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In the business of supplying pipes to transport drinking water over long distances, there is one nuance that is generally unnoticed. While there is an oversupply of pipes relative to demand on the over all, a niche market is under-served- that of pipes of small diameter.
Lanco Industries – which, incidentally, has nothing to do with the Lanco group and is close to renaming itself as Srikalahasti Pipes Ltd – is striving to capture this niche. Much of its Rs 425-crore capex programme is aimed at improving its small dia pipes capacity.
Small pipes, defined as those with diameters between 80 mm and 300 mm, are in demand, thanks partly to governments’ thrust on rural water supply. In 2013-14, nine Indian companies that make ‘ductile iron’ pipes, produced 10.68 lakh tonnes, though their combined capacity is about 20 lakh tonnes. However, the demand for small diameter pipes is growing and is expected to be 10 lakh this year. Supply is lagging, at under 7 lakh tonnes.
The margins are better than for large dia pipes, says Gouri Shankar Rathi, Director, Lanco Industries.
The company, which was set up by the Lanco group and was taken over by the Kolkata-based Electrosteel group later, is a few months from completing Rs 100-crore de-bottlenecking programme that will increase its capacity by 50,000 tonnes, to 2.25 lakh tonnes. Half of the expanded capacity will be small pipes.
Alongside, Lanco Industries is on to Rs 325-crore project that is meant to raise the capacity by a further 1 lakh tonnes. When this is complete in early 2016, the company will be capable of producing 150,000 tonnes of small dia pipes and 175,000 tonnes of large ones.
The project brings in its wake a few attendant benefits. The company’s power capacity will increase by 1.5 MW, as more hot gases will be produced by the new blast furnace. More slag will come out of the furnace. The company is “exploring” ways of converting the slag into value-added products, Rathi said.
In the quarter ended June, Lanco Industries achieved a turnover of Rs 217 crore and made a net profit of Rs 13 crore. In 2013-14, its turnover and profits were Rs 1,037 ccrore and Rs 39 crore, respectively. On Thursday, on the NSE, Lanco Industries closed at Rs 51.60.
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