Water storage is becoming a key factor in any building – commercial, industrial or residential. Demand for water storage products is universal – both in urban and rural areas.
With the growth of plastic processing industry in India, plastic water tanks are becoming popular and are replacing conventional water tanks. Plastic water storage tank is one of the best alternatives of conventional water storage methods because of variety of reasons. It is a highly durable light weight tank, which occupies less storage area vis-à-vis concert or cement tanks. Additionally, plastic water storage tanks are flexible than conventional storage tanks.
In India market size of plastic water storage tanks is estimated to be around Rs 5,000 crore and the industry is growing at a CAGR of 9%. In India, water storage tank business is mainly a regional play and the unorganised sector controls nearly 70% of the market. Sintex holds 50% of the organised market while Vectus holds 16% and Supreme Industries 6%.
Market leader is in trouble
But the big news is that the market leader is in trouble and in fact, is in deep financial mess. KKR, a private equity firm, has dragged one of the subsidiaries of Sintex Plastics to NCLT and has initiated insolvency proceedings. Even otherwise dealers have been complaining, of late, about the company’s delayed delivery of its products. Nevertheless, Sintex as a brand name is well respected in the market and its products command 10-15% premium vis-à-vis its rivals. At the same time, people in the market also talk about the deteriorating quality of the products of the company in last few months.
Dealers and marketmen also point out some other limitations of the brand. Sintex tanks are available only in limited number of colours, while customers are demanding more colours. Further, Sintex offers cap lock while competitors offer threaded locks. Some dealers also point out that Sintex products come without any warranty while competitors offer warranty. For example, Vectus, the second largest producer of tanks, offers a 5-year warranty.
Sintex’s trouble an opportunity for others
Trouble with the market leader has alerted many players in the market who have been eyeing to enter and expand their business. Current uncertainty in the market has given a golden opportunity for them to make an entry and grab the market share. For example, Prince Pipes has launched water tanks in the Gujarat market. The company plans to launch the product across the country. According to the company management, it will focus on the quality of the products and will refrain from chasing volume-led growth.
Supreme plans expansion
On the other hand, Supreme Industries is already manufacturing and selling the products and also enjoys small market share. But the upheavals in the market have opened up opportunities for the company re-chart its growth strategy. Water storage tanks were never a major focus area for the company but the company now plans to grow its water tank business. To expand its business, the company is exploring new geographies to enter. The company is also exploring the option of starting the manufacturing of roto products at a new location to encash the business potential by effective servicing.
Astral’s latest acquisition
Astral Poly Technik Ltd. has announced its foray in to the business of manufacturing/trading of plastic water storage tanks and adding new capacity, with a total investment not exceeding Rs 75cr.
Astral Poly has acquired Aurangabad-based plastic water tank company Shree Prabhu Petrochemicals. The deal gives Astral access to 13,500 MT p.a capacity of Shree Prabhu. Astral has a large network of dealers and distributors across the county; water tanks will be a logical extension of its Astral brand.
Proximity to market is essential for success
However, one of the core issues in the marketing of water storage tanks is the proximity to market place as the water tanks consume lot space and transportation over a long distance will increase the logistic cost. That’s why the industry is marked by the existence of large number of small and regional players catering to limited areas. Sintex became successful in this line because it has factories at multiple locations. Interestingly, the companies like Supreme, Prince and Astral too have factories in multiple locations. Further, most of the pipe manufacturers have wide distribution network catering to both agriculture and construction sectors. Most of the distributors of these companies already deal in water tanks; this will be a natural extension for plastic pipe companies.
Further, diversification into water storage sector doesn’t need much capital investment for pipe manufacturers. The installation of roto and blow moulding capacities is moderately capital intensive but plastic pipe companies can accommodate it in their existing infrastructure, thereby adding another growth lever. Therefore, foray into water storage tanks business seems to be a natural progression for plastic pipe manufacturers given the synergies in supply chain & distribution network.