APL Apollo Tubes surges 6%, hits fresh high ahead of 1:1 bonus issue

The company has fixed September 18, 2021, as the record date for the purpose of ascertaining the eligibility of shareholders entitled for issuance of bonus equity shares of the company

Shares of APL Apollo Tubes hit a record high of Rs 1,874.95 as they surged 6 per cent on the BSE in intra-day trade on Wednesday ahead of the 1:1 bonus shares. The stock of the iron and steel products company has surpassed its previous high of Rs 1,850 touched on July 28, 2021.

Meanwhile, Apollo Tricoat Tubes (Tricoat), the group company stock was up 4 per cent at Rs 1,715 on the BSE. The stock is trading close to its record high level of Rs 1,757 hit on August 9, 2021.

The board of directors of APL Apollo Tubes and Apollo Tricoat Tubes at their respective board meetings held on August 06, 2021, had recommended the issue of bonus equity shares in the proportion of 1:1 i.e. 1 equity share of Rs 2 each for every 1 equity shares of Rs 2 each held by the shareholders of the company as on the record date.

These companies have fixed Saturday, September 18, 2021, as the record date, for the purpose of ascertaining the eligibility of shareholders entitled to issuance of bonus equity shares of the company. The stocks will turn ex-date for bonus shares on September 16, 2021.

In the past three months, the stock of APL Apollo Tubes has outperformed the market by surging 36 per cent, as compared to an 11.5 per cent rise in the S&P BSE Sensex.

APL Apollo Tubes (APAT) is the largest manufacturer of structural steel tubes in India, which finds applications in residential and commercial buildings, warehouses, factories, agriculture, and other infrastructure works. It enjoys around 50 per cent market share in India, and operates through a network of 10 plants, over 800 distributors, more than 1,500 stock-keeping units (SKUs), and 200,000 fabricators serving over 50,000 retailers.

"The merger with Tricoat is margin and RoE accretive and is expected to create value for shareholders. Common ad spends and distribution network, along with other synergy benefits, is expected to benefit APAT in the medium-to-long term. Tricoat’s EBITDA/MT is 1.7-1.9x higher than blended EBITDA/MT, and is expected to further increase revenue share of VAP, improve overall margin, and further de-commoditize the business," Motilal Oswal Securities said in its initiate coverage on the stock.

Marginal increase in domestic steel consumption is expected to have a profound impact on domestic volumes of structural steel tubes, thereby benefitting APAT significantly, the brokerage further added. Warehousing, modular housing, modernization of rural, semi-urban as well as urban houses, urban infrastructure, and urban real estate are some of the major growth drivers for the structural steel tubes industry, it said.