Tata Metaliks is looking to expand its Ductile Iron Pipe capacity as demand as tripled due to the government's push on potable water. However, the stock is unmoved this year after surging nearly 40 percent in 2021.
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Pig Iron manufacturer Tata Metaliks will invest Rs 600 crore to expand its Ductile Iron pipe capacity to over 4 lakh tonnes per annum. The company inaugurated the first phase of the expansion project of the plant at Kharagpur on Thursday. The expansion will take place in two phases.
Ductile iron pipes are used for transmission of potable water, waste-water and water for irrigation purposes. The company has shifted its focus on the DIP business due to the government's increased thrust on water supply, which has tripled the demand for DI pipes in the country when compared to its current capacity. As a result, realisations on DI Pipes have increased between 25-30 percent.
What makes these pipes different is their ability to handle high pressure and stress compared to traditional cast iron pipes. Tata Metaliks also cites the environmental benefits of such pipes compared to non-metallic pipes.
The DI Pipe plant in Kharagpur will be one of the most advanced units with high levels of automation and robotics.
"This new plant will help the company expand its product range and enhance its presence in the fast-growing water infrastructure space," Tata Metaliks said in its exchange filing.
Market Research Future predicts the global ductile iron pipes market to be worth $16.4 billion by 2030.
Tata Metaliks expects robust demand in the ductile iron pipes business over the next four to five years. "With the capacity expansion underway, we are widening our product range up to 1,200 mm diameter pipes which will expand the scope of our participation in the water infrastructure ecosystem, the company wrote in its annual report.
In its earnings call for the April-June quarter, the management said that India is the most competitive in the DI Pipes exports market as China is expected to comply to carbon emission norms, making their industry less competitive.
After a 38 percent jump in 2021, shares of Tata Metaliks are flat this year. Monarch Networth Capital expects the stock to be a strong re-rating candidate. "Tata Metaliks' impeccable capital allocation history and superior corporate governance provide further comfort for re-rating," the broking firm wrote in its note.
Shares of Tata Metaliks are trading 5 percent higher at Rs 854 as of 10:30 AM.