Polyvinyl chloride (PVC) pipes and fittings manufacturers are likely to witness 13-15 percent growth in the volume of their sales during fiscal 2023-24 due to the government’s renewed focus on infrastructure and housing projects. This sector has already grown rapidly so far this year with the current financial year i.e. 2022-23 may end with a decadal high volume growth of 22-24 percent from the low base last year.
A recent study conducted by Crisil showed PVC pipes and fittings manufacturers are set to sustain their growth momentum in the volume of sales this year, driven by higher budgetary allocation to drive government schemes in water supply, irrigation, housing, and infrastructure. All these sectors have witnessed phenomenal growth in sales volume this year as the government ramped up allocation and disbursal of funds to speed up the existing stalled projects and plan new ones.
The industry has seen strong pent-up demand from both bulk and retail customers as several projects that were affected by over two years of pandemic spread, got a sudden boost in the financial year 2022-23. Both the government and private investors intensified work on the projects underway. As a consequence, a subdued three-year compounded annual growth rate of around 2 percent across India’s infrastructure and housing sector suddenly saw a spurt in demand for PVC pipes and fittings.
| PVC pipe makers’ consolidated October - December quarter financial performance (Rs crore) |
| Company | Total income | Net profit |
| 2022 | 2021 | 2022 | 2021* |
| Astral Ltd | 1267.8 | 1102.7 | 94.9 | 127.8 |
| Supreme Industries Ltd | 2330.6 | 1959.63 | 194.08 | 206.59 |
| Finolex Industries Ltd | 1152.58 | 1024.10 | 72.07 | 177.77 |
| Prince Pipes and Fitting Ltd | 707.12 | 665.72 | 35.39 | 67.32 |
| Jain Irrigation Systems Ltd | 993.26 | 665.57 | 22.52 | (55.58) |
Source: Company websites, *Before Other Comprehensive Income
The growth forecast assumes significance as almost players in the manufacturing of PVC pipes and fittings unanimously guided the one-year growth forecast, by saying that demand for PVC products witnessed an uptick with the decline in new virus cases. For players in the sector, more than 70 percent of the demand comes from agriculture, water supply, and sewerage, and depends, directly or indirectly, on government funding. The remaining demand is from residential plumbing and industrial applications.
“The volume growth next fiscal will be sparked by two key demand drivers. One is higher capital allocation in the Union Budget for irrigation and housing schemes such as Jal Jeevan Mission (Rs 69,684 crore, up by 27 percent on yearly basis), and Pradhan Mantri Awas Yojna (Rs 79,000 crore, up by 62 percent). And two, continued healthy demand from the residential real estate sector,” said Anand Kulkarni, Director, Crisil Ratings.
The growth in the volume of sales is being witnessed for the last at least two quarters as manufacturers recorded a sharp increase in sales despite a decline in PVC prices and a proportionate cut in the value of pipes and fittings. PVC resin prices declined by Rs 66 a kg i.e. 45 percent between April and November but recovered by Rs 15 a kg between November and December. Plastic pipes and fittings manufacturers continued to be impacted due to falling PVC prices till November 2022.
PVC prices started upward move December onwards as large consumers and retail chains started re-stocking which improved business sentiment substantially. In spite of an increase in PVC resin prices, its demand from pipes and fittings manufacturers continued at the ultimate consumption in the infrastructure and housing sector were robust. Analysts estimate that PVC resin prices would remain range bound which augurs well for the industry. The industry estimates to maintain the growth momentum with affordable raw material prices.
All plastic goods manufacturers posted robust growth in sales volume in the October-December 2022 quarter. Supreme Industries Ltd, for example, posted a phenomenal 51 percent growth in sales volumes to the tune of 138,362 tonnes (worth Rs 2284 crore) of plastic goods for the October – December 2022 quarter as compared to 91,364 tonnes (valued Rs 1895 crore) in the corresponding quarter last year.
The company sold 359,087 tonnes of plastic goods and achieved a net product turnover of Rs 6,500 crore during the nine months of the current year against sales of 265,301 tonnes and a net product turnover of Rs 5,106 crore in the corresponding nine months of the previous year achieving volume and product value growth of about 35 percent and 27 percent respectively.
Similarly, Finolex Industries recorded a 92 percent jump in its volume of pipes and fittings sales to 90,396 tonnes during October-December 2022 quarter in comparison with 46,994 tonnes in the comparable quarter last year. The company’s turnover from the sale of pipes and fittings grew by 30 percent to 1077 crore during October – December quarter from Rs 831 crore in the same quarter last year.
Prince Pipes and Fittings Ltd also reported phenomenal growth in their volume of sales during the October-December 2022 quarter. The company said in its quarterly financial performance that its volume of plastics sales grew by 35 percent to 43,693 tonnes worth Rs 706 crore in the third quarter of the current financial year. Experts forecast the growth momentum may continue in the January-March 2023 quarter and thereafter as well.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
