 "Rising from the ashes")
From near-bankruptcy in 2003 to India's largest plumbing and drainage pipe manufacturer with revenues of Rs 821 crore in FY13, Ahmedabad-based Astral Poly Technik has come a long way. Sandeep Engineer, Astral's managing director, has a clear mandate for growth - offer something that is beneficial to the masses and yet more affordable than existing products.
Revenues jumped by nine times since the company's initial public offer (IPO) in early 2007, growing at a compound annual growth rate (CAGR) of more than 40 per cent, while net profit expanded at 47 per cent. An investment of Rs 1 lakh in the company's IPO would have grown to Rs 8.6 lakh by now.
Astral created scale and space for itself in a highly competitive market by focusing on superior products and innovations. Most of its products were 'firsts' in India. It was the first to offer chlorinated polyvinyl chloride (CPVC) pipes, lead-free uPVC piping and corrosion-resistant piping solutions for industrial applications.
"After having worked in Cadila Healthcare as a project engineer, I decided to become an entrepreneur and borrowed Rs 50,000 from my father to become a distributor of Isabgul. When it didn't do well, I tried my hand in active pharmaceuticals ingredients (API). But the pollution norms were such that I was required to hold land 10 times what I had bought in Santej. It was during this time, on one of my US trips, that my uncle introduced me to the idea of pipe manufacturing," recalls Engineer.
Engineer then joined hands with his uncle to set up a firm in India to make CPVC pipes and, later, uPVC pipes for plumbing and drainage systems. CPVC pipes have superior physical attributes - such as heat resistance - compared to PVC. On the other hand, uPVC, also called rigid PVC, is preferred when strength and durability are prime concerns.
However, challenges still awaited. "Being the first licensee of Lubrizol in India, we could manufacture and market CPVC piping and plumbing systems in India. In order to strengthen our business plans, we entered into a techno-financial joint venture with Specialty Process LLC of the US. However, disaster struck in 2001 and the JV failed. Consumers in India were of the opinion that plastic pipes could not match metal pipes. We almost went bankrupt," says Engineer.
The company nevertheless set up its own plant for manufacturing fittings, which until then it used to import from the US. However, plastics being a capital-intensive industry, Astral needed funds for further expansion. "The only solution was to go public, so that we did not bring liabilities to our balance sheet," adds Engineer.
What also worked, he says, was the fact that Astral was in an industry that was less prone to frequent technological change.
Astral has sought to expand its national presence by setting up dealerships across the country. Recently, it built a green field manufacturing facility in Tamil Nadu, and it is open to the idea of plants in other regions if demand picks up. Astral increased its ad spend from Rs 2.4 crore in FY10 to Rs 17 crore in FY13.
It tied up with makers of the hit Bollywood film Dabangg2, where the film's hero Salman Khan is shown fighting villains with Astral pipes. The fight sequence and its prominent use in hoardings gave Astral instant brand recognition, and Astral's dealers have begun referring to the company's products as "Dabangg pipes".
Astral has received invaluable support from its technology partner Lubrizol, USA, which controls nearly 70 per cent of the global CPVC market. A combination of better product and marketing acumen has helped the company grab a growing share of the demand for pipes from the construction and the industrial sectors. Continuous expansion in production capacity is reflected in its fixed assets, which have risen from Rs 98 crore in FY09 to Rs 281 crore currently.
To scale up further is a huge challenge. But Engineer believes that India's infrastructure growth will be a continuing source of demand. "We will continue to focus on infrastructure by bringing in products that are affordable and meant for the masses," he says.
Revenues jumped by nine times since the company's initial public offer (IPO) in early 2007, growing at a compound annual growth rate (CAGR) of more than 40 per cent, while net profit expanded at 47 per cent. An investment of Rs 1 lakh in the company's IPO would have grown to Rs 8.6 lakh by now.
Astral created scale and space for itself in a highly competitive market by focusing on superior products and innovations. Most of its products were 'firsts' in India. It was the first to offer chlorinated polyvinyl chloride (CPVC) pipes, lead-free uPVC piping and corrosion-resistant piping solutions for industrial applications.
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As a result, the company became a leading player in the highly commoditised PVC pipe industry. Its CPVC pipes are now fast replacing regular PVC and galvanised iron pipes in industries and homes.
"After having worked in Cadila Healthcare as a project engineer, I decided to become an entrepreneur and borrowed Rs 50,000 from my father to become a distributor of Isabgul. When it didn't do well, I tried my hand in active pharmaceuticals ingredients (API). But the pollution norms were such that I was required to hold land 10 times what I had bought in Santej. It was during this time, on one of my US trips, that my uncle introduced me to the idea of pipe manufacturing," recalls Engineer.
Engineer then joined hands with his uncle to set up a firm in India to make CPVC pipes and, later, uPVC pipes for plumbing and drainage systems. CPVC pipes have superior physical attributes - such as heat resistance - compared to PVC. On the other hand, uPVC, also called rigid PVC, is preferred when strength and durability are prime concerns.
However, challenges still awaited. "Being the first licensee of Lubrizol in India, we could manufacture and market CPVC piping and plumbing systems in India. In order to strengthen our business plans, we entered into a techno-financial joint venture with Specialty Process LLC of the US. However, disaster struck in 2001 and the JV failed. Consumers in India were of the opinion that plastic pipes could not match metal pipes. We almost went bankrupt," says Engineer.
The company nevertheless set up its own plant for manufacturing fittings, which until then it used to import from the US. However, plastics being a capital-intensive industry, Astral needed funds for further expansion. "The only solution was to go public, so that we did not bring liabilities to our balance sheet," adds Engineer.
What also worked, he says, was the fact that Astral was in an industry that was less prone to frequent technological change.
Astral has sought to expand its national presence by setting up dealerships across the country. Recently, it built a green field manufacturing facility in Tamil Nadu, and it is open to the idea of plants in other regions if demand picks up. Astral increased its ad spend from Rs 2.4 crore in FY10 to Rs 17 crore in FY13.
It tied up with makers of the hit Bollywood film Dabangg2, where the film's hero Salman Khan is shown fighting villains with Astral pipes. The fight sequence and its prominent use in hoardings gave Astral instant brand recognition, and Astral's dealers have begun referring to the company's products as "Dabangg pipes".
Astral has received invaluable support from its technology partner Lubrizol, USA, which controls nearly 70 per cent of the global CPVC market. A combination of better product and marketing acumen has helped the company grab a growing share of the demand for pipes from the construction and the industrial sectors. Continuous expansion in production capacity is reflected in its fixed assets, which have risen from Rs 98 crore in FY09 to Rs 281 crore currently.
To scale up further is a huge challenge. But Engineer believes that India's infrastructure growth will be a continuing source of demand. "We will continue to focus on infrastructure by bringing in products that are affordable and meant for the masses," he says.