Indian Polyvinyl chloride (PVC) pipe makers are likely to record stellar growth in their sales volume this financial year (FY2024-25) due to robust performance in the construction and infrastructure sectors. Government schemes such as ‘Nal se Jal’, and ‘Housing for All’, among others, have exceeded their initial targets, contributing to strong performance so far this year. The government’s strong focus on infrastructure development is expected to have a multiplier effect across all input sectors, including PVC pipe manufacturing.
According to a Crisil study released on Tuesday, PVC pipe makers are poised to make history with double-digit growth in their sales volume for the third consecutive year, driven by strong demand from the housing and infrastructure sectors. The rating agency forecasts India’s pipe manufacturing industry to witness 10-12 percent growth in their sales volume in the financial year 2024-25, following expansions of 14 percent and 24 percent recorded in the financial years 2023-24, and 2022-23, respectively.
| Polyvinyl chloride (PVC) volume growth index |
| Financial year | Quantity growth (%) |
| 2024-25(f) | 10-12 |
| 2023-24(e) | 14 |
| 2022-23 | 24 |
| 2021-22 | 4 |
| 2020-21 | (-)2 |
| 2019-20 | 3 |
| 2018-19 | 12 |
Sources: Crisil, and Polymerupdate Research
Strong user industry demandStrong demand from end-user industries has been the key growth driver, triggering larger capital expenditure (capex) by PVC pipe makers this fiscal and the next year. Key sectors such as irrigation, water supply, sanitation, and housing account for over 80 percent of India’s total PVC pipe demand. As capex is likely to be funded through internal accrual, credit profiles of PVC pipe makers should remain stable. A Crisil Ratings analysis of 22 PVC pipe makers, accounting for 40-45 percent of the segment’s volumes, indicates as much.
Anand Kulkarni, Director of Crisil Ratings, stated, “Demand for PVC pipes will remain strong as key end-user industries such as irrigation, water supply, and sanitation will benefit from continued budgetary allocations towards schemes such as ‘Jal Jeevan Mission’ and ‘Pradhan Mantri Krishi Sinchai Yojana’. The government’s focus on achieving direct water connections to all households will continue considering approximately 76 percent of households have direct water connections. Alongside, increasing irrigation coverage is expected to continue over the medium term with irrigation access being at approximately 54 percent of the net sown area.”
Residential real estate - an important driverResidential real estate is also an important demand driver for PVC pipes because of plumbing applications. Demand growth for residential real estate in fiscal 2025 is expected to be at 10-12 percent over fiscal 2024, especially with mid to premium residences selling well. Healthy budgetary allocation towards ‘Pradhan Mantri Awas Yojana’, focusing on affordable housing, will also drive demand.
Healthy volume growth will drive higher operating leverage and along with stable PVC resin prices (forms 70-75 percent of the total costs) will translate into improvement in operating profitability by 100-150 basis points to 13-14 percent this fiscal. It is worth mentioning here that prices of PVC resin were modest last fiscal owing to a slowdown in global housing demand as pipes and fittings account for over 70 percent of global PVC resin demand.
Operating margin has been on an improving trend since fiscal 2024 after a sharp fall in fiscal 2023 owing to inventory losses after PVC resin prices fell. The improving profitability and healthy demand prospects enhancing capacity utilisation to over 70 percent will enable pipe makers to undertake expansion.
Jaya Mirpuri, Director, Crisil Ratings, finds, “PVC pipe makers are expected to incur a capex of approximately Rs 5,000 crore over next two years to expand their capacity by 20-25 percent. Most of this is likely to be funded through internal accruals. Further new capacities will commission in a staggered manner and hence are likely to be absorbed by healthy demand. As a result, the balance sheets will remain comfortable and credit profiles stable.”
With no major incremental debt and improving profitability, the ratio of debt-to-Ebitda (earnings before interest, tax, debt, and amortisation) ratio is expected to improve to around 0.35 time this fiscal from around 0.45 time in the last fiscal.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
