Creador’s water scarcity play

India accounts for two of these transactions - Vectus and Somany Ceramics - and they follow a broadly similar thesis, capitalizing on urbanization and rising household incomes. While Somany is considered a leading manufacturer of ceramic and porcelain tiles used in construction, Vectus provides water tanks and piping for homes increasingly set up to accommodate India's chronic water shortages.

"At the most basic level India has a problem with water. Even in the best areas of Delhi you only get two hours water supply per day so you need lots of storage or you run out," says Brahmal Vasudevan, Creador's CEO.

He notes that demand is not purely an urban phenomenon: as incomes rise in villages more people are buying water tanks where previously they would not. The company also benefits from a shift in the housing sector from steel to plastic piping.

Vectus was established in 2004 by Ashish Baheti and Atul Ladha, who between them have more than 23 years of experience in the retail plastic products business. The company has 11 manufacturing units and distribution agreements with 400 dealers nationwide, serving a customer base that is half property developers and half retail. It distributes water tanks under the Vectus, Ganga and Waterwell brands, and pipes and fittings under the Vectus brand.

Revenue came to $66.7 million for the 12 months ended March 2014, up 34% over from three years ago. Profit has grown 45% over the same period.

Vectus started of manufacturing water tanks but moved into piping because consumers tend to buy both types of product from the same retail point. However, according to Vasudevan, the main competition remains divided between the two areas.

There are 2-3 large players in the water tank space, led by Sintex Industries, and 5-6 in plastic piping, notably Supreme Industries and Jain Irrigation. While the former is a direct rival in residential piping, the latter - which is backed by Nalanda Capital - focuses on agriculture.

"It's quite a consolidated market," Vasudevan adds. "This is because setting up the plant is easy but building the branding and distribution network is a lot harder."

Sources familiar with the transaction say that Creador will take an approximately 20% stake in Vectus and Anand Narayan, a senior managing director at the private equity firm, will join the board. The new capital will be used to build new plants and expand capacity as Vectus seeks to maintain its fast growth rate. Creador's value creation team will also offer strategic support.

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• Topics
• Expansion
• Industrials
• South Asia
• India
• Creador
• Growth capital
• manufacturing