Degree
Master of Business Administration
Faculty / School
Faculty of Business Administration (FBA)
Advisor
Dr. Mohammad Asad Ilyas
Project Coordinator (Internal)
Dr. Nasir Afghan, Asad Ilyas, Salma Mirza
Project Coordinator (External)
Mahmood-ur-Rehman, Nasir Raja
Client
International Industries Ltd (IIL)
Committee Member 1
Asad Ilyas, Institute of Business Administration, Karachi
Project Type
MBA Research Project
Keywords
https://ir.iba.edu.pk/do/search/?q=Polyethylene&start=0&context=8598587&facet=">Polyethylene, International Industries Limited, Global HDPE market, Competition dynamics
Abstract / Summary
Across the globe, polyethylene (PE) plastics have been used increasingly and with an excellent track record for piping systems inside and around buildings over the past 40 years. Most commonly used are cross-linked PE for hot water applications, flexible PE compounds for house connection water and gas pipes. A high level of quality and installation efficiency has been developed over the years through improved raw materials and a clear system approach (raw materials, pipes, fittings, installation procedures, training). In future, the use of PE is expected to continue its strong growth due mainly to the excellent material properties and increasing acceptance among installers, architects, authorities and house owners. An outlook of the Global demand of plastic pipe is illustrated in the graph below indicating an increasing demand for High density polyethylene as a substitute for PVC pipes because of its environmental and health-safe properties. The purpose of this report is to provide International Industries Ltd (IIL) a feasibility study on the extension of its product line to introduce the PE pipes of diameter greater than 250mm and its impact on current operations. Currently IIL is in the business of producing and marketing of GI Pipes, Steel Tubes and Pipes, API Line Pipes & Polyethylene (PE) Line Pipes for both national and international usage. In Pakistan as well, PE (Polyethylene) pipes is the future in the piping world (water and gas transmission) as many national certifying bodies such as Plastic Technology Center (PTC) only recommend PE pipes to be used when water or gas is to be transmitted based on several health and environmental concerns, and thus IIL has seen an opportunity in this category and this report will shed light by elaborating on several issues that the company might confront while rolling out the product in the market. Talking about the macro environment of the industry, currently there are two players, Hi-Tech and BBJ. Hi-Tech operates in Sind and BBJ has its scope in Punjab and Northern areas of Pakistan, therefore the only competition considered for this feasibility is Hi-tech as the geographic scope of this project is limited to the province of Sind. The historic annual imports for high-density polyethylene resins imported is depicted in the graph below which shows an increasing trend indicating mounting usage for piping. Analyzing the production capacity compared to the overall demand of HDPE, IIL is entering into a greater diameter pipe manufacturing where the production capacity within Pakistan is excess over the demand. However, since the consumption of the greater diameter pipe is highly dependent upon Government funding and the delivery lead times are short, manufacturers are bound to keep over capacity which justifies the overall capacity to be excess over the annualized demand. The Market size based on the imports of raw material for Polyethylene pipe with diameter greater than 250mm is computed approximate to around 3,212 tons which seems to be a good opportunity for IIL as a new entrant for greater diameter pipes. In order to complement the market size, the financial outlook of the project depicts a lucrative prospect for IIL. The NPV of the project is calculated to be Rs. 60 million with an IRR of 31.8%. The key advantage which boosts the financials is the existing infrastructure and premises with two of its PE pipes extruders already in operations. The Cash flows exhibit a positive picture for sustainable growth bolstered by revenues amounting to Rs. 89.3 million by year 2017.
Recommended Citation
Lakhani, M. S., Faisal, M., Aijaz, M. A., Hakimuddin, H., & Hayat, A. (2011). Feasibility study of Polyethylene pipe plant expansion (Unpublished graduate research project). Institute of Business Administration, Pakistan. Retrieved from https://ir.iba.edu.pk/research-projects-mba/179
