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Pricing Power of Plastic Pipe Industry In India

There are large number of local players and recyclers who account for ~35% of the total market.

PVC compound which is 70-75% of COGS consists of resin, additives (calcium) and stabilizers (titanium di-oxide) which are required to be mixed in prescribed proportion to manufacture a pipe of a standard quality (Ideal proportion being 85:10:5). Additive (calcium) is 1/10th of resin cost. Local players manipulate the mix of PVC compound (60:35:5) to achieve low manufacturing cost.

Source – ValueQuest

Raw Materials – 

Raw-material for plastic pipe i.e., PVC resin and additives together account ~70-75% of the total COGS. In India, ~ 56% of the total demand of PVC resin is met through imports. There are limited domestic resin suppliers. One of the largest domestic resin suppliers is Reliance.

Unlike large players who enjoy 4-8% discount by procuring resin from Reliance or by directly importing from international resin manufacturers, small players procure resin from importers or distributors by paying a premium of 2-3%. Due to this, large players enjoy a cost advantage of 6-11% over small players. Small / regional players try to eliminate this differential by manipulating the mix of PVC compound!

Source – Prince Pipe & Fittings DRHP, Page no -137

Source – Reliance Securities, Page no – 15

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