prince pipes & fittings ltd share price Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Global Economy

The global economy witnessed very inconsistent trends through 2022. Soon after the initial COVID-19 wave, economic activity rebounded strongly in 2022, buoyed by pent-up demand and an agile, responsive policy support. However, as 2023 set in, global economies have been responding without much cheer. War and international tensions continue to shape global economic developments, and ongoing trends reflect that patterns of economic activity will continue to shift around the world in line with new geopolitical fissures and fault lines. According to the World Banks latest Global Economic Prospects report, global growth has slowed sharply and the risk of financial stress in emerging market and developing economies (EMDEs) is intensifying amid elevated global interest rates. The outlook for the global economy is in fact gloomy, according to the results of the latest survey of chief economists conducted by the World Bank.

The World Banks latest projections indicate that the world economy will remain frail—and at risk of a deeper downturn—this year and in 2024. The projections also outline global growth to slow from 3.1% in 2022 to 2.1% in 2023, before inching up to 2.8% in 2024. Even this tepid growth assumes that stress in the banking sector of advanced economies does not spill over to EMDEs.

This difficult context highlights a multitude of policy challenges. Recent bank failures call for a renewed focus on global financial regulatory reform. Global cooperation is also necessary to accelerate the clean energy transition, mitigate climate change, and provide debt relief for the rising number of countries experiencing debt distress. At the national level, it is imperative to implement credible policies to contain inflation and ensure macroeconomic and financial stability, as well as undertake reforms to set the foundations for a robust, sustainable, and inclusive development path.

Outlook

The global economy is expected to grow 2.8% in 2023, influenced by the ongoing Russia-Ukraine conflict. Concurrently, global inflation is projected to fall marginally to 7%. Despite these challenges, there are positive elements within the global economic landscape.

Some large economies like China, US, India, Japan, are not in a recession. Approximately 70% of the global economy demonstrates resilience, with no major financial distress observed in large emerging economies. The energy shock in Europe did not result in a recession, and significant developments, including Chinas progressive departure from its strict zero- Covid policy and the resolution of the European energy crisis, fostered optimism for an improved global trade performance. Despite high inflation, the US economy demonstrated robust consumer demand in 2022. Driven by these positive factors, global inflation is likely to be still relatively high at 4.9% in 2024. Interestingly, even as the global economy is projected to grow less than 3% for the next five years, India and China are projected to account for half the global growth.

(Source: IMF)

Indian Economy

India has witnessed a 7.2% growth in Gross Domestic Product (GDP), which is higher compared to other major economies such as the US, China, Indonesia, and the UK, among others, as per data released by the Government. Indias GDP in current price terms ranks above the UK, France, Canada, Russia, and Australia, but below the USA, China, and Germany.

The World Bank Indias biAnnual flagship publication, has outlined that Indias growth continues to be resilient despite some signs of moderation in growth. The Update notes that although significant challenges remain in the global environment, India was one of the fastest growing economies in the world. The overall growth remains robust and is estimated to be 6.9% for the full year with real GDP growing 7.7% year-on-year during the first three quarters of fiscal year 2022/23. There were some signs of moderation in the second half of FY 22/23.

Growth was underpinned by strong investment activity bolstered by the governments capex push and buoyant private consumption, particularly among higher income earners. Inflation remained high, averaging around 6.7% in FY22/23 but the current-account deficit narrowed in Q3 on the back of strong growth in service exports and easing global commodity prices.

Although headline inflation is elevated, it is projected to decline to an average of 5.2% in FY23/24, amid easing global commodity prices and some moderation in domestic demand. The Reserve Bank of Indias has withdrawn accommodative measures to rein in inflation by hiking the policy interest rate. Indias financial sector also remains strong, buoyed by improvements in asset quality and robust private-sector credit growth.

The central government is likely to meet its fiscal deficit target of 5.9% of GDP in FY23/24 and combined with consolidation in state government deficits, the general government deficit is also projected to decline. As a result, the debt-to-GDP ratio is projected to stabilize. On the external front, the current account deficit is projected to narrow to 2.1% of GDP from an estimated 3% in FY22/23 on the back of robust service exports and a narrowing merchandise trade deficit.

Indias industrial output, as measured by the index of industrial production (IIP), grew in April 2023 by 4.2% over last year, as per data released by the Ministry of Statistics and Programme Implementation (MoSPI).

As per data in CMIEs CapEx database, project completions stood at Rs.6.9 trillion as of June 11, 2023 compared to Rs.1.2 trillion in the corresponding quarter last year. This possibly implies that the output of infrastructure goods will continue to be high in May as well, especially with the railway freight of cement already recording a 6.8% higher volume compared to last year.

Output of consumer durables contracted by 3.5% in April. Evidently, discretionary spending remains restrained. Despite a fall in consumer durables output, total consumer products output recorded a 5% growth as the non-durables anchored the segment with a 10.7% increase in their output.

Capital goods output helped move the IIP along with a 6% growth in their output in April over last year. While this is a healthy increase, it is lesser than the 9.2% average year-on-year growth the segment has seen every month in the last 11 year. Primary goods and intermediate goods saw their output expand with a small 1.9% and a measly 0.8% in April compared to last year.

Outlook

The overall outlook for the Indian economy remains positive. Investments are expected to see a turnaround and thrust the economy into sustainable growth. As per Indias Economic Outlook by a leading consulting firm, India will likely grow at a moderate pace of 6.0%-6.5% in FY 2023-24, as the global economy continues to struggle. Growth in the next fiscal will likely pick up as investments kickstart the virtuous circle of job creation, income, productivity, demand, and exports supported by favourable demographics in the medium term.

It looks like the world has come out of the shadow of the pandemic. However, geopolitical crises, supply chain reorientations, global inflation, and tight monetary policy conditions will continue to cast an overhead shadow.

Industry Overview

Indian Plastic Pipes and Fittings Market

The Indian PVC pipe market is currently in a strong growth stage. Despite the pandemic, the polymer pipes sector has been performing well in the new normal India. The demand for metal to polymer pipes has significantly changed in a number of industries, including plumbing and piping applications in the construction industry. The use of CPVC pipes in the hot- and cold-water plumbing industry has increased significantly during the past several years.

Based on a report by CRISIL, polyvinyl chloride (pvc) pipes and fittings manufacturers are set to sustain their momentum with a 13-15% on-year volume growth next fiscal, driven by higher budgetary allocation for government schemes in water supply, irrigation, housing, and infrastructure.

For industry players, more than 70% of the demand comes from agriculture, water supply, irrigation, and sewerage, and depends, directly or indirectly, on government funding. The remaining demand is from residential plumbing and industrial applications.

India PVC demand - In FY 2023, the industry has surpassed 3.7 MMT

End segment landscape in India - About 80% of the demand is from pipes and fittings

The market for plastic pipes has organised players accounting for approximately 65%.

• 35-40% of the industrys demand is accounted by plumbing pipes with 10-15% for SWR, both used in residential and commercial real estate.

• 45-50% accounted by agriculture.

• 5-10% by infrastructure and industrial projects.

• Global Polyvinyl Chloride capacity is poised to see considerable growth over the next five years, potentially increasing from 59.97 MTPA in 2022 to 71.79 MTPA in 2027, registering total growth of 20%.

• Asia Pacific remains the largest producing region with more than a half of global total, followed by North America and Europe.

• More than 65% of global PVC demand comes from Asia Pacific and the region will keep this position as well as the highest growth rates; China and India will be responsible for most of the growth

• Among countries, India is expected to lead Polyvinyl Chloride capacity additions by 2027, followed by China and US.

• Construction industry will continue to be the driving force for world PVC market.

Types of polymers, and its applications

Plastic pipes are made using different types of polymers and have varied applications:

Types of Pipes	Applications
Unplasticized	• Irrigation
Polyvinyl Chloride	• Cold water plumbing
(UPVC)	• Drainage
Chlorinated Polyvinyl	• Hot and cold-water system
Chloride (CPVC)	• Industrial applications
High-density	• Underground drainage structured wall
Polyethylene (HDPE)	• WSS solid wall
Polypropylene Random (PPR)	• Hot and cold-water systems
	• Industrial applications
Composite pipe	• Hot and cold-water systems
	• Gas pipeline
	• Industrial applications

Key Drivers of the PVC pipes industry:

Governments focus on infrastructural development:

• Significant increase in allocations for capex spending by 33% to Rs.10 lakh crore conveys Governments intent on ensuring that infrastructure acts as a force multiplier.

• PM Awas Yojana allocated over Rs.79,000 crore, 65% higher as compared to 2022 boosting Housing for All mission.

• Jal Jeevan Mission budgeted allocation increased by 27% to Rs. 69,684 crores.

Low piped water penetration in India:

• 75% of households do not have drinking water on the premises.

• 85% of households do not have access to piped water.

• 600 million Indians face high to extreme stress over water 6%.

Rapid growth of housing sector:

• Indian residential real estate market is witnessing a surge in new launches as the appetite for homeownership remains strong.

• Key cities contributing to new launches in Q1 2023 included MMR (Mumbai Metropolitan Region), Hyderabad, Pune, National Capital Region and Bengaluru, together accounting for 89% supply addition.

• Mid-segment homes continue to dominate new supply with 36% share, followed by the premium and affordable segments with 24% and 18% share, respectively.

Agriculture industrys growing potential:

• In the sector of agriculture, PVC pipes play a vital role in transportation, storage of water, irrigation, and hydroponic systems. In agriculture pipes and fittings can be used both for potable as well as nonpotable uses.

Discovery of new applications for PVC and CPVC pipes

• India is the fastest growing consumer of PVC and there remains large scope for sustained growth. Pipes and fittings form 73% of the end consumer market for PVC in India. In addition to the above, the demand for replacement of metal pipes in the residential real estate market; potential of upgradation of GI pipes to PP and CPVC in the industrial segment are avenues that offer new application areas.

Non-real estate linkages ensure long-term sector growth.

Housing sector - A key growth river for PVC pipes and fittings

The top 7 cities of India saw robust housing sales activity.

City	01-23	04-22	01-22	Q-o-Q	Y-o-Y
fit NCR	17.100	14.600	18.800	17%	-9%
itfh mmr	34.700	28.400	29.100	22%	19%
Bengaluru	15.700	11.800	13.450	33%	17%
Pune	19.900	16.500	14.000	21%	42%
jp^jj Hyderabad	14.300	11.500	13.100	24%	9%
Chennai	5,900	3.800	5.000	55%	18%
Kolkata	6.200	5.500	6,000	13%	3%

Source: Anarock - HOUSING SECTOR - NEW PEAK

Industry Break-Up In Terms Of Polymer Types

Over the last few years, branded pipes and fittings companies continued to gain strong industry lead and market share from unorganized manufacturers and a few larger regional organized players facing balance sheet challenges. Over the last few years, the larger pipes and fittings brands have continued to plough the industry by consistently investing in brand awareness, category education, local audience engagements especially in Tier 2 and 3 towns and cities, and targeted social media and below-the-line activities. All such efforts have contributed to greater plumber and consumer awareness, importance of quality and adherence to BIS standards in pipes, particularly for residential real estate projects.

The growth of the organized segment has further been aided by greater lateral focus on value- added products and fittings and product portfolio expansion offered to channel partners. Consequently, organized players have become one-stop solution providers for plumbing applications. Among several variants of plastic pipes, demand for UPVC and CPVC have been consistently rising owing to affordability, high quality, durability, and newer applications.

With stronger focus on tax compliance due to e-invoicing/GST Regulations and stringent adherence to BIS standards, unorganized manufacturers continue to be impacted and are witnessing shrinking market share.

Even in FY21, supply-side constraints and raw material cost inflation have hurt unorganized players impacting their profitability and balance sheet. Ability to build a resilient brand, focus on premiumisation, efficient influencer engagement, product innovation and efficient supply chain management will enable larger players to drive deeper roots into the industry, carve out a better leadership position and gain larger market share leaving unorganized players to grapple with operating challenges driven by volatility in imported raw material supply and stricter tax compliance.

PVC price impact

International geopolitics & conflicts along with supply issues have impacted PVC prices which have now corrected and most likely bottomed out.

Indian Bath & Sanitaryware Market

India is worlds 2^nd largest sanitaryware manufacturer after China. The Indian sanitaryware industry size is estimated to be around Rs 55bn, of which 75% is estimated to be the organised market. The industry is highly consolidated with the top 4 players commanding 60-70% share in total market. Morbi and Thangadh (in the state of Gujarat) combined manufactures around 75% of Indias total production. Easy availability of raw material and skilled labour are the key reasons. Sanitaryware is highly penetrated in India, but the industry offers strong growth over the long-term as replacement demand accounts for only 15-20% of the domestic sanitaryware market (vs 80% in developed countries).

The faucet market in India is worth over Rs 100bn, of which 60% is estimated to be the organized market. The industry is highly fragmented. New real estate construction activity and premiumization are the key demand drivers for faucets.

Per industry experts, the Indian bath and sanitaryware market is estimated to grow at 8% CAGR over 2021-2027 driven by increased national drinking water outlay, hygiene & sanitation programmes (Swachh Bharat Abhiyaan), governments Housing for All, Smart Cities, social media influence, consumer preference and better living standards. Organised players will continue to gain market share, in our view, owing to companys aggression towards capacity addition, brand building and channel expansion.

Indian sanitaryware industry structure

Total market size (Rs bn)	55.0
Organised market share	75%
Organised market (Rs bn)	41.3
Indian faucet industry
Total market size (Rs bn)	100.0
Organised market share	60%
Organised market (Rs bn)	60.0

Source: Systematix Report

Company Overview

Prince Pipes - Leading the transformation in Indias water infrastructure

Prince Pipes and Fittings is one of Indias largest integrated piping solutions providers based in Mumbai. Over 3 decades, we have been engaged in the manufacturing of polymer piping solutions in five types of polymers - CPVC, UPVC, HDPE, PPR and LLDP. Over time, we have emerged as one of the fastest growing companies in the Indian pipes and fittings industry. With 1500+ distributors and 7 state-of-art facilities across India, the Prince Pipes brand is the hallmark of Quality, Trust, and Innovation. In January 2023 the company was included in the Business Todays 500 Most Valuable Companies List.

Company Profile

Over the last Three decades, Prince Pipes has emerged as one of the leaders in the Indian pipes and fittings industry, creating innovations in plumbing, irrigation, storage, and sewerage systems. Now the journey has taken a much larger scale.

We are taking bold strides to strengthen our market and industry presence diversifying into newer verticals of Modern Plumbing and Bathware. The time has come to create new beginnings. Push our limits further, strengthen efficiencies and optimize capital productivity - all directed at creating higher stakeholder value.

Prince Pipes - Leading the transformation in Indias water infrastructure

Prince Pipes and Fittings is one of Indias largest integrated piping solutions providers based in Mumbai. Over Three decades, we have been engaged in the manufacturing of polymer piping solutions in five types of polymers - CPVC, UPVC, HDPE, PPR and LLDP. Over time, we have emerged as one of the fastest growing companies in the Indian pipes and fittings industry. With 1500+ distributors and 7 state-of-art facilities across India, the Prince Pipes brand is the hallmark of Quality, Trust, and Innovation. Prince Pipes and Fittings Limited is a Fortune India 500 company.

Vision

To be an acknowledged leader in Indian plastic piping industry by exceeding customers expectations and maximizing bottom line for all our stake holders.

Mission

Our mission is to bring a revolution in plastic piping industry through innovative solutions which would create a profitable growth and benefit our customers and the society at large.

Core Values

Ethical Standards:

We conduct business in an ethical manner and act as a good corporate citizen in all areas in which the

Respect:

We respect and appreciate all individuals and cultural identities. We embrace the differences. We ensure harmonious working environment for all our employees.

Transparency:

Transparency is the hallmark of all our business dealings. We communicate openly and sincerely. We appreciate feedback.

Commitment to Quality:

We are committed to providing the best quality products to our customers.

Ownership:

We believe in accepting responsibility and ownership while embracing common goals, teamwork and collaborative decision making.

Prince Pipes is one of Indias largest integrated pipings solutions providers. We market products under the brand names of Prince and Trubore. We continue to develop expansive operations across agriculture, plumbing, borewell categories, and are building the widest sewage product range and underground drainage solutions. With a deep product portfolio of over 7,200 SKUs positions we are an end-to-end solutions.

Prince Pipes has an extensive pan-India distribution network of over 1,500 channel partners. With seven manufacturing units at Athal (Dadra and Nagar Haveli), Dadra (Dadra and Nagar Haveli), Haridwar (Uttarakhand), Kolhapur (Maharashtra), Chennai (Tamil Nadu), Jaipur (Rajasthan) and Sangareddy (Telangana), we are well positioned to actively address the growing potential of the Indian pipes and fittings industry. To bolster its presence in East India, the Company plans to add ~ 35,000 MT Pipes greenfield capacity in Bihar.

In November 2022 and January 2023, Prince Pipes launched Three new, world class plumbing and drainage solutions with the introduction of Skolan Safe a Premium Polypropylene (PP) Silent Drainage System, HT Safe PP Low Noise Drainage System and Prince Hauraton - a modern range of Surface Drainage solutions.

This initiative was a part of the Companys growth strategy to bring innovative products to the Indian markets. Now, Prince Pipes offers a world class range of technology-oriented drainage and plumbing solutions, segmented under the Modern Plumbing vertical.

In 2023, the Company also diversified into the Bathware segment with the launch of Prince Bathware - a new, unique collection of faucets, showers, sanitaryware and accessories.

In March 2023, the Companys Chennai plant achieved IGBC Gold rated Green Factory Building certification by the Indian Green Building Council (IGBC). Earlier our Jaipur manufacturing facility has achieved Platinum rated Green Building certification by IGBC. And Jaipur also awarded GOLD medal in the 8th edition of National Awards for Manufacturing Competitiveness (NAMC) 2021, organized by International Research Institute for Manufacturing, in strategic association with Moneycontrol.

Creating a future-fit business

• Building presence across the product chain to strengthen Indias water infrastructure.

• Enhancing efficiencies to build a more agile and resilient enterprise.

At Prince Pipes, we pride ourselves on our deep heritage in the industry giving us a strong knowledge edge and ability to serve evolving the needs of our customers. We have been sharpening our competitive edges and efficiencies to stay above the curve in an increasingly competitive business environment. Our passion for excellence and strategic initiatives for enterprise growth has set us on course towards transforming into an even more agile and resilient organisation.

• In line with our aim of being an end-to-end pipes and fittings solution provider, the Company has been transforming in a way that allows it to build a clear presence across the product chain to strengthen Indias water infrastructure.

• We are building a deep and comprehensive product portfolio serving a gamut of diverse applications. We are today one of the largest manufacturers and integrated piping solutions providers.

• At Prince Pipes, we identified Indias PVC and piping opportunity very early on and have been leading a technology-led and sustainability-based agenda. This agenda is about leveraging Indias national priorities that include Indias focus on being energy efficient, strengthening water infrastructure, increase agricultural output, health and well-being of people and reduce the use of natural resources while building sustainability.

• As an end-to-end piping systems solutions provider, we have been offering customers a seamless experience - from plumbing, storage and sewerage solutions, and installation of products, which require other related products as well as plumber assistance.

With two more critical product and segment verticals of Modern Plumbing and Prince Bathware as part of our service capabilities, we truly evolved to better consolidate our industry presence. With access to our large product portfolio, projects can take advantage of a wider range of globally preferred piping & drainage solutions, industrial heavy duty piping capabilities, greater cost & quality efficiencies as well as proactive customer service.

Presence across water infrastructure - Adding depth to product portfolio

We are at an exciting stage of growth as we build great depth to our portfolio aligned to the Companys vision and goal focused on transforming Indias water infrastructure. We are a multi-player polymer Company dealing with polymers - CPVC, UPVC, HDPE, PPR and LLDP - that cater to extensive industry applications in plumbing, sewage, irrigation, industrial and underground drainage.

We continued to launch state-of-art products in the piping division as part of the Companys growth strategy to bring innovative and global products to the domestic market.

• This fiscal the Company introduced Prince OneFit with Corzan CPVC technology - Second product in collaboration with Lubrizol, global leaders in CPVC and WireFit range of electrical conduit pipes and fittings.

• Another thrilling milestone was the launch of the new vertical - Modern Plumbing. As part of this we launched three new, world class plumbing and drainage solutions with the introduction of Skolan Safe a Premium Polypropylene (PP) Silent Drainage System, HT Safe PP Low Noise Drainage System and Prince Hauraton - a modern range of Surface Drainage solutions. This initiative was a part of the Companys growth strategy to bring innovative, global drainage products to the Indian real estate and industrial projects to align with world-class norms and standards.

• Prince FlowGuard Plus-continues to percolate into Indias homes and constructions as one of the safest, most reliable, and cost-effective plumbing solutions in the real estate industry. In 2020, our collaborations with Lubrizol [Headquartered in the US] - the worlds largest manufacturers and inventors of CPVC compounds - has created a strong & sustainable partnership in the piping industry. Prince Flowguard Plus CPVC plumbing systems is Indias first CPVC to win Ghriha Council Certification.

The Key to Brand Growth... Premiumization

• As one of Indias largest integrated piping solutions providers, the Prince Pipes brand has been the hallmark of Quality, Trust, and Innovation. We adopted a different product branding strategy much early, as we realized that to our customers, mere difference is no longer enough.

• We transformed our marketing strategy to become centric about stretching category norms and creating strong demand for customers to accept and appreciate the value additions of Prince products.

• Through aggressive campaigns on fake and duplicity, road shows across India targeted at specific customer segments based on industry and needs, plumber educations and awareness campaigns, active channel partner engagements - high decibel BTL branding and targeted digital marketing campaigns are being successfully implemented towards Premiumization.

Building future capacities & manufacturing excellence

As we work towards being future-fit, we believe that building our manufacturing strength across the seven state-of-art plants, go beyond production capabilities and capacities. Another green field plant will be set up in the state of Bihar to strengthen presence in East India. It is the continuous improvement of our operations to reduce waste, increase production profitability, and gain a winning edge with quality and safety innovation. Our focus is not merely to maximize production throughput, but total build multiple pillars of the business centering on:

Safety - meant for both people/employees and product safety that can have major impacts on our companys wellbeing. Our effective safety system ensures that employees handle products properly in a safe environment.

Quality innovation-meeting customer expectations and producing consistent quality products to generate consistent sales, and meeting consumer compliance demands. We encourage employees to accepting responsibility for product quality which allows for innovation and an effective quality system.

Maximising yield-A multitude of steps are taken to eliminating or reducing waste and minimizing product wastage. We have built effective yield systems that are continuously innovating processes, tracking yield measurements closely, and establishing strong waste control.

Boosting productivity - We explore new ways of maximizing throughput and continuing to set new goals for production. On the plant floor we inspire engaged employees contributing to maximum efficiency while protecting safety, quality, and yield.

Plant location	Installed capacity (TPA)	Production capacity (TPA)	Products	Year of establishment
Athal (UT of Dadra and Nagar Haveli)	11,110	9,444	Fittings	1995
Dadra (UT of Dadra and Nagar Haveli)	60,286	44,830	Pipes	2000
Haridwar (Uttarakhand)	89,163	69,913	Pipes and Fittings	2008
Chennai (Tamil Nadu)	50,825	38,546	Pipes	2012
Kolhapur (Maharashtra)	14,861	11,369	Pipes	2012
Jobner (Rajasthan)	34,647	26,405	Pipes	2019
Sangareddy (Telangana)	54,196	42,442	Pipes and Fittings	2021
Total	315,088	242,949

Strong & growing network of pan-India channel partners

In May 2023, we once again were awarded the FEST Best Channel Loyalty Program for our unique customer loyalty program Udaan. The success of the Udaan Loyalty Program rests with our channel partners who have been strong loyalists, active supporters and key growth contributors.

Our channel associate ecosystem of over 1500 partners is an integral part of our business delivery helping us to innovate our products and drive mutual and sustainable growth.

Building on strong business fundamentals

As Prince Pipes implements its vision of bringing transformative changes to Indias water infrastructure, we continue to evolve and strengthen our presence as a fundamentally strong enterprise that can address and continue to do business at unprecedented times. Some inherent traits of our business has held us in good stead, building a resilient business, even in tough weather. It is hence encouraging that Business Today one of Indias leading publications has ranked Prince Pipes amongst Indias most valuable list of companies.

Our financial strength, quality management, and indemand products & services - are three things in combination that have enabled us to build a loyal customer base that contributes to our fundamental strength.

Although this fiscal witnessed unprecedented volatility in input costs in PVC prices that impacted our Companys profitability in the first half of the fiscal, the Company was able to mitigate this situation by cost and inventory optimization. The trend reversed moderately from December 2022 and our resilient performance in Q3 strongly bounced back in Q4 with significant improvements in operational margins.

Robust controls and processes, strict audit systems ensure financial health

Having a robust system of controls & processes and stringent audit systems, we ensure that our risk management is highly efficient and integral to our Companys long-term goals. Our success as an organization depends on our ability to identify and leverage the opportunities generated by our business and the markets we operate in. We take an embedded approach to risk management which puts risk and opportunity assessment at the core of the Boards agenda.

The Companys prudent financial management has translated into a long-term debt free status since March 2021.

Driving ESG - Progress with Purpose

Prince Pipes is a frontrunner in sustainable business practices. Through the years, we have integrated our sustainability and business strategies. We aim to demonstrate that robust financial results are not contrary to sustainable business; in fact, they are complementary.

We have in place an Integrated Management System through which we constantly strive to reduce losses (internal rejection/energy losses) by providing necessary resources to achieve the targets and usage of energy and environment efficient products and equipment.

Our overarching goal remains the delivery of growth, which is consistent, competitive, profitable and responsible. In the backdrop of a challenging operating environment during the fiscal, we dynamically managed our business to deliver strong bottom line performance whilst growing our customer franchises and made significant progress on several strategic priorities.

Key Performance - Financial Highlights

Advancing with resilience

Financial Highlights (in Rs. million)

	FY23	FY22	y-o-y change (%)
Revenue	27,108.70	26,568.32	2%
Other income	85.49	54.71	56%
EBITDA	2,503.15	4,156.11	(40)%
Profit before tax (PBT)	1,648.40	3,368.71	(51)%
Profit after tax (PAT)	1,214.20	2,494.03	(51)%

 

Ratios	FY23	FY22	Change
Debtors Turnover (x)	6.38	6.94	(8.08)%
Inventory Turnover (x)	5.19	6.28	(17.34)%
Debt Service Coverage Ratio (x)	2.06	2.83	(27.07)%
Current Ratio (x)	2.45	1.89	29.44%
Debt Equity Ratio (x)	0.04	0.12	(64.05)%
Operating Profit Margin (%)	9.23	15.64	(641) Bps
Net Profit Margin (%)	4.48	9.39	(491) Bps
Return on Equity- RoE (%)	9.24	21.6	(57.25)%

Balancing Risks and Opportunities

A well-established Risk Management System that tracks, targets, and mitigates existing and emerging risks

Types of risks	Risk description	Mitigation
Industry Risks:
Slowdown in economic activity	Plumbing, irrigation, water transportation and sewerage applications are the key segments driving growth in the plastic pipes industry. These sectors are dependent on the level of activity in residential and non-residential construction, agriculture, and industrial spaces. A slowdown in any of these sectors is likely to impact financial performance.	Sectors like real estate, agriculture, industrial, etc. are dependent on overall economic performance, Government policies & Regulations, and budget allocations. The increasing Government investment in housing and sanitation, building and construction, and irrigation and schemes such as, AMRUT, Har Ghar Nal Se Jal, Housing for All and Smart Cities are expected to provide impetus to the pipes industry. They offer great opportunities for organised players like us and allow us to maintain sustainable growth.
Raw material supply	Increase in raw material prices can affect profitability. UPVC, CPVC,	We leverage our long-standing relationships with suppliers and try to mitigate raw material price hikes.
	HDPE and PPR resins are the key raw materials used in the production of pipes. Their prices depend on crude oil prices. Any upward movement in crude oil prices impact raw material prices of resins.	Long-term contracts with suppliers, backed by well- defined inventory management helps us cushion against volatile price movement in commodities.
Competition	We operate in an industry that is highly competitive.	To remain relevant and ahead of our peers, we strive to strengthen the Companys competitive strengths. Map competitive landscape closely, focus on improving operational strengths & efficiencies, periodic strategic meets to stay ahead of industry. Our strategically located manufacturing facilities, wide distribution network, diverse products, and our ability to provide comprehensive plumbing, irrigation and sewerage management solutions allow us to maintain significant competitive advantage.
Operational	Risks
Operational efficiency	Manufacturing operations may be impacted due to circumstances not completely within the control of the Company. Unexpected breakdown or technical issues could adversely affect the production and/or cost overruns.	Continuous monitoring, periodic review and timely maintenance of equipment and infrastructure. Adoption of technology has helped gather information related to any potential/ actual breakdown, ensuring minimal impact on the operation. Special focus to strengthen operations with sustained investments in newer technologies.
Logistic and Supply Chain	Disruption in supply chain or distribution related logistical issues. Other related issues might include receipt of material, vendor payments issues.	Checks and processes are reviewed and recorded on regular basis to take stock of inventory, invoicing processes, stocks and dispatched goods management. The Company ensures that the receiving department is independent of the purchase and invoice processing department. Independent checks are done by bill booking department on rates, destination, tonnage claimed, and other charges levied (detention, reimbursements, etc.), if any after confirmation is received from User department.
Enterprise Risk Management spanning AntiFraud Control Framework	Risks can include counterfeit goods circulating in the markets and on- boarding of new customers / channel partners / distributors accepted without performing due diligence.	The risk relating to counterfeit goods has been assessed, and appropriate and relevant action has been planned to mitigate the risks. Processes are in place to monitor effectiveness of such actions, with corrective action undertaken where these are ineffective.

Financial Risks

Foreign exchange	We import some raw materials and equipment used in our manufacturing plants. Any unfavourable movements in the exchange rate would impact our performance.	We constantly evaluate exchange rate exposure arising from foreign currency transactions. We enter into a variety of derivative financial instruments such as foreign exchange forward contracts, interest rate swaps and cross-currency swaps to mitigate this risk.
Changing Regulations and policies	The Indian Government has imposed an antidumping duty (ADD) on CPVC resin / compound imports from China and Korea for a period of five years (valid up to February 2025). This move is followed by provisional antidumping duty announced on August 26, 2019.	Earlier, CPVC resin was sourced from various geographies, including Korea, China, Japan, and Europe. Post Government Regulation, the Company has stopped sourcing the same from China and Korea. Since our raw material imports are not concentrated from these geographies, we have been able to mitigate this risk to a large extent.
Credit	Majority of our sales to distributors are on an open credit basis, with standard payment period between 15-30 days. Inability to collect the receivables could adversely affect our performance.	We purchase raw materials from domestic suppliers on credit terms of less than a week and purchase imported raw materials on credit terms of 90-150 days. However, the standard payment term with distributors is generally between 15-30 days. We use working capital facilities to fund the timing difference between the payment for raw materials and the receipt of payment for manufactured products. In addition, we also use channel financing to optimise the working capital requirements and improve collections/debtor days.
Regulatory Risks
Regulatory / legal	Evolving regulatory changes in tax, legal and industry scenario may impact the Companys performance	A dedicated team regularly monitors all evolving Regulations and provides timely inputs to the Company for prompt and corrective action.

Sustainability

Building higher positive impact

At Prince Pipes, ESG is more than a suite of metrics and statistical measurements. Our focus on ESG has evolved into a larger commitment that influences our habits, purchasing decisions, business choices, and the way we behave as a corporate citizen. We are expanding and deepening our focus to create higher positive impact-by providing the right opportunities, manufacturing responsibly, and approaching business conscientiously. In essence, we are focusing on Environmental, Social & Governance (ESG) through sustained, environment-specific programmes.

Environment

Our efforts are centered on conserving natural resources, reducing pollution, protecting biodiversity, and sustaining the environment for future generations. We continue to take several definitive steps towards preserving the environment and consideration for the severe and already visible impacts of climate change - be it using more renewable energy or working towards carbon neutrality; be it increasing our water recycling efforts or upholding stringent quality norms that win us several safety awards. We continue to promote sustainable development through our business decisions and actions.

Social

Socially responsible behavior towards employees and the community has been a hallmark of Prince Pipes and Fittings. We create and maintain a diverse, vibrant, and merit-based work environment for the community, our CSR policy focuses on social investments in empowering the plumbing community, as well as education-centric initiatives.

Governance

Prince Pipes is committed to values and ethical business conduct in letter and spirit. We have maintained high standards of governance that guide us to achieve strong, balanced, and sustainable growth for all stakeholders. Our experienced Board of Directors, supported by robust risk management and compliance processes, play a key part in ensuring the highest standards of governance in all our activities.

Persistent focus on Environment, Social and Governance [ESG] goals:

• Total Carbon footprint generation increased from 49,645 MT in FY-22, to 57,482 MY in FY 23 i.e., increase of 15.8%

• Carbon footprint in kg of CO2 per Kg of production increased from 0.387 in FY-22 to 0.394 in FY-23, i.e., increase on 1.8%

• Renewable source of energy increased from 15.96% in FY-22 to 17.06% in FY-23 i.e., growth by 6.9%

People

At Prince Pipes, people represent the building block of progress. Our people management comprises a structured approach of employee development, safety, leadership development and employee family wellbeing. Our policies promote operational democracy where employees feel heard and respond with a sense of ownership.

Our HR policy is centered around holistic development and trust building.

• Regular programs conducted for enhancing the skills of its employees, improve career development - Driving specialized training programs like Six Sigma

• Foster a people-centric culture that enables outperformance. Our unwavering focus is on attracting, nurturing, and retaining talent, while promoting inclusivity, diversity, and transparency

• Respect and promote human rights of all individuals. We are committed to identify, prevent, and mitigate adverse human rights impact resulting from or caused by business activities beforehand or if they occur, through human rights due diligence and mitigation processes

• Provides a workplace environment that is safe, hygienic, humane and which upholds the dignity of the employees. It provides facilities for the well-being of its employees including those with special needs

• Complies with the statutory provisions pertaining to employees and about the health, safety and wellbeing of our staff

• We continue to provide several internal and external training opportunities to upskill our employees and enhance their skillsets. As on March 31, 2023, we have a team of 1,752 people, working together towards the

organisations singular vision and growth

Employee engagement and welfare activities undertaken during the year include:

Health Related initiatives:

• Loser is the winner (weight loss initiative) - Post pandemic health being the prime importance we had conducted the competition to make people health conscious also gave sessions by nutritionist

• Health talk webinars with eminent doctors.

• Learning the Indian Way - YOGA + Meditation sessions for a month.

• Emotional Health - Session with psychiatrist on Child Mind Psychology

Celebrations to commemorate Republic Day, Womens Day and Indian festivals were organized to strengthen bonding and collaborative spirit amongst all staff members.

Employees also engaged in social welfare causes and activities to contribute to overall wellbeing were organized with enthusiasm:

• Financial support to employees & contractors during pandemic were provided

• Contributed Rs.5.00 lakh in coastal beach cleaning

• A social media campaign is ongoing #WeAreInItTogether to build emotional connect for employees during pandemic and create awareness of all efforts being undertaken by the Company

• A social media campaign #WhyThisKolaveri -has been created to promote a culture of greater transparency within the organisation

Health, Wellness, and Safety

We enhanced the safety of our workplace, and reported no aberration which could lead to consequences like legal action, compensation claims, increased insurance premia, reduced productivity / profitability and reputational damage. In view of this, responsible health and safety practices is fundamental to long term sustainability.

Building a culture where employees exhibit and practice safe behavior:

• Occupational Health and Safety is centrally governed by our OHSMS certification process and is supplemented by plant Safety Committees. The Company has in its staff, specially trained safety professionals along with trained line management. Some of the initiatives taken in Health & Safety are listed below.

• Introduced new safety performance measurement metrics i.e., LTI (Lost Time Injury) and AFD (Accident Free Days) which is benchmarked against the top industries in the world. the Company has achieved the targets taken in the year 2022-23

• Behavior Based Safety (BBS) initiative is a formal community-based prevention programme aimed at fostering a zero-accident culture. Primary objective of BBS was to identify hidden habits and environmental factors that predisposed people to the cause

- The approach to implement BBS in the Company is focused on identification of potential hazards & mitigate it through HIRA (Hazard Identification & Risk Assessment). Individuals were able to conduct their duties in a more responsible manner through our initiative of consultation & participation of employees in safety related activities

• Following specific safety/ EHS and skill up-gradation trainings are given to the employees:

- Daily Toolbox Talk (TBT) on activity related topics

- Training in first aid through St. John Ambulance, an organization which teaches and provides first aid & emergency medical services

- Behavior Based Safety (BBS) training through outside expert faculties

- EHS awareness training for new employees

- HIRA (Hazard Identification and Risk Assessment) training & Environmental Aspect Impact

- Safety auditor training

- Practical training on how to operate the fire extinguishers, Fire hydrant, etc.

- Mock drills every quarter

- Environment day and safety week celebration in plants to improve awareness through slogan/ essay/ drawing competition and tree plantation

Innovation

Innovation remains one of Prince Pipes key strengths, that enables us to build strong product differentiation and helps the Company to create top of mind recall. Through the Companys 40 year legacy, Our passion to make an impact on Indias water infrastructure, has been a constant. We take great pride in this heritage and by virtue of being amongst the leading players in the pipes and fittings industry, we understand evolving needs and future trends. Leveraging this strength, Prince Pipes has consistently introduced new products to the market aligned to international trends. The companys commitment to innovation have led to sustained investments in manufacturing, research & development, information technology and sustainability.

In line with our aim of being an end-to-end pipes and fittings solution provider, the company has been actively strengthening its comprehensive product portfolio. We have launched the following products:

Pipes & fittings:

• Prince Onefit with Corzan CPVC Technology:

Can be used in Industrial applications. It offers high performance and user friendly solutions to fight corrosion and allow continuous production by decreasing downtime. Corzan? CPVC Technology has been globally adopted as the preferred high- performance piping technology across the worlds industrial applications. Backed by Lubrizol Advanced Materials 60 years of experience with chlorinated polyvinyl chloride (CPVC), Corzan? CPVC Technology transports harsh chemicals at high temperatures without corrosion concerns, found in the toughest processing applications.

• WireFIT: range of electrical conduit pipes and fittings.

• PE-FIT Aqua - HDPE Piping Systems

Modern Plumbing:

• Skolan Safe: a Premium Polypropylene (PP) Silent Drainage System. It offers the latest technological innovation in noise insulated drainage systems sound rated at 12 db at 2 lps flow rate and certified by Fraunhofer, Germany. The product offers excellent acoustic and mechanical qualities, durability and robustness derived from the raw material polypropylene (PP) with mineral fillers. Prince Pipes has associated with Ostendorf, a leading supplier of waste discharge systems in Germany for its production.Skolan Safe finds applications in luxury homes, condominiums, large commercial buildings, hotels, office buildings, hospitals, commercial kitchens, libraries, and educational institutes.

• HT Safe: Low Noise PP Drainage System. With the benefit-laden properties of polypropylene (PP), Prince-HT Safe is a top-quality product, with high utility value. The Prince-HT Safe System has been designed keeping in mind architectural and civil engineering considerations, as well as stringent mechanical, sanitary and environmental requirements. With Indias rapid urbanisation, HT Safe emerges as a reliable, new age drainage system that can replace all challenges faced by conventional piping & drainage systems, delivering a significantly superior experience in terms of mechanical, chemical and acoustic performance.

• Prince Hauraton - is an innovative range of drainage systems developed with German technology. Hauraton is one of the world leaders in supplying effective drainage systems for over 65 years. The products find application across civil constructions (car parks, airports, container terminals, petrol stations), landscapes (private & public areas, terraces, gardens, squares & parks, railway platforms) and sports facilities (sports fields, stadiums, racetracks).

Prince Bathware:

• The Company unveiled its new collection of faucets and sanitaryware. Inspired by European bathware trends, The range goes by the names Aurum, Titanio, Platina, Tiara, Marquise. Matchless in style and design they have been carefully curated following exhaustive industry research. Argento, Meta, Kristal and Palladium complete the Prince Bathware line.

• The versatile and aesthetic portfolio also includes sanitaryware with a comprehensive and elegant range of products designs for overhead showers, hand showers &, health faucets, besides sensors for basins and urinals alongside bathroom accessories. The range also includes Tankless EWC, One-Piece Wall Mounted Toilets and Tabletop Basins that come laden with top class features of comfort, anti-germ expertise, easy installation, and water conservation.

Internal Control

Prince Pipes has institutionalized a system of internal controls, with documented procedures covering all corporate functions. Our Internal controls provide evidence-based assurance regarding the effectiveness and efficiency of operations, the reliability of financial controls, and compliance with laws and Regulations.

Our policies and procedures are periodically updated, overseen by the Internal Auditor. The Company aligns all processes and controls with industry standards and stipulations. The Board and the Audit Committee supervise the adequacy of all internal controls and processes by monitoring the execution of internal audit recommendations via compliance reports. Independent auditors have also concluded and verified the adequacy of all reportings.

Cautionary Statement

Certain Statements found in the Management Discussion and Analysis may constitute "Forward Looking Statements" within the meaning of applicable securities laws and Regulations. These forward-looking statements involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. In accordance with the Code of Corporate Governance approved by the Securities and Exchange Board of India, shareholders and readers are cautioned that in the case of data and information external to the Company, no representation is made on its accuracy or comprehensiveness though the same are based on sources thought to be reliable. The Company does not undertake to make any announcement in case any of these forward looking Statements become materially incorrect in future or any update made thereon.