Delhi-based manufacturer of steel pipes and tubes APL Apollo Tubes Ltd said it has agreed to acquire a tube manufacturing unit of Shankara Building Products Ltd for Rs 70 crore ($10 million).
The acquired 2,000-million tonnes per annum (MTPA) tube manufacturing unit makes galvanised iron (GI) and pre-galvanised (GP) pipes that are high margin and value-added product segments for the acquirer, said APL Apollo in a stock market disclosure.
The acquisition will also allow APL Apollo to build and consolidate its market share in the southern market as Shankara is the second largest player in the region, it added.
The acquired unit is currently operating at 40% utilisation and the target is to improve that to the company standard of 80-85%, it said.
“The plant complements our existing operations in Bengaluru and Hosur and will further bolster our manufacturing capacity to meet the growing demand for steel tubes and pipes in the south, east and south-western markets," said Sanjay Gupta, chairman, APL Apollo.
The company also said that it has elevated Arun Agarwal, currently south India head, as chief operating officer (COO). In his new role, Agarwal will be responsible for sales, purchase and production activities across India and the domestic markets.
APL Apollo operates six manufacturing facilities with a total capacity of 2.1 million MTPA. Its products include MS Black pipes, galvanized tubes, pre-galvanized tubes, structural ERW steel tubes and hollow sections. Its three-tier distribution network of over 600 dealers is spread across India, with warehouses-cum-branch offices in over 20 cities.
The company registered 25% growth in total revenue to Rs 5,480.39 crore in the fiscal ended 31 March 2018 from Rs 4,383.62 crore in the previous fiscal. The volumes grew at 18.5% from 0.94 million MTPA to 1.11 million MTPA helped by a healthy recovery in the demand environment in the latter half of the year. Net profit rose to Rs 158.13 crore during the period from Rs 152.11 crore.