APL Apollo zooms 48% in 10 trading sessions as Board okays merger scheme

The company's board on February 26 had approved the merger of Shri Laxmi Metal Udyog and Apollo Tricoat Tubes with the company.

Shares of APL Apollo Tubes (APL Apollo) hit a new high of Rs 1,394, up 4 per cent on the BSE, in the intra-day trade on Monday, surging 30 per cent in the past six trading days after the company’s board approved the merger of Shri Laxmi Metal Udyog and Apollo Tricoat Tubes (Apollo Tricoat) with the company. The stock was trading higher for the 10th straight day and has rallied 48 per cent during the period.

Apollo Tricoat’s minority shareholders will receive one equity share in APL Apollo for each equity share held Apollo Tricoat. This transaction has been effected by way of a scheme of amalgamation and is subject to shareholder approval at each of APL Apollo and Apollo Tricoat, as well as regulatory approvals. This transaction is expected to close in Q3FY22 with appointed date of merger being April 1, 2021

The amalgamation shall result in consolidation of the respective operations served by one platform thereby leveraging the capability of APL Apollo, the company said.

Meanwhile on February 11, CRISIL Ratings upgraded its rating on the long-term bank facilities of APL Apollo to ‘CRISIL AA/Stable’, and reaffirmed the rating on the short-term bank facility and commercial paper programme at ‘CRISIL A1+’.

"The upgrade reflects CRISIL Rating’s expectation that APL Apollo’s credit risk profile will improve in the near term on the back of a sustained improvement in operating performance driven by above-industry volume growth and improving operating margins. Similarly, healthy free cash flows would result in low net-debt leading to strengthening of financial risk profile," it said in its rating rationale.

The ratings reflect APL Apollo’s leadership position in the electric resistance-welded (ERW) pipes and structural products industry, and diversity in terms of its geographical presence, product profile, and the end-user industries. These strengths are partially offset by exposure to intense competition and to volatility in the prices of raw material as well as finished goods, Crisil said in rating rationale. APL Apollo will continue to register steady growth in operating performance while maintaining comfortable financial risk profile, over the medium term, it added.