The revival in construction and infrastructure activities in India bodes well for Astral Ltd.'s pipes business, according to its Chief Financial Officer Hiranand Savlani.
Astral aims to double its revenue over the next five years and expects 60-65% of the revenue contribution from the pipes business, Savlani told BQ Prime's Niraj Shah.
The company had estimated a revenue contribution of 50-55% from its pipes business earlier. "We are going much ahead than what we originally thought," he said.
Revenue from other products in the company's portfolio will constitute 35-40%, Savlani said.
Judging the "excellent" growth of its pipes segment, the company also opened two new plants.
Astral is witnessing growth in the pipes business, especially after starting the new East plant, he said. "In a very early stage of journey, we have reached the run rate of 800-1,000 metric tonne a month," Savlani said.
The pipes business will witness robust growth in the next 4-5 years, tracking the construction cycle, according to him.
Capex In New Categories, Pipes
The company has completed capital expenditure in the newer categories, Savlani said. Astral now has four times capacity in the paints segment. For segments such as valve, tanks and sanitaryware, the company holds enough capacity, he said.
The incremental capex will come only in the pipes category. Other categories will require some capital deployment, he said. "We are coming up with plants in Hyderabad and Guwahati for pipes."
Astral is also debating internally on setting up another plant, in light of the unexpected growth the company has seen in this segment over the last five months.
"It looks (like) we have to create the capacity; otherwise, one or two years down the line, we may have challenges in capacity. So, we have to be ahead of the curve," Savlani said.
Due to high demand, Astral is tripling the capacity for manufacturing Drain ProPipe. The pipe is garnering good response because of its strength as compared with other drainage pipes that have the potential to break, he said.
Margin Expectations
The margin for the pipes segment are fantastic, according to Savlani. Astral expects 16-18% Ebitda margin for the pipes business, which could go even higher if the volume shoots up. The margin will expand if the product mix changes, he said.
"This year, our capacity utilisation will be the highest in the last six to seven years," the CFO said.
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