Prince Pipes and Fittings Ltd - IPO Note

Private Client Research




Plastic Products


Prince Pipes and Fittings Ltd

Plastic Products

December 16, 2019

Rating: Subscribe

Sensex: 40938.72

CNX Nifty: 12053.95

NSE: -

BSE: -

Price range
Rs. 177 - Rs. 178
Issue Period
Dec 18, 2019 to Dec 20, 2019


December 16, 2019



CNX Nifty








Issue details

Face value (Rs.)
Market lot
84 Equity Shares and in multiples thereof
Issue size
Rs 500 crores
Public Issue
2.81 crore shares
Market cap post IPO
1954 crores
Equity Pre - IPO
9.58 crore shares
Equity Post - IPO
10.98 crore shares
Issue type
100% book building

Shareholding (Pre IPO)


Shareholding (Post IPO)


+91 22 6639 3000

Strong brands in the pipes and fittings segment with over 30 years’ experience and multiple industry awards and accolades:
Prince Pipes has a strong legacy of more than three decades in the polymer pipes segment. The company markets its products under two brand names: Prince Piping Systems; and Trubore (which it acquired in October 2012). It has an advantage of being one of the leading organised players in this highly fragmented market and had a market share of approximately 5% in FY2019. The company is amongst the top six organised players, which collectively have a total market share of 49% in FY 2019. The fittings segment typically earns higher margins due to the specialised nature and precision required vis-à-vis the pipes segment. The company’s strong brands enabled it to increase its market share in the fittings segment.

Comprehensive product portfolio across polymers serving diverse end-use applications:
The Company has a comprehensive product portfolio and is positioned not just as a pipe manufacturer but also as an end-to-end piping systems supplier. It currently manufactures polymer pipes using four different polymers: UPVC; CPVC; PPR; and HDPE, and fittings using three different polymers: UPVC; CPVC; and PPR. It has different stock keeping units for different products under each polymer type. Its products are used for various applications in the fields of plumbing, irrigation, and SWR (soil, waste and rain) management.

Strategically located manufacturing facilities with a core focus on quality:
The size of the pipes being large results in high transportation cost. The company has a competitive advantage in this respect as it has established six manufacturing facilities (located in proximity to its buyers) in: Athal and Dadra (both located in the Union Territory of Dadra and Nagar Haveli); Haridwar (Uttarakhand); Chennai (Tamil Nadu); Kolhapur (Maharashtra) and Jobner (Rajasthan). The company uses five contract manufacturers to increase market penetration in North, West and South India. For FY 2019, sales in North, South, West and East India represented 38.57%, 26.93%, 23.54% and 10.96%of revenue from operations, respectively.

Large & growing distribution network:
The Company sells its products to distributors, who then resell the products to wholesalers, retailers, and plumbers. It sells its Trubore products directly to wholesalers and retailers and has a pan-India network of distributors for its Prince Piping Systems products and a network of wholesalers and retailers for its Trubore brand products in South India.

Technical collaboration with a reputed international player:
The company has a collaboration with WavinOverseas B.V, a company headquartered in Zwolle in The Netherlands. Wavin provides the company with technology and know-how to improve manufacturing efficiency and quality of its products.The average number of breakdowns per week (availability) at its Athal plant decreased from 40 for FY 2016 to 23 for the six months ended September 30, 2019 and the Athal plant’s overall equipment efficiency increased from 86.5% for FY 2016 to 91.2% for FY 2019.

Setting up a new manufacturing plant in Telangana:
The Company plans to set up a new manufacturing plant in Sangareddy (Telangana), with a total estimated installed capacity of 51,943 tonnes per annum. It plans to commence production at the Telangana plant in FY 2021. Currently, the company’s clients in South India are catered to by its plants in Athal and Haridwar. The opening of the Telangana plant will enable it to compete in these markets more effectively.

Expand the Trubore brand to new geographies:
The Company acquired the Trubore brand in October 2012 and has evolved it into a premium brand. Trubore brand products are currently sold in South India, primarily in Tamil Nadu. The company plans to increase sales of its Trubore brand products by increasing its network of wholesalers and retailers pan-India over the next three or four years.


The plastic pipes industry in India is five decades old, with the first polyvinyl chloride (PVC) plant being established in 1961. With the introduction of various PVC products in the 1970s, PVC consumption started doubling almost every five years. Between 1985 and 1995, the Green Revolution resulted in increased usage of PVC pipes in the agriculture sector due to their superior performance. The industry has experienced a rapid 10-12% CAGR growth in the past five Fiscal years. The major reasons for growth are: increasing demand for pipes in the construction/ building industry and irrigation sector, nationwide infrastructural development, the government’s focus on urban/rural development, and the Smart City initiative. Among several variants of plastic pipes available in the market, the demand for UPVC and CPVC, in particular, has been rising owing to affordability, high quality and durability.

One of the most important changes in the pipes industry was the large-scale shift from metal-based pipes to polymer-based pipes in most applications. This was especially true in case of plumbing and piping applications in the construction industry. This evolution has allowed for greater research and development in specialised products by organised players for specific applications with the development of polymers such as CPVC for hot and cold water plumbing, fire fighting and transportation of industrial fluids. The CPVC segment, which poses technological entry barriers, has also given branded players an opportunity to increase their market share. Until then, UPVC dominated the plastic pipes industry with several unorganised players posing stiff competition to branded players


Reduction in activity in the agriculture segment:
Demand for products relating to irrigation is affected by the level of growth in the agriculture segment in India. The level of growth in the agriculture segment is, to a major extent, impacted by the monsoon each year. A good monsoon season typically bodes well for farmers’ incomes and the agriculture segment, and in turn, for the company’s business. Any reduction in the activity in the agriculture segment could have a material adverse effect on its business, results of operations and financial condition.

Highly competitive markets:
The markets in which it sells its products are highly competitive and the company faces significant competition from organized and unorganized pipe manufacturers. The success of players in the industry depends on: (a) a pan-India presence; (b) size of distribution network; (c) product portfolio; (d) the end-use sectors it caters to; and (e) presence in pipes as well as fittings segment. Furthermore, its competitors’ actions, including expanding manufacturing capacity or the entry of new competitors into one or more of its markets could result in the company lowering the prices of its products in an effort to maintain sales volume. If it fails to compete effectively, it would have a material adverse effect on its business, financial condition and results of operations.

Increase in the cost of raw materials:
The Company’s primary raw materials comprise UPVC, CPVC, PPR and HDPE resins, which are derived from crude oil by-products. Crude oil prices are volatile and any increases in the price of crude oil would lead to increases in the prices of the raw materials required to manufacture its products. The company has not entered into any long-term supply contracts for such raw materials and, therefore, it is subject to the risk of increases in the costs of UPVC, CPVC, PPR and HDPE resins and the depreciation of the Rupee against the U.S. dollar.

Promoters Pledge:
The Promoter Group entities, Express Infra Projects LLP, have issued bonds aggregating up to Rs 200 crores, of which Rs 191.5 crores was outstanding as at October 31, 2019. For securing these bonds, the Promoters have pledged35% of the Equity Share capital of the company (in their capacity as first holders or second holders of such Equity Shares) on a fully diluted basis, with IDBI Trusteeship Services Limited, acting as a trustee on behalf of the bondholders.

Company Description

Prince Pipes is recognized as one of the leading polymer pipes and fittings manufacturers in India in terms of number of distributors. It markets its products under two brand names: Prince Piping Systems; and Trubore. Due to its comprehensive product range, it is positioned as an end-to-end polymer piping systems solution provider. It has more than 30 years’ experience in the polymer pipes segment. It currently manufactures polymer pipes using four different polymers: UPVC; CPVC; PPR; and HDPE, and fittings using three different polymers: UPVC; CPVC; and PPR. As at October 31, 2019, it had a product range of 7,167 SKUs. Its products are used for various applications in plumbing, irrigation, and soil, waste and rain water (“SWR”) management. Its product range meets the requirements of both the rural and urban markets.

The company distributes its products from its six plants and 11 warehouses. The company’s warehouses are managed by clearing and forwarding agents. It sells its Prince Piping Systems products to distributors, who then resell the products to wholesalers, retailers, and plumbers. As at October 31, 2019, the company sold Prince Piping Systems products to 1,151 distributors in India. It sells its Trubore products directly to wholesalers and retailers. As at October 31, 2019, the company sold Trubore products to 257 wholesalers and retailers.

Business Segments
UPVC pipes: These pipes find application in agriculture and plumbing for portable water supply and sewerage. Continuous replacement of galvanised iron pipes with these pipes has supported healthy demand growth in the past. Features such as affordability and longer life compared with metal pipes have aided this segment.

CPVC pipes: These pipes are primarily used in plumbing applications, as well as hot and cold, potable water distribution systems. Demand growth for this segment over the past five Fiscal years (i.e., April 1, 2014, to March 31, 2019) has been the highest among pipes, as CPVC pipes in India are still at a nascent stage and have huge potential due to factors such as longevity, corrosion free, fire resistant, being lead-free, and the ability to withstand high temperatures.

HDPE pipes: These pipes are used in the irrigation sector, sewerage and drainage, city-gas distribution and in chemical and processing industries. HDPE pipes account for ~15% share in the total plastic pipes industry. These pipes have been gaining prominence over traditional metal and cement pipes, due to durability, low maintenance and longevity versus metal pipes.

PPR pipes: These pipes account for a mere 5% of the total plastic pipes demand. These pipes, which are used for various industrial purposes, are relatively costly compared with other plastic pipes, which restricts their usage.

Profit & Loss Statement:- (Consolidated)

(Rs. Crores)

Income Statement Mar-17 Mar-18 Mar-19
Revenue from operations 1330.00 1320.50 1571.80
Growth% -0.71% 19.03%
Cost of material consumed 836.40 893.80 1072.80
Manufacturing expenses 107.50 46.10 34.00
Changes in inventory -54.90 -18.50 20.40
Employee Benefit Expenses 60.90 72.50 78.30
Other Expenses 217.50 163.40 180.50
Total Expenses 1167.40 1157.30 1386.00
EBITDA 162.60 163.20 185.80
EBITDA margin(%) 12.23% 12.36% 11.82%
Depreciation 32.80 38.00 45.10
EBIT 129.80 125.20 140.70
Other income 2.40 6.00 7.10
Interest cost 36.30 36.10 36.40
Profit before tax 95.90 95.10 111.40
Provision for tax 21.70 22.40 28.10
Profit after tax 74.20 72.70 83.30
PAT margin(%) 5.58% 5.51% 5.30%
EPS 7.85 8.08 9.26
Source: Stockaxis Research, Company Data


We have a positive outlook for the company based on parameters such as healthy earnings profile, strong distribution network, and robust return ratios. The issue is priced at 19.6 X PE and 3.4x Price to book as compared with its listed peers Finolex Industries which is trading at P/E of 19.7X and 1.8x price to book. Hence, considering its docile debt position and increased competitiveness of the market it operates into, We recommend ‘Subscribe’ to this issue for listing gains.

Key Information:

Use of Proceeds:
The objects for which the company intends to utilise the Net Proceeds and the proceeds from the Pre-IPO Placement, are as follows:

  1. Repayment or prepayment of certain outstanding loans of the company
  2. Financing the project cost towards establishment of a new manufacturing facility, either set up directly or indirectly (through a wholly-owned subsidiary that the company may set up in the future)
  3. Up gradationof equipment at its manufacturing facilities
  4. General corporate purposes, subject to the applicable laws.

Book running lead managers:
JM financial & Edelweiss

Jayant Shamji Chheda, aged 73 years, is the Chairman and Managing Director of Prince Pipes. He has been associated with the company since incorporation as a Director. He was awarded the ‘Lifetime Achievement Award’ at the Vinyl India Conference, 2014. Parag Jayant Chheda, aged 48 years, is Executive Director. He has been associated with the company since April 27, 1996 as a Director. He holds an associate degree in business administration from Oakland Community College. He has over 21 years of experience in the piping industry. He was awarded the ‘Inspiring Business Leader Award’ at the Economic Times Summit, 2016 for the ‘Business and Industry’ sector. Vipul Jayant Chheda, aged 44 years, is Executive Director. He has been associated with the company since March 11, 1997 as a Director. Rajesh R. Pai, aged 48 years, is Non-executive Director. He was appointed to the Board on November 26, 2019.