Tulsi Extrusions (TEL) is a PVC pipe manufacturing company, having its presence in Gujarat, Orissa, Assam, West Bengal, Delhi, and Maharashtra. The company is engaged in manufacturing PVC pipes, PVC fabricated fittings, SWR pipes and fittings, PVC casing and Screen pipes, ASTM plumbing pipes, LLDPE pipes, and HDPE pipes. It has three manufacturing facilities located in Jalgaon, Maharashtra. It markets its product under the brand name Tulsi through 867 dealers in the five states.
Plans
The company has a total production capacity of 10,483 metric tonne. It is expanding its production capacity in its Jalgaon unit to 17,971 metric tonne per annum. It also intends to expand its product range with the manufacturing of PVC moulded fittings, sprinkler systems, online drip irrigation system, fittings for micro irrigation, manufacturing of PVC injection moulded fittings, HDPE sprinkler systems, and inline drip irrigation system, and LLDPE fittings for micro irrigation.
It would set up a 1.5 MW windmill power plant for captive consumption at an estimated cost of Rs 10 crore. The products manufactured by the company find application in agriculture, potable water supply schemes, sewage and drainage systems, construction industry, telecom industry, and bore well for underground water suction.
Investonomics
India is the eighth major consumer of plastics in the world and the plastic industry demand is expected to grow by around 10-12% per annum for the next few years. The global PVC pipe demand is expected to grow by 4% per annum. PVC pipes, because of its anti corrosion features and durability, are used extensively, instead of conventional building material in various construction applications. Further on-going accelerated irrigation benefit program and major thrust given to infrastructure development in India, and the construction boom has given a fillip to PVC building material demand in the recent past. The company has a diversified product range within the same product line. It has started manufacturing HDPE pipes, which is an immediate replacement for PVC pipes and is chlorine-free. This provides an edge for the company, as there are no major competitors in manufacturing HDPE pipes. It is foraying into the macro-irrigation sector, sprinkler irrigation, lift-irrigation, which are major growth sectors going forward.
The industry is highly fragmented and unorganised. Due to a lower scale of operation, the company would not be able to enjoy economies of scale in its operation. Also, an increase in global crude oil prices directly impacts the input cost of the company, as PVC resin prices are directly linked to it. The company relies on external agencies of major petrochemical companies to source its raw material and it does not have any long-term agreement with any major supplier. Hence, the company is vulnerable to PVC resin price risk.
Valuation
On the valuation front, Tulsi Extrusions, considering the annualised earnings and the post-issue equity, the company quotes a P/E of around 21(x) and 22(x) respectively at the lower and the higher end of the price band. Industry leader Finolex Industries currently trades at a P/E of around 12(x) and Astral Poly Technik, trades at P/E of around 14(x). Hence, on this front, in comparison with its peers, the scrip price appears steep.