According to some industry experts consolidation in plastic pipes industry is picking up pace. Nearly 40% of the Rs 28,000 crore plastic piping industry is accounted for by the unorganised sector who find the going tougher in recent times due to various regulatory issues. As a result, there is continuous shift in the plastic pipes industry towards organized sector.
However, even in organized sector only well managed companies like Astral and Supreme Industries are gaining market share. For example, in the first half of the current financial year while the industry grew at 5% these companies saw their volume growing at the rate more than 20% which is mainly due to market share gains. Even in organized sector some companies are in deep trouble due to liquidity crisis and debt problems. However, companies with strong balance sheet can make most of the situation, say the market experts and analysts.
Consolidation in the industry is led by a recent hike in anti-dumping duty, GST implementation, and leverage issues with a couple of large players. It may be noted that the Union ministry of commerce and industry in August had imposed a provisional anti-dumping duty on imported CPVC resin/compound from producers/exporters from China and Korea. Since the duty imposed is too steep, it has substantially narrowed down the price difference between organized and unorganized sectors. This has resulted in consumers slowly shifting towards branded products in the market, thus making the life of the players in unorganized sector difficult.
The Indian plastic piping industry is among the few building material categories with a high share of unorganised players. The top-5 players constitute 40% of the organised market. Replacement demand constitutes 35% of the market and the rest comes from real estate industry. Irrigation followed by plumbing are the largest applications for plastic pipes. Industry is likely to post CAGR of 10-12% over the next five years on the government’s plan on affordable housing and piped drinking water to every household.