The 'Astral Poly Technik' story

The ‘Astral Poly Technik’ story

April 11, 202012:47 pm

Came across the fascinating story of ‘Astral Poly Technik’ in the book ‘ The Unusual Billionaires’ by Saurabh Mukherjea. The story is about a single man ‘Sandeep Engineer’, a first generation entrepreneur who started from scratch and having been through several failed attempts in different businesses came to build ‘Astral’ a household name. Astral Poly Technik Ltd’ is a publicly listed company with a market cap of  ₹14,000 cr(12.04.20).The story is about the grit, guts & perseverance. Read more in ‘The ‘Astral Poly Technik’ story’

Astral Pipes website: Link

The 'Astral Poly Technik' story- Initial Timeline

1981: After completing his chemical engineering, Sandeep Engineer started working for Cadila Pharma as project engineer. The idea was to learn how projects are implemented.

He quit the job after 2 and half year that paid him the monthly salary of ₹850 to be his own boss.

1984: He started the business of distribution of Isabgol. The brand for whom he was selling had differentiated flavors and beautiful packaging. But that did not took off as nobody was interested.

He then started a pharmaceutical company. That was running well when the client collapsed and then he started a chemical company for which they did not get pollution clearance from the Gujarat govt.

The next venture was into trading of APIs(Used to make pharma drugs). He used to get orders from Pharma companies and get the APIs manufactured from some other company. But post the first order the pharma companies started contacting these API manufacturers directly bypassing Sandeep. From here he said in order to do something meaningful, he need to setup his own unit.

He then started manufacturing API and established a company by the name of Kairav chemicals . With the support from Cadila healthcare promoter Pankaj Patel,his first employer, he set up the facility. Pankaj Patel assured him that they will buy whatever he manufacturers.

The 'Astral Poly Technik' story- CPVC Pipe story

The journey of Astral began in mid-1990s when Sandeep ji got to know about CPVC pipes through his uncle, who was the director of research at B F Goodrich(a US based company). B F Goodrich was the inventor of CPVC resin technology. His uncle used to travel often to India to meet companies and explain the benefit of CPVC pipes over GI Pipes but he was always met with cold response. 

This was because CPVC pipes were 30% costlier and it was never perceived that plastic can replace iron. There was a mindset that metal will always be stronger and better than plastics.

Chlorinated polyvinyl chloride (CPVC) is a thermoplastic produced by chlorination of polyvinyl chloride (PVC) resin used for hot and cold water lines. 

There was lot of problem with the Galvanized Iron(GI) pipes used in industrial piping, corrosion was the major one. CPVC pipe didn’t have the problem of corrosion as well as has higher ductile strength, can handle hot water upto 93 degree Celsius compared to 60 degree Celsius for GI pipes. 

Visualizing that the market will change for the better CPVC pipes, as has been in the US , Sandeep ji decided to bring CPVC to India. He then forged JV with Thompson Plastics of USA.  Astral Poly Technik was setup in 1996, 20% equity was paid by Thompson, 20% by Sandeep’s uncle and the remaining he paid by selling his house.

Astral began by launching industrial pipes(corzan) in 1999. But there was zero acceptance in the market. There were many chemical companies who were facing problem with GI pipes in terms of leakage every 6 months as those pipes would corrode when chemicals pass through them. Given the image of metal being superior to plastic, nobody trusted Astral’s claim of being better than GI piples.

Sandeep offered his astral pipes for free and ask these companies to try out for a year and only if it works pay me. He took many such challenges but still the market did not pick. Nobody wanted to change and the most important being the cost factor.

Even by 2000, the plant used to be operational only for 4 days a month. They were accumulating losses.

He was funding Astral from the cash generated from the API business( Kairav Chemicals).

By 2001, both the companies(Astral & Kairav) were on the verge of bankruptcy. Even their banker Madhavpura Mercantile Cooperative Bank collapsed, adding to the woes. After industrial piping, he tried his hands at plumbing pipes(used in building construction), even that did not work out, given their higher pricing point. 

He did not give up. He just wanted to survive.

At that difficult point of time, he pondered what is it that was hurting them the most:

1. GI Industrial piping was much cheaper than CPVC pipes: 

So Astral reduced the CPVC prices to match with that of GI. 

2. There were no margins in plumbing pipes. The margins were in fittings which they were importing: 

Astral started making piping fittings.( For that he got capital infusion from Thompson family who owned B F Goodrich). They set up fitting capacity at Baddi, Himachal Pradesh(HP). Offering plumbing prices at no margin.

HP offered excise wave off, they enabled them to lower cost of manufacturing.

The lower pricing of CPVC pipes at par with GI pipes helped to take off the business. The losses for these pipes were covered by the premium pricing of the fittings, as they are small units and not much attention is paid to their pricing.

The 'Astral Poly Technik' story- The growth challenge

Post this, the next set of challenges was waiting for them. How to grow the company?

They started meeting real estate companies and hotels explaining the benefits of CPVC plumbing pipes. In 2003, Astral received first large order from Rohan Lifescapes that was followed by Hiranandani and Kalpataru.

He used to showcase the company’s product at exhibitions and convince distributors and dealers to stock his products. 

They were the first company in India to train plumber given the CPVC product was new to India. If these plumbers did the installation wrong, it was a dent to their hardly built reputation. In the first year only they trained 30,000 plumber. It is still continued till date and they are training 30k-40k plumbers each year.

Plumbers have lot of influence on the brand of pipe to be bought. So it acted as a growth lever for them.

The 'Astral Poly Technik' story- Need for branding

2004: Even after all these efforts, dealers were not stocking Astral products.

Sandeep ji asked one of the distributor of the reason why they are not stocking Astral pipes. To answer his question, the dealer asked him to spend a few hours in his shop and find out the reason himself.

Sandeep after spending time at the shop found out that noone was asking for Astral pipes or CPVC Pipes. So there came the need for advertisement and branding. As of now whatever sales they were doing was only towards projects(B2B). 

The 'Astral Poly Technik' story-Advertisement

At that time advertising for plumbing pipes were unheard off. Piping was considered to be something that is hidden inside the wall and there was no need for any sort of ad.

In 2004-05, the company’s turnover was just of ₹25cr and they started advertising. They approached Mudra (now DDB Mudra), where the first thing they did was to change the logo. The initial logo of Astral featured a plumber with the message ‘Safety, Reliance Proven’. The new logo exhibited a pyramid made of plumbing pipes, as pyramids were counted amongst the strongest structures in the world and had stood the test of time. 

They started doing TV ads in leading Hindi Channles Aaj Tak & Star News during the India’s general election of 2004. The allocated budget was ₹2.7cr for that year.

In 2007, the company came out with their IPO raising ₹35cr. At that time they had 70% market share of CPVC market.

The 'Astral Poly Technik' story- Dabanng Pipes

In 2012, the company after so much of Sandeep’s reluctance(due to high cost of bollywood star advertisement), got involved with Salman Khan’s Dabangg 2. In the opening scene of the movie, Salman Khan kicks villain using Astral pipes. Company used this opportunity to advertise everywhere with Salman’s poster along with Astral pipes. The ad was extended through wrapping of trams in Kolkata and local trains in Mumbai. About 56,000 people, mainly its target customers such as plumbers, dealers, architects and consultants – were given free tickets for the movie, which earned the brand much brownie points. Salman Khan is still associated with the company.

On the back of Dabangg 2 ad, the sales of 2013, went up by 44% in 2013 amidst a slowdown.

Once the brand is created, it enables any company to drive harder bargains with its dealers and improve other financial ratos.

The company now has tie up/JV all major technology giants in piping or related sector.

One very interesting strategy company used was to import new/innovative products given their association with major global technology giants and observe their response in India. If it was accepted among the customers, they would manufacture it in their factories.

Since then there is no looking back for the company.

https://www.businesstoday.in/markets/company-stock/astral-poly-technik-share-price-rises-bse-astral-poly-net-profit-financials/story/363754.html

It is usually the passion of first generation entrepreneur that create most of the multibaggers. The story of Astral is unique as they created a new segment which never existed replacing the already established ones. Hence, the resistance was much more, so was the return.

The hard work & struggle faced by Sandeep Engineer paid off when the company’s turnover increased from ₹96cr in 2007 to ₹2500 in 2019. The profitability increase was much more substantial.

And finally, the monetary part as on 09 April 2020, Sandeep Engineer was worth ₹1.1 Bn(₹8300 cr).

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Shekhar Yadav

I am a full time stock market investor. The blog is an extension of my research, thoughts & opinion. Please don't consider anything on this website to be an investment advise.

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