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ICICI Securities Report
APL Apollo Tubes Ltd. has announced a minority equity investment proposal by its wholly owned subsidiary APL Apollo Mart Ltd. into Shankara Building Products Ltd.
APL Apollo will end up owning ~9.9% of Shankara for a total investment of Rs 1.8 billion (~6% of APL Apollo's total capital employed as on end December 2021). This will be through a combination of purchase of secondary promoter shares (1 million shares at Rs 755/share) and proposed preferential allotment of convertible warrants (1.4 million shares at Rs 750/share).
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Shankara was valued at 0.9 times enterprise value/sales (FY22 annualised). The investment will be funded via internal accruals and is expected to be earnings per share and return on capital employed accretive from the very first year.
APL Apollo sees an opportunity to potentially double its existing sales from Shankara.
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