Stock sinks 50%, profit dives 76%: Can Prince Pipes' Rs 70 Crore Bihar push spark a revival?

Indian Express

6 days ago

In mid-2023, Prince Pipes' stock price touched Rs 740, riding high on hopes of India's booming housing sector, rural water supply push, and its growing brand strength in plumbing solutions.
Fast forward twelve months, and the stock now trades near Rs 350, a fall of more than 50%, as the company struggled through one of its most challenging years.
In FY25, Prince Pipes reported a 76% decline in profit after tax (PAT), squeezed by sharp volatility in PVC resin prices, unexpected inventory losses, and aggressive dealer incentives that cut deep into margins. Despite a small rise in volumes, revenue dipped, and profitability took a severe knock, shaking investor confidence.
But then the company has been expanding capacity, entering new segments like bathware, and doubling down on higher-margin products like CPVC pipes. A major new plant in Bihar, planned capacity scale-up to 60,000 MT, and early traction in its bathware business suggest a longer-term strategy at play.
For investors watching these developments, the key question now is not just about past profit decline or stock fall. It is whether the strategic moves can turn Prince Pipes into a stronger, more diversified growth story or if this downturn signals deeper structural headwinds in an intensely competitive market.
At its core, Prince Pipes operates in the plastic piping solutions market, serving applications across plumbing, water supply, irrigation, sanitation, and increasingly, interior bathware fittings.
The company manufactures and sells pipes and fittings in PVC, CPVC, HDPE, and PPR materials, each with different uses and margin profiles.
In FY25, Prince Pipes sold about 1.77 lakh metric tons of products, slightly higher than 1.73 lakh metric tons in FY24, a growth of around 3%.
Now, this suggests stable demand despite industry headwinds. However, when you look at numbers, they tell a different story: revenue fell by 2% to Rs 2,524 crore from Rs 2,569 crore last year.
Why did the revenue fall? The main reason is lower realisations per ton, meaning the average price at which the company sold each ton dropped. This happened because of:
Thus, while Prince Pipes managed to maintain volumes, it came at the cost of lower revenue per ton and weaker margins.
PAT also fell sharply by 76% to Rs 43 crore in FY25 from Rs 182 crore in FY24. The EBITDA margin, a key measure of operational profitability, halved to 6% from 12% last year.
To understand this, one must look at the gross profit margin, which fell to 25% in FY25 from 29% in FY24. The company booked inventory losses estimated at Rs 90 crore for the year, as high raw material costs previously stocked became unviable to sell at the new lower market prices. These inventory write-downs directly reduced gross profit and, therefore, operating profit.
Prince Pipes has a strong focus on PVC pipes, which make up a large part of its sales volume but are generally lower margin compared to CPVC products.
In FY25, the company saw double-digit growth in CPVC volumes, which is encouraging because CPVC pipes have higher average realisations and better margins.
CPVC is used in hot and cold water plumbing, preferred in residential and commercial buildings for its heat and corrosion resistance. By pushing more CPVC products, Prince aims to improve its margin profile in the long term.
Geographic and segment footprint
The company has a pan-India presence, supported by eight manufacturing facilities, including its newest plant in Begusarai, Bihar.
As of FY25, its network of over 1,500 channel partners helps it reach deep into tier-2 and tier-3 cities, critical markets where modern plumbing and water infrastructure are expanding fast.
Besides pipes, Prince is building its bathware business, which contributed Rs 30 crore in FY25 revenue. While still small, this segment can complement the core pipe business by tapping into the same retail and construction channels.
According to industry estimates, the domestic pipe industry is projected to grow at around 10-12% CAGR over the next few years.
However, this growth is not without challenges. The market has become intensely competitive, with large organised players like Supreme Industries and Astral, as well as a sizeable unorganised segment that competes aggressively on price.
This has forced companies like Prince Pipes to balance between protecting margins and maintaining or expanding market share.
After a tough FY25, Prince Pipes' management has laid out a cautious but optimistic roadmap. Rather than chasing short-term volume at any cost, the company plans to focus on strengthening its brand, improving product mix, and executing strategic capacity expansions.
One of the biggest moves is the expansion at the Begusarai plant in Bihar. The plant started operations in Q4 FY25 with a capacity of 24,000 metric tons. Management aims to scale this up to 60,000 metric tons by the first half of FY26. This facility is strategically important because it will help the company serve east India more effectively, reduce freight costs, and improve service levels in a high-potential market.
Besides capacity, management is betting on product diversification, particularly in CPVC pipes and the new bathware segment. CPVC pipes have shown double-digit volume growth even in a difficult year.
The bathware business, under the Aquel brand, is still small (Rs 30 crore in FY25 revenue) and loss-making today, but management believes it will reach breakeven in the next four to five quarters. By entering this category, Prince wants to become a one-stop solution provider for builders and households, offering everything from water supply pipes to bathroom fittings.
Management also stressed that it will focus on stabilising margins rather than aggressive price cuts.
With PVC resin prices bottoming out recently, the company expects a more stable raw material environment in FY26. This should reduce the risk of further inventory losses and help improve gross margins.
Management expects double-digit volume growth in FY26, supported by government-led water supply and sanitation programmes, ongoing urban infrastructure expansion, and housing construction recovery. A stable PVC price environment should encourage channel partners to maintain normal inventory levels, unlike the heavy destocking seen last year.
Additionally, brand investments such as advertisements and partnerships in high-footfall zones signal Prince Pipes' intention to strengthen consumer recall and trust.
The stock has corrected sharply from around Rs 740 in mid-2023 to nearly Rs 350 today. This decline has already priced in much of the near-term pain: inventory losses, margin pressure, and weak short-term growth.
At current levels, Prince Pipes trades at an estimated 90 times trailing earnings, which seems high due to the very low FY25 profit base. However, on a forward-looking basis, if the company can deliver its guided double-digit volume growth and gradually recover margins toward its historical average (around 10-12% EBITDA margin), earnings could improve meaningfully over the next two to three years.
For example, if Prince Pipes can move closer to Rs 150 crore in PAT over the next two years, the forward price-to-earnings multiple would compress significantly, making the valuation more reasonable. The key is execution: stabilising margins, improving product mix, and successfully ramping up new capacities and bathware business.
While the long-term structural demand drivers for pipes and water infrastructure in India remain intact, investors should consider key risks:
Raw material price volatility, especially PVC, which could again hurt margins.
Intense competition from both large organised players and regional unorganised manufacturers.
Execution risk in scaling up new segments like bathware and in achieving breakeven as planned.
Economic cycles and government spending trends which can affect construction and housing demand.
Overall, Prince Pipes' strategy reflects a long-term focus on becoming a more diversified and resilient company. The expansion into east India, growth in CPVC and bathware, and focus on brand investments all point towards building a stronger business foundation.
However, after a year with a 76% drop in profit and continued challenges in demand and margin recovery, this is not a quick turnaround story. Investors considering the stock today must be prepared for near-term volatility and be willing to wait for gradual margin recovery and scale benefits to play out.
Note: This article relies on data from annual and industry reports. We have used our assumptions for forecasting.
Parth Parikh has over a decade of experience in finance and research and currently heads the growth and content vertical at Finsire. He holds an FRM Charter and an MBA in Finance from Narsee Monjee Institute of Management Studies.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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