Prince Pipes & Fittings Ltd

It gives me great pleasure to write to you after another year of purpose-led growth. We continued to progress through a year that witnessed inflationary trends, supply chain constraints, and sustained pressure on PVC prices.

In this operating environment, our focus remained on meeting the evolving demand of our consumers, ensuring uninterrupted supply of our products, safeguarding the environment, and undertaking strategic initiatives that will give greater play to our business model.

I am happy to share that we have been persistent and successful in transforming our intent and ideas into unstoppable growth. Our robust results for the financial year 2022-23 demonstrate our team's leadership, strength of our brands, our execution prowess, and our agility.

The year saw an unprecedented volatility in input costs in PVC prices, which led to significant inventory losses adversely affecting our profitability. Since April 2022, PVC prices have been corrected by a record of Rs. 66 per kg and bottomed out at ~ Rs. 76 per kg by end of November. We were able to partly mitigate the situation by cost and inventory optimisation initiatives. This trend moderately stabilised until March 2023 and, we displayed a resilient volume and margin performance in the second half of the fiscal.

On an Annual basis, we were able to maintain a volume expansion of 13.4% with EBITDA margins rebounding to 19.4% in Q4, led by our operational aggression, efficient supply chain management, cost efficiency measures, and marketing thrust. We ensured a resilient mindset to capture growth, strengthen business fundamentals, and implement key strategic initiatives through the launch of new products and segments - all of which were aimed at giving greater thrust to our business model. We simultaneously widened our distribution network and enhanced brand visibility.

The company reported consolidated revenue growth of 2% to Rs.2,711 crores, EBITDA stood at Rs.250 crore and EBITDA margins stood at 9.2% in FY23. Profit after tax was at Rs.121 crores in FY23. The company remains long-term debt free during the year. The company continues to maintain CRISIL long-term and short-term debt with long-term debt now rated CRISIL A+/Stable (upgraded from CRISIL A/Positive) and short term CRISIL A1+ (upgraded from CRISIL A1).

I am proud to share that Prince Pipes was ranked in Business Today in 500 Most Valuable Companies list. On behalf of all my colleagues, I thank each one of you for your continued support and dedication as we take definite strides towards our vision of transforming our country's water infrastructure.

The Indian economy continues to gain global attention as one of the world's leading growth engines. The Union Budget 2023-24 has effectively captured this potential and outlined initiatives to stimulate India's growth momentum. The Budget finely pushed up the capex spending without compromising on fiscal discipline. It continues to maintain a thrust on the real estate, infrastructure, agriculture, social infrastructure sectors and key themes of inclusive development, green growth, sanitation, health, drinking water connections-which are measures to ensure comprehensive economic growth. PM Jal Jeevan Mission- budgeted allocation of Rs.700bn and PM Awas Yojana allocation of Rs.790bn are initiatives that augur well for the building materials industry.

The first half of the fiscal factored the impact of an unprecedented inventory loss led by a steep fall in raw material prices, impacting margins. Further sustained destocking amongst our channel partners, adversely impacted volumes in the second quarter. This was an unprecedented, one-off development since our three-decade presence, that our team navigated with all resilience reporting better volume performance and improved market share. The second half of the fiscal year saw a gradual upward trend of PVC prices with pressures abating, which enhanced our volume performance led by improvement in sentiment and re-stocking in the distribution channel. This stability supported by underlining demand momentum from real estate, agriculture, and infrastructure sectors, also provided strong growth impetus.

At Prince, we pride ourselves on understanding and serving industry needs. Hence, our focus continues to be on innovation and market expansion as we launched two key products with superior German technology in Modern Plumbing division which marks the start of the next chapter of our growth. We launched Prince Skolan Safe, a Premium Polypropylene (PP) Silent Drainage System, Prince HT Safe - low noise PP Drainage System and Prince Hauraton - a modern range of Surface Drainage solutions. This initiative is aligned with company's growth strategy to bring innovative products to the Indian markets, significantly expand our capabilities and give new depth to our portfolio. Prince Pipes now brings a world-class range of technology-oriented drainage and plumbing solutions, to builders, homeowners, and consultants across the nation, under the modern plumbing vertical. We are leveraging the Prince Pipes brand and our pan-India network of dealers and channel partners as we roll out the product across India.

Some of our other new product launches during the fiscal year include WireFit, range of electrical conduit pipes and fittings and Prince OneFit with Corzan CPVC technology with super resistant to corrosion for high industrial application.

Another significant milestone is our expansion into the Bathware segment with the launch of a premium line of faucets and sanitaryware. This development is a natural extension of our business. Making a presence in the 'front-of-the-wall' category will enable us to organically expand the product portfolio, leverage the equity of a leading brand and serve the real estate market, where we already have a robust presence. The products will be initially introduced in a phased manner across India. As per market estimates the overall market size of the Bathware segment is expected to reach approximately Rs.15,000 crores with the organized market at ~65% and unorganized market at ~35%. In the Bathware segment, faucets are estimated to be in the range of Rs.9,000 - 10,000 crores and Sanitary in the range of Rs.6,000 - 7,000 crores.

One of our core competitive strengths is our strong distribution network and deep relationships with our business associates, customers and other influencers. We've been able to build strong customer loyalty due to the value-creating experiences and a positive emotional relationship with the Prince brand. For the second time, Prince won The Customer FEST Best Channel Loyalty Program. Prince Pipes was one of the first corporations in the pipes and fittings industry to have launched a loyalty program in November 2016 for plumbers and dealers.

At Prince Pipes, we follow a multistakeholder model of sustainable growth. We believe that to generate superior long-term value, we must care for all our stakeholders - our consumers, customers, employees, shareholders, and above all, the planet and society. This fiscal year too, we made commendable progress as we made strong environmental impact, created social capital, and achieved cost efficiency.

We are cognizant of the way Prince Pipes creates social capital in the way people interact and collaborate with each other to create greater value. Our flagship event to commemorate World Plumbing Day in March 2023 was a great success as we hosted Season 2 of Shram Ka Sammaan Campaign across Mumbai, Pune, Ahmedabad, Jaipur, Delhi, Patna, Lucknow, Chennai, Kolkata, and Hyderabad. The event felicitated plumbers for their long-standing association with the company, as Prince provided over 5,000 loyal plumbers with accidental insurance policies - again an industry first.

With prospects in the areas of potable water supply, wastewater supply, electrical and telecommunication cable protection, agriculture, chemicals, and oil and gas, the future of the Indian plastic pipe market is bright. The Indian plastic pipe market is expected to grow at a CAGR of 10.3% from 2022 to 2027, reaching an estimated $10.9 billion. The expansion of government infrastructure investment, rising home and business building, industrial production, the irrigation sector, and the replacement of deteriorating pipes are the main growth drivers for this market. The government has already set the ball rolling through various schemes. Several opportunities in the industrial realm are witnessing transformation, where Prince Pipes can bring its expertise, know-how, and wide product range.

With the growing industry potential, strategically, our entry into Bathware and faucets gives us the opportunity to harness synergies with our robust pan-India sales and distribution network and equity of the Prince brand which has the potential to create great value for our stakeholders. We will continue to evaluate our portfolio with future trends and opportunities to build a wide product canvas that addresses several industry drifts and needs, as we work towards strengthening India's water infrastructure.

As passionate entrepreneurs, we remain hungry for progress, to create lasting change, accelerate results, and be the best at transforming progressive ideas into unstoppable growth. Walking the path of this mission becomes much more enjoyable with the support of like-minded comrades, partners, and teammates. I take this opportunity to thank all the members of our Prince Parivar who continue to bring sincerity, enthusiasm, passion, and integrity to work every day. I also express my sincere gratitude to all our investors, customers, partners, Bankers, and other stakeholders, for your overwhelming trust, support, and confidence in Prince Pipes and Fittings Limited.

We look forward to your continued encouragement.

Sincerely,

Chairman and Managing Director.