Building Material Sectors

In India

An Industry Profile from McG

- A Demopack of Select Slides -

Madras Consultancy Group , Chennai

 Contents *

• Building & Construction Industry in India : An Overview

• Housing Sector
• Building Material Sectors : An Overview
• Cement
• Steel
• Tiles
• Paints
• Lighting
• Sanitaryware & Bathroom fittings
• Roofing Systems
• Wood & Plywood
• Glass
• Housing Finance
* Note : This demo pack has only a few select slides of the contents

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 Building Material Sectors : An Overview

• Building materials constitute 65 to 75 % of the total cost of construction

• Building material usage India, largely accounted for by the domestic housing
sector, has its own unique characteristics, e.g. :

– Use of Burnt bricks, with cement plastering as the primary material for
walls

– Extensive use of traditional, locally available materials like timber,

bamboo, palm leaves, mud, stones, etc., in rural areas

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 Housing Sector : Contents

• An Overview
• Housing Stock & Housing Shortage
• Housing Demand Estimates
• Estimation of Construction Activity
• Major Factors in Housing Sector Development
• Urban Infrastructure

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 Housing Sector : An Overview

• Housing shortage a perpetual problem - estimated at 19.4 Mn. units

• During the last decade, the useable housing stock grew to 164 Mn. units - a
growth of 23 %

• Primary drivers being rapid urbanisation & developments in semi- urban &
rural housing

• Housing sector & urban development expected to grow steadily in the

coming years

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 Cement : Industry Structure

• Cement industry is considered as one of the core infrastructure industries

• Cement industry in India dates back to 1914, first unit in Porbunder

• Indian cement industry is the fourth largest in the world

• Fragmented industry : 56 cement companies in India operating 124 large

plants & 300 mini plants

• Total Capacity in cement industry

– Large Plants = 137 million tonnes)

– Mini Cement Plants = 11.1 million tonnes)

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 Cement : Market Size & Demand Trends

• Estimated market size - Rs. 290 Bn. (2001-02)

• Industry grew by 10 percent growth during 2001 - 02

– Production rose from 93.6 Mn tonnes to 102.4 Mn tonnes

– Attributed to a host of factors including slow progress of major

infrastructure projects

Mn Tonnes

Production 29.9 12.1 23 29

Consumption
28.7 12 25.5 25.7

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 Capacity & Production

Mn. tonnes (2001-02)

Installed capacity 137.0

Production (Large Plants) 102.4
Production (Mini Plants) 6.0
Consumption 102.4

• Till the mid nineties most of the excess capacity was added in North-West
India, in Maharashtra, Gujarat. Madhya Pradesh and Rajasthan.

• MP, Rajashtan & AP account for 53 % of production

• Today the excess capacity is a major problem - resulting in low cement

prices in most parts

• Capacity utilisation : 75 %

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 Sales & Distribution

• Cement in India is primarily sold through a distributor - dealer network

• Total margins for the distribution channels - 17 to 18 %

• Direct sales less than 2 % of total sales

• Managing the distribution network & strong working relationships with

distributors, contractors etc., - critical

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 Competitive Scenario : Consolidation Time

• Industry has witnessed consolidation through a spate of take-overs and

mergers

– Gujarat Ambuja (GACC) picked up 11.4 % stake in

ACC at Rs. 5201 / tonne from Tata group
– GACC also bought out DLF Cement
– Grasim Industries acquired Reliance’s 10 percent stake in L& T recently

• Major action expected from MNC’s

– Lafarge acquired Tisco’s cement division at Rs. 3555 / tonne

– Lafarge acquired Raymond Cement at Rs. 3500 / tonne
– Cement Francais Italia picked up 50 % stake in Zuari Cement at Rs. 4000 /
tonne
– Holderbank and Cemex may come in
– All have eyes on 37.5 % stake in L&T’s cement business
– Share of MNC’s in Indian Cement Industry has rose to 40% while the
Indian majors incl. GACC, ACC, L&T hold the rest 60 %

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 Government Policies

1940-1981 : 1982-1988 : 1989 :

Price and Distribution
controls Partial Decontrol Total Decontrol

• Cement an essential • Levy cement quota was • Rapid growth in sales &
commodity fixed for the units and profits
the balance could be
• Very slow growth sold in the open market • Slow down during
recession of early
• Capacity in 1980-81 : • Led to rapid growth nineties
27.9 mt
• Capacity grew by 110 • Rapid growth after
% to 59 mt by 1989 1992-93, with large
capacity additions

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 Tiles : Introduction

• Domestic market for ceramic tiles is estimated at around Rs. 22 billion

• The growth rate in the tile industry is estimated to be around 15 %

• India accounts for - 1.3 % of world production

• Total Capacity of the Indian industry : 1.5 Mn. TPA

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 Tiles Industry : Structure

• There are around 20 players in the organised sector, and around 130 in the
unorganised sector clustered at Gujarat and Rajasthan

• Industry divided broadly into Wall Tiles & Floor Tiles

• Wall tiles are all basically Ceramic Glazed Tiles.

• Floor tiles have different varieties, viz.

– Cement Mosaic - dominates with more than 88 % share

– Ceramic (10 %)
– natural stones such as Marble & Granite (2%)

• Unorganised sector a major force in Wall Tiles and in Mosaic Tiles

• Unorganised sector accounts for 60 % of the total tiles market by volume &
35 to 40 % value

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 Tiles Production : Organised Sector
(000 tonnes)

900 788
717 766
800
700 703
547
600 487
430
500
400 230 300
300
200
100
0
1991-92 1993-94 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02

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 Tiles Industry : Competitive Scenario

• Kajaria and Somany dominate in the North

• H & R Johnson, Bell and Somany are doing well in the West.

• H & R Johnson has taken over EID Parry and Sun Ceramics has taken over
Madhusudan Ceramics

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 Imports & Exports

• Global export market for Ceramic Tiles - USD 5 billion; growing at 8-10% per
annum.
– India’s share - 0.6%
– Major destinations - Sri Lanka, Gulf Countries and Africa

3.4 3
4 3.1
2.1 1.8 2.7
INR Crores

3 Exports
2
1 0.6 0.8 0.9 Imports
1 0.1 0.2

0
94-95 95-96 96-97 98-99 1999- 2000-
2000 01

• Import - around 6 to 7 percent of the production - is worth of about Rs. 10 Mn.

• Threat of Chinese imports a reality now

– China is the worlds largest producer of vitrified tiles - 16 times India's total
production

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 Outlook…….

• Growth in housing sector would be the primary demand driver

• Renovation and modernisation of existing houses will also drive the demand

• Excise duty on ceramic tiles reduced from 24 per cent to 16 per cent in the
Union Budget 2001-02

• Floor tiles projected to grow faster, driven by the shift from Mosaic to
ceramic tiles

• High growth rate of around 12 % will be sustainable, can even go upto 20 to

25 % according to some analysts

• A major problem - Transportation

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 H & R Johnson (India) Ltd.

 Turnover : Rs. 294 Crore (2000-01)

 Major Products: Ceramic Wall / floor tiles, Vitrified tiles

 Location : Mumbai, Plants at Pen / Thane (Maharashtra), Dewas (M.P)

& Kunnigal (Karnataka)

 Units in U.K, Greece, South Africa, Australia & India

• Foreign Collaboration : Johnson International, U K

 Started in 1958, is a part of the Rajan Raheja group of companies. has a capacity of 16
Mn sq m per annum.

• Johnson tiles has a market share of 30 % in the ceramic wall tiles market and 15 %
market share in ceramic floor tiles.

• Wide distribution network of 3600 dealers, very strong in the retail market.

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 McG
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