We expect pipe demand to be robust

Finolex Industries Limited (FIL) is one of India’s largest rigid PVC–U pipes and fittings manufacturer and the second largest PVC resin manufacturer. FIL is headquartered in Pune and operates through its state of the art manufacturing plants located in Urse (Pune), Ratnagiri (Maharashtra) and Masar (Gujarat).
Saurabh S. Dhanorkar, Managing Director – Finolex Industries Ltd told Sandeep Menezes that investment in the irrigation sector will pick up over the next few years creating a huge demand for PVC pipes and fittings.

Excerpts from the interview:

Saurabh Dhanorkar

Saurabh Dhanorkar

Though last year the pipes industry barely registered any growth? Going forward, how much market growth do you expect?

We have to keep in mind that the demand for pipes is seasonal in nature with a tendency to slow down during monsoon. This is because when it is raining it is difficult to dig trenches for laying underground pipes for agriculture and also the construction activity runs at a slower pace. The slow down last year was because of an extended monsoon which continued right up to February 2014. If you look at the long term average, the CAGR of pipe industry is in double digits. Going ahead we expect the pipe demand to be robust.

What will be the main future demand drivers for growth of pipes industry in India?

Even after so many years of independence India still lags way behind developed countries in terms of reach of irrigation. Out of the total cultivated land only 43 per cent has access to irrigation. The rest of the cultivation is rain fed. The new Government has already accorded top priority to irrigation with the slogan “HarKhetKoPaani” (water to every farm field). We expect investment in the irrigation sector to pick up over the next few years creating a huge demand for PVC pipes and fittings. Another growth driver would be the increased focus on sanitation and toilet facilities. The ‘Swach Bharat Abhiyan’ (Clean India Drive) launched by the new Government is already eliciting a good response and this will drive growth for pipes and fittings.

PVC-U is the most widely used of all plastics used for pipe installations. It is rigid, versatile, and is suitable for both above or below ground installations. Going ahead, do you feel there will be an increased shift towards PVC-U pipes?
UPVC is a superior material compared to metal or concrete for the following reasons:

a) PVC has better flow characteristics as compared to galvanized iron or cement pipes.
b) PVC is corrosion free.
c) PVC is easy to install.
d) Transportation of PVC is easier because of its low weight per metre.

We are already seeing a shift towards UPVC from the traditional material and we expect this trend to continue in the coming years.
Copy of 0469What are Finolex’s future growth plans in the PVC-U pipes and fittings segment? How does Finolex plan to double its turnover in next five years?
Finolex pipes has already been growing at a CAGR of 15 per cent over the past ten years and we expect this trend to only get better in the coming years due to various new opportunities emerging on the horizon. We already have three ultra-modern plants in India having a total production capacity of more than 200,000MTs. We plan to add approximately 30,000 MTs of new capacity every year. All the three locations i.e. Pune, Ratnagiri and Masar have adequate infrastructure for brownfield expansion and as such capex requirement for such expansion will be marginal. We also plan to introduce new type of pipes and other products in our portfolio to help us to achieve our target of doubling the turnover in five years.
Finolex pipes and fittings are sold through a large dedicated and well-oiled network of dealers, sub-dealers and retail outlets totalling to more than 15,000. This network is capable to handle many more products equally efficiently. Finolex has decided to introduce new products covering water management through this network. Finolex is currently in discussion with various players to identify such opportunities and we expect to start rolling out new products during the next financial year. We do not expect to make a large capital expenditure for this initiative. The idea is to leverage the existing strength of the distribution network so that the company as well as the dealers are able to increase the return on investment.

Finolex recently forayed into managing water for irrigation, and industrial and domestic usage business. Tell us about the strategic objectives behind this foray?

As an organization we are keen on ensuring that the available water should reach the end user in the most efficient manner. Finolex understands the value of what water can do in the urban and rural context. A pipeline which brings water to farmer’s field is his lifeline. If this pipeline breaks down, then the farmer stands to lose not only his crop, but his entire livelihood. This is why we have laid a very high emphasis on our product quality. We consider it our primary responsibility to ensure that the pipeline not only brings life into his crop but also brings him prosperity.

The company has been continuously engaged with concerned agencies to create solutions and is partnering many initiatives to help efficient water transportation as well as conservation. It is now taking this initiative to the next level by creating new products and technologies which will find applications not only in agricultural but also domestic and industrial usage.

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