India's "Sunrise Industry - The Construction Chemicals industry"

Construction Chemicals, as the name suggests, are the chemical compounds used in construction activities, be it residential, non-residential or non-building. These compounds belong to a niche specialty segment of the chemical industry and can be used either in existing construction projects to speed up the work or in new construction projects to impart durability and strengthen the structures. The benefits of using construction chemicals are far more than the increase in the cost of the project which is 2-5%. Certain chemical products help in minimizing the quantities of cement and water used in the construction. These compounds impart chemical as well as physical properties in applications such as cross-linking or phase change (from liquid to solid). Construction chemicals are essential for high quality concrete and for promoting the improvement of concrete performance. They also increase the life of construction work and impart additional protection from environmental hazards. Based on end use applications, these compounds can be broadly classified into five categories as shown in Figure 1.

*PCE :Polycar boxylic ether; SNF: Sodium Naphthalene Formaldehyde; SMF: Sulphonated Melamine Formaldehvde.

The Indian construction chemical market is at a nascent stage, but is attracting lots of attention with an increasing number of global construction companies making a foray into manufacturing operations in India. The industry is becoming more attractive and is expected to experience strong growth in the next 5 years owing to the trends in the industry as detailed in the report later. The Indian construction chemicals market has shown a strong growth rate of ~17% p.a.,historically due to the construction boom in India and growing awareness in the industry for better quality of construction. Increase in urbanization has further boosted the growth of construction chemicals industry. It increased from INR 1,400 Crores in 2007 to INR 3,600 Crores in 2013.

Construction chemicals ( INR Crore) Source : Industry reports, Tata Strategic estimates 1400, 2100, 3600, 2007, 2010, 2013

Construction chemicals market is largely driven by concrete admixtures, which accounted for 42% of the total market in 2013. Flooring and waterproofing chemicals are the next big segments with a share of 14% each. Other segments include sealants, grouts and adhesives which together account for ~18% of the total construction chemicals market. The share of flooring is high in Indian market as compared to developed world while India have low share of Tiling, Sealants and waterproofing. Indian construction chemical market has >80% business in new builts.

Cement is a widely used as binding material in construction. For concreting, cement is mixed with crushed rock, sand and water in specific proportion to produce concrete. For getting better results, better workability, more strength, and finishing, cement or mortar admixtures are used. Chemical admixtures are added to the mix immediately before or during mixing. Admixtures are primarily used lTo reduce water content in concrete. lTo increase compressive strength and durability parameter of concrete. lTo enhance the workability and giving more transportation and placing time. Admixtures 42%, Flooring 14%, Waterproofing 14%, Repair & rehabilitation12%, Adhesives & Sealants18%, Figure 3: Indian Construction Chemical product share (Admixtures are used during the first stage of construction. The market in India was valued ~INR 1,500 Cr in 2013.  Three types of admixtures are most prevalent in the market - Ligno based, SNF (Sulfonated Naphthalene Formaldehyde) & SMF (Sulfonated Melamine Formaldehyde) based and PCE based. Ligno based admixtures were the first generation admixtures and gave lower performance compared to SNF and PCE based admixtures. PCE based admixtures are the 3rd generation admixtures and are usually 3-4 times more expensive than SNF/ Ligno based admixtures. The raw materials for manufacturing of PCE admixtures are not easily available in India and ~80% are imported from Korea, China and Japan. Apple Chemie India Pvt. Ltd. is currently the only manufacturer of PCE in India.

Flooring compounds are mostly epoxy and polyurethane based. Industrial flooring compounds are used to meet various industrial needs such as abrasion, load impact, chemical attack, moisture penetration, strengthening of damaged floors, as well as improving the aesthetic appeal of the floor. They are also used to provide certain special features such as slip resistance, static resistance, fire resistance, antibacterial properties, and so on. Flooring compounds are largely used at the finishing stage of the construction. Major commercial complexes and shopping malls prefer such products. The market for such compounds in India is valued ~INR 500 Cr in 2013. Epoxy and floor hardeners constitute the major share of the market followed by PU based flooring agents.

Water proofing caters to various end use applications with products based on Bitumen, PU and polymers like SBR & Acrylic. These compounds are available in liquid, solid, slurry and two-component coating forms. Water proofing compounds are designed to stop water infiltration. These compounds or membranes can be extremely effective when applied on the exterior of a foundation system. Application of the water proofing compounds can be done by implant treatments i.e. either dipping or spraying or by low-pressure spraying on the surface Water proofing compounds are added during the construction as integral water proofer during the construction, for waterproofing of concrete and also post construction as a preventive and maintenance waterproofing ingredients. The size of this segment is estimated ~INR 500 Cr in 2013. The price of products varies depending on the raw material used. The industry is moving away from bituminous compounds

due to their lower performance and non- eco-friendly nature.

The repair and rehabilitation is a highly unexplored and underdeveloped market. Retrofitting is basically addition of new technology or features to older systems and improving the structures with energy efficiency. Rehabilitation is reconstruction of the structural components which were damaged. These products include cementations repair mortars, epoxy based mortars and other products like rust removers, anticorrosion products etc. The size of this segment is estimated ~INR 430 Cr in 2013. Cementitious mortars are most frequently used due to their lower prices as well as the ease of usage. Polymer based repair and rehabilitation products are widely used as they are less expensive than epoxy based material and also comply with the desired strength criteria. Epoxy based mortars are the growing segment and skilled labor is required for most of the product applications.

Sealants are used to seal expansion joints, cracks, joints in concrete roads and to fill gaps between concrete. Major types of sealants include the following:

• Polysulphide sealants: These are most commonly used in the construction industry as expansion joints for concrete roads, structural joints and others. lPolyurethane sealants: These are used for high-end applications where high flexibility and bonding strength are required.

• Silicone sealants: These are generally used where good bonding is required between two dissimilar surfaces such as fixing of glass on metal frame.

Grouts are compounds used for giving extra strength for the foundations of loadbearing structures. They are also used for repair and sealing of cracks and gaps. Grouts have different chemistries depending on the applications as discussed below:

• Epoxy-based liquid grouting compounds are mainly injected into the walls to fill hairline cracks and gaps, thereby improving the strength of the structure.

• Cementitious grouts are used for imparting extra strength to machine foundations, base plate or anchor bolts for machines or equipment and others. They are also used for repair of building structures and in heavy industries such as steel, power plants and ports.

• Polyester-based grouts are also available, which are used for anchoring to impart strength to foundations that must be achieved in limited available space. Grouts can also be made to have special characteristics such as fast setting, free flow, on-shrink and others by addition of different additives as per the end-user requirement.

Tile Adhesives are made using high quality material which enhances the durability of the adhesive and its bonding span is increased. They are primarily based on cement, epoxy and polymer formulation (mainly acrylic polymer). Cementitious adhesives are most commonly used in India owing to their lower price. They are used in a variety of applications as discussed below:

• Cementitious adhesives: Cement based adhesives are largely used as wall tile adhesives & ceramic floor tile adhesives. Water resistant cements and polymer modified cements are suitable both for internal and external use.

• Epoxy adhesives: Epoxy resins are two component cold curing adhesives which produce high strength durable bonds. These adhesives may be used internally or externally and are resistant to oils, water, dilute acids, alkalis and most solvents

• Polymer based adhesives are suitable for fixing wall tiles in damp and wet conditions like domestic showers, swimming pools.

The overall market is fairly consolidated but there is considerable fragmentation of individual products and application areas. There are a large number of global construction companies who have set up local manufacturing operations in India. The top 7 players account for ~50% of the market; next 20 players ~25% and the remaining 25% comprises of small and unorganized players. In the past there has been a considerable change in the market share of companies due to which Medium-sized and regional manufacturers have gained considerable share of market. Based on revenues top 5 players are Pidilite, BASF, SIKA, FOSROC & SWC. There are many other regional and smaller players as well. Approximately 300 companies are estimated to be operating in this segment.

The overall market is fairly consolidated but there is considerable fragmentation of individual products and application areas. There are a large number of global construction companies who have set up local manufacturing operations in India. The top 7 players account for ~50% of the market; next 20 players ~25% and the remaining 25% comprises of small and unorganized players. In the past there has been a considerable change in the market share of companies due to which Medium-sized and regional manufacturers have gained considerable share of market. Based on revenues top 5 players are Pidilite, BASF, SIKA, FOSROC & SWC. There are many other regional and smaller players as well. Approximately 300 companies are estimated to be operating in this segment.

*Top 5 Player profiles are given in Annexure I.

The construction chemicals market in India is still highly under-developed when compared to other countries, such as China, which accounted for 42% of the global construction chemicals consumption in 2012. Consumer awareness is very low regarding new chemical techniques and construction aids. Margins are lower because most contractors prefer low-cost chemicals to reduce the overall construction cost. High value products have limited demand and are used only by premium construction houses. Some of the key challenges faced by the industry are as follows: 

• Price sensitive market: Indian construction chemicals market is highly costconscious. The customers are not willing to spend much on construction chemicals. They are still not fully aware of the benefits of various construction chemicals and hence tend to use low-cost substitutes. Decisions are taken based on immediate cost and not on overall benefits achieved from the usage of these materials.

• Low entry barriers: The construction chemicals market is comprised of large MNCs as well as several local small-scale manufacturers. Due to low entry barriers, competition is high and several low value products are being sold in the market.

• Low awareness levels: Contractors are not adequately aware about the use of right type and quality of construction chemicals for durable structures. The durability of Knowledge & Strategy Partner Knowledge Paper on Indian Construction Chemicals Industry: Imperatives of Growth 13 material is not been studied extensively by the manufacturer under In material is not been studied extensively by the manufacturer under Indian condition. The chemical protection and maintenance is not well understood by the user. The application tools or accessories need to be updated. The code provision or the user guide line with product is missing 

• Unskilled labourers: The practice of employing unskilled workers in construction activity is still hampering the growth of the sector, as construction chemicals are sensitive products and their use requires basic technical expertise and training. 

• Lack of stringent regulations: The industry lacks in relevant consumer standards for construction. Market participants are also frequently challenged by the absence of quality standards for manufacture and application of construction chemicals which leads to price wars.

• Ban on illegal sand mining in India: National green tribunal (NGT) banned sand mining from river beds without an environmental clearance across the country in August, 2013. Sand and bricks, apart from steel, cement and aggregate, are the prime raw material that goes into construction. Due to non-availability of natural sand, industry has started using crushed stone sand and artificial sand. This is likely to impact the usage and requirements of construction chemicals in the market as the quality specifications of the concrete from artificial sand would be different than that of the natural sand. Construction chemicals market has a huge growth potential due to the expected growth in construction and manufacturing sector in India. With growth primarily driven by increasing construction activities in both new construction and repairs & rehabilitation technologies, demand for construction chemicals has increased. Many newly developed products give better performance and results. Hence, there is a shift in demand towards products offering better performance value-added products such as silicon caulks, specialty cement additives, polymer-based grouts and mortars etc.