Two Factors That Astral Sees Driving Growth

Astral Ltd. is betting on India’s infrastructure spending and a global shift away from China to drive growth.

The maker of pipes to adhesives has not only seen demand momentum within in India but from overseas markets, Chief Financial Officer Hiranand Savlani told BloombergQuint's Niraj Shah in an interview. The adhesives and pipes underpinned its earnings for the quarter ended March, along with a low base.

Strong housing demand in tier-1 cities supported robust pipe volumes, aiding realisations and margins. In FY21, pipe volumes grew 3% over a year earlier to 1.37 lakh tonnes.

Q4 Highlights

• Adhesive revenue grew 78% over a year earlier to Rs 240 crore during the quarter.

• Revenue for the pipe business rose 31.8% sequentially to Rs 886.4 crore.

• Overall operating margin expanded by 470 basis points year-on-year to 22.6%.

• The pipe segment margin increased 435 basis points to 23.5%, supported by Rs 25 crore inventory gains.

• Adhesive margin expanded 590 basis points to 18.8%.

• While commodity prices are rising, better offtake and higher capacity utilisation, which stands at 55-60%, and operating leverage will offset that.

Astral is confident that while domestic growth will aid market share growth, its products are finding acceptance in the overseas markets as well.

Consumers as well as certain governments prefer non-Chinese products, helping helped Astral's products sell faster in countries such as the U.K., Savlani said. The company exploring export of value-added products like chlorinated polyvinyl chloride pipes and valves.

The company relaunched its composite CPVC pipes (aluminium mix) after technical and operational improvements and its valve (industrial and plumbing) facility at Dholka, Gujarat is also ready to commence operations.

While Savlani refrained from offering any guidance for FY22 and FY23, he is confident of growth. Astral is expanding capacity expansions like adding tank capacities at multiple locations, pipe capacities at Sangli and Aurangabad, and a new research and development facility, training centres to support the adhesive segment, and new product launches in the pipe segment. But these are at a smaller scale and won’t require major capex spends, Savlani said. That, according to him, will aid return ratios over the next few years.

Watch the full interview here: