Asbestos cement sheets are affordable, corrosion resistant, weather and fire proof in nature. Besides, they are also inexpensive, need no maintenance and last long compared to thatched roofs, tiled roofs and even galvanized iron sheets. As a result, they are popular roofing material in rural and semi urban areas.

The market for Asbestos Cement sheets is estimated at Rs 3500 crore while that of metal roofing is estimated at Rs 3600 crore. India has about 68 asbestos cement manufacturing units, belonging to about 20 different entities. The industry recorded mere 2% increase in sales to 42-lakh tone in FY 2010-11 from about 41 lakh tonne in the previous year. The above normal South West Monsoons, and erratic nature of the same towards the end of the season and delays in housing starts were responsible for sluggishness in demand.

There is tremendous scope for increase in demand for asbestos cement sheets. As per the information gathered by Visaka Industries, almost 80-85% of rural people use thatched roof/tiles for the shelter. Thatched roof need regular replacement and tiled roof needs continued maintenance. Therefore whenever the economic conditions improve the first choice of the rural poor to replace the roof over their head is the affordable and relatively durable product Cement asbestos Sheets. Therefore, Visaka Industries see increased potential for usage of Cement asbestos Sheets in rural areas. Besides greater thrust on housing for rural poor, both by Central and State governments, adds to demand for asbestos cement sheets.

But there are concerns too. Asbestos fibres, cement and fly ash are three critical inputs for the industry. Asbestos fibre is primarily imported, and the recent depreciation of rupee has added to the landed cost of imports. Despite capacity overhand, the cement prices remain elevated due to rationalization of supplies by the producers. The availability of fly ash is not a problem, but it was available free in the earlier years, but since the past couple of years, the cost of fly ash and its transport to the manufacturing site has increased.

Meanwhile, factoring in the strong growth potential, the asbestos cement sheet sector has witnessed massive capacity expansions, by both the existing and new manufacturers. In FY 2011-12 alone, about eight new units are to be commissioned, which can intensify the competition, which coupled with sluggish demand is actually robbing the pricing power of the sector. Add to this, the elevated and rising input costs means pressure on margins.

Hyderabad Industries expects Indian asbestos cement sheet sector to grow by about 5% - 7% in the current fiscal. The company factors in good monsoon in 2010-11 increase in rural income on account of record agriculture production coupled with increase in minimum support price to facilitate this growth. While the results for the quarter ending September 2011 can be sluggish, we can expect better growth in demand and profits in the second half of the current fiscal, factoring in better rural spending and increase in construction activity, especially in rural and semi urban areas.