|
In India's quest to retain its position as one of the fastest growing economies in the world, it is relying on increase in consumption as one of the major drivers. Indeed, one of the reasons why the country was less affected than many other nations during the global financial crisis is that the domestic consumption was quite robust. This was in sharp contrast to China, where the reliance on exports being high, the dragon nation witnessed considerable slowdown as the developed world sank into recession. When the consumption story in India was being touted as the big driver for India's growth, rural demand was always considered to be the key. This is hardly surprising in an economy, where almost 65-70% of the population depends upon agriculture as a means of livelihood.
Even today, over 50% of the Indian population still lives under thatched roofs (Kuccha roofing) and clay tiles. Security concern coupled with rising income level drives the desire of Rural India to shift from kuccha house to pucca house. A reasonably good monsoon in 2011-12 and Government's continued thrust to provide adequate shelter to the rural poor by introducing various programs like Indira Awas Yojna, Golden Jubilee Rural Housing Finance Scheme, etc., will boost the demand for various building products thereby providing a huge potential for the Company's Charminar roofing sheets. With the expected softening of the Inflation rate and expectation of a healthy demand from rural India, the fibre cement sheet industry is likely to grow between 5% to 7% annually.
Cement asbestos products market
This industry is more than 74 years old industry in India. Cement asbestos Products continue to be in demand because of the industry's effort in making in roads into rural markets, its affordability, and other qualities such as corrosion resistance, weather and fire proof nature. Currently there are 20 entities in the Industry with about 68 manufacturing plants throughout the Country. The products are marketed under their respective brand names mainly through dealers for the retail market and directly for projects and government departments. The total production for the year 2011- 2012 was estimated at 48 lakh metric tones. The industry demand as measured by the total sales of the industry has been growing considerably over the years, the growth for the last year is about 7.5%.
Cement asbestos products represent a convenient intermediate roofing product in rural and semi-urban India. The product caters to the bottom of the country's economic pyramid where household incomes are placed at around Rs 4,000. The scope of the cement asbestos sector is highlighted by the fact that nearly half the country's rural population lives in kutcha or semi-pucca dwellings, which would inevitably need to be transformed into organized homes as incomes increase. Since thatched roofs need regular maintenance, users move from thatched roofs to red clay tile roofs to cement asbestos products and concrete slab roofing as soon as they can afford it.
The attractiveness of the space is indicated by its size and sustainable scope: 70% of India's population is rural translating into a market of around 80 crore consumers, possibly the second largest such population type in the world. Besides, this population segment is extensively under-consumed. Rural housing shortage has been estimated at 14.6 mn units (11.4 mn on account of replacement and additional 3.2 mn of new units) according to NABARD. Besides, investment in a dwelling unit ranks next only to food in India's rural priority (~42% of the rural population).
More importantly, the under consumption is positioned to correct itself with speed following the successful implementation of government programmes like Indira Awas Yojna (allocation was increased 10.75% to Rs 11,075 crore in Budget 2012-13) and Rural Housing Fund (allocation of Rs 4,000 crore in Budget 2012-13), placing a larger income in the hands of the rural Indian. India's rural income – estimated at ~ 56-60% of India's income – is also influenced by harvests, yields, realizations, irrigation, monsoons, credit and support prices.
The government's rural housing push
Rural Infrastructure Development Fund:
The government enhanced the allocation under Rural Infrastructure Development Fund (RIDF) to Rs 20,000 crore for 2012-13. Further, an amount of Rs 5,000 crore from the allocation will be kept aside to create warehousing facilities. Affordable housing: The government strengthened its focus on affordable housing, allowing overseas borrowings for low cost housing, extension of interest
subvention for one more year for loans up to Rs 15 lakh on property cost up to Rs 25 lakh, service tax exemption on low cost mass housing up to 60 sq mt and Rs 4,000 crore fund for rural housing (3,000 crore in last fiscal). These initiatives will strengthen affordable housing.
Pradhan Mantri Gram Sadak Yojna:
Under this flagship scheme, the government provided an allocation of Rs 240 billion (increase of 20% over the previous year) to provide and enhance rural connectivity.
Mahatma Gandhi National Rural Employment Guarantee Scheme:
MGNREGS created legal entitlements for an individual's right to work in the rural economy. The previous year's budget allocation was Rs 400 billion, Rs 1 billion less than what was allocated in Budget 2010-11. Of the allocated amount, only Rs 310 billion was utilized. Keeping in view the under utilization of the allocated funds, Budget 2012-13 allocated Rs 330 billion to MGNREGS.
Indira Awas Yojana:
The allocation for rural housing scheme Indira Awas Yojana was primarily to provide housing for
SC/STs below the poverty line. This was Rs 11,075 crore in the Budget 2012-13. Each BPL family got Rs 45,000 as assistance in the plains and Rs 48,500 in the hilly areas. Jawaharlal Nehru National Urban Renewal Mission: The government almost trebled spending on JNNURM in 2012-13 to address urban infrastructure gaps.
Rural development:
For 2012-13, India's finance minister allocated Rs 736.8 billion to the Ministry of Rural Development to undertake rural development projects.
Changing trends In Building Products
Infrastructure and construction segments are fundamental to economic development and normally grow at twice the rate of GDP. The Indian consumer prefers better quality building materials and needs faster construction methods due to fast economic growth, greater disposable income and high exposure to media. In the construction industry there is rapid migration from conventional techniques and products. Modern products of superior quality and technology are being adopted. They enable faster speed, greater strength and higher safety.
Hyderabad Industries
Hyderabad Industries has gone in for a major change in makeover to address the new emerging demands, markets and trends. Being a market leader over several years, with its strong brand "CHARMINAR", a strong & extensive distribution network spread across the country, serviced by its 9 manufacturing locations, and a newly structured sales & marketing team, HIL is well poised to capitalize on the opportunities provided by the rural India and is all set to increase its market presence and improve its market share.
The worldwide trend towards sustainable buildings, which began in the 1990s, is now gaining momentum due to increasing concerns over climate change issues. Improving the environmental impact performance of new and existing properties is commonly recognized today as a priority to meet climate change challenges. Issues like diminution of fertile soil, emission from fossil fumes and global warming becoming key concerns across the world, there is need to switch over to products and methodologies that mitigate these concerns. Company's Green building Aerocon products which are environment friendly are garnering the attraction of building community in the last few years. The high acceptance of our Aerocon brand and our focus on quality and reliability will help the Company to grow the Green building division by a healthy 25% in 2012-13. Our solutions approach will help the customers use our products more efficiently. However, there will be pressure on prices as competition is likely to intensify as new entrants are expected in the market.
The Thermal Insulation division, which faced several constraints last year including a surge in competition from the new manufacturers and imports from China is creating new markets like the piping section and increasing exports to the GCC countries. This business is expected to do well
with the augmented capacity, improvements in efficiency, world class quality and reliability helping to counter the Chinese threat.
With the recent capacity augmentation in allied building products and thermal insulation business, focused approach on better sales and marketing efforts, cost reduction measures and productivity improvement through TPM (Total Productive Maintenance) practices, your Company is well placed to take advantage from the mounting demand in the industry.
Everest industries
Everest caters to the growing demand of the building and construction industry with a strong portfolio of products for industrial and commercial applications and rural housing. From a single product roofing manufacturer, Everest is evolving into a building solutions company with 40% of revenues derived from products other than fibre cement roofing.
Everest's fibre cement roofing is preferred in rural and agriculture based housing markets as an affordable and durable roofing solution. Dry wall construction methods using Everest fibre cement boards and solid wall panels are being specified by architects and interior designers in commercial establishments, malls and hotels. Everest pre-engineered and smart steel buildings provide superior design, faster speed and a high degree of certainty for project completion. They are replacing conventional construction methods for warehouses and factory sheds. High performance products like access floors, polycarbonate roofing and fixing accessories are being adopted by builders and contractors.
The company offers a range of ready-to-use high quality products and superior services for the construction industry. Everest is proud to be an integral part of the strong Indian growth story.
Prices improve
Asbestos fibre, cement and fly ash are the major inputs for asbestos corrugated sheets. Almost the entire domestic requirement of asbestos fibre is imported. The sharp depreciation of Indian rupee has meant increase in the landed cost of imported asbestos fibre. Likewise, cement prices have also hardened in the current fiscal, both sequentially and on y-o-y basis.
Based on change in WPI, we find that the domestic asbestos corrugated sheet prices have increased by 7.7% between October 2011 and August 2012. The prices are 6.8% higher in April 2012, 7.9% higher in May 2012, 7.0% higher in June-July 2012 and 7.1% higher in August 2012, on y-o-y basis.
Outlook
The market characteristics for cement boards over the coming year look positive because of intense construction activity and shift of consumers from particle boards and plywood to cement reinforced sheets. Export market is also growing. In short this is a product of the future.
The recent revival in South West Monsoon rainfall, especially in August and September 2012, augurs well for asbestos corrugated sheets, as nearly 70% of the demand for the product comes from rural areas. Also, the moisture retention can help improve Rabi 2012 prospects too, which can add to rural income, and power demand for asbestos corrugated sheets. Despite rise in input costs, the players are set to report healthy growth in profits, thanks to better demand and ability to pass on the rise in input costs through hike in product prices.
|