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Feature | December 2013

An easy market to enter

The Indian construction chemicals industry must circumvent certain roadblocks before it can cash in on the opportunities lying in wait. PROJECTS INFO provides a snapshot of the industry.  

The Indian construction chemicals industry is currently at a very nascent stage. However, the market is highly competitive with top five companies accounting for almost 50 per cent market revenues. Starting from water proofing compounds, construction chemicals have expanded range to ease the workmanship in demanding situations at various stages of construction. Today, each full-fledged construction chemicals manufacturer manufactures 50-100 various construction chemicals. However, these construction chemicals can be generally divided into following groups: water proofing compounds, tile fixing adhesives, repair and renovation products, admixtures for concrete and mortars, and coating and protection products.

 

Nowadays, several projects funded by multilateral agencies have made the use of construction chemicals mandatory.

 

To meet the increasing demand and to cope with the challenges from international players the India's construction chemical sector is showing great changes by developing strong R&D facility.

 

Current scenario
 The present market-size of the construction chemicals industry in India is about Rs 1,700 crore and is rapidly growing at the rate of around 20 per cent per annum. The Indian construction chemical industry is estimated at Rs 2,000 crore of which Rs 1,200 crore comprise organised sector, while Rs 800 crore is unorganised. The market is partially organised, especially in the industrial and infrastructure sectors. Even, growing areas such as 100 per cent FDI in the real estate sector has given a major boost to the already fast growing construction industry. Although the economic downturn had bogged down the real estate business, it is already showing signs of recovery. This revival, along with foreign investors' popular perception of India as a high-growth market, has given a shot in the arm for construction chemicals companies.

 

The Indian construction chemicals market is fast expanding on the back of major investments in infrastructure and rising demand for real estate. Frost & Sullivan describes the market as very consolidated as the top 10 market participants contribute more than 70 per cent. However, low entry-barriers make it an easy market to enter and, as a result, local players jostle larger brands. The unorganised segment caters to the lower end of the demand spectrum.

 

Speaking about the Indian market, Filip Roscam, Creative Design Expert (Germany), Merck India Ltd (a leader in construction chemicals), said, "For us, the Indian market is a strong growing market." Construction chemical are specialty products that are used in structures to increase their life, and also to impart additional protection from environmental hazards. The entry of foreign construction companies and use of foreign technologies makes good awareness of the importance of construction chemicals this has thus enabled some changes in the mindset of Indian customers. Deepak Parikh, Vice Chairman and Managing Director, Clariant Chemicals (India) Ltd (a provider of specialty chemicals) said, "The specialty chemicals industry in India is expected to more than quadruple in the next decade and Clariant sees India as a robust market for specialty chemicals." According to a Tata Strategic report on Indian chemical industry, Indian specialty chemicals market is currently valued at approximately $23 billion and has shown a strong growth at 14 per cent per annum over the last five years. Estimates show that Indian specialty chemicals market has the potential to reach $60-70 billion by 2020.

 

Demand
 The demand for construction chemicals is dependent on the construction industry. A medley of infrastructure projects across the country will increase the need for construction chemicals in the approaching years. Power projects, transport networks, dams, irrigation projects, airports and ports, commercial and residential developments and the rehabilitation and repair of aging structures will continue to support the growth of the industry.

 

Overall economic growth of the country and thus government initiative for the huge investment in infrastructure development has resulted in rapid demand for construction chemicals.

 

Construction chemicals are essential for high quality concrete and for promoting the improvement of concrete performance. There is an increased emphasis on high quality construction requiring detailed designing, good workmanship and the selection of appropriate building materials. Consequently, therefore the demand for construction chemicals for renovation or building of these new and existing buildings has been on the rise in the short term.

 

The industry has much potentiality to grow at a faster rate on the back of the end users awareness benefits of these construction chemicals. Easy adaptability to foreign technology and the entry of foreign companies in the construction sector have helped to change the mindset of the people that has eventually resulted in the growth in this sector. Apart from this, growth will also be primarily driven by increasing construction expenditures in improvement and repair projects.

 

Exports
 The Indian construction chemical industry contributes considerably in the country's exports. Around twenty percent of the industry turnover is achieved through exports. The major exports are to US, Europe, Germany and the SAARC nations. Hence the chemical segment supports at a considerable level to earn the foreign exchange.

 

Opportunities
 SAARC countries:
The SAARC countries lack the well organised construction chemical industry. This is a great opportunity for the Indian construction chemical industry to target the SAARC countries for the penetration of their products in the country.

 

Exports: The cost of manufacturing is low is India as compared to that of the western nations. Also the organised player not compromise in the quality and hence there is a good opportunity to target the other western nations where the construction activity is increasing.

 

Low labour cost: The labour cost in India is lower than that of in the western nations. If the labours are endowed with better skills the cost of production can be decreased.

 

Foreign direct investments: The government's decision to introduce hundred percent FDI in construction industry has opened a great opportunity for the industry growth. The overseas organisations will improve the quality of construction and hence will increase the use of standard construction chemical applications in the construction industry to give better quality of construction work products. Expenditure in construction sector: The government has increased the outflows for the construction activities of the country. The huge projects like National Highways Development Project (NHDP) and the Pradhan Mantri Gram Sadak Yojana (PMGSY) has brought a good opportunity for the Indian construction chemical industry.

 

R&D innovations
 A maturing market is encouraging manufacturers to expand their R&D activities in high-end niche products. Chembond Chemicals has lined up an array of products for launch in the next three to six months. These include PU-based crack injection compounds, sealants and liquid-applied waterproofing membranes.

 

According to issue dated September 3 of Projects Info, Chembond also recently participated in the Big 5 Construct India 2013, wherein they displayed a range of construction chemicals solutions under various categories. "We seek new opportunities of partnering with our customers and growing with them all the time," said Deepak Kanitkar, General Manager Technology and Business Development for Chembond Construction Chemicals Division.

 

Looking to the future, the company is researching new products in the crack repair additive category, its strong point. It proposes to add nylon and polyester fibre products to its existing micro polypropylene fibre monofilament.

 

The new product range from Chowgule Construction Technologies includes exterior wall coatings, the AcryCoat series of products. These high-performance coatings are highly elastic, UV-resistant and durable enough to withstand harsh and fluctuating weather conditions. They are also available in different shades to enhance the aesthetics of the structure and eliminate the need for an additional coat of paint. Pidilite Industries has recently introduced Dr Fixit Low Energy Consumption (LEC) solution for the Indian market, a breakthrough waterproofing-cum-insulation combination compound backed by a 25-year guarantee. Incredibly positive acceptance for a variant of this product in the Middle East spurred this local launch.

 

Even MC-Bauchemie was not far away from innovating new products in the market. The company's retarders and plasticizers of the Powerflow and Techniflow families assist in getting the ready-mixed concrete safely to site in just the consistency that is required and also make sure that post-processing it quickly reaches its high strength properties.

 

Green chemicals
 Builders and developers are becoming more environmentally aware and responsible, as is evident from the increasing uptake of chemicals aimed at helping reduce HVAC loads, energy costs, and the carbon footprint of buildings. Flyash compatible concrete admixtures are also being enthusiastically appreciated by the industry as they allow for reduced use of cement, a non-renewable resource that releases almost an equal amount of greenhouse gas for every kilogramme manufactured.

 

Foreign players' entry
 The good news is that the foreign players are coming to India in huge numbers, developing the technical know-how. The Asian market has been considered as a huge developing market by all the global players. The infrastructure segment in India foresees a wide scope of development and is evident with many R&D labs and manufacturing plants being put up by various global manufacturers. However, easy adaptability to foreign technology and the entry of foreign companies in the construction industry have helped to change the mindset of the people.

 

With the view of expanding the base in foreign countries, Ardex Endura India, a 50:50 joint venture between Germany's Ardex group and Prism Cement Ltd, commissioned its Rs 43 crore plant on the city's outskirts to manufacture tile fixing adhesives.

 

Roscam from Merck India said, "The company doesn't have a manufacturing unit in India; however, we have three manufacturing facilities in the world. We might not open a new manufacturing unit in India, as we think the three facilities will be enough to serve the overall demand."

 

Challenges
 The Indian construction chemicals industry must circumvent certain roadblocks before it can cash in on the opportunities lying in wait.

 

The industry is also facing the challenges of unskilled labourers and low entry barriers. Had construction chemicals been used along with cement in building our structures in the same ratios as they are in developed countries like the US, the industry would have been worth nearly Rs 9,000 crore vis-รก-vis the current Rs 1,800 crore annually; indeed, this is the biggest challenge the Indian industry is facing today.

 

Another major challenge is how the industry can align construction chemicals with sustainable development. Not that there are no green products on the market.

 

Conclusion
 In an effort to safeguards their interest, construction chemicals manufacturers have finally been able to form an association which is the Construction Chemicals Manufacturers Association (CCMA). This association under the able leadership of its current president is in touch with various organisations, such as FICCI, BIS, architects associations, civil engineering associations, etc. to get a deserved status for this industry from the government, removing mindless bureaucratic hurdles faced by this industry in its classification under excise/sale-tax and to get the requisite specifications incorporated through codes and relevant specification documents.

 

Speaking about the future plans, Parikh from Clariant added, "Our clear priorities for the fiscal year are to add value with competitive and innovative solutions while simultaneously controlling costs."

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