Astral in wait-and-watch mode

Astral Poly Technik, makers of Astral pipes (more famously known as ‘Dabangg pipes’ thanks to the in-film branding in the Salman Khan-blockbuster) recently announced its financial performance for the quarter and the fiscal ended March 31, 2020.

For the year, consolidated revenue fell nearly 18% while operating profit and profit before tax fell 14% and 35% respectively.

For the quarter ended March, the pipes’ segment revenue fell 16.5% from a year ago while the adhesives segment fell 27.9% from a year ago.

While the broader numbers may look disappointing, the company’s gross profit margins have seen an upswing with a 4% improvement during FY20, thanks to the backward integration in pipes’ segment and restructuring in its adhesives’ business.

Of the impact of Covid-19 on business, Sandeep Engineer, managing director of Astral Poly Technik, says, “Covid-19 will make matters worse for the unorganised sector and the small-medium scale of pipe manufacturers.”

The company, which recently launched pharma-grade sanitizers, is seriously considering cleaning products as a vertical. In an email interview with Fortune India, Engineer talks about the company’s plans for tackling the challenges arising from the pandemic and the lockdown.

How do you see the Covid-19 pandemic affecting your industry? Do you see consolidation in the sector, and organised players getting stronger?

Yes. Consolidation in the piping industry started with demonetisation, and the subsequent policy changes such as goods and service tax (GST), anti-dumping duty on the CPVC (chlorinated polyvinyl chloride) resins and compounds coming in from China and Korea, had already weakened the smaller players.

Covid-19 will make matters worse for the unorganised sector and the small-medium scale pipe manufacturers. Covid-19 will also make matters worse for those with single-location manufacturing facilities in case of a breakout of the disease. Those with multi-location setups will be in a much better shape to service the market.

In the past Astral Poly Technik has been aggressively focusing on capacity expansion and utilisation of the same. Going forward, do you plan to follow the same strategy, or would Covid-19 require you to go back to the drawing board and rework your plans?

We will wait and watch the market demand for a few months before resuming our capex (capital expenditure) plans. In case of industry consolidation, we might have to go back to being our aggressive selves. Being a low-debt company makes it easier for us to swing either way.

In the past, Astral Poly Technik has chosen an acquisition path to diversify in related lines of business, like Resinova and Seal IT, for expansion. How has that strategy paid off so far?

It has been a good journey so far. Our United Kingdom (UK) and United States (US) units have been functioning well despite the Covid-19 situation. The Indian adhesives business is undergoing some structural changes but is expected to be back on track soon. Through our adhesives businesses, we have gotten access to a new segment and have strengthened the Astral brand within the building materials industry.

In light of the Covid-19 pandemic, as the world will be living an entirely new normal, do you see diversification opportunities?

We shall explore cleaning products (personal and domestic) as a serious vertical. The use of these products will increase exponentially across India and the surrounding nations for a considerable period of time. We shall be distributing these products through our pipe and adhesive distributors to start, along with some online sales. Post introduction of pharma-grade sanitisers, we shall explore the medical store networks too.

What are the updates on the resumption of work at your plants across Gujarat, Tamil Nadu, Rajasthan, Maharashtra and Uttarakhand? Have you been able to resume production at full capacity across all the plants?

All our plants are up and running at capacities deemed to be safe by the local governments. Each state has its own rule. So far we have not had any major disruptions at any of our locations.