APL subsidiary Apollo Tubes will take a minority stake in Shankara Building Products; The stock ends 5% higher

APL Apollo Tubes Ltd. (APL Apollo), India’s leading manufacturer of branded structural steel tubes, has announced a minority equity investment by APL Apollo Mart Limited (Apollo Mart), a wholly owned subsidiary of APL Apollo in Shankara Building Products Ltd ( Shankara) through a combination of purchase of secondary sponsor stock today and proposed preferential allotment of convertible warrants. The investment is part of APL Apollo’s growth vision.

APL Apollo and Shankara have a business association of over 15 years, Shankara being one of the main distributors of APL Apollo products. The combination of APL Apollo will ensure sales consistency through Shankara’s retail and wholesale network and create synergies for APL Apollo Tubes.

The APL Apollo Tubes Ltd transaction closed on Monday at 957.45 rupees per share, up 47.8 rupees or 5.25% from its previous close of 909.65 rupees per share on BSE .

Investment Highlights

  • Purchase of 1,000,000 Equity shares at Rs755 per share from a person belonging to the promoter category
  • Proposed subscription of 1,400,000 warrants at Rs 750 per warrant (price to be approved by the Board of Directors of Shankara in accordance with applicable SEBI regulations) fully convertible into shares by preferential allotment, subject to receipt approvals required by Shankara.
  • Apollo Mart’s total ownership interest in Shankara following the issuance of the warrants will be 9.90% on a fully diluted basis.
  • Total investment size up to Rs1,805mn
  • Immediate investment of 1,018 million rupees (purchase on the secondary market + 25% subscription of warrants)
  • Remaining investment of Rs787mn within 18 months (75% on conversion of warrants)

Sanjay Gupta, Chairman of APL Apollo, said, “I am pleased to announce that APL Apollo has entered into an agreement with Shankara to invest Rs 1,050 million through Convertible Preferred Warrants. I hope this investment will further strengthen our longstanding association with Shankara and help both companies chart an improved revenue trajectory in the years to come.

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