The quarter's performance reflects Apar Industries' ability to capitalise on strong demand across its diversified portfolio whilst navigating elevated interest costs and margin pressures. With half-yearly (H1 FY26) consolidated net profit standing at ₹514.61 crores—up 29.81% from H1 FY25—the company has maintained its growth trajectory despite a challenging operating environment characterised by rising working capital requirements and capacity expansion initiatives.
Financial Performance: Volume-Led Growth Amid Margin Compression
Apar Industries' Q2 FY26 revenue of ₹5,715.42 crores represents the highest quarterly sales figure in the company's history, driven by robust demand across all three business segments. The 11.98% sequential growth from Q1 FY26's ₹5,104.16 crores and the 23.06% year-on-year expansion from Q2 FY25's ₹4,644.51 crores underscore the company's strong market positioning and execution capabilities. For H1 FY26, consolidated revenue reached ₹10,819.58 crores, up 25.12% from ₹8,655.03 crores in H1 FY25.
| Metric | Q2 FY26 | Q1 FY26 | Q2 FY25 | QoQ Change | YoY Change |
|---|---|---|---|---|---|
| Net Sales | ₹5,715.42 Cr | ₹5,104.16 Cr | ₹4,644.51 Cr | +11.98% | +23.06% |
| Operating Profit (Excl OI) | ₹460.91 Cr | ₹452.25 Cr | ₹356.54 Cr | +1.91% | +29.28% |
| Operating Margin (Excl OI) | 8.09% | 8.90% | 7.71% | -81 bps | +38 bps |
| Net Profit | ₹251.70 Cr | ₹262.91 Cr | ₹193.88 Cr | -4.26% | +29.82% |
| PAT Margin | 4.42% | 5.17% | 4.19% | -75 bps | +23 bps |
However, the quarter witnessed notable margin pressure. Operating profit margin (excluding other income) contracted 81 basis points sequentially from 8.90% in Q1 FY26 to 8.09% in Q2 FY26, though it remained 38 basis points higher year-on-year. The PAT margin similarly compressed from 5.17% to 4.42% quarter-on-quarter, primarily attributable to a sharp 25% sequential increase in interest costs to ₹107.90 crores from ₹86.32 crores. This surge in finance costs reflects the working capital intensity of the business as the company scales operations and invests in capacity expansion.
Despite the margin headwinds, the quality of earnings remains robust. The company generated record operating cash flow of ₹1,290.57 crores in FY25, a remarkable turnaround from negative ₹283 crores in FY24, demonstrating improved working capital management. The operating profit to interest coverage ratio for Q2 FY26 stood at a healthy 5.24 times, the highest on record, providing adequate cushion for debt servicing obligations.
Operational Excellence: Capital Efficiency Driving Returns
Apar Industries' operational strength is best reflected in its superior return ratios. The company's average return on equity (ROE) of 18.90% and return on capital employed (ROCE) of 34.71% significantly outpace industry benchmarks, demonstrating exceptional capital efficiency. The latest ROCE of 34.36% and ROE of 18.24% indicate sustained profitability despite the challenging environment. These metrics underscore management's ability to generate strong returns on both equity and total capital deployed, a critical factor for long-term wealth creation.
Balance Sheet Strength: Net Cash Position Provides Strategic Flexibility
Apar Industries maintains a robust balance sheet with a net debt-to-equity ratio of -0.09, effectively making it a net cash company. Total shareholder funds stood at ₹4,503.54 crores as of March 2025, with long-term debt of merely ₹298.33 crores. The company's debt-to-EBITDA ratio of 0.56 times is amongst the lowest in the sector, providing substantial headroom for growth investments without compromising financial stability. This conservative financial structure positions Apar favourably to weather economic cycles and pursue opportunistic expansion.
The company's sales-to-capital-employed ratio of 4.32 times reflects efficient asset utilisation, with each rupee of capital deployed generating ₹4.32 in revenue. This efficiency metric has improved substantially from historical levels, indicating operational leverage gains as the company scales. Fixed assets have grown from ₹885.53 crores in March 2023 to ₹1,433.94 crores in March 2025, reflecting ongoing capacity expansion across manufacturing facilities.
| Quarter | Net Sales (₹ Cr) | Operating Profit (₹ Cr) | Net Profit (₹ Cr) | Operating Margin | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 5,715.42 | 460.91 | 251.70 | 8.09% | 4.42% |
| Jun'25 | 5,104.16 | 452.25 | 262.91 | 8.90% | 5.17% |
| Mar'25 | 5,209.76 | 458.23 | 249.97 | 8.83% | 4.82% |
| Dec'24 | 4,716.42 | 356.11 | 174.92 | 7.58% | 3.72% |
| Sep'24 | 4,644.51 | 356.54 | 193.88 | 7.71% | 4.19% |
| Jun'24 | 4,010.52 | 376.55 | 202.54 | 9.45% | 5.08% |
| Mar'24 | 4,455.11 | 426.71 | 236.22 | 9.63% | 5.33% |
Industry Context: Capitalising on Infrastructure Boom
Apar Industries operates in the Other Electrical Equipment sector, which has faced headwinds over the past year with the industry declining 17.03%. However, Apar has significantly outperformed, delivering a 1-year return of -0.96% compared to the sector's steep decline, representing a remarkable 16.07 percentage points of alpha generation. This outperformance reflects the company's diversified business model spanning conductors, cables, and speciality oils, which provides insulation from sector-specific downturns.
The company's strong positioning in power transmission infrastructure aligns well with India's ambitious renewable energy targets and grid modernisation initiatives. Government focus on strengthening transmission networks to integrate renewable capacity and reduce technical losses provides a sustained demand tailwind for Apar's conductor business. Similarly, the cable segment benefits from urbanisation, industrial expansion, and telecommunications infrastructure rollout.
Margin Dynamics: Balancing Growth and Profitability
The sequential margin compression in Q2 FY26 warrants attention. Whilst operating margins (excluding other income) at 8.09% remain above the 5-year average of approximately 8%, they have declined from the peak of 9.63% in March 2024. This pressure stems from multiple factors: competitive intensity in the conductors segment, raw material price volatility (particularly aluminium and copper), and elevated interest costs as working capital requirements surge alongside revenue growth. Management's ability to stabilise margins through operational efficiencies and judicious pricing will be critical to sustaining profitability momentum.
Peer Comparison: Premium Valuation Justified by Quality
Apar Industries commands a premium valuation relative to most peers in the Other Electrical Equipment space, trading at a price-to-earnings ratio of 41.55x and price-to-book value of 8.13x. However, this premium appears justified when examining underlying fundamentals. The company's ROE of 18.90% substantially exceeds the peer average of approximately 10%, whilst its net cash position (debt-to-equity of -0.09) contrasts sharply with peers carrying positive leverage.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity | Div Yield % |
|---|---|---|---|---|---|
| Apar Industries | 41.55 | 8.13 | 18.90 | -0.09 | 0.56 |
| Waaree Energies | 37.15 | 0.87 | 23.17 | -0.48 | 0.06 |
| Premier Energies | 47.14 | 17.48 | 0.00 | -0.31 | 0.09 |
| Vikram Solar | 84.62 | 9.36 | 10.18 | 0.01 | — |
| Genus Power | 22.58 | 4.83 | 7.72 | 0.23 | — |
| Avalon Tech | 97.83 | 12.79 | 7.74 | 0.07 | — |
Apar's dividend yield of 0.56%, whilst modest, reflects a sustainable payout ratio of 24.94% that balances shareholder returns with reinvestment needs. The company paid a dividend of ₹51 per share with an ex-date of July 29, 2025. With a market capitalisation of ₹37,216 crores, Apar ranks as the third-largest player in its peer group, providing adequate scale advantages whilst maintaining growth potential.
Valuation Analysis: Fair Value Amidst Growth Prospects
At the current market price of ₹9,467.95, Apar Industries trades at a P/E (TTM) of 41.55x, representing a 22% discount to the industry P/E of 53x. The stock's price-to-book value of 8.13x appears elevated in absolute terms but must be contextualised against the company's superior ROE of 18.90%. Using the traditional P/BV-to-ROE framework, Apar's ratio of 0.43 (8.13 divided by 18.90) suggests reasonable valuation relative to return generation capability.
The company's valuation grade currently stands at "Fair," having transitioned from "Attractive" in April 2025. The EV/EBITDA multiple of 22.33x and EV/Sales ratio of 1.84x align with peers of similar quality. However, the PEG ratio of 6.70 raises concerns, suggesting the stock may be pricing in optimistic growth assumptions. With 5-year sales CAGR of 23.85% and EBIT CAGR of 39.04%, sustaining such growth rates will be challenging as the base expands.
"Apar Industries' combination of robust growth, superior capital efficiency, and fortress balance sheet justifies a valuation premium, though margin trajectory and working capital management will determine whether current multiples prove sustainable."
Shareholding Pattern: Institutional Confidence Building
Apar Industries' shareholding structure reflects growing institutional confidence. Promoter holding remains stable at 57.77% across the last five quarters, indicating strong management commitment without any pledging of shares. Mutual fund holdings have increased progressively from 18.44% in September 2024 to 20.39% in September 2025, with a notable sequential jump of 87 basis points in Q2 FY26. This accumulation by domestic institutional investors signals conviction in the company's long-term prospects.
| Shareholder Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter Holding | 57.77% | 57.77% | 57.77% | 0.00% |
| Mutual Funds | 20.39% | 19.52% | 18.15% | +0.87% |
| FII Holding | 9.25% | 9.07% | 9.86% | +0.18% |
| Other DII | 2.12% | 2.01% | 1.94% | +0.11% |
| Insurance Companies | 0.13% | 0.26% | 0.54% | -0.13% |
| Non-Institutional | 10.35% | 11.37% | 11.74% | -1.02% |
Foreign institutional investor (FII) holdings have stabilised around 9.25% after declining from 10.97% in September 2024, with a marginal 18 basis point increase in Q2 FY26. The total institutional holding of 31.88% provides adequate liquidity whilst leaving room for further accumulation. The decline in non-institutional holdings from 11.37% to 10.35% suggests profit-booking by retail investors at elevated valuations, potentially creating entry opportunities for long-term investors.
Stock Performance: Exceptional Long-Term Wealth Creation
Apar Industries has delivered extraordinary wealth creation over extended timeframes, though near-term performance has been subdued. The stock's 1-year return of -0.96% significantly trails the Sensex's 5.76% gain, resulting in negative alpha of 6.72 percentage points. However, this short-term underperformance pales against the staggering 5-year returns of 3,210.47%, representing a compound annual growth rate exceeding 100% and generating alpha of 3,096.64 percentage points versus the Sensex.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +10.31% | +0.68% | +9.63% |
| 1 Month | +13.27% | +5.76% | +7.51% |
| 3 Months | -2.26% | +4.50% | -6.76% |
| 6 Months | +69.04% | +5.86% | +63.18% |
| YTD | -8.16% | +8.78% | -16.94% |
| 1 Year | -0.96% | +5.76% | -6.72% |
| 2 Years | +88.73% | +33.26% | +55.47% |
| 3 Years | +548.45% | +41.76% | +506.69% |
| 5 Years | +3,210.47% | +113.83% | +3,096.64% |
Recent momentum has improved markedly, with the stock surging 10.31% over the past week and 13.27% over the past month, substantially outpacing the Sensex. The 6-month return of 69.04% demonstrates renewed investor interest following a period of consolidation. The stock currently trades 19.75% below its 52-week high of ₹11,797.35 but remains 121.73% above its 52-week low of ₹4,270.00, suggesting a mid-range positioning within the annual trading band.
Technical Outlook: Mildly Bullish Momentum Building
From a technical perspective, Apar Industries displays a "Mildly Bullish" trend that commenced on October 3, 2025, at ₹8,439. The stock trades above all key moving averages—5-day (₹8,803.79), 20-day (₹8,538.88), 50-day (₹8,403.67), 100-day (₹8,506.40), and 200-day (₹7,671.38)—indicating strong underlying support. Weekly indicators show bullish signals from MACD, RSI, Bollinger Bands, and Moving Averages, though monthly MACD remains mildly bearish and KST shows caution on both timeframes.
The stock's beta of 1.35 classifies it as a high-beta security, exhibiting 35% greater volatility than the broader market. With annualised volatility of 48.70%, Apar carries substantially higher risk than the Sensex's 12.49%, warranting position sizing accordingly. The risk-adjusted return of -0.02 over the past year reflects the elevated volatility relative to modest absolute returns, though this metric should improve as the stock builds momentum.
Investment Thesis: Quality Growth at Fair Valuation
Apar Industries presents a compelling investment case anchored in three pillars: exceptional quality credentials, sustained growth momentum, and reasonable valuation. The company's "Excellent" quality grade—upgraded from "Good" in July 2025—reflects consistent financial performance characterised by 23.85% sales CAGR and 39.04% EBIT CAGR over five years. The fortress balance sheet with net cash position and zero promoter pledging provides strategic flexibility for organic and inorganic growth initiatives.
The "Positive" financial trend designation in Q2 FY26 underscores improving operational metrics, with quarterly net sales, operating profit, and profit after tax all reaching record highs. The "Mildly Bullish" technical trend complements fundamental strength, suggesting favourable risk-reward for accumulation. The overall Mojo score of 75/100 places Apar firmly in "BUY" territory, upgraded from "HOLD" on October 6, 2025.
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Exceptional Capital Efficiency: Average ROE of 18.90% and ROCE of 34.71% demonstrate superior returns on invested capital, significantly exceeding industry benchmarks.
- Fortress Balance Sheet: Net cash position with debt-to-equity of -0.09 and low debt-to-EBITDA of 0.56x provides strategic flexibility and financial resilience.
- Sustained Growth Momentum: 5-year sales CAGR of 23.85% and EBIT CAGR of 39.04% reflect strong market positioning and execution capabilities across diversified segments.
- Record Operating Cash Flow: FY25 operating cash flow of ₹1,290.57 crores marks the highest in company history, validating earnings quality and working capital management.
- Zero Promoter Pledging: Stable 57.77% promoter holding with no pledged shares demonstrates management confidence and governance strength.
- Rising Institutional Confidence: Mutual fund holdings increased from 18.44% to 20.39% over the past year, with total institutional ownership at 31.88%.
- Diversified Business Model: Operations across conductors, cables, and speciality oils provide insulation from segment-specific downturns and capture multiple growth drivers.
KEY CONCERNS ⚠
- Margin Compression: Operating margin declined 81 bps QoQ to 8.09%, whilst PAT margin contracted 75 bps to 4.42%, raising concerns about pricing power and cost management.
- Elevated Interest Burden: Interest costs surged 25% QoQ to ₹107.90 crores, reflecting working capital intensity and constraining bottom-line growth despite strong top-line expansion.
- High Valuation Multiple: PEG ratio of 6.70 suggests the stock may be pricing in optimistic growth assumptions, leaving limited margin for disappointment.
- Near-Term Performance Lag: 1-year return of -0.96% and YTD decline of 8.16% indicate recent underperformance, with the stock trading 19.75% below 52-week highs.
- High Volatility Profile: Beta of 1.35 and annualised volatility of 48.70% classify Apar as a high-risk security requiring careful position sizing.
- Working Capital Intensity: Negative operating cash flow of ₹283 crores in FY24 (before FY25 recovery) highlights the business's capital-intensive nature during growth phases.
- Commodity Price Exposure: Dependence on aluminium and copper subjects margins to raw material price volatility, requiring active hedging and pricing strategies.
Outlook: What to Watch
POSITIVE CATALYSTS
- Margin stabilisation or improvement in coming quarters through operational efficiencies and favourable product mix
- Sustained revenue growth above 20% YoY driven by infrastructure investments and renewable energy integration
- Working capital normalisation leading to improved cash conversion and reduced interest burden
- Capacity expansion projects coming online, driving operating leverage and scale benefits
- Further institutional accumulation, particularly by FIIs, providing valuation support
RED FLAGS
- Further margin compression below 8% operating margin or 4% PAT margin levels
- Sequential decline in net profit for two consecutive quarters indicating structural profitability challenges
- Deterioration in operating cash flow or sustained negative working capital trends
- Increase in debt levels or leverage ratios, compromising the current net cash position
- Institutional selling, particularly if mutual fund holdings decline below 18%
The forward outlook for Apar Industries hinges critically on management's ability to navigate the delicate balance between aggressive growth and margin preservation. The company's strong order book and favourable industry dynamics provide revenue visibility, but execution on operational efficiency initiatives will determine whether the current valuation premium can be sustained. Investors should monitor quarterly margin trends, working capital metrics, and cash flow generation as key indicators of business health.
The Verdict: Quality Growth Story Worth Accumulating
Score: 75/100
For Fresh Investors: Apar Industries represents an attractive entry opportunity for investors seeking exposure to India's infrastructure and power transmission growth story. The combination of excellent quality credentials, sustained growth momentum, fortress balance sheet, and fair valuation creates a compelling risk-reward profile. The current price of ₹9,467.95 offers reasonable value for long-term wealth creation, particularly following the recent consolidation from 52-week highs. Accumulate in tranches given the high-beta nature of the stock.
For Existing Holders: Continue holding with conviction. The company's operational excellence, superior return ratios, and strategic positioning justify patience through near-term volatility. The upgrade to "Excellent" quality status and positive financial trend validate the long-term investment thesis. Consider adding on any dips towards the ₹8,500-8,800 zone, where technical support converges with attractive valuation.
Fair Value Estimate: ₹10,800-11,200 (14-18% upside potential over 12-18 months), based on 45-47x forward earnings and sustained 20%+ profit growth. The valuation assumes margin stabilisation around 8.5-9% operating margin and continued strong cash generation.
Rationale: Apar Industries' exceptional capital efficiency (34.71% ROCE, 18.90% ROE), net cash balance sheet, and sustained 23.85% sales CAGR position it amongst the highest-quality plays in the electrical equipment space. Whilst near-term margin pressure warrants monitoring, the company's diversified business model, strong market positioning, and execution track record provide confidence in sustained value creation. The current fair valuation following recent consolidation offers an attractive entry point for quality-conscious growth investors.
⚠️ Investment Disclaimer: This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
