The small manufacturers of plastic pipes are finding the going tough as the industry is faced with multiple issues. The industry in general and small players in particular are adversely affected by a sharp increase in PVC prices due to disruption in global supply chains, container shortages and declaration of force majeure by large resin manufacturers.
Unorganised players are facing a double whammy – problems in sourcing raw material and inflationary prices (that have more than doubled and continuing northward). Furthermore, the sharp increase in PVC prices has narrowed the gap between CPVC and PVC pipes, leading to market share gains for the former in the residential sector.
As per the latest rule, BIS licence for all pipe manufacturers has become mandatory from 1st October onwards. Accordingly, it has necessitated plant/machinery upgradations for all non-ISI certified PVC pipes manufactures to ISI norms, or face closures from October 1st. Large branded players are unaffected by this new rule as they were anyway producing ISI-standard pipes, implying unorganised players would bear the brunt. Even in case of a slight production halt/delay by smaller players, it’s a big structural driver for branded players.
Though there is no unanimity about the size of the industry, its estimated to be around Rs 35,000 crore. Over the years, along with the general growth of the industry, in the last few years the industry has also seen formalisation wherein market share is getting transferred from unorganised sector to organised sector. The share of organized players in the piping industry has increased from 50% in FY10 to 67% in FY21 while that of top-5 players from 22% in FY12 to 37% in FY21. Formalisation is expected to gain further momentum due to the current turmoil in the industry.