>PLASTICS INDUSTRY: REDEFINING PERCEPTION

Key Investment Rationale

Plastic consumption in India to grow at 15% CAGR

With India’s GDP growing at 8% annually and plastic products increasingly

finding application in all sectors of the economy, replacing other competing

products such as steel and aluminium, we expect demand to remain robust.

The application of plastic is increasingly evident across sectors including

packaging, agriculture, healthcare, aerospace, electronics and infrastructure.

According to the All India Plastics Manufacturers’ Association (AIPMA), the

domestic consumption has been growing at 10-12% CAGR over the last decade

and is all set to reach the 12.5mn tonnes in 2012 from 9mn tonnes in 2010

which will make India the third largest plastic consumer after US and China.

Innovation & introduction of value-added products: Key to growth & margins

The key USP in any industry that is largely unorganised is to regularly innovate

and come out with niche products at regular intervals. Sintex, Supreme, Astral

Time have consistently followed this thumb rule and thus have been able to

grow at a pace which is way above the industry average.

Plastic composites: Niche high growth engine

Plastic composites are new age products and are ideal replacement for

conventional materials such as steel, aluminium and wood on account of their

durability, corrosion and maintenance free character. The Indian composites

industry has grown at healthy 16-18% CAGR over the last five years, more than

twice the GDP growth rate. The burgeoning manufacturing sector and heavy

investments in infrastructure is expected to provide an impetus to the Rs 63-

bn Indian composite industry, which is expected to grow at 16-17% CAGR.

From our coverage universe, Sintex and Time Technoplast have a presence in

the composites segment while Supreme Industries is currently putting up a

facility to make composite cylinders. These companies will not only benefit

from high growth in these segments but will also enjoy better margins as

compared to their bouquet of conventional plastic products.

To read the full report: PLASTICS INDUSTRY