Asbestos cement sheet (ACS), a composite building and construction material, is the most preferred roofing solution material, especially in rural and semi-urban areas because of its strength, durability, ease of installation and above all affordability as its cheaper than other roofing materials. Its widely used across the country for warehouses, factories, low-cost housing and any roofing application. Though ACS continues to face stiff competition from steel sheets and other alternative products such as metal cladding sheets, it still remains competitive and has an edge because of its certain advantages.
The ACS market is estimated to be of about Rs 3,900 crore or 3.6 mtpa. Though its used all over the country its essentially rural-centric product as it finds wide usage in villages for roofing of houses, cattle sheds and poultry farms. ACS is an oligopoly industry where top-6 players account for 80% of the industry.
The main demand drivers for cement roofing sheets are dependent on growing disposable income in the rural areas driven by factors like minimum Support Price (MSP), fair wage rate payment and good monsoon. The Government’s ‘Housing for All’ initiative aims to provide affordable houses in rural and urban areas by 2022. This is also likely to increase demand for different types of roofing sheets including, coloured roofing sheets and it is expected to grow in the coming years. Other factors that affect the demand and supply are improved disposable income in the hands of rural population, reduction in tax rates, increased farm productivity, nuclearization of families and most importantly Government focus on housing.
Last year was a bad year for the industry
It has been a smooth ride of the ACS industry all these years, except, of course, 2019-20. Last financial year was a testing time for the industry as it faced slow growth primarily due to liquidity constraints in the rural economy, staggered elections leading to crunch in the market demand, availability of labour, and increase in the prices of raw materials. Other factors such as sand mining constraints and spurt of social disruptions only added fuel to fire. According to Visakha Industries “The year 2019-20 was weak in terms of market demand due to slower economic growth in general and weak rural economy in particular.”
Government’s measures help industry to recover
However, the government took some corrective measures to address the liquidity constraints by increasing the disbursements through NABARD for 2019-20. Other Government measures to boost India’s rural economy and improve rural livelihoods include development of cluster-based specialised farming, promotion of organic farming, support for farmers’ organisations, extension of farmer credit to fisheries and animal husbandry for farmers are expected to help towards revival of roofing sheets demand in the coming years.
However, the industry faced the greatest challenge towards the end of last fiscal year due to outbreak of Covid-19 followed by countrywide lockdown. To address the situation, the Government has further extended additional refinance support of Rs 30,000 Crores to the National Bank for Agriculture and Rural Development (NABARD) which will be used to increase rural liquidity.
This will be used to push liquidity through regional rural banks (RRBs) and co-operative institutions, and expand the ongoing drive to enlist 25 million new farmers for concessional credit as part of its Covid-19 relief package. The working class migrants returning to villages is also expected to advance farming and enhance their cash flows in the coming years. While the impact of Covid-19 outbreak continues to pose a big threat on the performance of this segment, the brands who have significant penetrations and presence in rural markets are expected to have lesser impact.
Industry stages recovery
However, recent performance of leading ACS manufacturers like HIL, Visakha and Everest show that the industry has successfully come out of lockdown blues and heading towards strong growth. In the second quarter, HIL has posted strong growth while Visakha and Everest have almost reached pre-Covid level volumes.
Price moves up
ACS price went up by 15% in the first quarter and later on retreated marginally, that is, 4-5%. This limited price decline is mainly due to sustained demand from rural India and firm pricing in steel-coated sheets. Experts expect that if the strong demand sustains into Q4, there are chances of ACS prices going up further in the new season.
ACS manufacturers, in general, are optimistic about the future prospects of the industry. Government’s decision to lower the corporate tax rate to 25% will help many manufacturers to derive better margins and pass cost differentials to customers and make product pricing competitive. Further, ‘Housing for All’ and Direct Benefit Transfer undertaken by the Indian government will empower rural spending and enhance the demand for roofing products. Higher farm income through recent hike in MSP prices and back to back better Monsoons too will help the rural economy to flourish which in turn will improve the demand for ACS. Also, rising steel prices in FY2019-20 helped widen the market for substitutes like cement fibre sheets. This trend has been maintained in the current year also which will help the ACS industry in the current year too.