RoofingIndustry India(PartI) Roofing Industry India (Part I)

July2011
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ExecutiveSummary
Market
PresentrateofgrowthinroofingmarketinIndiais~22.5%andisexpectedtofurthergrow at~34% Hugedemandforcementsheetsinruralareasandformetalroofsheetsinindustrialsector

Drivers Di

Challenges Ch ll
Increaseininputcost Banasbestoslobby

Drivers& Challenges

Growthinconstruction Governmentinitiatives Growthindisposableincome Growth in PEBs GrowthinPEBs Environmentalconsiderations

Sectorwise Opportunity

RealEstate:ExpectedtobevaluedatINR8,640bnby2020 RetailIndustry:Indiahasbeenrankedthethirdmostattractivenationforretailinvestment Airports:Developmentandmodernizationofairportinfrastructureisintheoffing HospitalitySector:Markedinvestmentsaretotakeplaceinthissector HealthcareSector:DevelopmentofhealthcareinfrastructureacrossIndiaisinthepipeline y y MetroRails:INR2tntobeinvestedinmetrorailsysteminthenext10years SEZs:Currentlythereare130operationalSEZswhichisexpectedtogrowinthefuture

MajorPlayers

Competition

EverestIndustries TataBluescopeSteel

HyderabadIndustries y ColourRoofIndia

VisakaIndustries CenturywellsRoofingIndia
2

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MarketOverview Drivers&Challenges Drivers & Challenges SectorwiseDemand Competition

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RoofingindustryinIndiahasbeenshowingconsistent growthandisexpectedtogrowfurtherinthefuture
RoofingMarket Overview
Inthepresentscenario,Indianroofingindustryhas beengrowingat22.5%andisexpectedtogrowto ~34% Despiterecessionarytrendsduring200809,the Indianconstructionmarkethasbeengrowingbothin termsofvolume,innovationandtechnology terms of volume innovation and technology Fibercementroofingindustryhasgrownbyover8%
Growthfuelledbyarobustruraleconomy Revivalofindustrialandinfrastructuresectors
20

MarketSizeandGrowth
bn sqm. +3%
15 10 5 0 9.5 9.7 10.0 10.3 10.6 10.9

2009

2010

2011e

2012e

2013e

2014e

Note:Figuresarefortherespectivecalendaryears

RoofingMarket Segmentation(2010)
1% 1% 11% 14% 55%
18%

AsbestoscementroofingsheetindustryinIndiahasa capacityof4mnmetrictonnes
Industryisgrowingatasteadyrateof810%annually

Asphalt Plastic & PVC Asbestos Fiber Cement Metal Clay Tiles Reinforced Concrete Cement

Metalroofingisgainingpopularityintheindustrial g g gp p y sectorowingto
Demandfortimebound,speedyconstruction Demandforaestheticallypleasingproducts

Source:ConstructionweekTopOftheWorld,Apr,2010;ContifyTherewillbemoregrowthinroofing,Jun2011
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Roofingreferstotheelementswhichcover,protectand insulatetheroofsurfaceofastructure.Theoverall...
RoofingMarket Segmentation(1/2)
Segment Aluminum Corrugated Sheets Description MarketShare (2010)

Aluminiumistheidealoptionforroofingandcladdingowingtoits durability,resistancetofireandeconomicalproperties

0.5%

AsbestosFiber CementSheets

Madefromoflargeamountsofcementandchrysotilefiber,itfindswide applicationsinresidentialandcommercialpurposesowingtoitsproperties ofdurability,fireproofandresistancetonormalwearandtear

10.5%

Asphaltsheets

About80%ofresidentialroofsarecoveredwithasphaltroofshinglesand owetheirpopularitytolowcost,easeofinstallationandgoodperformance

0.7%

ClayTiles

Madefromfiredclayandpredominantlyfoundinruralareas.Theyarenow modifiedintoMicroConcreteTilesduetoitscosteffectivenessand versatility

17.6%

Source:NayanMValaSecurities,IndianRoofingSector,Sep2010
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marketcanbecategorisedundereightsegments
RoofingMarket Segmentation(2/2)
Segment Corrugated GalvanizedIron (CGI)Sheets Description Usuallyadoptedascoveringsofroofandsidesofindustrialbuildings,major advantageofitbeinglightweightandhighstrengthwithaddedcoatingof zincandaluminiumatlowcost MarketShare (2010)

13.5%

MetalSheets

Madefrommetalunits,theyformtheenvelopeofabuildingwith advantagesbeinglightweight,durableandresistanttofireandweather andlastsmorethanasphaltandwoodshingles

0.4%

Plastic&PVC Sheets

Comesinthicknessrangingfrom1.0mmand2.5mm.Suitableforindustrial, agricultural,poultry,diaryfarmsandshedswhichrequireskylightsfor naturallight natural light Thisthicksubstancecanbepaintedontoterracesandexternalwallsfor protectionagainstwaterandcorrosion.Itisadvantageousasitradiatesup to70%heatandenjoysmaximumshareinresidentialandcommercial buildings

1.8%

Reinforced Cement Concrete(RCC) Concrete (RCC)

55.0%

Source:NayanMValaSecurities,IndianRoofingSector,Sep2010
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Asbestoscementroofingmarkethasbeengrowingwiththe risingdemandfromtheruraleconomy
AsbestosCementRoofing Overview
AsbestosCementroofingsheetindustryinIndiahas acapacityof4mnMTandisgrowingatasteadyrate of810%annually Presently,itisanoligopolisticmarketwithfourmajor playerscontrolling67%ofthetotalmarket Theindustryderivesitsgrowthprimarilyfromthe ruralmarket,whereintheIndianGovernmentgives thethrustfordevelopmentofruralinfrastructure speciallyonruralhousingthroughvariousinitiatives suchasIndiraAwaasYojna Advantages
Resistancetoweather deterioration Dimensionallystable Easyinstallation Noncombustible N b tibl
Source:SKPSecuritiesLtd,HyderabadIndustriesLtd.,Mar2011
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MarketSizeandGrowth
mnMT
5 4 3 2 1 0 3.63 3.95

+9%
4.31 4 31

4.70

200910

201011e

201112e

201213e

Note:Figuresarefortherespectivefinancialyears

MarketShare(2010)
13%
33%

Disadvantages
Susceptibletobreakage Dullgreycolour Needsregularmaintenance

RamcoIndustriesLtd. 35
16%

VisakaIndustriesLtd. EverestIndustriesLtd. HyderabadIndustriesLtd. Others

17% 21%

ROOFINGINDUSTRYININDIA2011.PPT

MetalRoofingmarkethasbeengrowingwiththerising demandfordurableandaestheticproducts
MetalRoofing Overview
Metalroofingoptionsincludecorrugatedgalvanized ironsheets,aluminiumcorrugatedironsheets,and colourcoatedmetalsheets Aluminiumandsteelarethepreferredmaterials owingtocosteffectivenessandeasyavailability Metalroofswithbuiltinsolarpanelsareconsidered tobethemostenergyefficientandaregradually gaininginpopularity

MarketSizeandGrowth
Mn T 0,3 0,2 0,1 0,0 2008 2009 2010 2011e 2012e
Note:Figuresarefortherespectivecalendaryears

+17%
0.18 0.21 0.24 0 24

0.28

0.15

Advantages
Resistanttofire Lightweightanddurable Li ht i ht d d bl Flexibleandhasaesthetic potential Canberecycled b l d

Disadvantages
Initialcostishigh Incompatiblematerialscan p causerapidcorrosion Poorinsulationagainstnoise Energyintensive Energy intensive transportationofsheets

Companies
Intermark AssociatesPvt. Ltd. 35 NexusInfratech Pvt.Ltd. f

Brands
Smartroof (corrosion resistant&rainproof SpiderRoofingin Spider Roofing in Galvalume Steel Skyroof Brandroofing system(profiledcolour coatedgalvalume sheets Lysaght (Metallic Coating) 8

Skyarch RoofsPvt.Ltd.

TataBluescope SteelLtd.

Source:ContifyTheNewAgeofMetalRoofing,Jan2011;ceramiccolursindia.com,Sep2010
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Economicaladvantageandaestheticnatureleadstousage ofthesetilesintheroofingsector
ClayTileRoofing Overview
Accordingtoindustryestimates,thereare250mn housesinIndia
46%areconsideredtobehomeswithpuccaroofs 6% id d b h ih f 54%homesaremadeofthatchandclaytiles

Advantages&Disadvantages
Advantages
Longservicelife Lowinmaintenance Durable Deliverclassicbeauty

Disadvantages

Cover~18%ofthetotalmarketshareinIndia Whenevaluatedonapriceversusperformancebasis, tilesaresuperiortonaturallyoccurringmaterial tiles are superior to naturally occurring material

Breakagelossduring transportation

MangaloreRoofTile Overview
Preferredroofingmaterialespeciallyforfarmhouses andhotels Aretheoldestandmostpopulartiles
Largelyusedinheritagebuildings

Advantages&Disadvantages
Advantages
Economical Highthermalresistant Absorbswater Easyinstallation

Disadvantages
Easyformationoffungus& moss

UsageofMRTasdecorativetilesoverRCCroofing
Addsaethniclooktomodernhomes

Metalsubstructureisprovidedavoidingwoodusage

Source:constructionupdate.comRoofingAug2009;btiles.comRoofingTilesDec2010
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RCCformsthecommonmethodofroofinginIndiaowingto itscosteffectiveness&versatility
RCCRoofing Overview
ReinforcedCementConcreteroofingisthemost popularformofroofingaccountingfor55%ofthe entiremarketshareinIndia ti k t h i I di Itisamanmadeconstructionmaterial,widelyused inmanytypesofstructures ConcreteBlockTechnologyoffersaspeedier,cost effectivealternativetoconventionalroofingand effective alternative to conventional roofing and walling

Advantages&Disadvantages
Advantages
Relativelowcost Relative low cost Highcompressivestrength Longservicelife Developscracks D l k Mouldability toanyshape

Disadvantages
Finalstrengthdependson Fi l hd d mixing,curing&casting Developscracks

MicroConcreteRoofing Overview
Meetsthegrowingneedforhighqualityroofing Canbeusedonsteelandwoodunderstructureto makeattractiveroofs p g Offersbothaestheticandwaterproofingmaterial
Ideallysuitedtoreplacethatchandfiredclaytilesinrural area

MCR UniqueFeatures
Highlydurable Lighterthanotherroofingtiles Canbeeasilyinstalled
Canbefixedtoslabswithcementmortar

Source:PMNewsBureauMicroConcreteRoofingtileshaveedgeoverslopingroofsDec2009;betucoConcreteBlockTechnology RoofingTilesIndiaFeb2007; icjonline.comSustainabilityofconcreteinIndiancontextJul2010

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ValidatedbytheBuildingMaterials&Technology PromotionCouncil(BMTPC)andispromotedby DevelopmentAlternatives&TARA(Technology& Development Alternatives & TARA (Technology & ActionforRuralAdvancement)

Canbecolouredtouserspreference Reduceheatgain Doesnotcontainasbestosfiber Utilizes waste (stonedust) Utilizeswaste(stone dust)

ROOFINGINDUSTRYININDIA2011.PPT

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MarketOverview Drivers&Challenges Drivers & Challenges SectorwiseDemand Competition

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Drivers&Challenges Summary

Drivers
Growthinconstructionindustry Governmentinitiatives Growthindisposableincome p Banasbestoslobby GrowthinPreengineeredbuildings

Challenges
Increaseininputcost

EnvironmentalConsiderations

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Increasingrateofconstructionshasapositiveimpactonthe roofingindustryinIndia
Growthinconstructionindustry
Despitetheglobaleconomicdownturn,theIndianConstructionindustryisstillbooming There has been considerable investment in major construction areas such as airports large Therehasbeenconsiderableinvestmentinmajorconstructionareassuchasairports,large shoppingmalls,newstadiums,metrostations,SEZsandITParkswhichhasstimulatedthe growthintheroofingindustry ConstructionIndustryinIndiaisworthoverINR2,331bnandaccountsformorethan20%of GDP Giventheexpectedinvestmentsinurbaninfrastructure,thebuilding,constructionandreal estatesectorisexpectedtogrowataCAGRof9.510%over201122inrealterms Contribution of construction industry to the GDP of India would be constant at INR 8 000 bn till ContributionofconstructionindustrytotheGDPofIndiawouldbeconstantatINR8,000bntill 2022 Roofingandcladdingsegmentofconstructionisexpectedtoaccountfor2530%ofthetotal costofbuildingconstruction Astrongimpactspecificallycomesfromtheruralhousingsector RapidlygrowingconstructionindustryisastrongdriverfortheroofingmarketinIndia

Impact

Source:TheEconomicTimes,IndianConstructionGrowthStimulatingRoofingIndustry,May2010;medcindia.orgSkillDevelopmentPerspectivesonInfrastructureand Construction,Jun2011;businessvantageIndia2010,Jul2010
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Governmentinitiativeswillboostdemandforroofingin India
Governmentinitiatives
Governmentimpetustodevelopbackwardareashasledtotheincreaseinconstructionof housing,schoolsandhospitalswhichaidsinthedevelopmentoftheroofingmarket GovernmentinitiativessuchasIndiraAwasYojna,GoldenJubileeRuralHousingFinance Scheme,PradhanMantriAdarshGramYojna,ProductiveHousinginRuralAreaandRural HousingFundetc.arerapidlyincreasingthedemandforruralroofingsector IntheUnionBudget201112,governmenthasincreasedallocationtoruralandinfrastructure development d l
SocialSectorSpending INR1.6tn(36.4%ofthetotalplanoutlay) InfrastructureDevelopment INR2.1tn(48.5%ofthetotalplanoutlay)

Impact

GovernmentProgramsandAllocationforRuralSector Initiatives
BharatNirmanYojna NationalRuralEmployment Scheme(NREGS) Scheme (NREGS) BackwardRegionGrantFund RuralInfrastructuredevelopment Fund(RIDF) RashtriyaKrishiVikasYojna R ht i K i hi Vik Y j

Allocation(INRbn)
580 400 99 180 78

ImpactonRoofingMarket
Plansfordevelopmentofruralinfrastructurecreatingdemandforroofing Enhancesthelivelihoodsecurityofpeoplefromruralareasproviding employmentandincreasingpurchasingpower employment and increasing purchasing power Redressregionalimbalancesandgapsinlocalinfrastructure Financesruralinfrastructureprojects Plansforagriculturaldevelopment,increasingincomeoffarmers Pl f i lt l d l t i i i ff

Source:InvestmentinInfrastructureduringEleventhYearPlanJan2011;SKPSecurities,HyderabadIndustriesLtd.,Mar2011;UnionBudget201112
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Growthindisposableincomeofpeopleleadstoanincrease indemandforroofinginIndia
UpwardTrendofDisposableIncome
Withthegrowthofurbanizationandpopulation,themarketsizeofresidentialroofingdemand isgrowing Aboomingeconomyandtheevergrowingmiddleclasshaskickstartedtherealestateindustry thusleadingtothegrowthofroofingsector Ruralconsumerenjoysrisingdisposableincomeduetounprecedentedfoodinflation,whichhas drivenupMSP(MinimumSupportPrice)forfarmerswhereas,thecostsarecappeddueto Governmentsubsidies Government subsidies Risingdisposableincomedrivesdemandforruralandurbanroofingmarket AggregateAnnualDisposableIncome(INRtn)
Globals Strivers Seekers Aspirers >1000 5001000 200500 90200 23% 44 15% 9% 34% 33% 9% 2015e 34% 15% 3% 2025e
ROOFINGINDUSTRYININDIA2011.PPT

Impact

CategorizationofRoofFormsinIndia(2011)
RCC Pucca Kaccha

90 24%
25%

Deprived <90 24 7% 13% 9% 49% 23% 2005

54% 21%

Strongopportunity forplayersdueto increasingincome i i i

Source:McKinseyGlobalOutlook;SKPSecurities,"HyderabadIndustriesLtd,Mar2011;RoofIndia2011;VisakaIndustriesLtdAnnualReport,200910
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Growthinpreengineeredbuildings(PEB)willleadtothe developmentoftheroofingmarket
PEBIndustry
MarketforPEBinIndiaisestimatedatINR30bnandisexpectedtogrowbymorethan20% annually PEBare4050%cheaperthanconventionalbuildingsandexplorethescopeofmetalroofing BenefitsofPEBsteelstructures
Timesaving Freefromfire,weatherandearthquakeresistant C b Canberecycled l d

Impact

Manufacturingindustriessuchaspower,automobile,engineeringgoodsandservicesincluding logistics,warehousesandinfrastructurearelargeusersofPEB Roofsarecustomizedanddesignedasperthebuildingspecifications PEBMarketinIndia

MnTPA
3

+20%
2 1.20 1 0 1.44 1.73

2.07

2010

2011e

2012e

2013e

Source:SKPSecurities,HyderabadIndustriesLtd,Mar2011;VijayMittalsinterview,(ISPAT),ProjectVendor
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Increasingconcernfortheenvironmentaidsindemandfor greenbuildingproducts
EnvironmentalConsiderations
Demandforgreenbuildingproductsisincreasingonaccountofconcernsfortheenvironment andenergyconsumption Needtoswitchovertoproductsthatmitigateconcerns,showingimmensepotentialforGreen Roofs InternationalcouncilforResearch&InnovationInBuilding&Constructionrecognizesroofas sustainableifit
Minimizes the burden on the environment by using earths resources responsibly Minimizestheburdenontheenvironment byusingearth sresourcesresponsibly Conservesenergy byimprovingthermalefficiencyofroofs Extendsrooflifespan byimprovinglongtermperformance

Impact

Demandforconversionofexistingbuildingstosustainableandenergyefficientonesaccording toLEED(LeadershipinEnergyandEnvironmentalDesign)Certification ( p gy g )
Providesindependent,thirdpartyverificationthatabuildingprojectmeetsthehighestperformance standards

MetalRoofswithSolarPanelsareindemandforefficientenergyusage RainwaterharvestinGreenRoofsisgainingpopularityowingtoenvironmentalreasons Nanotechnologysolarreflectivecoatingsareefficientheatreflectivecoatings

Helpsinreducingtheheatloadonbuildingswithmetalsteelroofsby30%

Increaseinsocialconsciousnesswillleadtodemandforroofingproducts

Source:Contify,TheNewAgeofMetalRoofing",Jan2011;SKPSecurities,HyderabadIndustriesLtd,Mar2011;igbc.inCertification IndianGreenBuildingCouncil
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Increaseinrawmaterialscosthasanadverseeffectonthe sector
InputCost
Mainrawmaterialforasbestosfibercementsheet arecement,pulp,flyashandchrysotilefiber
Anyhikeinthepricesofcementorfiberhasanadverseimpactonthepriceanddemandofproduct

Impact

ChrysotileFiber(AsbestosFiber)isimportedfromcountriessuchasBrazil,Canada,Zimbabwe, Kazakhstan
ChrysotileFiberhaswitnesseda10%increaseinpricesglobally

Expecteddeclineinpricesofcementin201011withhealthydemandboostedproductionputa p p y p p downwardpressureonpriceofproduct FiberCementSheetComposition

FlyAsh 7% 8% WoodPulp
35%

Cement

ChrysotileFiber 50%
100%

7%

IronPrice
INR/Tonne 40,000 20,000 0 2009 2010 Mar 2011 22,550 +15% 26,745 29,918 INR/Kg
200 100 0

AluminiumPrice
+10%
95 106 115

CementPrice
INR/50 Kg
400 229 200 0

+2%
210 240

2009

2010

Mar 2011

2008

2009

2010

Source:NayanMValaSecurities,RoofingStock,Sep2010;SKPSecurities,HyderabadIndustriesLtd,Mar2011;acmainfoGlobalandIndiancommoditypricetrends, Apr2011;SatyaSundaramCementIndustryUndergoingExpansion,May2010
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Impositionsandclimacticfluctuationscandeterthegrowth ofroofing
BanAsbestosLobby
InIndia,thereisabanontheusageofblueandbrownvarietiesofasbestosproducts Exposuretoasbestosrelatedproductscauseshealthhazardsincluding
Asbestosis Mesothelioma LungCancer

Impact

ManufacturersaresubjecttoclearancesfromPollutionControlBoards,CentralEnvironmental Ministry,constantauditsrelatedtoemployeehealthandsafetyaswellassubmissionofreports Ministry constant audits related to employee health and safety as well as submission of reports andevidencesthataddressconcerns
AsperEnvironmentalClearanceLetter,stackemissionofasbestosfibershouldnotexceedtheemission limitof0.2fiber/cc AsbestosFiberinworkzoneenvironmentshallbemaintainedwithin0.1fiber/cc

RecentdevelopmentinIndiagoesagainstasbestosmining
IndianRailwaysisremovingAsbestosroofsheetsfromallstationsandreplacingthemwithmetalsheets KeralaStateHumanRightsCommissionhasorderedremovalofallAsbestosCementsheetsfromschoolsand hospitalsintheState Asbestos has been removed from the standard schedule for civil works item known as DSR2007 with effect AsbestoshasbeenremovedfromthestandardscheduleforcivilworksitemknownasDSR2007witheffect from2007

Theneedtoundergoongoingsurveillanceservesasanentrybarrierformanufacturers

Source:Businessstandard.com;SKPSecurities,HyderabadIndustriesLtd,Mar2011;infimetal.orgEnvironmentandOccupationalHealthandSafetyIssuesArisingfrom AsbestosProductionandUse,Jun2011
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Thankyoufortheattention
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