Indian plastics processor Vectus Industries Ltd. is using $16.7 million in private equity investment to dramatically expand its manufacturing capacity to meet growing demand for water infrastructure like tanks and pipes.
The Noida-based firm said the investment from Creador II LLC, a Mauritius-based private equity firm, will help it double capacity for PVC pipes in existing extrusion plants and add new factories for its blow molded and rotomolded water tanks.
“The demand is coming from the villages and rural areas now, it's not just restricted to the cities,” said Managing Director Ashish Baheti. “We've been growing at the rate of 30 to 35 percent per annum. That's why we got the investment.”
Those new factories and expansions at existing facilities will give it capacity for 2,000 metric tons a month of plastic pipe, and will add localized production capacity for above-ground water tanks in southern India in Tamil Nadu and in northern India in Jammu, he said.
Vectus has about $80 million in annual revenue, and its products are distributed at 4,000 locations in India.
Baheti disclosed details of the capacity expansions in an interview on the sidelines of the India-based Society for Asian Rotomoulders conference Feb. 2 in New Delhi, where he gave a presentation.
As well, six months ago the company launched into another business, opening a factory in Karnataka to make underground manhole inspection stations and underground water storage tanks with rotomolding.
Vectus struck a technology partnership for that factory with Turkish rotomolder Floteks, which developed the processes.
Baheti told the conference delegates that manufacturing for underground tanks and water infrastructure has much more demanding safety and performance requirements than above ground tanks, so the company sought out Floteks, in Bursa, Turkey, as a partner.
He said the underground market is potentially as lucrative as the above ground tank business, which is a major market for India's rotomolding companies.
“Some people estimate the size of underground water storage tanks is the same size as the above ground tanks,” he said in a speech at the conference. “And most of the underground tanks are made of concrete. Underground tanks are required for environmental reasons.”
As well, he said most manhole inspection stations are currently made from brick or precast concrete, but with the building of new cities and extension of existing infrastructure, there's a lot of room for plastics.
“There is a huge untapped market in India,” he said.
The manholes are being made to meet the EN 13598-2 standard, which is used in that application worldwide.
Vectus currently has 12 factories around India with 2,000 employees, along with joint venture blow molding plant in Kenya it set up in 2013. It said it was the first company in India to begin manufacturing blow molded above ground water tanks, in 2010.
The companies announced the Creador investment in mid-2014, which Baheti said gave it a minority share in Vectus.
Creador said it's a private equity fund for Southeast Asia and India, and made the investment because Vectus is the world's largest manufacturer of blow molded water tanks and the only Iarge Indian company focused on plastic water tanks and plastic pipes.
It said market demand is large because most Indian cities receive water for only two to eight hours a day, so local storage capacity is crucial.
Vectus's blow molded tanks have design advantages, and the company is well positioned to take advantage of India's switch from steel water pipes to plastic, the investment firm said.
“Creador is delighted to have this opportunity to partner with Ashish [Baheti] and Atul [Ladha] in shaping Vectus Industries' next phase of growth,” said Creador founder and CEO Brahmal Vasudevan, in a statement. “Both of them are passionate entrepreneurs who have developed Vectus Industries into a leading player in the water tanks and plastic pipes space with a broad range of products, strong brand and excellent distribution.”
