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India's plastic pipe industry has immense growth potential due to its lower per-capita pipe consumption compared to the global average, according to a recent report by Jefferies.
The report stated that the country's consumption levels are significantly below those of developed regions like the US, Europe, and China, highlighting a large untapped market. It said, "India's per-capita-pipe-consumption is lower than World average and further lower than US, Europe and China. This implies significant headroom for growth for Indian plastic pipe industry." The report also revealed that the plastic pipes sector has recorded an impressive 8 per cent compound annual growth rate (CAGR) over the past decade, from FY15 to FY24. It is projected to reach a market size of Rs 500 billion by FY25, driven by a revival in capital expenditure (capex) and a robust housing cycle. Industry growth is expected to remain strong, fueled by increasing traction in the housing sector and infrastructure investments. However, the report also outlines challenges related to the key raw material, polyvinyl chloride (PVC). PVC prices have been volatile, directly impacting margins for plastic pipe manufacturers. It said "PVC is the key RM for Plastic Pipes, and its volatility is a pass-through. Any sharp fall in PVC price entails near-term inventory losses, impacting margins". While PVC prices rose from Rs 75 per kg at the end of September 2024 to Rs 78 per kg by November 2024, they fell by around 4 per cent in December 2024. Sharp declines in PVC prices can lead to inventory losses for companies, as well as destocking by distributors, which drags down volumes. The first half of FY25 witnessed weaker capex activity and a higher base effect from the previous year, which weighed on volume growth in the pipes and tiles segments. However, Jefferies expects a recovery in volumes during the second half of the calendar year 2025, supported by a rebound in capex and business-to-business (B2B) activity. The report noted that while the housing sector continues to exhibit healthy demand, the plastic pipe segment has consistently outperformed the tiles sector in volume growth over the past two years. This trend is expected to continue. However, the industry remains vulnerable to sharp fluctuations in PVC prices, which could impact near-term margins and volumes. Despite these challenges, the long-term growth prospects for India's plastic pipe industry remain promising, supported by favorable market dynamics and increasing infrastructure investments. (ANI)
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