The company plans to set up a subsidiary that will manufacture, trade, market and distribute tiles, ceramics and allied products. The new business will also have the option of using contract manufacturers.
More significantly, Apollo Pipes said the subsidiary may acquire existing operational and profitable manufacturing businesses, leaving the door open for acquisitions rather than building the entire business from scratch.
The board has authorised Managing Director Sameer Gupta and Joint Managing Director Arun Agarwal to incorporate the subsidiary and determine the timing and manner in which the ₹300 crore will be invested.
Why the move matters
The plan marks a diversification for Apollo Pipes, taking it into a new building-materials category beyond its existing portfolio of piping products.
Tiles and ceramics, however, give the company exposure to some of the same underlying demand drivers, including housing construction, renovation and real-estate development.
The ability to acquire existing profitable manufacturers could also allow Apollo Pipes to gain manufacturing capacity and market presence faster than setting up new plants from the ground up.
The company hasn’t yet disclosed how much of the ₹300 crore will go towards manufacturing facilities, acquisitions or other investments, or when it expects the new business to begin operations.
₹189-crore preferential issue
Separately, Apollo Pipes’ board approved a preferential issue of up to 31 lakh warrants to identified non-promoter investors.
The warrants will be issued at ₹610 apiece, including a premium of ₹600, potentially raising as much as ₹189.1 crore.
Each warrant can be converted into one fully paid-up Apollo Pipes equity share with a face value of ₹10.
The company didn’t state in the disclosure that the proceeds from the preferential issue would specifically fund the ₹300-crore tiles and ceramics plan. The two announcements should therefore be treated as separate unless the company provides such a linkage.
The preferential issue requires shareholder and other regulatory approvals.
Authorised capital to rise
The board also approved increasing Apollo Pipes’ authorised share capital to ₹60 crore from ₹50 crore.
The revised capital will comprise six crore equity shares with a face value of ₹10 each. Apollo Pipes said the increase would provide sufficient authorised capital to issue shares if the proposed warrants are converted.
The change also requires shareholder approval.
Apollo Pipes shares were trading 0.48% lower at ₹628 on the NSE at 3:14 pm on Monday, August 31.
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