Plastic Tubes, Sheets and Other Products- Final Report

7/31/2019 Plastic Tubes, Sheets and Other Products- Final Report

1/36

Industry Analysis

Plastic tubes, sheets and other products


2/36

2 | P a g e

Table of Contents

1. Industry Scope, Structure and Evolution

1.1 Overview 4

1.2 Industry Scope 4

1.3 Industry Structure 5

1.4 Different types of Plastics 8

1.5 Evolution 9

2. Product Life cycle (PLC) 9

3. Overall Market size and Growth Rate

3.1 Global Market 9

3.2 Growth 10

3.3 Indian Market 10

3.4 Growth 13

4. Key players in the segment

4.1 Global Players 14

4.2 Domestic Players 15

4.3 Comparative Financial Analysis 15

4.4 Comparative Production Analysis 16

5. Industry Drivers

5.1 Increase in Oil & Gas and Exploring & Processing activities 17

5.2 Huge Replacement market 18

5.3 Lack of manufacturing facilities in some countries 18

5.4 Upcoming Projects 18

5.5 Growth in Domestic Sectors 18

6. Key Industry Issues

6.1 Raw material price volatility 20

6.2 Shortage of skilled labour 21

6.3 Stiff Competition 21

6.4 Environmental issues 21

7. Status of Technology 21


3/36

3 | P a g e

8. Customer Profile 22

9. Substitute Products 22

10. Supplier Power

10.1. Upstream 22

10.2. Downstream 23

11. Industry Rivalry

11.1. Upstream 23

11.2. Downstream 23

12. Entry barriers

12.1. Upstream 23

12.2. Downstream 23

13. Regulatory Environment 23

14. Porters Five Forces to gauge Industry attractiveness

14.1. Upstream 24

14.2. Downstream 24

15. Possibility of Consolidation 25

16. Industry Prognosis

16.1 Global 25

16.2 Domestic 25

17. Industry Aggregates17.1. Plastic Tubes 27

17.2. Plastic Sheets 28

18. List of All Companies in Rs. 200-500 Crore Bracket 29

19. List of All Companies in Rs. 200-500 Crore Bracket Fitting the Distress Criterion 29

20. Company Financial Analysis (from 19) 30


4/36

4 | P a g e

1. Industry Scope, Structure and Evolution

1.1. Overview

The term "plastics" encompasses organic materials, such as the elements carbon (C), hydrogen (H), nitrogen

(N), chlorine (Cl) and sulfur (S), which has properties similar to those naturally grown in organic materials such

as wood, horn and rosin. Organic materials are based on polymers, which are produced by the conversion of

natural products or by synthesis from primary chemicals coming from oil, natural gas or coal.

1.2. Industry Scope

Basic manufacturing takes place in 6 stages. Heres the route taken in the petroleum -to-plastics process:

Raw Materials

Older plastics were made from a wide range of natural products, including rubbers and gutta-percha. Most

plastics today are made from processed petroleum. Today, 99% of plastics used throughout the world are

manufactured from oil and from natural gas obtained during the refining of crude oil and its separation by

fractional distillation into different products.

Crude oil and natural gas are extracted from the ground, on land or under the oceans, by sinking an oil well

and are then transported by pipeline and/or ship to refineries where their components are processed into

refined products. In fact, approximately 16 percent of all petroleum is destined for use in manufacturing

plastics, synthetic rubbers and other materials1

1Source: www.thomasnet.com/articles/plastics-rubber/plastic-lifecycle

Drilling ofPetroleum andshipping to the

refinery

Refining of CrudeOil and natural

gas into ethane,propane

Cracking ofEthane and

propane intoethylene and

propylene

Formation ofFluff

Production ofResin by adding

addictives

Processing ofPlastics

Plastic Products:Plastic Tubes,

Sheets etc
http://www.azom.com/Details.asp?ArticleID=300http://www.azom.com/Details.asp?ArticleID=300


5/36

5 | P a g e

1.3. Industry Structure

To define the structure of the plastic industry, the process can be divided into three- Polymer Manufacturing

Plastic Processing and the End Users. Polymer manufacturing process includes the refining, cracking and

polymerization. Plastic Processing consist of mixing addictives and the processing.

Crude Oil & Natural

Gas

Refining

Gasoline, Petroleum,

Lubricants etc

Distillation Units

(Ethane, Propane)

Cracking

Steam Cracker

(Monomers:

Ethylene and

Propylene

PolymerizationSynthetic Rubbers,

Tyres

Polymerization

Plant

(Polymer Resins:

Polyethylene,Polypropylene)

CatalystsPaints

Synthetic Fibres,

Clothin etc

AddictivesFabrication Plant

(Plastic Products)Processing

OthersHouse wares,

Adhesives,

Biomaterials, Toys,

Irrigation system etc

Electrical

ComponentsSockets, switches, wire

coating and insulation,

relays etc

Automobile and

TransportationPipes & Hoses, Cables,

Paneling, Insulation,

Housings, Filters etc

InfrastructureWindow fittings, Wall

covering, Flooring,

Tiles, Plumbing, Pipes,

Fittings etc

PackagingBottles, Containers,

Tubs & Pails, Lids &

Cap, Foam, Packaging

Materials


6/36

6 | P a g e

1.3.1. A brief description of the various activities involved in production of plastic products are given below

Polymer Manufacturing

Refining of Crude OilCrude oil contains a mixture of hydrocarbon compounds and relatively small quantities of other

materials such as oxygen, nitrogen, sulphur, salt and water. In the refinery, most of these non -

hydrocarbon substances are removed and the oil is broken down into its various components, and

blended into useful products. The oldest and most common way to separate things into various

components (called fractions), is to use the differences in boiling temperature of different

hydrocarbons. This process is called fractional distillation. Crude oil is heated and the vapours formed

are allowed to enter enters the bottom of the fractional distillation column that is filled with trays or

plates. There is a temperature difference across the column and the trays help to collect liquids that

form at various heights in the column. Newer techniques use chemical processing on some of the

fractions to make others, in a process called conversion. Chemical processing involves breaking large

hydrocarbons into smaller pieces, combining smaller pieces to make larger ones and rearranging

various pieces to make desired hydrocarbons. The output of this stage includes Ethane, Propane,

Kerosene, Gasoline etc

Cracking of Ethane and PropaneWhen Ethane and Propane are extracted, they are then subjected to steam cracking. Steam cracking

is a process that breaks down these materials, which are saturated hydrocarbons, into smaller,

unsaturated hydrocarbons. The ethane and propane are mixed with steam, which dilutes them, and

then fed into an oxygen-free furnace. The materials are heated very quickly at high temperatures

around 850 degrees Celsius, which results in the cracking reaction to form Ethylene and Propylene

Formation of FluffEthylene and Propylene so formed are combined with catalysts, a type of material that causes afurther petrochemical reaction. Often, the catalyst used for polymer manufacturing is called the

Ziegler-Natta catalyst, a type of material of combined titanium compounds and organometallic

aluminum compounds. The introduction of the catalyst causes the ethylene or polythene to fluff into

a type of powdered solution.

When plastics emerge from reactors, they do not have the desired properties that make it a material

of choice. It is still raw material.

Plastic Processing

Mixing addictivesAdditives are incorporated into polymers to alter and improve their basic mechanical, physical or

chemical properties. Additives are also used to protect the polymer from the degrading effects of

light, heat, or bacteria; to change such polymer properties as flow; to provide product color; and to

provide special characteristics such as improved surface appearance or reduced friction.

Types of Additives:

o Antioxidants: Help prevent "oxidation", the polymer reacting with oxygen.o Colorants: Used to create a particular colouro Fillers/Extenders: Used to improve strength and lower the cost of the material.o Foaming agents: Used to form gases in the plastic to produce a foam materialo Plasticizers: To increase flexibility and workabilityo Reinforcements: Used to reinforce or improve tensile strength, flexural strength and stiffness

of the material


7/36

7 | P a g e

The resins produced, are then shipped in pelletized, granulated, powdered, or liquid form.

Processing of plastic productsThere are several different processing methods used to make plastic products based on the type of

plastics needed.

For thermoset, the resin is shipped to manufacturers who will form the resin into a finished shape and

cure it. The cure may be done through heat (generally above 200 C), through a chemical reaction or

irradiation such as electron beam processing. The curing process transforms the resin into a plastic or

rubber by a cross-linking process. Catalysts are added that cause the molecular chains to react at

chemically active sites linking into a rigid, 3-D structure. The cross-linking process forms a molecule

with a larger molecular weight, resulting in a material with a higher melting point. During the

reaction, the molecular weight has increased to a point so that the melting point is higher than the

surrounding ambient temperature, the material forms into a solid material.

Some examples of thermosets are:

o Bakelite, a phenol-formaldehyde resin (used in electrical insulators and plastic ware)o Duroplast, similar to Bakeliteo Urea-formaldehyde foam (used in plywood, particleboard and medium-density

fibreboard)

o Melamine resin (used on worktop surfaces)o Epoxy resin (used as an adhesive and in fibre reinforced plastics such as glass reinforced

plastic and graphite-reinforced plastic)

o Polyimides (used in printed circuit boards and in body parts of modern airplanes)Thermoplastics, however, are extruded into a shape during production, and then shredded into small

pellets. These pellets are then transported to manufacturers, who can melt the pellets down and

eventually refashion them into something else. The processes that are used to mold or shapethermoplastics basically soften the plastic material so it can be injected into a mold, flowed through a

die, formed in or over a mold, etc. The processes usually allow any scrap parts or material to be

ground up and reused. Below are the four main methods in which plastics are processed to form the

products that consumers use, such as plastic film, bottles, bags and other containers.

o Extrusion: Plastic pellets or granules are first loaded into a hopper, then fed into an extruder,which is a long heated chamber, through which it is moved by the action of a continuously

revolving screw. The plastic is melted by a combination of heat from the mechanical work

done and by the hot sidewall metal. At the end of the extruder, the molten plastic is forced

out through a small opening or die to shape the finished product. As the plastic product

extrudes from the die, it is cooled by air or water.

Thermoset Processing

Curing

Thermoplastic Processing

Extrusion

Injection moulding

Blow Moulding

Rotational Moulding


8/36

8 | P a g e

o Injection molding: In injection molding, plastic pellets or granules are fed from a hopper intoa heating chamber. An extrusion screw pushes the plastic through the heating chamber,

where the material is softened into a fluid state. Again, mechanical work and hot sidewalls

melt the plastic. At the end of this chamber, the resin is forced at high pressure into a

cooled, closed mold. Once the plastic cools to a solid state, the mold opens and the finished

part is ejected.

o Blow molding - Blow molding is a process used in conjunction with extrusion or injectionmolding. In the direct blow molding method, a partially shaped, heated plastic form is

inserted into a mold. Air is blown into the foam, forcing it to expand to the shape of the

mold. In the indirect method, a plastic sheet or special shape is heated then clamped

between a die and a cover, Air is forced between the plastic and the cover and the material is

pressed into the shape of the die. This process is used to manufacture hollow plastic.

o Rotational Molding - Rotational molding consists of a closed mold mounted on a machinecapable of rotation on two axes simultaneously. Plastic granules are placed in the mold,

which is then heated in an oven to melt the plastic. Rotation around both axes distributes

the molten plastic into a uniform coating on the inside of the mold until the part is set by

cooling.

The process wise break up of different goods is given below:

Molding Process Product Break-up by Manufacturing

processes in Indian

context2

Extrusion Pipes & Profiles, Fiber, Mono filaments,

Film, Sheet, Wire & Cables etc

76%

Injection Moulding Household goods, Furniture, Luggage,

Packaging, Electrical components etc

18%

Blow Molding Containers, Bottles, Cans 5%

Rotational Molding Toys, Storage Tanks 1%

1.4. Different Types of Plastics

There are many types of plastics that are suited to different application needs. Some of the more common

plastics and its common uses are mentioned below:

Low Density Poly Ethylene (LDPE): A thermoplastic most familiar from its uses in shopping bags,trash can liners, and food storage containers.

High Density Poly Ethylene (HDPE): A thermoplastic Commonly found on most detergent bottles,milk jugs

Polypropylene: A thermoplastic used in packaging, ropes, food containers, car fenders (bumpers),plastic pressure pipe systems and clothing.

Polyvinyl chloride (PVC): A thermoplastic used in a wide variety of applications, including plasticpipes , outdoor furniture, siding, floor tiles, shower curtains, clamshell packaging as well as clothing

and upholstery

Polystyrene: A thermoplastic used in food containers, disposable cups, plastic tableware, Compactdiscs & cassette boxes, packaging foam and jewel cases

2Source: IBEF Report on Rubber and Plastics 2008


9/36

9 | P a g e

Polyester: A thermoplastic or thermoset (depending on the chemical structure) that is more oftenseen in fibers and textiles

Polycarbonate: A thermoplastic designed to feature strong temperature and impact resistance, usedoften in engineering applications like riot shields, security windows, traffic lights, lenses Compact

discs and eyeglasses

1.5 Evolution

1.5.1. Plastic Tubes/Pipes

Plastics were developed before and during World War II. Water systems engineers at first considered plastic

pipe only a substitute for the cast and ductile iron pipe that made up much of our water piping, and clay pipe

that was used for sewer systems. Light in weight, with non-corrosive properties, and resistant to chemical and

bacteriological build up, plastic pipe offered benefits lacking in traditional pipe. Since the late 50s and the early

60s, the use of plastic pipe has increased at a breathtaking rate. From this point on, plastic pipe has not only

expanded its applications, different kinds of plastic have been constantly refined to meet every possible need.

The most popular plastic pipe materials include polyvinyl chloride (PVC), polyethylene (HDPE), each with its

own set of advantages and disadvantages.

Plastic is relatively a new entrant in the piping industry. Concrete has, in some form or another, been around

since the Assyrians, Babylonians and Egyptians, while steel was first patented in 1855. Plastic, on the other

hand, beginning with polyvinyl chloride or PVC in 1926, dates back to the 1930s, when it was used for sanitary

drainage. Low density polyethylene was discovered in 1935 and it wasn't until sixteen years later in 1951 that

high density polyethylene appeared on the scene in response to a need for a superior insulating material that

could be used for such applications as radar cable. Since then, polyethylene has made its way into various

applications.

1.5.2. Plastic Sheets

Data unavailable

2. Product Life CycleDeveloped countries such as Western Europe and North America, as well as Japan are comparatively mature

markets where growth in consumption activity tends to be well below the global average. Developing markets,

such as China, India and other emerging nations in the Asia/Pacific region; Eastern Europe; Latin America; and

the Middle East region are in the Growth stage of the Product Life Cycle.

3. Overall Market Size & Growth3.1. Global MarketSize

Since 1950, total world production/consumption of plastics was at an average annual rate of growth of 15 %,

or doubling every five years driven by a track record of continuous innovation. This trend continued until 1975-

1979, the period of first oil shock. This high growth rate was never achieved again; the average annual growth

rate of plastics was 15% from 1960 to 1974, and 8% thereafter, from 1974 to 2000, and 2007. From 1.5Mt in

1950, total global production reached 260 Mt in 2007. Global production fell back again in 2008 to 245 million

Mt as a direct consequence of the global financial crisis which had virtually affected all the sectors.3

Year 1950 1960 1976 1979 1989 2000 2005 2007 2008 2010E 2015E 2020E

Production

(in Mt)

1.5 7 50 62 100 160 196 260 245 300 365 538

3Source: Report by European Plastic Converters


10/36

10 | P a g e

Asia has been worlds largest plastics consumer for several years. It is expected to account for about 34% of

the global consumption excluding Japan, which has share of about 7.75%. North America is expected to 21%

share and Western Europe with 23% share in the global market4.

The global plastic- product wise consumption is given below*5:

*Figures as in 2008

3.2. Growth

Global growth of polymers in 2010 is estimated to show similar levels as pegged in 2006-07 mainly due to

excellent growth in China, good growth in India as well as other Asian countries. Asia now accounts for almost

35-40% of the global polymer consumption6, and therefore is a major deciding factor in influencing the global

growth of polymers. The polymer demand for consumer products, automotive applications and packaging

sector in Asia will continue to drive the growth of polymers; as these three population-driven market segments

will benefit from the growing populace of the Asian region that already accounts for 40% of the worlds

inhabitants.

Plastic pipe products are expected to continue expand their share of the overall world pipe market. Worldwidedemand for plastic pipes/tubes is forecast to increase 4.5 percent annually to 8.1 billion meters in 2012

7. The

sector is gaining market share at the expense of pipe made with commodity materials such as iron and

concrete.

PVC pipe, which accounted for two thirds of plastic pipe demand in 2007, will remain the primary plastic pipe

in use, due to its widespread use in numerous construction applications. . Nevertheless, demand for other

types of plastic pipe will post greater rates of growth through 2010. High density polyethylene (HDPE) pipe, for

example, will benefit from growing use in natural gas transmission, electrical conduit and in corrugated drain

and sewer pipe applications.

3.3. Indian Market Size

The Indian plastic processing industry is highly fragmented. According to a 2008 estimate, it comprises of

about 55000 processing units spread over both the organized and unorganized sectors, employing an

estimated 0.4 million people and contributing over Rs 80,000 million (US $1.8 billion). About 85% of the plastic

processing units are in the small scale sector and these account for about 25% of the total production. Globally

4Source: www.plasticnews.com

5Source: www.plasticnews.com

6

Source: www.plastemart.com/upload/Literature/India-polyolefin-in-2007-over-60-total-polymer-consumption-exceeding-6.5-mln-tons.asp7

Source: http://www.encyclopedia.com/doc/1G1-192002737.html

40%

25%

5%

10%

20%

Global Plastic -Product Consumption

Packaging

Infrastructure

Electrical Components

Automotive and Transportation

Others


11/36

11 | P a g e

the degree of fragmentation id large and despite the small size of operations of the players, they are able to

operate profitably8.

In terms of product segments, following the global trend, plastics find widespread application in packaging

industry, followed by construction and household.*9

*Figures as in 2008

3.3.1. Export Market

In 2008-09, the value of world plastic export was US$ 3.7 billion per year. However the share of India was less

than 1 % year, way behind the market leader China, whose exports total US $ 22 billion. Exports are likely to be

down by 11-12 per cent in 2009-10 as key markets for Indian plastics like the US continue to be impacted by

the recession10

.

The top trading partners for Indian plastic industry are USA, UK, Italy, UAE and Germany.

3.3.2. Analysis of the Market size across the Value Chain

3.3.2.1. Petrochemical Production

The Petrochemical industry, which entered in the Indian industrial scene in 1970s, registered a rapid growth in

the 1980s and 1990s. Petrochemical industry mainly comprise of synthetic fibre / yarn, polymers, Synthetic

Rubber, Synthetic detergent intermediates, performance plastics and plastic processing industry.

The production performance of petrochemicals during 2002 to 2008 is as follows11

:

Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Production

( in Mt)

6.235 6.553 7.007 7.349 7.467 7.841 7.460

3.3.3.2. Polymer Production

Indias per capita consumption is however just one-fifth of the world average. Indias per capita consumption

is 5 kg compared to the world average of 26 kg. Per capita consumption is highest in N America 90 kg, S

America 18 kg, W Europe 65 kg, E Europe 10 kg and China 30 kg12

.

8Source: IBEF Report on Market and Opportunity-Rubber and Plastics 2008

9Source: IBEF Report on Rubber and Plastics 2008

10

Source: Plastindia11 Source: Department of Chemicals & Petrochemicals, Government of India 12Source: http://www.cipet.gov.in/plastics_statics.html

42%

14%12%

9%

7%6%

10%

Indian Plastic -Product Consumption

Flexible Packaging

Rigid Packaging

Infrastructure

Household

Appliances

Electrical Component

Others


12/36

12 | P a g e

Production of Polymers in India13

Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Production

( in Mt)

3.97 4.17 4.49 4.77 4.77 5.18 5.0

The chart given below shows the consumption pattern of polymers in 200814

. There is negligible shift in the

consumption pattern over the years. PE and PP together account for about 70% of the total consumption.

3.3.3.3. Plastic Product Production and Consumption

Plastic tubes & sheets can be made from polyvinyl chloride (PVC), polypropylene (PP) and polyethylene (PE).

PVC accounts for the largest majority of pipe/tube materials where as sheets and films are majorly

manufactured from PE and PP.

The usage of Polymers (PVC, PE, and PP) across sectors has also remained constant over the last few years. The

charts below show the pattern for 2008. Pipes and fittings with 68% dominate the PVC consumption in India.

Sheets and Films account for about 8%

15

. About 50% of the PE consumption is by Sheets and Films, of whichPE sheets form about 60% and Pipes account for only 6%16

A large part of Polypropylene (PP) produced is used for Packaging, both flexible and rigid. In flexible packaging

it is used in Food and Confectioneries and Clothing packaging and in rigid packaging as Caps and Closures. PP is

used as monomaterial solution for automotive interiors. PP is also used for making fibres which has a host of

applications including tape, strapping, bulk continuous filament, staple fibres, spun bound and continuous

13Source: IBEF Report on Market and Opportunity-Rubber and Plastics 2008

14Source: Report by Chemicals & Petrochemicals Manufacturers Association

15Source: Report on Indian vinyl industry status and outlook

16Source: Report on PE industry Update

5%

17%

19%

31%

24%

4%LDPE

LLDPE

HDPE

PP

PVC

PS & Others

68%8%

8%

8%3% 3% 2%

PVC Sector Wise Consumption

Pipes & Fittings

Calendering

Films & Sheets

Wires & Cables

Footwear

ProfilesOthers

50%

30%

6%

2% 1% 11%

PE Sector Wise Consumption

Films & Sheets

Molding

Pipes

Wires & Cables

Fiber

Others


13/36

13 | P a g e

filament. A small percentage of PP is used to manufacture a range of Sheet, Pipe, Compounding and

Returnable Transport Packaging (RTP).

Polystyrene is used in food packaging applications (dairy products containers, meat or vegetable trays),

catering (disposable plates, cutlery, and glasses), vending cups (coffee automats), multimedia (CD-boxes, video

and audio tapes, computer disks, television fronts, and video recorder), appliances (refrigerators), houseware,

furniture amongst numerous other applications.

The overall picture across the value chain is as follows*:

Petrochemicals (7.460)

Polymers (5.0) Synthetic Fibres (1.98) Others (Elastomers, Surfactants) (0.48)

PP (1.55) PE (2.05) PS &Others (0.2)

Pipes (0.123) Sheets (0.615) Others (1.312) Pipes (0.816) Sheets (0.09) Others (0.28)

(* Figures as in 2008 in Mt)

Comparison of product wise consumption pattern in global and Indian market

Global Indian Remarks

Packaging 40% 56% (42% -Flexible,

14%- Rigid)

The fastest growing segment for plastics

bettering the world usage.

Infrastructure 25% 12% This Segment that promises great opportunity of

growth supported by the increasing demand

Electrical Components 5% 6% Growth in sync with the global market

Automotive and

Transportation

10% Very Small Another sector to concentrate. Pipeline

transportation is an important area here.

Others (Household,

Consumer Appliances)

20% 26% Households and Appliances still accounts for a

big chunk in India.

(Note: The analysis of value chain from an application point of view is not done as the break up across the

entire value chain was not available)

3.4. Growth

Since its inception in 1957, the Indian plastic industry has grown to service both domestic as well as its

overseas market, with a number of developments in the plastic machinery and the petrochemical sector.

Plastic industry, one of the fastest growing industries in India, has been growing at a phenomenal rate over the

years.

India's polymer demand grew by healthy 24% in the nine months ended December 2009, powered by 34%

spike in demand for Poly Vinyl Chloride (PVC) resins, 28% rise in demand for Polypropylene (PP) and 14%

increase in demand for Poly ethylene (PE). This coupled with recovery in the global economy should help the

plastic product manufacturers focused on domestic and global markets. In the last five years, the Indian

PVC (1.2)


14/36

14 | P a g e

plastics processing industry has created additional processing capacity of 14% in tonnage on annualized basis

year after year. The annual processing capacity as on March 2009 has become around 14 million tonnes.

During the same period, the growth in consumption of plastics goods was 12% per annum by volume, year

after year.

The sector grew by mere 7% in FY 2008-09, due to wild fluctuations in the polymer prices and the demand

destruction in the second half of that fiscal due to global economic and financial crisis. The industry hasconsumed around 6.5 million tonnes of prime plastics and converted 1.5 million tonnes of recycled plastics

into products in FY09. By 2010, the industrys cumulative contribution to the Indian economy is expected to

be US $ 44 billion, accounting for 0.7% of Indias gross domestic product (GDP)17

.

The plastic industry is fast moving up the value chain, from manufacturing lower-end everyday products like

buckets and mugs to high-end applications such as auto fuel tanks or hot-water pipes. These new plastic

products are also transforming a number of other industries where they are used. The applications of plastic

pipes and sheets within the segment are underground transportation (pipelines) and construction. This aspect

is discussed in detail Industry drivers.

One major sector expected to contribute immensely to the growth is Infrastructure. Comparing the global and

the domestic plastic- product wise consumption pattern, it can be found that the plastic products account for

about 25% on a Global level whereas in India it is just the half of it (12%).

Major international companies from various sectors such as automobiles, electronics, telecommunications,

healthcare etc. have set-up large manufacturing bases in India. Therefore, demand for these plastic products is

expected to increase rapidly.

4. Key players in the segment4.1. Global Players

JM Eagle: J-M Manufacturing Company, Inc. merged with PW Eagle and is collectively known as JMEagle. Headquartered in New Jersey, USA, they together comprise the worlds largest plastic pipemanufacturer.

IPEX Inc, located in Canada manufactures one of the world's largest and most diverse lines ofintegrated thermoplastic piping systems-pipe, valves, fittings and auxiliary.

KWH Pipe Ltd, a Canadian based company is a world leader in the manufacture and development ofplastic pipe systems.

Polypipe Limited is the market-leading manufacturer of plastic piping systems brand in the UKbuilding products sector

Advanced Drainage Systems, Inc. headquartered in Ohio, United States is the world's largest producerof corrugated high density polyethylene (HDPE) pipe and related products.

Goex Corp. in United States is the industry leader in extruding a wide variety of resins into qualitycustom rigid plastic sheet and roll stock products

Spartech Corporation, United States is a leading producer of plastic products including polymericcompounds, concentrates, custom extruded sheet and roll stock products and packaging technologies

for a wide spectrum of customers.

17Source: http://www.cipet.gov.in/plastics_statics.html


15/36

15 | P a g e

4.2. Domestic Player

Finolex Industries Limited (FIL) is the largest PVC pipe manufacturer in India. Beginning as a modestrigid PVC (Poly Vinyl Chloride) pipe manufacturer, FIL went on for backward integration and now

manufactures PVC resin too.

Kriti Industries Ltd is a leading manufacturer of plastic polymer piping systems, moulded plasticproducts

Chemplast Sanmar Ltd, the flagship company of Sanmar group has PVC as one of its main business,PVC business is backward integrated and gets its inputs from its own captive plants

Reliance Industries Limited has a wide range of products from petroleum products & petrochemicalsare recently into manufacturing of HDPE Pipes.

Tulsi Extrusion Limited is engaged in the manufacturing of Rigid PVC pipes and fittings , HDPE pipes,SWR pipes and fittings, blue casing pipes, ASTM plumbing pipes, LLDPE pipes, Elastomeric Sealing

pipes, and moulded components for multiple uses.

Ester Industries Ltd. is Indias leading producer of polyester films. They have forward and backwardintegration of manufacturing facilities

Caprihans India Limited is one of the largest manufacturers of PVC Films in India Finolex Cables Ltd, the flagship company of the Finolex Group manufactures PVC sheets Responsive Industries Ltd specializes in soft sheeting

4.3. Comparative Financial Analysis

4.3.1. Plastic tubes/pipes18

Particulars Reliance

Industries Ltd

Tulsi Extrusion

Ltd

Finolex

Industries Ltd

Chemplast

Sanmar Ltd

Kriti Industries

Ltd

(in Rs. Crore)

Sales 146328.07 82.45 1698.80 761.33 569.0

EBIDTA 25386.94 6.52 23.97 69.79 17.58

PAT 15309.32 1.26 (37.89) (66.62) (2.71)

Net Worth 126372.97 74.51 499.95 306.56 30.93

Total Assets 245953.16 116.32 1878.92 1880.29 163.81

Debt Equity Ratio 0.66 0.45 1.61 4.13 1.90

Operating Margin 17.33 8.26 1.54 7.50 3.08

Net Margin 10.54 1.90 (2.02) (9.24) (0.48)

ROE 14.85 1.71 (7.19) (19.60) (8.39)

ROA 7.73 1.17 (2.08) (3.99) (1.42)

18Source: Prowess| Mar 2009


16/36

16 | P a g e

4.3.2. Plastic sheets19

Particulars Finolex Cables Ltd Responsive

Industries Ltd

Ester Industries

Ltd

Caprihans India

Ltd

(in Rs. Crore)

Sales 1505.55 453.87 410.71 173.73

EBIDTA 45.63 52.51 76.45 9.21

PAT (35.49) 26.61 33.43 3.35

Net Worth 596.23 122.27 141.08 91.22

Total Assets 1095.94 295.82 246.65 129.14

Debt Equity Ratio 0.50 0.58 0.40 0

(in %)

Operating Margin 1.23 11.33 16.94 5.10

Net Margin (4.09) 5.63 6.56 1.77

ROE (5.73) 23.90 26.31 3.69

ROA (3.16) 9.59 13.46 2.65

4.4. Comparative Production Analysis

4.4.1. Plastic Tubes/Pipes20

Reliance Industries Limited

Production(in 000 metre) Sales Value (in Crores)

HDPE Pipes 9500 80

Tulsi Extrusion Ltd

Production(in tonnes) Sales Value (in Crores)

PVC Pipes & fittings 9846.30 70.71

Finolex Industries


PVC Pipes 85548 505.55

Chemplast Sanmar Ltd


Pipes 13923 82.96

Kriti Industries Ltd


PVC Rigid Pipes 27451 202.83




17/36

17 | P a g e

4.4.2. Plastic Sheets21

Ester Industries Ltd


Films 29534 332.54

Caprihans India Ltd


Rigid & Flexible PVC Sheets 15420 161.71

Plastic Extruded Sheets & Films 420 3.4

Finolex Cables Ltd


PVC Sheets & Accessories 1506 16.90

Responsive Industries Ltd


Pipes 3785.20 15.69

5. Industry DriversPlastic find application in a wide range of products, in industrial and agricultural applications and consumer

use. Plastic tubes and sheets are widely used in applications such as automobile, transportation, irrigation,

infrastructure etc. Hence, the demand for these products depends largely on growth in user segments and

over all macro-economic growth. It has been seen that the consumption of polymers is closely linked to the

economic development of a country.

It is expected that the positive trend in the Indian pipe industry to continue for the next 3-5 years on the back

of higher E&P activities due to resurgence in crude oil price, increased efforts by the Government of India (GoI)

on infrastructure development for laying pipelines for oil & natural gas transport (e.g. the National Gas Grid

project), replacement demand from North America and European countries, water & sewage transport and

irrigation facilities.

The key industry drivers for the industry are:

Increase in Oil & Gas and Exploring & Processing activities Huge Replacement market Lack of manufacturing facilities in some countries Upcoming Projects Growth in Domestic Sectors

5.1. Increase in Oil & Gas and E&P activities

2008-09 financial crisis had a limited impact on the Indian pipe industry affecting new oil and gas exploration

and production (E&P) projects worldwide due to fall in global commodity prices including crude oil resulting



18/36

18 | P a g e

into reduced orders. With the worst of the financial crisis behind, the market remains optimistic regarding the

potential demand for the pipe sector. The E&P projects which were earlier stalled or revoked are being given a

new lease of life based on the inevitable rise in crude oil prices. The GoI in its efforts to reduce crude imports

has formulated the New Exploration Licensing Policy (NELP) for exploration and production of oil & gas. The

GoI has awarded 256 blocks till date and the number is set to increase to 330 by 2010.

The increasing E & P activities translate into the growth and demand for pipes used for exploration and for linetransportation pipes used for transporting oil and gas over long distance.

5.2. Huge Replacement market

Pipeline transportation is the most effective mode of transporting oil and gas. Transportation by pipes costs

around 1.5 tonnes vis--visroad and rail transportation of Rs. 2.3 per ton and Rs. 3.5 per ton respectively 22.Besides cost efficiency other factors which give an edge to pipeline transport are safety, eco-friendliness and

protection against pilferage.

So, there is demand emanating from the replacement market. Moreover, the pipeline network of both the US

and Russia is over 40 years old. Clearly, there is a lot of long-term demand for pipes out there in the market23

.

5.3. Lack of manufacturing facilities in some countries

Another major factor for the rise in demand for pipelines is the lack of adequate manufacturing capacity in

some countries. While the demand for pipes in the US currently stands at around 3,150 km per annum, the

country has a total manufacturing capacity of only 2,100 km per annum. Over the next seven years, this

demand is expected to rise to 36,300 km. The Middle East too is experiencing a similar situation compared

with an annual demand for 4,200 km of pipes, manufacturing capacity stands at just around 1,800 km. In the

next seven years, demand from the Middle East is likely to rise to 28,000 km, which would translate into $10

billion.

5.4. Upcoming Projects

The total world demand for pipeline is estimated to be 71 million tonnes*.24

Planned Project Total Length (in Km) Required tonnage

( in million tonnes)

Total 454 235171 71

* Figures for 2007-12

The major portion of world demand for pipelines is expected to flow from Middle East and Asian countries

demanding over 45% of world demand followed by American countries 33% and European countries 15%. The

demand scenario indicates three leading markets for pipes industry i.e. Middle East & Asia, America & Europe.

5.5. Growth in Domestic Sectors

5.5.1. Underground Infrastructure

Plastic pipes have forever changed the underground infrastructure. Polyethylene pipes are used for the

transporting natural gas and oil. An increasing percentage of our drinking water systems and sanitary sewers

are composed of polyvinyl chloride (PVC) plastic pipes, with more linear feet of new PVC water and sewer pipe

going in the ground today than all other types of pipe combined.

22Source: www.business-standard.com

23

Source: www.business.outlookindia.com

** Figures as in 200824

Source: Report by Simdex (Future Pipeline worldwide guide)


19/36

19 | P a g e

At present, India transport just over 45% of its petroleum products via pipelines. The oil and natural gas

pipeline network of India is approximately 1396825

km with a penetration level of 32% which is much below

the global level of 79%**. In comparison, even Pakistan has a pipeline length almost five times at about 56,400

km. US, on the other hand, boasts of among the largest networks with a total pipeline length of 18.3 lakh km.

India also has the unique distinction of having one of the lowest pipeline spreads per sq km of land at .003 km

compared to the UK (1.08 km) and the US (0.19 km)26

. With Private players like Reliance Industries Limited

(RIL), Cairn India etc showing interest in setting up pipe infrastructure for oil & gas distribution and theNational gas grid, the 8,000 kmpan-Indian network to distribute piped gas expected to be set up in 2015

27;

share is expected to increase in the future.

In view of the strategic importance of the oil & gas industry and oil security, and recognizing the demand for

energy, to fuel economic growth, Government of India (GoI) has developed the 'India Hydrocarbon Vision

2025 for hydrocarbon sector, comprising the different sectors including national and transnational pipelines.

The major upcoming project is the 1680-kilometre (1,040 mi) IranPakistanIndia gas pipeline, which is

proposed pipeline to deliver natural gas from Iran to Pakistan and India.

City gas pipe is currently available in 10 cities and the coverage is expected to grow to 40 cities in the next five

years, entailing an investment of Rs. 250-300 billion28

.

Plastic pipes are also used in transportation of water for commercial and residential purposes. The

government has targeted to provide access to 87% India's urban population to piped water by 2017. This

involves an investment of Rs 85000 Crores29

. Use of plastics in achieving this target can reduce the upfront

investment requirement by 20%30

.

Pipe breakage is the biggest cost for water distribution utilities. It has been observed from a study conducted

by the vinyl institute that the number of breaks in every 100km of pipes in service is about 0.7 for PVC pipes

compared to 35.9 for cast irons and 9.5 for ductile irons. China has encouraged the use of plastic pipes. By

2010, amongst the newly built, revamped or expanded projects, 80% of drainage pipes, 30% of urban sewage

pipes, 80% of water supply shall adopt plastic31

.

Also the material cost of plastic is lower than concrete and corrugated metal. Despite the successfulimplementation if plastics in piping internationally, there is a low usage of plastic pipes in India.

5.5.2. Agriculture & Irrigation systems

In the current scenario, while contribution of agriculture to the Indian economy is reduced significantly, more

than 60% of the Indian population directly or indirectly depends upon agricultural economy. India has adopted

some of the newer techniques for agriculture, but modern techniques involving the use of plastic is still lagging

behind. Better known as Plasticulture; the use of plastic in agriculture includes irrigation, greenhouse and

mulching.

India continues to depend upon water arising from monsoon (rain fall harvesting) and food grain production

across the country continues to depend upon the rainfall. The modern techniques of micro-irrigation are yet tobe adopted by Indian farmers. While China's agricultural sector uses modern techniques and consumes plastic

to a very great extent, agricultural sector in India uses a very small percent of the total plastic consumed in the

country. The Government has allocated a huge amount in its eleventh 5-year plans, wherein the country

desires to add 11 million hectares of irrigational facilities, entailing an investment of Rs.1580 billion . If this plan

25Source: Report on Pipelines in India by Petroleum Planning & Analysis Cell (Figures as in April 2009 )

26Source: http://www.indiratrade.com/reports/institutional/rmlt.pdf

27Source: www.thaindian.com/newsportal/

28Source: Report on Indian Pipe Industry by Bharat Books (Figures as in 2008)

29Source: World Bank

30Source: Crisil Report on Indian plastic vision 2010

31Source: Crisil Report on Indian plastic vision 2010


20/36

20 | P a g e

succeeds, a total of 2.4 million tons of plastic will be used for these applications32

. In addition to this the GoI

has also increased the annual budget allocation under the Rajiv Gandhi Drinking Water Mission from Rs.65

billion to Rs.74billion in the previous Union Budget 2009-1033

.

India has wide range of weather all across the country. It therefore needs the crop cultivation in a controlled

atmosphere. Green house as well as low tunnel cultivation could be very useful. Greenhouse film is used to

cover the greenhouses to protect the plant from unseasonal rain and control optical and growing conditions in

greenhouse cultivation. In fact India has started using green house technique for cultivation of floriculture.

Mulching is not well developed in India. Products like LDPE Mulch films have high potential in the country. This

film is used to retain the moisture level in the soil for the proper growth of fruits and vegetables. India being

the No: 1 producer of fruits and No: 2 producer of vegetables in the world, a high potential exists for plastic

products related to agriculture.

5.5.3. Construction

Plastics play a significant role in the building and construction industry as well. In fact, the industry is the

second largest consumer of plastic, followed only by the packaging industry. In the construction industry,

plastics are used for items such as pipes and valves. The average working life of all plastics applications in

construction is 35 years but, depending on the specific application, this has a wide variation between 5 years

(such as wallpaper) and 80 years (such as pipes)34

. Within piping and valves, plastics are highly used because of

their superior resistance to corrosion. In fact, they can be used for everything from freshwater to saltwater,

from crude oil to laboratory waste. In addition, they are much lighter than other materials and easier to install.

They are also less expensive.

The market for PVC and HDPE/LDPE pipes is expected to expand with more focus of GoI in improving the urban

and rural infrastructure. The various schemes announced by the Government like Accelerated Irrigation

Benefit Programme, Jawaharlal Nehru National Urban Renewal Mission, Indira Awaas Yojana etc will be the

main demand drivers.

Geo-synthetics are flexible polymeric sheets that are applies to the soil surface or between materials in civilengineering applications. Uses of geo-synthetics include various infrastructural projects including roads &

highways, airports (runways), railways, landfills, storm drainage, erosion control etc. Geosynthetic can be a

better and cost effective alternative to other materials in infrastructure development but continue to be

underutilized in India.

The Asia/Pacific region, the largest market, accounted for 44 percent of global geosynthetic sales in 200835

.

Advances in this region are primarily driven by China, which itself accounted for three- quarters of the regions

geosynthetic sales in 2008. Gains stem from the countrys ongoing development of large -scale hydrological

and transportation infrastructure projects, as well as its need to protect against erosion and soil loss.

A recent study into geosynthetic from industry research firm The Freedonia Group predicted that global

demand for geosynthetics would increase 5% annually to 4.7 billion square metres in 2013. When focusing on

India, it revealed that demand for geosynthetics was projected to increase 12.3% a year to 100 million square

meters by 2013, up from just 56 million square metres in 2008, with transportation being its biggest market.

This rate is the strongest in the world for an individual country. This demand largely comes from within the

transportation sector as the country is expected to add 309,000km of newly paved roads by 2013 about 75%

of India's population live in rural villages, so the new roads will bring prosperity and business to remote

areas36

.

32Source: www.prlog.org/10560643-outlook-and-challenges-for-the-indian-pipe-industry.html

33Source: Interim Union Budget 2009-10

34

Source: www.plasticsconverters.eu/markets/building35 Source: Report on World Geosynthetics to 2013 by Freedonia36

Source: www.roadtraffic-technology.com


21/36

21 | P a g e

6. Key Industry IssuesSome of the key industry issues identified are given below:

Raw material price volatility Shortage of skilled labour Stiff Competition Environmental issues

6.1. Raw material price volatility

The process is highly raw material dependent as the industry is highly Raw Material (RM) intensive with the

RM cost accounting for more than 70-80% of the total cost for pipe companies. As the input for plastics are

crude oil, polymer prices are directly proportional to the crude oil prices. Any fluctuation in the international

crude oil price will translate in a Fluctuation in polymer prices thus affecting the margins.

However larger players operating in the organized sector have been able to pass on the price hike to their

customers due to better quality specialized products catering to customer needs for critical application

6.2. Shortage of skilled labour

There is a shortage of skilled labour in the plastic industry. One of the reason is the shifting of preference form

blue collared job to white collared job. Another reason is inadequate wages being paid in the sector as

compared to other booming sectors. Due to the mismatch in the demand supply, the labour cost no longer

turns out to be cheap.

6.3. Stiff Competition

With larger capacities becoming operational in many parts of the world, India will have to actively explore

other markets like Africa to increase its exports. Though Indian players export to Middle East and Latin

America, the markets will see high competition as players from other geographies such as China, Japan

increasingly target these markets.

6.4. Environmental Issues

Plastic causes serious damage to environment both during its production and disposal. The major chemicals

that go into the making of plastic are highly toxic and pose serious threat to living beings. Some of the noxious

substances emitted during the production of plastic are synthetic chemicals like ethylene oxide, benzene and

xylenes. Besides hitting hard the eco-system, which is already fragile, these chemicals can cause an array of

maladies ranging from birth defects to cancer, damage the nervous system and the immune system and alsoadversely affect the blood and the kidneys, while many others are gases and liquid hydrocarbons that vitiate

earth and air. And, many of these toxic substances are emitted during recycling of plastic, too.

Apart from these perils, recycling of plastic is very uneconomical and labour-intensive as has been revealed by

a study conducted by the Public Interest Research Group, based in Delhi, India. Recycling of plastic is

associated with skin and respiratory problems, resulting from exposure to and inhalation of toxic fumes,

especially hydrocarbons and residues released during the process. What is worse, the recycled plastic

degrades in quality and necessitates the production of more new plastic to make the original product.

7. Status of TechnologySince the industry is dominated by small players, the technology and the techniques used are often obsoleteand result in higher costs and lower quality products. As a result the cost of production is higher than in case of


22/36

22 | P a g e

other big ventures which use updated method of production. This has acted as a serious handicap especially

after opening up of the economy when they have to compete with imported goods.

There has been a continuous upgradation in the plastic manufacturing technology. From the production side,

industry efforts to implement computer-aided design and manufacture (CAD/CAM) lead to drastic reductions

in costs, reductions in turnover time, and decrease some of the environmental concerns by minimizing

material waste. These continuing advancements in process technology remain the key factors behind theplastics piping products' success and future growth.

The use of nano technology has also proved to be an exciting technological advancement that has the

potential to contribute significantly to the future of plastics and plastic products. Nano composites enhance

the properties of thermoplastic resin, thus making them tougher, more heat and scratch resistant and can be

processed using the same equipment and methods as 'traditional' resins. Plastic nanotubes are also being

created with Nano technology, capable of carrying or dissipating significant electrical charge.

Significant recycling advances have been made in the industry replacing the existing mechanical recycling with

chemical recycling. It involves the generation of monomers and building blocks in high purity from the plastic

waste, enabling the re-manufacture of the original or new plastics.

8. Customer ProfileCustomers of plastic tubes/pipes and sheets are Downstream users like individual consumers and businesses

mostly across three sectors-Transportation, Agriculture and Construction.

TransportationGAIL, RGTIL (Reliance Gas Transportation India), ONGC (Oil and Natural Gas Corporation) and GSPL

(Gujarat State Petronet) are the only major players in transporting gas through HDPE pipes. Indian Oil

Corporation (IOCL) and Oil India (OIL) have also entered the segment but in a small way.

IrrigationPVC, PE Pipes and PC Sheets will be used here by farmers.

ConstructionPC, PVC Sheets, for construction and interior designing and PVC pipes, for plumbing are used by

builders.

As the number of manufacturers are high, the consumers have choice of whom to buy from but they have

moderate to low bargaining power as the downstream user industry is fragmented, which reduces their

collective bargaining power. Low product differentiation & low switching costs for customers combined with

reduction in import duties on the petrochemical products (polymers in this case) and additional capacitiescoming up in the Middle East have improved the bargaining power of the customers.

9. Substitute ProductsThe threat of substitution is quite high for plastic pipes. However, the high degree of substitution also means

that plastic pipes have a high chance replacing its substitutes. Steel pipes can substitute plastic pipes in

transportation where as conventional concrete pipes are still used for construction.

10. Supplier Power10.1. Upstream

There are four main players dominating the upstream sector noticeably Reliance Industries Limited (RIL),

Indian Petrochemicals Corporation Limited (IPCL), Gas Authority of Indian Limited (GAIL) and Haldia


23/36

23 | P a g e

Petrochemical Limited (HPL). RIL along with IPCL accounts for 70% of the petrochemical capacity in the

country. Due to this oligopolistic nature of the domestic market, the supplier power is significantly high.

10.2. Downstream

There are large numbers of small fragmented players in this industry due to which any one player or a cluster

of players cannot dictate the price. Moreover there is low differentiation among the products of smallerplayers, thus a low switching cost. Further, the reduction in import duties for these products and better quality

products in the foreign market has kept the supplier power medium.

11. Industry Rivalry11.1. Upstream

Rivalry within the domestic market is limited, as there are only a handful of players with world-class capacities.

However, with reduction in duties, there is threat of imports from Middle East and the Asia Pacific region,

which is going to increase the competition. Also, the refineries are getting integrated, which will reduce the

industry concentration in terms of market share.

11.2. Downstream

The manufacturing industry is mostly unorganized and highly fragmented with no company having a

substantial market share. Added to this is the fact that the companies at the primary inputs are doing forward

integration and have started producing end products and thus compete directly with its small customers.

The main differentiation between the products of smaller and the well established players are quality and

Price. Quality is a function of the technology that is used for the production whereas price depends on the

overall cost of production. The large players make better quality products at lower cost by combining the

technical expertise, modern technology and economies of scale. Thus, there is moderate rivalry in this

segment.

12. Entry barriers12.1. Upstream

The initial stages of production (Crude oil to Resins) are extremely capital-intensive in nature which makes it

impossible for small players in the downstream segment go in for backward integration. The minimum

economic size of an integrated plant is around 1 million tonnes per annum, which in turn call, for huge

investments investment of Rs 100 billion. But existing petrochemical companies can go in for forward

integration (Example: Reliance Industries Limited (RIL)).

12.2. Downstream

Capital requirement for setting up a plastic-product production plant is the less which can be explained by the

large number of small players in this segment.

13. Regulatory EnvironmentGoI has been playing a proactive role in supporting the plastic industry and the products. . The Indian Centre

for Plastics in the Environment (ICPE) set up on the recommendation of a Task Force constituted by The

Ministry of Environment and Forests (MOEF) is a body registered under Society Act on January 27, 1999. It is a

nodal agency recognized by the Government of India to handle all issues related to Plastics and Environment in

the country.

The task force on Petrochemicals has envisioned the following:


24/36

24 | P a g e

Development of value-added, quality petrochemical products at globally competitive prices using eco-friendly processes and technologies.

Innovation of new applications and products with focus on sustainable development.The Indian government has reserved certain categories of plastic products for Small Scale Industries (SSI). SSI

accounts for more than 70% plastic industry turnover. Some of the key products reserved includes PVC Pipes,

Polyester sheets, Tubular PP films, thermo welded plastic products etc. These are mostly low cost, low

technology items. Most high-end plastic products are not reserved.

Environmental Regulations

Plastic waste comprises 1-4 per cent of the total 80,000 tonne of Municipal Solid Waste (MSW)

generated everyday in India in terms of weight. This works out to 800-3,200 tonne of plastic each day.

Till now, there is no definite environmental policy and legislation framed in respect of plastic waste in

India, the plastic waste gets generated, collected, traded and reproduced by known methods into useful

products, thereby supplementing supply of raw materials at economic price. However, certain states

have come up with acts and legislations prohibiting throwing or depositing of plastic products in public

places and to facilitate the collection through garbage in identified and market garbage receptacles for

non-biodegradables, at convenient places. The National Plastic Waste Management Task Force ofEnvironment and Forest, GoI, has recommended a strategy and action programme of Plastics Waste

Management in India. They have issued criteria for labeling plastic products as Environmental friendly'

under its Ecomark' scheme in association with Bureau of Indian Standards. One of its requirements is

that the material should be biodegradable.

14. Porters Five Forces to gauge Industry attractiveness14.1. Upstream

14.2. Downstream

Competitive Force Ratings RemarksHigh Medium Low

Rivalry Only a handful of players

Entry Barriers Highly capital intensive

Buyer Power Fragmented downstream operations butincreasing imports

Supplier Power Oil Companies going for forward integration

Threat of Substitutes Rising Imports

Competitive ForceRatings

RemarksHigh Medium Low

Rivalry Highly Fragmented industry

Entry Barriers Low capital and technology intensive

Buyer Power Low switching Cost, Imports

Supplier Power Oligopolistic Upstream market, Price volatility

Threat of Substitutes Alternative available for all application


25/36

25 | P a g e

15. Possibility of ConsolidationPlastic Product industry is highly fragmented with small and large players with small players forming about

85% of the industry. No single player has any substantial market share in this industry. There is significant

opportunity for consolidation in this market.

Forward integration can happen here with the primary producers (Petrochemical Producers) entering in thedownstream activities. This will inject capital into the downstream industries thus improving the quality of the

products.

16. Industry Prognosis16.1. Global

Worldwide demand for plastic pipe is forecast to increase 4.6 percent annually through 2012 to 8.2 billion

meters, or 18.2 million metric tons. Gains will be based on continued strong prospects in developing nations,

particularly in China. In fact, China will account for 30 percent of overall length demand gains for plastic pipe

between 2007 and 201237

.

The region wise global demand for plastic pipe is as given below38

:

World Plastic Pipe Demand ( in million metres)

% Annual Growth

2002 2007 2012E 2002-2007 2007-2012E

Plastic Pipe Demand 5145 6525 8160 4.9 4.6

North America 1852 2161 2440 3.1 2.4

Western Europe 1041 1152 1285 2.0 2.2

Asia Pacific 1286 1852 2645 7.6 7.4

Other Regions 966 1359 1790 7.1 5.7

Despite below-average growth, developed countries will continue to account for the majority of total plastic

pipe demand. These regions (Western Europe and North America, as well as certain nations in the Asia/Pacific

region, such as Japan and Australia) have the highest levels of pipe use intensity. However, they are also

comparatively mature markets, where growth in construction activity tends to be well below the global

average, inhibiting growth rates for plastic pipe.

In the developing countries of Eastern Europe, Asia (exclusive of Japan) and the Africa/Mideast region, gains

will outpace the global average, benefiting from ongoing infrastructure development. Economic growth in

these countries will create demand for plastic pipe in networks for telecommunications and in residential

home building applications. Ongoing efforts across these regions to upgrade water treatment systems will

boost demand for plastic pipe used for potable water delivery and in drainage and sewage applications. Finally,

in many nations, demand will benefit from the expansion of natural gas distribution networks.

16.2. Domestic

India is projected to become the third-largest consumer of plastics by 2012 with sectors like packaging,

electronics, telecom, infrastructure, healthcare and consumer durables set to witness surge in plastic

consumption.

37Report presented by Freedonia Group in World Plastic Pipe

38Report presented by Freedonia Group in World Plastic Pipe


26/36

26 | P a g e

17. Industry aggregates:17.1. Plastic tubes

Parameters Industry

2007 2008 2009Revenue:

Turnover39

2189.53 2679.8 3070.08

EBITDA 317.42 396.59 439.48

PAT 136.44 136.56 128.73

Profitability

EBITDA/Total

Income 14.50% 14.80% 14.31%

PAT/Total

Income 6.23% 5.10% 4.19%

ROCE 15.98% 14.37% 12.97%

PAT/Avg. Net

Worth 28.19% 17.62% 13.89%ROE

Total Debt 995.74 1203.03 1672.19

Working capital Cycle

(Days)

Raw material

cycle 52.22 56.92 67.82

WIP Cycle 1.73 2.6 3.03

Finished goods

cycle 26.32 32.67 35.15

Debtors 98.84 96.73 103.63

Gross working

capital cycle 179.11 188.92 209.62Creditors 108.73 99.24 113.63

Turnover/Efficiency

Ratios

Fixed Asset

turnover 2.73 2.88 2.44

Inventory

turnover 5.29 4.20 4.64

Debtors turnover 3.67 3.77 3.52

Creditors

turnover 3.67 4.07 3.91

Liquidity

Quick Ratio 0.64 0.65 0.68

Current Ratio 1.21 1.41 1.24

D/E Ratio 1.44 1.01 1.39

DSCR (Debt

cover) 3.42 2.98 2.37

Interest Cover 2.55 2.86 2.21

Growth Rate (% yoy):

Turnover 33.97% 22.39% 14.56%

EBITDA 106.96% 24.94% 10.81%

PAT 235.40% 0.09% (5.73%)

Cost Structure:

39This figure gives only the turnover of the companies listed in CMIE. So it cannot be taken as an indicator for

the entire industry.


27/36

27 | P a g e

Net Sales 2070.43

2624.12

3025.73

% of Net Sales:

Stock

Raw Materials 61.05% 61.25% 55.70%

Staff cost 3.60% 3.63% 3.72%

Power & Fuel 3.12% 3.43% 2.96%

Manufacturing

Exp

R&D 0 0 0

Selling Expenses 5.33% 5.35% 5.63%

Other Expenses 3.59% 3.18% 3.40%

Depreciation 2.21% 2.04% 2.10%

Interest 3.83% 4.37% 5.23%

Tax 2.66% 3.47% 2.92%

No: of Companies 30 27 22

17.2. Plastic Sheets

Parameters Industry

2007 2008 2009

Revenue:

Turnover 2661.53 3331.47 3497.1

EBITDA 287.19 373.99 302.64

PAT 108.86 186.9 88.67

Profitability

EBITDA/Total

Income 10.79% 11.23% 8.65%

PAT/TotalIncome 4.09% 5.61% 2.54%

ROCE 11.32% 15% 10.21%

PAT/Avg. Net

Worth 20.19 23.78 14.71

ROE

Total Debt 1063.63 956.21 905.47

Working capital Cycle

(Days)

Raw material

cycle 25.79 23.58 21.15

WIP Cycle 16.17 14.58 12.09

Finished goods

cycle 21.07 17.46 16.22

Debtors 63.76 52.73 51.65

Gross working

capital cycle 126.8 108.35 101.12

Creditors 66.82 57.89 57.36

Turnover/Efficiency

Ratios

Fixed Asset

turnover 2.80 3.27 3.15

Inventory

turnover 7.29 8.14 12.00


Creditors 9.3 10.66 11.06


28/36

28 | P a g e

turnover

Liquidity

Quick Ratio 0.39 0.46 0.53


D/E Ratio 0.45 0.39 0.33

DSCR (Debt

cover) 6.18 8.42 4.17



Turnover 25.17% 4.97%

EBITDA 30.22% -19.08%

PAT 71.69% -52.56%

Cost Structure:

Net Sales 2617.75 3271.75 3407.97

% of Net Sales:

Stock

Raw Materials 62.05% 63.20% 61.43%

Staff cost 4.68% 4.37% 4.77%Power & Fuel 2.97% 2.70% 2.81%

Manufacturing

Exp

R&D 0.28% 0.17% 0.20%


Other Expenses 16.30% 16.57% 14.93%


Interest 1.28% 1.05% 1.44%

Tax 2.45% 2.11% 1.98%

No: of Companies 14 11 10

18. List of All Companies in Rs. 100 500 Crore Bracket1. Kisan Irrigations Ltd.2. Astral Poly Technik Ltd.3. Kisan Mouldings Ltd.4. Vishal Pipes Ltd.5. Jadia Pipes (India) Ltd.6. Sturdy Industries Ltd.7. Assam Roofing Ltd.

19. List of All Companies in Rs. 100 500 Crore Bracket Fitting the Distress CriterionCriteria to find out Distress Companies:

i. ROE% is lower than ROCE% for the immediately preceding two financial years; orii. Total Debt is at least 3 times the EBITDA of the preceding financial year end; oriii. The Company has used short term sources for long term purposes in the immediately preceding

two financial years; or

iv. The DSCR is less than 1 for any of the preceding two financial years; orv. The Company has incurred losses in any of the preceding two financial years or is likely to post

losses in the current financial year.


29/36

29 | P a g e

1. Kisan Irrigations Ltd.2. Kisan Mouldings Ltd.3. Vishal Pipes Ltd.4. Jadia Pipes (India) Ltd.5. Sturdy Industries Ltd.6. Assam Roofing Ltd.

20. Company (from 19) Financial Analysis:Kissan Irrigations Ltd

Parameters Kissan Irrigation Ltd

2007 2008 2009

Revenue:

Turnover 174.34 208.1 243.31EBITDA 9.44 11.63 14.51

PAT 3.29 4.09 4.2

Profitability

EBITDA/Total Income 0.05 0.06 0.06

PAT/Total Income 0.02 0.02 0.02

ROCE 4.15% 5.35% 4.82%

PAT/Avg. Net Worth 0.03 0.27 0.29

ROE 255.04% 317.05% 207.92%

Total Debt 27.09 42.63 56.11

Net Worth 24.93 28.68 32.89

Working capital Cycle (Days)

Raw material cycle 7.79 9.37 16.16

WIP Cycle 2.72 4.69 6.26

Finished goods cycle 23.58 36.94 41.61

Debtors 49.9 68.72 65.61

Gross working capital cycle 83.98 119.73 129.64

Creditors 66.72 75.6 69.7

Turnover/Efficiency Ratios

Fixed Asset turnover 9.52 8.17 7.72Inventory turnover 8.59 6.65 5.68


Creditors turnover 7.21 5.22 5.26

Liquidity

Quick Ratio 0.74 0.7 0.61


D/E Ratio 1.09 1.49 1.71

DSCR (Debt cover) 2.99 2.80 2.20



Turnover 117.27% 19.36% 16.92%


30/36

30 | P a g e

EBITDA 154.45% 23.20% 24.76%

PAT -17.16% 76.13% 12.28%

Cost Structure:

Net Sales 174.06 207.9 242.95

% of Net Sales:

Stock

Raw Materials 66.63% 66.13% 66.48%

Staff cost 2.45% 2.92% 3.24%

Power & Fuel 2.81% 2.47% 2.54%

Manufacturing Exp

R&D 0 0 0


Other Expenses 25.27% 27.43% 24.96%


Interest 1.44% 1.61% 2.17%

Tax 0.98% 0.93% 0.88%

Kisan Mouldings Ltd.

Parameters Kissan Molding Ltd

2007 2008 2009

Revenue:

Turnover 125.08 149.67 169.7

EBITDA 11.58 14.21 16.69PAT 3.6 4.26 2.97

Profitability



ROCE 12.64% 11.88% 10.92%


ROE 51.14% 60.51% 42.19%

Total Debt 40.08 57.47 68.4

Net Worth 25.93 29.36 31.51



WIP Cycle 18.87 18.97 25.24


Debtors 101.72 95.41 96.07


Creditors 58.11 67.68 79.37


Fixed Asset turnover 4.20 3.86 3.73

Inventory turnover 7.52 5.34 4.50



31/36

31 | P a g e


Liquidity

Quick Ratio 0.78 0.69 0.62


D/E Ratio 1.55 1.96 2.17




Turnover 19.45% 19.66% 13.38%

EBITDA 6.14% 22.71% 17.45%

PAT 2.86% 18.33% -30.28%

Cost Structure:

Net Sales 124.85 149.48 169.16

% of Net Sales:

StockRaw Materials 55.53% 59.15% 59.56%

Staff cost 3.20% 3.57% 4.29%

Power & Fuel 3.01% 2.96% 3.29%

Manufacturing Exp

R&D 0 0 0


Other Expenses 31.84% 34.59% 32.02%


Interest 2.74% 2.92% 4.07%

Tax 1.54% 1.51% 0.91%

Vishal Pipes Ltd

Parameters Vishal Pipes Ltd

2006 2007 2008

Revenue:

Turnover 78.01 127.5 165.88

EBITDA 1.93 2.92 3.85

PAT 0.72 0.95 1.07

Profitability



ROCE 10.05% 9.89% 10.14%


ROE 12.06% 15.91% 17.92%

Total Debt 7 15.51 20.7

Net Worth 7.93 8.88 11.51


Raw material cycle 75.32 0 31.1


32/36

32 | P a g e

WIP Cycle 80.27 0 56.66

Finished goods cycle 13.17 0 7.72

Debtors 35.35 0 50.53

Gross working capital cycle 204.11 0 146.01

Creditors 100.09 57.72 69.02Turnover/Efficiency Ratios



Debtors turnover 10.33 7.22

Creditors turnover 3.59 4.94

Liquidity

Quick Ratio 0.55 0.64 0.54


D/E Ratio 1.39 1.15 1.05




Turnover 50.64% 62.92% 28.26%

EBITDA 22.93% 51.30% 31.85%

PAT 18.03% 31.94% 12.63%

Cost Structure:

Net Sales 77.86 127.07 165.73

% of Net Sales:

Stock

Raw Materials 42.38% 51.59% 50.35%

Staff cost 3.58% 2.11% 1.02%

Power & Fuel 2.45% 1.52% 1.16%

Manufacturing Exp

R&D


Other Expenses 10.56% 8.48% 8.90%


Interest 0.59% 0.84% 1.05%

Tax 0.51% 0.38% 0.33%


33/36

33 | P a g e

Jadia Pipes Ltd

Parameters Jadia Pipes Ltd

2005 2006 2007

Revenue:

Turnover 76.48 114.08 124.04

EBITDA 0.87 1.93 2.45

PAT 0.12 0.11 0.16

Profitability



ROCE 3.69% 11.14% 10.75%


ROE 14.81% 11.96% 14.81%

Total Debt 12.13 11.22 14.66Net Worth 0.98 1.45 1.75


Raw material cycle 0 14.54 15.97

WIP Cycle 0 0 0

Finished goods cycle 0 9.55 12.86

Debtors 0 15.07 13.55

Gross working capital cycle 0 39.15 42.38

Creditors 2.16 16.02 21.12




Debtors turnover 0 24.22 26.94

Creditors turnover 0 44.56 21.06

Liquidity



D/E Ratio 6.78 4.73 5.18




Turnover 15.13% 49.16% 8.73%

EBITDA 31.82% 121.84% 26.94%

PAT 9.09% -8.33% 45.45%

Cost Structure:

Net Sales 76.48 114.08 124.04

% of Net Sales:

Stock

Raw Materials 89.84% 91.99% 93.97%

Staff cost 0.84% 0.70% 0.69%Power & Fuel 1.74% 1.69% 1.65%


34/36

34 | P a g e

Manufacturing Exp

R&D 0 0 0


Other Expenses 8.79% 5.13% 5.16%


Interest 0.43% 1.15% 1.31%

Tax 0.09% 0.10% 0.09%

Sturdy Industries Ltd.

Parameters Sturdy Industries Ltd

2007 2008 2009

Revenue:

Turnover 70.78 118.44 112.12

EBITDA 4.78 8.4 7.69

PAT 0.91 3.66 2.79

Profitability



ROCE 9.92% 17.80% 10.24%


ROE 14.97% 60.20% 39.91%

Total Debt 21.19 22.74 33.2Net Worth 12.77 16.43 29.04



WIP Cycle 4.97 8.39 12.86


Debtors 65.88 54.01 57.94


Creditors 93.33 75.26 46.53






Liquidity



D/E Ratio 1.45 2.4 2.03





35/36

35 | P a g e

Turnover 16.11% 67.34% -5.34%

EBITDA 2.36% 75.73% -8.45%

PAT 7.06% 302.20% -23.77%

Cost Structure:

Net Sales 70.56 118.19 112.04

% of Net Sales:

Stock

Raw Materials 85.49% 81.11% 85.03%

Staff cost 3.15% 0.97% 1.17%

Power & Fuel 2.28% 1.42% 1.54%

Manufacturing Exp

R&D 0 0 0


Other Expenses 16.16% 10.94% 10.26%


Interest 3.42% 2.55% 2.91%

Tax 0.26% 0.47% 0.42%

Assam Roofing Ltd.

Parameters Assam Roofing Ltd

2005 2007 2008

Revenue:

Turnover 55.66 91.92 111.69EBITDA 3.42 5.44 5.87

PAT 0.27 1.85 2.44

Profitability



ROCE 6.50% 9.37% 10.34%


ROE 40.91% 280.30% 369.70%

Total Debt 18.49 21.37 21.8

Net Worth 13.29 18.59 20.67


Raw material cycle 75.32 0 31.1

WIP Cycle 80.27 0 56.66

Finished goods cycle 13.17 0 7.72

Debtors 35.35 0 50.53

Gross working capital cycle 204.11 0 146.01

Creditors 100.09 57.72 69.02


Fixed Asset turnover 3.91 6.89 8.25Inventory turnover 3.20 4.83 4.42


36/36

Debtors turnover 10.33 0 7.22

Creditors turnover 3.59 0 4.94

Liquidity

Quick Ratio 0.55 0.64 0.54


D/E Ratio 0.69 1.83 2.36


Interest Cover 35.35 0 50.53


Turnover -6.97% 65.15% 21.51%

EBITDA -12.08% 59.06% 7.90%

PAT -41.30% 585.19% 31.89%

Cost Structure:

Net Sales 54.73 91.3 111.32

% of Net Sales:Stock

Raw Materials 60.30% 71.81% 74.96%

Staff cost 5.10% 2.94% 1.52%

Power & Fuel 3.49% 2.11% 1.73%

Manufacturing Exp

R&D 0 0 0


Other Expenses 15.02% 11.80% 13.25%


Interest 3.71% 2.09% 1.57%

Tax -0.15% 0.16% 0.18%

Plastic Tubes, Sheets and Other Products- Final Report

Documents

Transcript of Plastic Tubes, Sheets and Other Products- Final Report