Introduction

The Indian power sector is experiencing significant growth, with the Nifty Energy Index rising by approximately 70% over the past year. Major players like Tata Power, NTPC, and Power Grid have seen impressive stock performance. This surge is driven by India's increasing power demand and the government's commitment to enhancing power infrastructure.

India's Growing Power Demand

India, the third-largest power consumer globally, has a booming population and rising energy consumption. As of November 2023, India's power demand reached 243 GW, with a projected peak demand of 366 GW by FY32. The government aims to make India a major power house, allocating a significant budget to power sector Central Public Sector Undertakings (CPSUs).

Renewable Energy and Infrastructure Expansion

India's total installed capacity reached 434 GW in February 2024, with renewable energy sources and hydropower becoming major contributors. The country aims to reduce carbon intensity by 45% by 2030 and achieve net-zero carbon emissions by 2070. Additionally, India has expanded its power infrastructure, installing approximately 7,000 circuit kilometers of transmission lines in FY24.

Electrification in Railways

Indian Railways is on track to become the third-largest railway network globally and aims for 100% electrification. As of March 2024, 62,119 Route Kilometers (RKMs) have been electrified, covering about 94% of the broad-gauge network. This rapid electrification supports India's sustainability goals.

APAR Industries: Capitalizing on Power Sector Growth

APAR Industries, a 60-year-old company, specializes in manufacturing power conductors, specialty oils, cables, polymers, and lubricants. The company has a global presence in over 140 countries and is strategically positioned to benefit from India's expanding power infrastructure.

Conductors Business

APAR's conductor business, essential for energy transmission, has grown significantly since its inception in 1958. The company has diversified its offerings to include High-Temperature Low Sag (HTLS) conductors. The conductor business has experienced substantial growth, with revenues increasing by 17% YoY in FY24. Key drivers include government investments in power and railway projects and the growing demand for Optical Ground Wire (OPGW) and Overhead Equipment (OHE) conductors.

Specialty Oils & Lubricants Business

APAR entered the specialty oils business in 1969, initially focusing on transformer oils. The company has since expanded its portfolio to include white oils, petroleum jelly, and various industrial and automotive lubricants. APAR is India's largest and the world's third-largest transformer oil manufacturer. The specialty oils business has grown by 15% CAGR from FY19-23, with significant contributions from the white oils segment and lubricants business.

Cables Business

APAR ventured into the cables industry in 2008 and has become India's largest exporter and producer of renewable and specialty cables. The cables business has shown a topline growth of 18% CAGR from FY19 to FY23. APAR is the first Indian company to offer end-to-end telecom solutions, providing both copper and fiber cables. The company also offers solar, windmill, and utility cables to support renewable energy initiatives.

Other Business Segments

APAR's additional business segments include APAR Speciality Automotives and APAR Polymers. The company has introduced products like 2-wheeler batteries and EV tires under the ARKOS brand and ventured into the polymers business to support cable manufacturing operations. These segments currently contribute a small fraction of APAR's total revenue.

Financial Performance and CAPEX Plans

APAR has demonstrated consistent revenue growth, achieving a 16% CAGR from FY19 to FY23. The company's EBITDA has grown at a 29% CAGR, with EBITDA margins improving from 6% in FY19 to 10% in 9M FY24. APAR maintains a balanced capital structure with low debt and significant supplier credit. The company plans to invest Rs 300 crore annually in CAPEX to expand capacity and improve operations.

Conclusion: Strategic Leadership and Future Outlook

APAR Industries has strategically positioned itself to capitalize on India's growing power infrastructure. The company's diversified business portfolio, global presence, and focus on premium products have driven substantial growth. Despite current challenges, APAR's management anticipates continued growth in key segments, supported by increasing investments in electric infrastructure and emerging opportunities in defense and electric vehicles. However, the stock's valuation appears to have limited upside, with the market already factoring in the company's growth prospects.