08 Conductor Volume

FY09 Realisation

FY10

Source: Company Financials & ICRA Online Research

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Apar Industries Ltd

Transformer Oil & Specialty Oil business which forms almost half of the total revenue pie performed better than the conductor business. Apar has recorded revenue CAGR of 20 per cent during FY06-09. Transformer Oil in particular forms around 42 per cent of this segment and has posted gross sales at a CAGR of 15 per cent during FY06-FY10 with volume growth of 10 per cent (CAGR). Realisation in FY10 was on account of lower raw material prices of base oils and crude oil. Transformer Oil Performance
102
Realisation (Rs '000 / MT)
Margins

120
Volume ('000 MT)

104 76 82

111

120 100 80 60

100 80 60 40

60 43 34 39 40

40 20 0

20 0

FY06

FY07

FY08

FY09

FY10

Transformer Oil Volume LHS

Realisation RHS

Source: Company Financials & ICRA Online Research

Power and Cables business through Uniflex has posted revenue of Rs 180 crores in FY10 compared to Rs 128 crores in FY09. There have been significant signs of improvement in volumes and the company targets revenue of Rs 275300 crores and cash level profitability in FY11. Margins improved in FY10 on back of economic recovery Apar EBIDTA margins have been in the vicinity of 7 per cent during FY06 -10 except FY09 where the margins dropped due to the global crisis. Similarly EBIT margins are in the range of 6 6.5 per cent. In FY10, Conductors EBIT margins were at 6.1 per cent and Transformer Oil & Speciality Oils EBIT margins were at around 10 per cent. In the case of transformer oils, the sales mix improved, with high performance oils targeted at EHV customers of 220 KV to 765 KV power transformers both in domestic and overseas markets; this has led to better margins. Margin trends
200 150 100 2.1% 50 0 FY06 EBITDA FY07 EBIT FY08 FY09 FY10 EBIT Margin (%) EBITDA Margin (%) 80 71 107 97 125 111 56 1.6% 42 135 0% 153 2% 7.2% 7.1% 7.1% 6.8% 6.0% 8% 6% 4%

Consolidated margins deteriorated in FY10 due to higher other expenses

Source: Company Financials & ICRA Online Research

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Rs. in Crores

6.4%

6.4%

6.3%

Apar Industries Ltd

Input cost
Major raw material for Apar is Aluminium, Steel and Base Oil which together accounts for 98 per cent of the total raw materials consumed. Major supplier for Aluminium is NALCO and while base oils are imported from US and Korea.
Major Raw Material Aluminium Steel Base Oil
Source: Annual Report, ICRA Online Research

Product Conductors Conductors Transformer Oils

% of Raw Material 46% 5% 47%

Cost of goods sold amount to 77 per cent of the companys revenue

Imports account for 64 per cent of the total raw material consumed while the rest 36 per cent is procured indigenously. COGS accounts for the 77 per cent of the total revenue of the company.

Competitor Analysis
Apar is the second largest player in the conductor business after Sterlite Technologies and is the largest Transformer Oil manufacturer in the country. During FY10, Apar recorded a non-cash charge of Rs 55.5 crores for impairment in equity investment of Uniflex Cables. Excluding the expense, Apar has reported an EPS of Rs 26.64 translating into a P/E of 8.5x which is at discount to its competitors.
Particulars Apar Industries Conductor Business Sterlite Technologies Transformer Oil Business Mar-10 550 803 1,187 11.2% 59.1 9.3x 5.6x Savita Oil Technologies Source: Company Financials, BSE, Capitaline, ICRA Online Research Market cap and Revenue in Rs. Crores. Revenue and EBIT Margin for Sterlite Technologies s refers to the Power Transmission Segment only. Mar-10 114 4,055 1,524 12.5% 7.6 15.0x 10.4x Year End CMP M Cap Mar-10 227 735 Revenue EBIT Margin EPS (FY10) (FY10) (FY10) 2,251 6.0% 7.6 P/E 30.0x EV/EBITDA 2.7x

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Apar Industries Ltd

Industry Overview
Average per capita consumption of electricity in India is estimated at 704 kWh much lower than the world average of 2,300 kWh

Power Sector Indian power supply needs to grow at approximately more than 7 per cent annually to keep pace with gross domestic product which is targetted at 8 per cent per annum. (Source: Ministry of Power, April 2009). As of March, 2010, India faced an energy shortage of approximately 9.5 per cent of total energy requirements and 13.8 per cent of peak demand requirements. The average per capita consumption of electricity in India is estimated at 704 kWh during 2008-09. This is fairly low when compared to some of the developed and emerging nations such US (~15,000 kWh) and China (~1,800 kWh). Moreover, the world average stands at 2,300 kWh. The Central Government has identified the power sector as a key focus area to promote sustained industrial growth by embarking on an aggressive mission "Power for All" by 2012. According to the Integrated Energy Policy report issued by the Planning Commission, India would require additional capacity of approximately 73-86 GW by 2012, 159-190 GW by 2017 and 278341 GW by 2022, respectively, based on normative parameters in order to sustain a 8-9 per cent GDP growth rate (Source: IEP, Expert Committee on Power). Power generation capacity planned during the XIth Plan
Year 2008 2009 2010 2011 2012 XIIth Plan Hydro 2,372 1,097 845 1,346 9,967 15,627 Thermal 9,007 5,773 13,002 17,793 14,118 59,693 Nuclear 660 660 660 1,220 180 3,380 Total 12,039 7,530 14,507 20,359 24,265 78,700 % Achievement 77% 46% 66%

Source: Infaline Energy

According to the latest assessment of Central Electricity Authority, a capacity addition of 62,374 MW is likely to be achieved with a high level of certainty during 11th five year Plan period.
Capacity addition of 62,374 MW is likely to be achieved during the 11th five year plan period.

Out of nine sites identified by the CEA in consultation with the States for development of Ultra Mega Power Projects (UMPPs), comprising of 765kV & 400kV Lines and Substations, with a capacity of approximately 4,000 MW each, on a Build, Own, and Operate (BOO) basis, four projects have been awarded and few more projects are likely to be brought to the bidding stage. The strengthening of the National Power Grid through high capacity AC EHV lines and 765 kV UHV AC lines/ HVDC lines has been envisaged by the Government of India to facilitate transfer of power within and across the regions upto 38,650 MW by 2012.

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Apar Industries Ltd

Planned Inter Regional Capacity

Capacity in MW East-South East North East- West East North East North West West South North East North/ West Total (220kV & above) 132/110 kV links Total
Source: CEA

Xth Plan, Mar 2007 3,130 3,430 1,790 1,260 2,120 1,720 0 13,450 600 14,050

Existing, Mar 2009 3,630 6,330 2,990 1,260 3,220 1,720 0 19,150 600 19,750

XIth Plan, Mar 2012 3,630 12,130 6,490 2,860 4,220 2,720 6,000 38,050 600 38,650

Est. Addition in XIIth Plan 4,200 5,900 10,500 0 10,200 6,300 0 37,100 0 37,100

XIIth Plan 7,830 18,030 16,990 2,860 14,420 9,020 6,000 75,150 600 75,750

GoI plans to focus on the creation of a national grid in a phased manner by adding over 95,000 ckm of transmission network by 2012. Planned Transmission Lines
in ckm 765kV HVDC 500 kV HVDC 800/600 kV 400 kV 220 kV Total ckm With reforms at an accelerated pace, conductor industry will benefit Xth Plan, Mar 2007 2,184 5,872 0 75,722 1,14,629 1,98,569 Existing, Mar 2009 3118 7172 89496 122960 222746 XIth Plan, Mar 2012 7,612 7,478 3,600 1,25,000 1,50,000 2,93,852
th

Est. Addition in XIIth Plan 25,000 to 30,000 5000 50,000 40,000 155,000 to 180,000

Source: Presentation on Transmission System Requirement for the 12 plan ( 20012-17) CEA

Conductors The conductor industry has seen good growth in India, on account of investments made in the power transmission and distribution sectors. Power conductors are used in transmission and distribution lines. With reforms in the power sector set to continue, a lot of investments are expected to flow into the transmission and distribution segment. Rs 315 billion opportunity for the conductor business

Source: Sterlite Technologies Annual Report 2009

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Apar Industries Ltd

Sterlite Technologies and Apar Industries are major players in the conductor business with market share of 30 per cent and around 22 per cent, respectively. Transformer Oil Transformer oil is a highly-refined mineral oil that is stable at high temperatures and has excellent electrical insulating properties. It is used in oil-filled transformers, some types of high voltage capacitors, fluorescent lamp ballasts, and some types of high voltage switches and circuit breakers. Its functions are to insulate, suppress corona and arcing, and to serve as a coolant. Demand for the transformer oil comes from the transformer market.The transformer oil market can be divided into OEM and replacement demand. However, as 60 per cent - 65 per cent of the revenue is acccured from the OEM market. Apar is the largest player with 50 per cent market share in the transformer oil market with a turnover of approx 1,31,000 KL in FY10. Generally, 1 MW of power addition requires 7 MVA of transformer across generation, transmission and distribution. A 62,374 MW capacity achievement in XIth plan, will generate an additional demand for 87,323 MVA p.a. of transformers. A transformer has a shelf life of around 25 to 30 years. Thus transformers that were installed in 19801985 are likely to be replaced in the near future, which implies a replacement demand of 25,000 MVA per annum. Thus the demand for transformers is pegged at 1,12,323 MVA per annum. As per Apars annual report 2008-09, the requirement of transformer oil stands at 1,10,000 KL p.a.

The requirement of transformer oil stands at 1,10,000 KL p.a.

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Apar Industries Ltd

Summary Financials
Profit & Loss Statement Particulars (Rs Crores) Total Revenue Growth (%) Cost of Good Sold Gross Profit Growth (%) Employee Costs Other Expenditure EBITDA Growth (%) Depreciation EBIT Profit Growth (%) Net Interest expense Other Income(expense) Exceptional Items PBT Growth (%) Income Tax Profit after Tax Growth (%) Extra Ordinary Items & Others Net Profit Basic EPS Diluted EPS DPS Equity Capital Face value Ratio Analysis Particulars (Rs Crores) Margins Gross Margin (%) EBITDA Margin (%) EBIT Margin (%) Net Profit Margin (%) Valuation EPS BVPS P/E (x) P/BV (x) EV/ EBITDA (x) EV/ Sales (x) Profitability ROCE (%) RONW (%) Solvency Ratio Deb/ Equity Ratio (x) Interest Cover (x) Turnover Ratio Inventory T/o Days Debtors T/o Days Creditors T/o Days Other Ratios Dividend Payout (%) Dividend Yield (%) FY06 1112.4 (849.6) 262.7 (13.8) (169.3) 79.6 (8.6) 71.0 (20.9) 4.5 (1.7) 52.8 (10.9) 41.9 0.0 41.9 18.6 18.7 3.5 20.8 10 FY07 1511.4 35.9% (1203.1) 308.3 17.4% (15.9) (185.7) 106.7 34.0% (10.0) 96.7 36.2% (32.4) 4.4 (3.8) 64.8 22.6% (16.7) 48.1 14.8% 0.1 48.2 15.3 14.8 3.5 32.3 10 FY08 1771.4 17.2% (1394.6) 376.8 22.2% (18.9) (233.0) 124.9 17.1% (14.0) 110.9 14.7% (37.1) 0.0 (3.8) 70.0 8.1% (11.8) 58.3 21.2% 30.6 88.9 27.5 27.5 5.5 32.3 10 FY09 2643.2 49.2% (2248.8) 394.4 4.7% (26.6) (311.4) 56.4 -54.9% (14.7) 41.7 -62.4% (41.2) 0.1 (1.7) (1.2) PL (2.3) (3.5) PL (1.8) (5.3) (1.7) (1.7) 0.0 32.3 10 FY10 2251.3 -14.8% (1736.5) 514.8 30.5% (34.0) (327.8) 153.0 171.4% (18.5) 134.5 222.9% (33.2) 0.2 (1.2) 100.4 LP (22.4) 78.0 LP (53.6) 24.4 7.6 7.6 5.0 32.3 10

FY06 23.6% 7.2% 6.4% 3.8% 18.7 88.3 12.2 2.6 5.1 0.4 24.5% 22.8% 0.57 3.4 99 84 184 35.0% 1.5%

FY07 20.4% 7.1% 6.4% 3.2% 14.8 67.0 15.3 3.4 3.8 0.3 27.7% 22.2% 0.61 3.0 73 77 140 35.0% 1.5%

FY08 21.3% 7.1% 6.3% 5.0% 27.5 88.0 8.3 2.6 3.3 0.2 28.8% 31.2% 0.35 3.0 69 79 187 55.0% 2.4%

FY09 14.9% 2.1% 1.6% -0.2% (1.7) 86.6 NA 2.6 7.2 0.2 9.4% NA 0.58 1.0 52 62 175 0.0% 0.0%

FY10 22.9% 6.8% 6.0% 1.1% 7.6 87.6 30.0 NA 2.7 0.2 30.2% 1.3% 0.57 4.1 83 75 232 50.0% 2.2%

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Apar Industries Ltd

Balance Sheet Particulars (Rs Crores) Sources of Funds Equity Capital Reserves & Surplus Shareholders Fund Long Term Debt Deferred Tax Liability, Net Minority Interest Total Application of Funds Goodwill Fixed Assets Fixed Assets held for sale / disposal Capital Work-in-Progress Investments Current Assets Inventory Sundry Debtors Loans& Advances Cash & Bank Balance Total Current Assets Current Liabilities Sundry Creditors Provisions Other Current Liabilities Total Current Liabilities Net Current Assets Miscellaneous Exp not W/Off Total Cash Flow Particulars (Rs Crores) CF from Operating Activities Profit Before Tax Depreciation Direct Taxes paid Others Change in Working Cap CF- Operating Activities CF from Investing Activities Change in Fixed Assets Change in Investments Others CF- Investment Activities CF from Financing Activities Increase in Equity Changes in Minority Interest Changes in Borrowings Dividend Paid Others CF- Financing Activities Net Change in Cash Opening Cash & Bank Balance Closing Cash & Bank Balance

FY06 84.6 99.2 183.8 105.6 13.5925245 0.0 303.0 0.0 102.6 0.1 12.3 0.4 233.2 260.6 53.4 151.4 698.6 433.9 7.9 74.3 516.1 182.5 5.2 303.0

FY07 32.3 184.4 216.7 132.8 13.88 0.0 363.4 0.0 132.7 2.1 25.6 0.3 255.1 382.5 73.6 86.6 797.8 501.5 9.6 88.3 599.3 198.4 4.3 363.4

FY08 32.3 252.1 284.5 100.9 5.4 0.6 391.4 0.0 107.3 0.1 3.3 37.4 280.8 393.3 136.6 492.0 1302.7 946.1 19.1 97.1 1062.4 240.3 2.9 391.4

FY09 32.3 247.6 280.0 161.4 6.3 7.9 455.6 60.3 166.8 0.1 12.4 0.0 363.5 513.3 169.0 610.9 1656.7 1240.9 2.0 199.0 1441.9 214.8 1.2 455.6

FY10 32.3 251.0 283.4 161.7 7.2 0.3 452.6 0.0 178.6 0.1 2.4 0.0 439.2 424.3 173.6 488.2 1525.3 992.9 21.7 239.2 1253.8 271.5 0.0 452.6

FY06 52.8 8.6 (7.6) 18.8 39.6 112.3 (26.5) 0.9 4.5 (21.1) 32.4 (40.9) (6.4) 3.4 (11.5) 79.7 71.7 151.4

FY07 64.9 10.0 (16.1) 33.1 (80.2) 11.7 (55.5) 0.1 10.7 (44.6) 27.1 (13.8) (45.1) (31.8) (64.8) 151.4 86.6

FY08 73.9 14.0 (24.2) 35.1 361.4 460.1 (27.8) 65.5 37.6 0.2 (31.9) (12.0) (48.7) (92.3) 405.4 86.6 492.0

FY09 0.5 14.7 (23.9) 131.8 101.9 225.1 (30.0) 17.7 (12.3) (5.2) (13.0) (87.2) (105.4) 107.4 492.0 610.9

FY10 101.6 18.5 (18.1) (0.6) (167.3) (65.9) (21.2) 26.8 5.6 0.3 (62.4) (122.7) 610.9 488.2

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Apar Industries Ltd

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