Roofing Industry in India 2011 - Market Size and Growth, Drivers and Challenges

Roofing Industry India (Part I)Roofing Industry – India (Part I)

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Executive Summary

MarketPresent rate of growth in roofing market in India is ~2‐2.5% and is expected to further grow at ~3‐4%

Huge demand for cement sheets in rural areas and for metal roof sheets in industrial sector

D i Ch ll

Drivers & Challenges

Drivers–Growth in construction–Government initiatives–Growth in disposable incomeGrowth in PEBs

Challenges– Increase in input cost–Ban asbestos lobby

Real Estate: Expected to be valued at INR 8,640 bn by 2020

Retail Industry: India has been ranked the third most attractive nation for retail investment

–Growth in PEBs–Environmental considerations

Sector‐wise Opportunity

Airports: Development and modernization of airport infrastructure is in the offing

Hospitality Sector: Marked investments are to take place in this sector

Healthcare Sector: Development of healthcare infrastructure across India is in the pipeline

Metro Rails: INR 2 tn to be invested in metro rail system in the next 10 years

Competition

y y

SEZs: Currently there are 130 operational SEZs which is expected to grow in the future

Major Players

Everest Industries Hyderabad Industries Visaka Industries

2ROOFING INDUSTRY IN INDIA 2011.PPT

Competition y

Tata Bluescope Steel Colour Roof India Centurywells Roofing India

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•Market Overview

•Drivers & ChallengesDrivers & Challenges

•Sector‐wise Demand

•Competition

3ROOFING INDUSTRY IN INDIA 2011.PPTISIEmergingMarketsPDF in-avendusadv04 from 210.18.143.254 on 2012-03-22 06:21:21 EDT. DownloadPDF.


Roofing industry in India has been showing consistent growth and is expected to grow further in the future

• In the present scenario, Indian roofing industry has

been growing at 2‐2.5% and is expected to grow to

Roofing Market – Overview Market Size and Growth

20bn sqm.

~3‐4%

•Despite recessionary trends during 2008‐09, the

Indian construction market has been growing both in

terms of volume innovation and technology

10.910.610.310.09.79.5

5

10

15+3%

terms of volume, innovation and technology

• Fiber cement roofing industry has grown by over 8%

Growth fuelled by a robust rural economy

Revival of industrial and infrastructure sectors Roofing Market – Segmentation (2010)

02014e2013e2012e2011e20102009

Note: Figures are for the respective calendar years

• Asbestos cement roofing sheet industry in India has a

capacity of 4 mn metric tonnes

Industry is growing at a steady rate of 8‐10% annually

•Metal roofing is gaining popularity in the industrial 14%

11%1%1%

Asbestos Fiber Cement

Plastic & PVCAsphalt

g g g p p y

sector owing to ‐

Demand for time‐bound, speedy construction

Demand for aesthetically pleasing products 18%

55%

14%

Reinforced Concrete Cement

Clay TilesMetalCement


Source: Constructionweek “Top Of the World”, Apr, 2010; Contify “There will be more growth in roofing”, Jun 2011



Roofing refers to the elements which cover, protect and insulate the roof surface of a structure. The overall...

Segment DescriptionMarket Share

(2010)

Roofing Market – Segmentation (1/2)

Aluminum Corrugated Sheets

•Aluminium is the ideal option for roofing and cladding owing to its durability, resistance to fire and economical properties

0.5%

Asbestos Fiber Cement Sheets

•Made from of large amounts of cement and chrysotile fiber, it finds wide applications in residential and commercial purposes owing to its properties of durability, fire proof and resistance to normal wear and tear

10.5%

Asphalt sheets•About 80% of residential roofs are covered with asphalt roof shingles and owe their popularity to low cost, ease of installation and good performance

0.7%

Clay Tiles•Made from fired clay and predominantly found in rural areas. They are now modified into Micro Concrete Tiles due to its cost effectiveness and versatility

17.6%


versatility

Source: Nayan M Vala Securities, ”Indian Roofing Sector”, Sep 2010



…market can be categorised under eight segments

Segment DescriptionMarket Share

(2010)

Roofing Market – Segmentation (2/2)

Corrugated Galvanized Iron (CGI) Sheets

•Usually adopted as coverings of roof and sides of industrial buildings, major advantage of it being light weight and high strength with added coating of zinc and aluminium at low cost

13.5%

Metal Sheets•Made from metal units, they form the envelope of a building with advantages being light weight, durable and resistant to fire and weather and lasts more than asphalt and wood shingles

0.4%

Plastic & PVC Sheets

• Comes in thickness ranging from 1.0mm and 2.5mm. Suitable for industrial, agricultural, poultry, diary farms and sheds which require skylights for natural light

1.8%natural light

Reinforced Cement

Concrete (RCC)

• This thick substance can be painted onto terraces and external walls for protection against water and corrosion. It is advantageous as it radiates up to 70% heat and enjoys maximum share in residential and commercial

55.0%


Concrete (RCC)buildings

Source: Nayan M Vala Securities, ”Indian Roofing Sector”, Sep 2010



Asbestos cement roofing market has been growing with the rising demand from the rural economy

•Asbestos Cement roofing sheet industry in India has a capacity of 4 mn MT and is growing at a steady rate

Asbestos Cement Roofing – Overview Market Size and Growth

4.704 315+9%

mn MT

of 8‐10% annually

• Presently, it is an oligopolistic market with four major players controlling 67% of the total market

• The industry derives its growth primarily from the

4.313.953.63

1

2

3

4

rural market, wherein the Indian Government gives the thrust for development of rural infrastructure specially on rural housing through various initiatives such as Indira Awaas Yojna Market Share (2010)

02012‐13e2011‐12e2010‐11e2009‐10

Note: Figures are for the respective financial years

35

Advantages Disadvantages

Resistance to weather deterioration

Susceptible to breakage 33%16%

13%

Everest Industries Ltd.

Visaka Industries Ltd.

Ramco Industries Ltd.

deterioration

Dimensionally stable Dull grey colour

Easy installation Needs regular maintenance

N b tibl

16%

21%17%

Others

Hyderabad Industries Ltd.


Source: SKP Securities Ltd, “Hyderabad Industries Ltd.”, Mar 2011

Non‐combustible 21%



Metal Roofing market has been growing with the rising demand for durable and aesthetic products

•Metal roofing options include corrugated galvanized iron sheets, aluminium corrugated iron sheets, and

Metal Roofing – Overview Market Size and Growth

0.280 24

+17%0,3

Mn T

colour coated metal sheets

• Aluminium and steel are the preferred materials owing to cost effectiveness and easy availability

•Metal roofs with built‐in solar panels are considered

0.240.21

0.150.180,2

0,1

to be the most energy efficient and are gradually gaining in popularity

2010 2012e2011e200920080,0

Note: Figures are for the respective calendar years

35


Resistant to fire Initial cost is high

Li ht i ht d d blIncompatible materials can

Companies Brands

Intermark Associates Pvt. Ltd.

Smartroof (corrosion resistant & rainproof

fSpider Roofing inLightweight and durable

pcause rapid corrosion

Flexible and has aesthetic potential

Poor insulation against noise

b l dEnergy intensive

Nexus Infratech Pvt. Ltd.Spider Roofing in Galvalume Steel

Skyarch Roofs Pvt. Ltd.Skyroof Brand roofing system(profiled colourcoated galvalume sheets


Source: Contify “The New Age of Metal Roofing”, Jan 2011; ceramiccolursindia.com, Sep 2010

Can be recycledEnergy intensive transportation of sheets Tata Bluescope Steel Ltd.

Lysaght (Metallic Coating)



Economical advantage and aesthetic nature leads to usage of these tiles in the roofing sector

• According to industry estimates, there are 250 mn houses in India

6% id d b h i h f


Clay Tile Roofing – Overview Advantages & Disadvantages

46% are considered to be homes with pucca roofs

54% homes are made of thatch and clay tiles

• Cover ~18% of the total market share in India

•When evaluated on a price versus performance basis, tiles are superior to naturally occurring material

Long service life

Breakage loss during transportation

Low in maintenance

Durabletiles are superior to naturally occurring material Durable

Deliver classic beauty

Mangalore Roof Tile – Overview Advantages & Disadvantages • Preferred roofing material especially for farmhouses and hotels

• Are the oldest and most popular tiles Largely used in heritage buildings


Economical Easy formation of fungus & moss

•Usage of MRT as decorative tiles over RCC roofing Adds a ethnic look to modern homes

•Metal substructure is provided avoiding wood usage

High thermal resistant

Absorbs water

Easy installation

9

Source: constructionupdate.com “Roofing” Aug 2009; btiles.com “Roofing Tiles” Dec 2010

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RCC forms the common method of roofing in India owing to its cost effectiveness & versatility

Advantages & Disadvantages


Relative low cost Fi l h d d

• Reinforced Cement Concrete roofing is the most popular form of roofing accounting for 55% of the

ti k t h i I di

RCC Roofing – Overview

Relative low cost Final strength depends on mixing, curing & castingDevelops cracksHigh compressive strength

Long service life D l k

entire market share in India

• It is a man‐made construction material, widely used in many types of structures

• Concrete Block Technology offers a speedier, cost effective alternative to conventional roofing and

MCR – Unique Features

Develops cracksMouldability to any shape

effective alternative to conventional roofing and walling

Micro Concrete Roofing – Overview •Highly durable

• Lighter than other roofing tiles

• Can be easily installed Can be fixed to slabs with cement mortar

•Meets the growing need for high quality roofing

• Can be used on steel and wood under‐structure to make attractive roofs

•Offers both aesthetic and water proofing material

• Can be coloured to user’s preference

• Reduce heat gain

• Does not contain asbestos fiber

•Utilizes waste (stone‐dust)

p g Ideally suited to replace thatch and fired clay tiles in rural area

• Validated by the Building Materials & Technology Promotion Council (BMTPC) and is promoted by Development Alternatives & TARA (Technology &

10

Source: PM News Bureau “Micro Concrete Roofing tiles have edge over sloping roofs” Dec 2009; betuco “Concrete Block Technology‐ Roofing Tiles India” Feb 2007; icjonline.com “Sustainability of concrete in Indian context” Jul 2010

• Utilizes waste (stone dust)Development Alternatives & TARA (Technology & Action for Rural Advancement)



•Market Overview

•Drivers & ChallengesDrivers & Challenges

•Sector‐wise Demand

•Competition



Drivers & Challenges – Summary

Drivers

Growth in construction industry

Government initiatives

Growth in disposable income

Challenges

Increase in input cost

p

Growth in Pre‐engineered buildings

Ban asbestos lobby

Environmental Considerations



Increasing rate of constructions has a positive impact on the roofing industry in India

Growth in construction industry

•Despite the global economic downturn, the Indian Construction industry is still booming

• There has been considerable investment in major construction areas such as airports large

Impact

• There has been considerable investment in major construction areas such as airports, large

shopping malls, new stadiums, metro stations, SEZs and IT Parks which has stimulated the

growth in the roofing industry

• Construction Industry in India is worth over INR 2,331 bn and accounts for more than 20% of

GDP

•Given the expected investments in urban infrastructure, the building, construction and real

estate sector is expected to grow at a CAGR of 9.5‐10% over 2011‐22 in real terms

• Contribution of construction industry to the GDP of India would be constant at INR 8 000 bn till• Contribution of construction industry to the GDP of India would be constant at INR 8,000 bn till

2022

•Roofing and cladding segment of construction is expected to account for 25‐30% of the total

cost of building construction

• A strong impact specifically comes from the rural housing sector

• Rapidly growing construction industry is a strong driver for the roofing market in India


Source: The Economic Times, “Indian Construction Growth Stimulating Roofing Industry, May 2010; medcindia.org ”Skill Development‐Perspectives on Infrastructure and Construction”, Jun 2011; businessvantage “India 2010”, Jul 2010



Government initiatives will boost demand for roofing in India

Government initiatives

•Government impetus to develop backward areas has led to the increase in construction of housing, schools and hospitals which aids in the development of the roofing market

Impact

•Government initiatives such as Indira Awas Yojna, Golden Jubilee Rural Housing Finance Scheme, Pradhan Mantri Adarsh Gram Yojna, Productive Housing in Rural Area and Rural Housing Fund etc. are rapidly increasing the demand for rural roofing sector

• In the Union Budget 2011‐12, government has increased allocation to rural and infrastructure d ldevelopment Social Sector Spending ‐ INR 1.6 tn (36.4% of the total plan outlay)

Infrastructure Development ‐ INR 2.1 tn (48.5% of the total plan outlay)

Government Programs and Allocation for Rural Sector

Initiatives Allocation (INR bn) Impact on Roofing Market

Bharat Nirman Yojna 580 Plans for development of rural infrastructure creating demand for roofing

National Rural Employment Scheme (NREGS)

400Enhances the livelihood security of people from rural areas providing employment and increasing purchasing powerScheme (NREGS) employment and increasing purchasing power

Backward Region Grant Fund 99 Redress regional imbalances and gaps in local infrastructure

Rural Infrastructure development Fund (RIDF)

180 Finances rural infrastructure projects

R ht i K i hi Vik Y j 78 Pl f i lt l d l t i i i f f


Source: Investment in Infrastructure during Eleventh Year Plan Jan 2011; SKP Securities, “Hyderabad Industries Ltd.”,Mar 2011; Union Budget 2011‐12

Rashtriya Krishi Vikas Yojna 78 Plans for agricultural development, increasing income of farmers



Growth in disposable income of people leads to an increase in demand for roofing in India

ImpactUpward Trend of Disposable IncomeWith the growth of urbanization and population, the market size of residential roofing demand is growing

A booming economy and the ever‐growing middle‐class has kick‐started the real estate industry thus leading to the growth of roofing sector

Rural consumer enjoys rising disposable income due to unprecedented food inflation, which has driven up MSP (Minimum Support Price) for farmers whereas, the costs are capped due to Government subsidiesGovernment subsidies

Rising disposable income drives demand for rural and urban roofing market

90

Categorization of Roof Forms in India (2011)Aggregate Annual Disposable Income (INR tn)

KacchaPuccaRCC90

23%

24%

44Aspirers

Seekers

Strivers

Globals >1000

500‐1000

200‐500

90‐20025%

KacchaPuccaRCC

Strong opportunity for players due to i i i

3%15%

34%

44

9%33%

34%9%

15%

24

23%49%

13%7% 9%

Deprived <9054%

21%

increasing income


Source: McKinsey Global Outlook; SKP Securities, "Hyderabad Industries Ltd”,Mar 2011;Roof India 2011; Visaka Industries Ltd “Annual Report”, 2009‐10

2025e

3%

2015e

9%

2005

23%



Growth in pre‐engineered buildings (PEB) will lead to the development of the roofing market

PEB Industry•Market for PEB in India is estimated at INR 30 bn and is expected to grow by more than 20% annually

Impact

• PEB are 40‐50% cheaper than conventional buildings and explore the scope of metal roofing

• Benefits of PEB steel structures Time saving

Free from fire, weather and earthquake resistant

C b l d Can be recycled

•Manufacturing industries such as power, automobile, engineering goods and services including logistics, warehouses and infrastructure are large users of PEB

• Roofs are customized and designed as per the building specifications

3

Mn TPA

PEB Market in India

1.731.44

1.20

2.07

0

1

2+20%


Source: SKP Securities, “Hyderabad Industries Ltd”, Mar 2011; Vijay Mittal’s interview,( ISPAT), Project Vendor

02013e2012e2011e2010



Increasing concern for the environment aids in demand for green building products

Environmental Considerations Impact•Demand for green building products is increasing on account of concerns for the environment and energy consumption

•Need to switch over to products that mitigate concerns, showing immense potential for Green Roofs

• International council for Research & Innovation In Building & Construction recognizes roof as sustainable if itMinimizes the burden on the environment by using earth’s resources responsiblyMinimizes the burden on the environment ‐ by using earth s resources responsibly

Conserves energy ‐ by improving thermal efficiency of roofs

Extends roof life span ‐ by improving long term performance

• Demand for conversion of existing buildings to sustainable and energy efficient ones according to LEED (Leadership in Energy and Environmental Design) Certification( p gy g ) Provides independent, third‐party verification that a building project meets the highest performance standards

•Metal Roofs with Solar Panels are in demand for efficient energy usage

• Rain water harvest in Green Roofs is gaining popularity owing to environmental reasons

•Nanotechnology solar reflective coatings are efficient heat reflective coatings Helps in reducing the heat load on buildings with metal steel roofs by 30%

• Increase in social consciousness will lead to demand for roofing products


Source: Contify, “The New Age of Metal Roofing", Jan 2011; SKP Securities, “Hyderabad Industries Ltd”, Mar 2011; igbc.in “Certification‐ Indian Green Building Council”



Increase in raw materials cost has an adverse effect on the sector

•Main raw material for asbestos fiber cement sheet are cement, pulp, fly ash and chrysotile fiber Any hike in the prices of cement or fiber has an adverse impact on the price and demand of product

Input Cost Impact

• Chrysotile Fiber (Asbestos Fiber) is imported from countries such as Brazil, Canada, Zimbabwe, Kazakhstan Chrysotile Fiber has witnessed a 10% increase in prices globally

• Expected decline in prices of cement in 2010‐11 with healthy demand boosted production put a p p y p pdownward pressure on price of product

Fiber Cement Sheet Composition

Wood PulpFly Ash Cement Chrysotile Fiber

7%

INR/50 Kg

35%

100%

8% 50%7%

Iron Price Aluminium Price Cement Price

INR/Tonne

20,000

0

+15%

29,91826,74522,55040,000

11510695

0

100

200INR/Kg

+10%240210229

0

200

400INR/50 Kg

+2%


Source:Nayan M Vala Securities, “Roofing Stock”, Sep 2010; SKP Securities, “Hyderabad Industries Ltd”, Mar 2011; acmainfo “Global and Indian commodity price trends”, Apr 2011; Satya Sundaram “Cement Industry Undergoing Expansion”, May 2010

0Mar 201120102009

0Mar 201120102009 2008 2009 2010



Impositions and climactic fluctuations can deter the growth of roofing

• In India, there is a ban on the usage of blue and brown varieties of asbestos products

• Exposure to asbestos related products causes health hazards including ‐

Ban Asbestos Lobby Impact

Asbestosis

Mesothelioma

Lung Cancer

•Manufacturers are subject to clearances from Pollution Control Boards, Central Environmental Ministry constant audits related to employee health and safety as well as submission of reportsMinistry, constant audits related to employee health and safety as well as submission of reports and evidences that address concerns As per Environmental Clearance Letter, “stack emission of asbestos fiber should not exceed the emission limit of 0.2 fiber/cc”

Asbestos Fiber in work zone environment shall be maintained within 0.1 fiber/cc

• Recent development in India goes against asbestos mining Indian Railways is removing Asbestos roof sheets from all stations and replacing them with metal sheets

Kerala State Human Rights Commission has ordered removal of all Asbestos Cement sheets from schools and hospitals in the State

Asbestos has been removed from the standard schedule for civil works item known as DSR2007 with effect Asbestos has been removed from the standard schedule for civil works item known as DSR2007 with effect from 2007

• The need to undergo ongoing surveillance serves as an entry barrier for manufacturers


Source: Businessstandard.com; SKP Securities, “Hyderabad Industries Ltd”, Mar 2011;infimetal.org “Environment and Occupational Health and Safety Issues Arising from Asbestos Production and Use”, Jun 2011



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Roofing Industry in India 2011 - Market Size and Growth, Drivers and Challenges

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