Market Analysis - Manufacturing Unit of PVC Pipes
Market Analysis - Manufacturing Unit of PVC Pipes
Market Analysis - Manufacturing Unit of PVC Pipes
Introduction:
After Polypropylene and Polyethylene, PVC is the third largest selling plastic commodity
in India. PVC Pipes are made of the same material, PVC which is an abbreviated form of
Polyvinyl Chloride. PVC comes in the form of a solid material that is brittle and white in colour.
There are two types of PVC: rigid and flexible. The PVC compound can be made flexible by
adding more plasticiser to it. Due to its versatility and long life expectancy, it has various
applications.
PVC pipes are light weight which makes it easier to transport and store, its maintenance
cost is also low and it is easy to install. It is not reactive and it can withstand great pressure as
well. Due to its multiple properties like temperature and corrosion resistance, it is being used all
over India for various purposes. However, they are not UV resistant and become brittle when
exposed to UV light (Gur and Spuhler, n.d.).
The main usage of PVC pipes are in agriculture, industry, residential and municipal.
PVC pipes are used in various sectors namely irrigation sector, drainage system, water supply,
deep tube well, real estate sector etc. It is used majorly for domestic and agricultural purposes
like, internal water distribution in the houses, drainage system, rainwater harvesting, Irrigation
system (Distribution of water throughout the fields), deep tube well etc.
Previously, only agricultural pipes and casing pipes were introduced in the market.
However, with the evolution of the industry, new products such as PVC, CPVC, UPVC pipes
have been introduced in the market. Therefore, PVC pipes have been used as a substitute for
various products like Galvanised Iron pipes (GI), Cast iron pipes etc.
There are various types of PVC pipes. The functions of different types are mentioned
below (Indian Pipe and PVC Connection Pipe Used in India: All You Need to Know, n.d.).
1. PVC: These are the most common types of pipes. Due to its ease of use, it is
widely used in drainage systems.
2. CPVC: Chlorination of PVC leads to the formation of CPVC. CPVC stands for
Chlorinated PVC pipes. This can carry both hot as well as cold water as it is
thermoplastic.
3. UPVC: The full form of UPVC is unplasticized PVC. Its stiffness is very high
and it is also very cost effective. These characteristics make it suitable for use in
general purposes.
Raw Materials Used: The raw materials required to make Rigid PVC Pipes are as follows:
● PVC Resin: The properties of resin that is required to make PVC pipes are:
- Suspension Grade since these are porous and hence have the ability to
absorb the plasticizers at 80 degree celsius which is required in the
manufacturing process (Essential Compounding Chemicals used with
PVC Resin, Primary, Secondary Plasticiser, Heat, Light Stabilisers,
Undated).
- K value should be between 65 to 68 as they have the best property in
terms of stability and processability (Essential Compounding Chemicals
used with PVC Resin, Primary, Secondary Plasticiser, Heat, Light
Stabilisers, undated)
- Bulk density should be between 500-560 gms/L
The resin has properties which allows it to withstand high chemicals. However,
the thermal resistance of the PVC resin is very poor. It degrades easily under
mechanical pressure and heat. Therefore it cannot be processed further without
the addition of some other additives like plasticizer.
The formulation of PVC pipes is usually done by keeping 100 parts of PVC resin
by weight as the base for all the other ingredients (Pvc Project Report - [DOC
Document], 2022).
● Plasticizer: These are mainly used to convert the rigid PVC plastic into a flexible,
soft and elastic material. The plasticizer that is used commonly is the Dioctyl
Phthalate (DOP). Other plasticizers include Reoplast, Paraplex, Dibutyl Phthalate
(DBP) etc.
● Processing acids:
● Lubricants: Its function is to reduce friction between the equipment and the
polymer material when it is under heat and pressure. The one that is widely used
is paraffin wax. There are two kinds of lubricants that are used during the process.
- External Lubricant
- Internal Lubricant
● Fillers: These are used in order to create calcined clay which helps in reducing
the material costs, as it acts as a lubricant as well as a colour pigment. Few fillers
that are used as a replacement for resin are Calcium carbonate, clay etc.
● Stabilizers: These are used in order to stabilize the polymers while they are under
the heat, which prevents them from decolouring and degrading during the
manufacturing process.
● Stearic Acid: These act as secondary stabilizers.
● Pigment and Colour
● Titanium dioxide: This is used in order to protect the PVC molecules from UV
rays and radiation. It also helps in better dispersion (Whittle, 2010)
● Impact modifier: They are used as shock resistance as well as rubber. It stops the
chemicals from burning to a great extent while they get mixed and compounded
(Essential Compounding Chemicals used with PVC Resin, Primary, Secondary
Plasticiser, Heat, Light Stabilisers, 2022).
.
Machinery Used:
● High Speed Mixer
● Rigid Pipe Extruder
● Various sizes of Die Head and mandrel: The mandrels are used in order to give
required thickness to the pipes. The various sized mandrels that are used are
2.5kgf/cm sq, 4kgf/cm sq etc. In order to produce pipes of different sizes, various
sized dies such as 20, 45, 65, 90, 110 mm are used, most common being 90 and
110 mm. However the pipes range from 20 mm to 400 mm.
● Vacuum tank/Coolant: These are used to cool down the PVC pipes and mold
them into a definite size as well.
● Traction Machine
● Pipe Cutting Machine
● Tilting Machine
● Storage Racks for pipes
● Pulveriser/ Grinder: These are used to grind the pellets of PVC resin and other
raw materials into its powder form before the raw materials goes into the high
speed mixer.
● Lathe machine: It is used to cut the pipes precisely. It also helps in removing the
unnecessary materials from the compound that is being rotated in the machine
(Kumar, n.d.).
● Printers
● Weighing machine: The weighing machine is used to weigh the quantity of raw
materials and is also required to weigh the PVC pipes when it's ready for dispatch.
Manufacturing Process:
PVC pipes are not produced by any kind of chemical reaction. It goes through a process
which requires compounding of all the raw materials mentioned above. It is produced by
extruding the thermoplastic material, PVC resin which accounts for 90% of the total raw material
used. The other 10% accounts for the remaining raw materials like the fillers, stabilizers,
lubricants etc. Before starting the manufacturing process, all the raw materials that come in the
pellet form and grinded in a grinder to turn it into the powder form. The different processes
through which the raw materials go through is as follows.
Mixing: The first step in the manufacturing process is ‘Dry Blend’. This powdered
compound is created by mixing all the ingredients together in a high speed mixer. The high speed
mixer has a steel disk that rotates at a very high speed. It also has a cutting blade and the shape of
the mixer helps in creating the required pressure and temperature which allows for a great
dispersion. The high speed results in high velocity and shear amongst the individual components.
This helps in speeding up the process and also leads to an increase in temperature which is
required for the lubricant to melt. The melted lubricant acts as a coat on the particles of PVC
which is required for the extrusion process. The other advantage of the high speed mixer is that it
helps in dispersing the stabilizer which clings to the PVC particle well due to the lubricant film
(Pvc Project Report - [DOC Document], 2022). The pigments and colours that are used also get
uniformly spread due to the high speed.
However, the process starts with first adding the PVC resin to the high speed mixer as per
the capacity which is rotated at high speed. Second the stabilizer is added. Once the temperature
reaches 60 degree celsius, the dry ingredients are added until the temperature reaches 70 degree
celsius. After that the liquid ingredients like the additives are added. The liquid ingredients
should be pre-blended in order for it to mix well. It is then rotated till the mixture reaches at
80-90 degree celsius. However, before adding the processing aid, the temperature of the mixture
should not be very high as that will limit the mixing of the processing aid. These are followed by
the processing aid and the impact modifier, which are the last ingredients to be added. Once the
final mixture reaches 100 degree celsius, the machine is stopped and the mixture is left to cool
(Pvc Project Report - [DOC Document], 2022).
Extrusion:
The compound mixture is then passed through a filter in order to remove big particles. It
is shifted to the Rigid pipe extruder through a Spring Conveyor. The pipe extruder is double
screwed and has the placement for the dies and mandrel which is required to produce various
sizes of the pipes. The blend is fed into a hot chamber through a hopper. The continuous rotating
screw in the long heating chamber moulds the mixture due to the heat and the pressure.
The mould then moves towards the Die head, the size of the die depends on the
requirement. The shape of the pipe is retained as it leaves the Die Head.
Sizing: After the pipes are out of the extruder, it is cooled during this step. To maintain
the shape of the pipe, it is passed through a Vacuum tank, which either has a spray of water or a
flood of water. The pipe is then submerged inside the water for it to cool down. The force of the
water from the spray maintains the shape of the pipe.
Traction: To keep the shape of the pipe straight it is passed through the traction machine.
The length of the pipe is calculated and the trademark on the pipe is also printed during this step.
Cutting: Once everything is done, the last step is to cut the pipes either automatically or
manually and therefore, it is passed through the cutting machine. This can be done in two ways
either manually or automatically.
Storage: Once the pipes are out of the cutting machine, the pipes reach the tilting
machine where the pipes are stacked and stored. Proper care should be ensured while storing the
pipes. The pipes should be stacked in layers and sockets should be placed alternatively. The
heaviest pipes should be placed at the bottom. Pipes should be placed in a manner that avoids
distortion. A random pipe is chosen from the lot of pipes that are ready for lab testing.
Transportation: Once the pipes are tested they get the ISI mark, are packed in bundles
and are finally dispatched for sale. The PVC pipes require proper support while they are being
transported. They are packed in plastic strips and then inside a plastic bag. They should be
padded and highly secured with chains and ropes. Proper care should be taken and the sockets
should be prevented from rubbing against each other. While unloading the pipe, proper
consideration should be given, so that the pipes do not fall on top of each other or on uneven
surfaces. Therefore it should be rolled down quite gently while unloading.
Infrastructure Required:
Power 25 KW
Quantity of Raw Materials Required: The raw materials that are required are given below. PVC
Resin is also the primary raw materials and is used in the of 9:1, where 9 portions of PVC resin
is mixed with 1 portion of all the other materials and chemicals mentioned below.
The quantity of raw material required to produce 1 batch of PVC pipe that is 100kg of
PVC pipe of size 90mm is given below. This is according to the ISI standards. The total quantity
that is produced in one batch is usually 102-103kg of PVC pipes. However, 2-3% of chemical
burns down during the manufacturing process due to which the total amount of PVC pipes that
are produced is 100Kgs.
Filler:
Calcium Carbonate 9 18 100.8
Lubricant:
Paraffin Wax 0.1 90 9
Packaging 1
Incubation Period Schedule:
The total incubation period for setting up a manufacturing unit of PVC pipes is around 1
year. It includes all the processes starting from market research, to installation of machines and
finally selling the pipes commercially. Below are some of the processes that need to be followed
while setting up the manufacturing plant.
Market Research
Site Selection
Arrangement of Finance
Trial Run
Production of units
- Volume distributed: PVC pipes are distributed on the basis of per kg or ton. 70% of the
PVC pipes produced are usually distributed to the retailers and 25% to various
government departments. The other 5% is distributed amongst contractors and promoters
as well as the agriculture and irrigation departments.
- However, for a tiny manufacturing plant that produces 52000 kg of 90 mm PVC pipe per
month, 70% of the PVC pipes are distributed to the retail stores of sanitary and plumbing
and the other 30% to the government departments. This is because the 90mm pipes are
used for domestic sewage. The initiatives started by the government to construct
infrastructure in the rural and urban areas and the development of toilets everywhere
leads to the increase in demand for the 90mm pipes.
- Therefore out of 52000 kg, 36400 kg is distributed to the retail stores and the remaining
15600 kg is distributed to the government departments.
- MRP per kg: The raw material cost and the manufacturing cost results in Rs. 145/kg.
The profits that companies make are usually Rs.18-20/kg. The selling price of the pipe
depends on brand, the type of PVC and the amount of fillers used. The current price of an
average PVC pipe is Rs. 163/kg - Rs. 400/kg without the 18% GST.
Market Potential:
India is the 8th major country that consumes plastic (Pvc Project Report - [DOC
Document], 2022). The demand for PVC pipes have increased tremendously all over India as
well as at a global level due to the increase in urbanisation, population, per capita income,
government schemes etc. The PVC pipes are being fitted in the construction of new and old
buildings. The increase in the usage of PVC pipes in the sanitation and plumbing sector,
agricultural sector and real estate industry are the driving force of the industry. This is because
everyone requires free and smooth movement of water. The market size for PVC pipes in the
domestic sector accounts to Rs. 315B. The demand for PVC pipes in India is almost 20 Lakh
metric tonnes per annum. The market size of PVC pipes in India is expected to grow at 6.81%
CAGR during 2019-2030 which will result in 6779 KTPA by 2030 (Sejpal, Joshi and Rajashekar,
2021).
The Public Health Engineering Department and the Irrigation sector are the primary
consumers of PVC pipes. These are followed by the Tea estates, Municipal corporation and used
extensively in the North east region of India. Out of the total PVC pipes demand in North East
India, more than 50% is required in Assam, which is followed by Tripura. Therefore the demand
for PVC pipes in the northeastern region is quite high. Although the demand for PVC pipes is
quite high in the northeast region, the supply is not enough to fulfill the demand. There is a huge
gap between the demand and supply of PVC pipes in the eastern region. The gap accounts to
almost 20000 metric tonnes per annum with an increasing demand of 10% every year. Hence
there is a need of setting up manufacturing units and there is a huge potential for the growth of
the PVC pipe industry in the North-eastern region of India (Pvc Project Report - [DOC
Document], 2022).
The irrigation sector contributes to the highest sales in the PVC industry and results in
45-50% of the entire sales. This is followed by the plumbing sector which accounts for 35-40%
of the total sale. The sewage sector contributes to another 15% of the sales (Sejpal, Joshi and
Rajashekar, 2022). Even the real estate sector is a key consumer of the PVC pipes. There is high
demand for PVC pipes in the retail outlets and the government institutions.
PVC pipes are substituting the iron and steel pipes as they corrode very easily. Another
reason for the substitution of steel pipes is the high cost associated with them. Presently, in India,
OPVC pipes have been introduced which is a replacement of ductile iron pipes which are usually
used for public sanitation units. The blaze pipes are being replaced by MPVC and DWC pipes
are replacing Cement Pipes. The PVC pipe market is increasing due to its ability to withstand
high temperatures, chemicals etc without the fear of getting rusted or corrosion. The PVC/UPVC
pipes are usually used for agricultural and residential water supply. The CPVC pipes are used in
residential plumbing, the HDPE pipes are mostly used for irrigation, sewage and city gas
distribution. Among the various kinds of PVC pipes, CPVC and UPVC pipes have recorded the
largest share in revenue.
Due to Covid hitting the country, the price of the PVC pipes were at an all time high in
FY20. Even with the impact that covid had, the demand for PVC pipes remained decent in the
Agriculture sector in FY21. This was due to the necessity of food during the period. However the
demand for the non-agri pipes remained the same in FY21 due to the government initiative of
building the real estate sector and the push for spending on infrastructure.
The PVC pipe industry is anticipated to grow at a rate of 10% CAGR during the period
between 2020-2025 from a Rs. 300bn sector to a Rs. 500bn sector due to the initiatives that are
being taken by the government. Although the polymer capacity of PVC is significantly high in
India, it imports PVC as the demand has outgrown the capacity to produce the same. It is also
assumed that there is going to be water shortage in the upcoming years due to the unpredictable
patterns of rainfall, which is going to see a huge increase in demand for PVC pipes as more
borewells will have to be constructed. However, the price of PVC resin, which is the primary raw
material for manufacturing the PVC pipes, is increasing. This may be a concern for the growth of
the PVC market. The other concern is that the consumers feel that the long term use of PVC
pipes for drinking water purposes can pose a threat to health as Plastic is hazardous. Even the
disposal of PVC pipes acts as a restraint.
There is a large amount of competition in the PVC industry in India. However, the
organised sector is booming due to the branding and the BTL activities. They are increasing
awareness amongst the plumber and the consumer about the importance of quality of the pipes
and are also adhering to the BIS standards. This is the reason why the organised sector is getting
focused as compared to the unorganised ones. Due to the impact of covid, the organised sectors
have also started taking the market share of the unorganised sector as they couldn’t survive the
impact and therefore had to shut down.
Some of the key players in the PVC pipe industry are:
- Ashirvad Pipes Private Limited
- Supreme Industries
- Finolex Industries
- Astral Poly
- Prince Pipes
- Apollo Pipes
- Jain Irrigation
Out of these Finolex is the largest manufacturer of PVC pipes. It has a huge network of
dealers, retailers and sub-dealers. Over the last five years, the company has had a profit growth
of 26.02% CAGR. It produces 370,000 MT of PVC pipes per annum. It is also the largest
manufacturer of PVC resin. Due to the production of PVC resin, they produce high quality pipes
which also gives them a high margin of profit (Sejpal, Joshi and Rajashekar, 2022).
The increasing demand for PVC pipes is not going to die down anytime soon. Since the
product is easy to use and is cost effective, the demand is going to increase with the increasing
population and hence, there will be an increase in the growth of the PVC industry.
Margin Profile:
● The PVC plumbing margin is around 12-13%, followed by the sewerage which is in the
range between 9-12%. The least margin is that of the agriculture sector which lies
between 6-9%. This is because of the low cost that needs to be provided to the farmer, the
commoditized nature of the product and a huge number of unorganised players in this
market.
● The CPVC margins are the second highest as it ranges between 16-18%. This is because
of its multiple uses like hot and cold water applications, as it is importec and its high
presence amongst the organised players.
● The highest margin is that of the fittings that has a margin of 10-20 %.
● Almost 10-15 % profit made out of the investment put.
Fixed Assets:
1. Investment in Building:
The area that is required needs to be around 4000-5000sq feet to set up one
production unit. The place can either be rental or can be a plot that can be owned. To set
up a building of 4000sq feet, around Rs. 40 lakh needs to be invested.
The land should be suitable for the production of PVC pipes. The ideal land is
usually near the industrial zones.
Working Capital:
4. Electricity Bill: Around Rs. 80000 is invested as electricity bill per month.
5. Labour costs: Usually ten laborers are required to run one production line. This includes
the skilled labours, unskilled labours and the technicians. Out of the ten labours 5 labours
are used for the manufacturing process whereas the other five are required for
administration purposes. Two laborers are used as operators, one is required for the
mixing process, one labour is required to cut the pipes and a fifth labour is required for
loading, unloading of pipes and the printing process. Around Rs. 1.5L is spent on the 10
labours.
6. Maintenance, marketing and transportation cost: These result in Rs. 200000 investment
per month. The operational cost usually results in 3% of the total sales.
7. Raw Materials: The amount that is invested in raw materials is almost Rs. 58,36,116 per
month.
8. Administrative costs: These include the expenses required for stationery, telephone,
office equipment etc. These usually account for Rs.25000.
Profit Incurred:
The total working capital that is required in a span of one month or 26 days sums up to
Rs. 62,91,116.
The raw material cost results in Rs. 130/kg and the manufacturing cost is almost Rs.
15/kg. The companies usually tend to make a profit of Rs.18 to Rs.25 per kg. Therefore one kg
of PVC pipe is sold at Rs 163 or more excluding the 18% GST.
Therefore to calculate the profit incurred, we will need to subtract the working capital from the
net revenue.
The total net revenue would be around Rs. 84,76,000 for 52,000kgs in a month. Hence the total
profit will result in Rs. 21,84,884 per month.
Conclusion:
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Glossary