With demand coming back into the economy, real estate and home improvement sectors have seen an uptick. Hiranand Savlani, CFO at Astral, a plastics pipe company, discussed the demand picture and their outlook for the company.
According to him, when the real estate cycle starts playing, it normally stays for five-six years.
“Day by day, ready inventory stock is getting diluted, which is also going to give us a big boost on the demand side. The way numbers were in the last three quarters, it looks like it should be good for every company in the pipe sector,” he said.
On demand, he mentioned that highest demand is coming from the plumbing and construction segment.
He said, “Demand is coming from two sides, one is the replacement side of the market and second is the new construction side, both are doing excellent.”
He expects this to continue for a long period.
In terms of the storage tank business, the company is targeting a capex of about Rs 100 crore. Savlani expects the shift in storage tanks from unorganised to organised players, to benefit the company.
“Small companies are getting affected because of the continuous price rise of polymer. Volatility is so high and the supply chain is also disturbed on the polymer side, hence sourcing material for a smaller company is a big challenge. So companies like us are getting a huge advantage in terms of growth and margins,” he stated.
Polymer prices dropped by 15 percent in Q1FY22 and in Q2, the prices rose by 15 percent yet again. “Whenever price rise happens, it gets passed on to the market. As a result, our margins are always protected,” he shared.
He is optimistic about seeing some inventory gains in the coming months because of the sudden increase in polymer prices during the current quarter.
On the volume front, the company will be crossing the pre-COVID levels. “The volume growth will remain robust. Long-term guidance we have already given, we are going to double our revenues in the next four-five years. We are sticking to that guidance,” Savlani said.
He sees low government spending in the infrastructure segment but expects it to pick up soon.
“Our share of the pie is hardly 6 percent but going forward, we are expecting that business to give good growth. Now, tenders have started from the government side, slowly and gradually, they will start picking up. The government is going to spend a sizeable amount of money on the creation of infrastructure, that is going to give us growth in the coming times,” he said.
For the full interview, watch the accompanying video.