Finolex Industries is planning to increase its share of plumbing, sanitation pipes and fittings business, and achieve a 50:50 split between the agriculture and non-agriculture pipes and fittings businesses. There is now a renewed focus on growing the non-agri segment.
Ajit Venkataraman, CEO, Finolex Industries, said the company has been an agriculture piping-focused company and is a late entrant to the plumbing and sanitation segment, but it is working towards growing the non-agri piping and fitting business. Five years ago, the agriculture pipe segment accounted for 80% of the volumes and 20% was plumbing and sanitation, but now the share ratio is 65%:35%.
Explaining the rationale for growing the plumbing and sanitation piping business, Venkataraman said agriculture is a cyclical business while the non-agri business is much more steady and predictable. Pipes and fittings for the housing and construction segment enjoy higher margins with more complex materials used and more fittings being consumed in this segment, he said.
Venkataraman further said there is enough headroom to grow in the plumbing and sanitation market with the segment expected to grow at 15% CAGR. The old galvanised iron pipes were being replaced by PVC pipes in the middle and last mile of the network in small cities and towns across the country, leading to a rise in demand. The share of the organised sector is growing with unorganised players finding it difficult to deal with PVC price volatility, he said.
However, this is a more competitive business with more organised players focused on this segment, he pointed out.
“The effort needed in this segment is different with more investment needed in brand building, visibility in the retail channel, marketing, promotions and spending money on advertising the brand. The company will be focusing on these areas,” Venkataraman said.
The company is also developing talent to work on this business. It has created a new technology team and hired IT talent to focus on this business.
Finolex dominates the agri segment with a wide distribution and dealership network as well as brand familiarity, which it sees as an advantage to expand the non-agri business in tier-2 and 3 markets. The company is reaching out to builders, architects and plumbers.
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With 50% of agriculture in the country still rain-fed, the growth in the agri pipe segment, too, is expected to keep expanding. This segment is expected to see a growth of 8-12%.
Finolex has the capacity to manufacture 370,000 metric tonne pipes and 40,000 tonne fittings and this capacity is likely to be sufficient for the next two to three years, according to the company.
