PVC pipe makers to see stronger profitability this fiscal: Crisil

PVC pipe makers are poised for stronger profitability this fiscal, with EBITDA per tonne expected to rise to Rs 23,000. Crisil Ratings projects a 10-15% revenue surge driven by high resin prices, despite a likely moderation in sales volume.

PVC pipe makers are expected to see stronger profitability this fiscal as resin prices remain elevated, with EBITDA per tonne likely to rise to Rs 23,000 from Rs 21,200 last fiscal, Crisil Ratings said in a press release Monday.

Market Outlook and Key Variables

Crisil Ratings expects volatility in global resin prices, escalation of the West Asia conflict and demand recovery across end-user segments to bear watching. While prices may normalise closer to pre-war levels in the coming months with the ceasefire announcement, average prices will remain higher compared to pre-conflict levels.

The ratings agency noted that the capacity additions will also stay limited owing to expected moderation in sales volume, even as capacity utilisation holds steady around 70 per cent.

Revenue and Cost Analysis

Crisil Ratings said that the organised polyvinyl chloride (PVC) pipe and fitting makers are expected to see revenue surge by 10-15 per cent this fiscal as higher crude oil prices following the conflict in West Asia have shored up realisations. However, sales volume is likely to moderate because of lower demand in some segments.

"Higher crude prices and a depreciating rupee are expected to keep resin prices elevated. As two-thirds of resin requirements of PVC pipe makers are imported, accounting for 75-80 per cent of their total costs, rising resin prices although expected to moderate in the third quarter will drive realisations 12-15 per cent higher on-year this fiscal, with players expected to pass on much of the cost increase to their customers," said Himank Sharma, Director, Crisil Ratings.

Impact on Per-Unit Profitability

The rising prices of resins and PVC products will also support higher per-unit profitability, as fixed costs remain largely stable.

Sector-wise Demand and Volume Outlook

Crisil Ratings said demand for PVC pipes from the irrigation sector, which accounts for about 45 per cent of total demand, is expected to grow a modest 2-4 per cent this fiscal. This is underpinned by increased irrigation requirements for the 2026 agricultural season and the launch of Jal Jeevan Mission (JJM) 2.0 in March 2026 with a budgeted allocation of Rs 67,670 crore, thrice that of the previous edition.

However, demand from plumbing and water supply segments linked to urban infrastructure and real estate, which account for the remaining 55 per cent, is expected to be constrained by elevated costs and inflationary pressures. As a result, overall PVC pipe sales volume is projected to decline by 3-5 per cent, deviating from steady growth seen in previous fiscals.

Capex and Financial Health

Crisil Ratings noted that higher resin prices have increased working capital requirements this fiscal, leading to higher dependence on external debt. Inventory holding at manufacturers' end is set to rise by 10 days to 85 days.

"This fiscal, organised PVC pipe makers are expected to add 5-10 per cent to existing capacities, entailing a capex outlay of Rs 2,500-2,700 crore. This will drive a 13-15 per cent increase in gross block. Despite the planned capital expenditure and incremental working capital requirements, healthy cash accruals will limit reliance on external debt," said Rushabh Borkar, Associate Director, Crisil Ratings. (ANI)

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