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Growing market demand for sanitaryware in India

  • An overview of the sanitaryware market
  • Reasons for the growing demand in the sector
  • Shift in preference of consumers

 

Ceramic sanitaryware industry comprises a variety of products such as washbasins, water closets, bathtubs, faucets, cisterns, seat covers, sinks, bidets, other accessories, etc.

The Indian sanitaryware market is divided into two sub-categories; organised and unorganised market, both in terms of value and volume. The unorganised players manufacture sanitaryware items largely with the use of conventional technology and cater mostly to the mass market with a focus on low-income strata group. On the other hand, organised players employ the latest world-class technologies for production and mainly serve the people with mid income, premium market and super-premium segment. Currently, the size of the Indian sanitaryware market is approx. INR 13 billion, wherein ~43% (INR 5.6 billion) is contributed by the organised sector, while the rest of the 57% (INR 7.4 billion) is through the unorganised sector.

The Indian bathroom accessories market is growing at a rapid pace and is expected to witness a continuous growth during 2017-21. The CAGR during this period is expected to be around 12-15%, which is nearly a double of the growth of the Indian GDP. A healthy growth in the sector will be driven by supportive government policies followed by a push towards infrastructure, construction and housing sector, rapid urbanisation and competition in the hospitality sector.

The government’s focus is on the infrastructure segment, especially urbanisation along with the housing both in the urban and the rural areas. This is expected to drive the overall growth in the sanitaryware market. There is also an emphasis on developing 100 smart cities, there are initiatives like ‘Housing for All’ and improved sanitation is projected to boost the growth. The Government of India is aiming to ensure habitable conditions for the poor and has launched several new flagship programs such as Pradhan Mantri Awas Yojana (PMAY) and Swachh Bharat Mission. The Smart City project plan to build 100 smart cities and offers a prime opportunity for the real estate sector with an investment of INR 1,911.55 billion and is focused on revamping the identified area with an investment of INR 1,525 billion. In February 2018, there was a creation of the National Urban Housing Fund, which approved an outlay of INR 600 billion. The Indian government has fixed the housing targets for more than 10 million houses in the rural and 3.7 million houses in the urban areas by 2022. In the short-term, the PMAY-Gramin (Rural) aim to cover 10 million new houses by FY-2019 and PMAY (Urban) had set a target for the completion of 1.2 million houses in FY-18. Additionally, in order to make India open defecation free by 2019, there is a plan to construct 55 million household toilets and 115,000 community toilets under the Swachh Bharat Mission (Gramin).

Indian is one of the fastest growing economies. Hence, government’s push on infrastructure, construction and housing sector is equally supported by a consistently rising Personal Disposable Income (PDI) in the country. The PDI has increased at a CAGR of 10.03% during 2016-17 and it is further projected to grow at a CAGR of 22.56% (2019-20), the expected PDI will be INR 2,31,000 billion in 2020. Alongside, the perception of individuals (mainly the middle and upper class) on bathrooms have registered a dramatic shift over the past decade. It was perceived as a necessity a few years ago. However, presently, bathrooms have evolved as a style statement. Further, people are opting for bigger and better bathrooms as a sign of status and luxury, increasing their size also gives an opportunity for adorning these with exquisite fixtures.

In addition, consumers are increasingly becoming hygiene conscious. There is a growing preference for functional and feature-rich bathrooms, which is leading to rising sanitaryware demand. A majority of customers are moving from traditional standard closets to wall-mounted closets and pedestal basin to over-the-counter basins because these are more contemporary in design. This shift can be attributed to the ease of cleaning and thin rim designs, which are space saving and trendier as well. The innovation of touchless bathrooms and kitchen faucets expanded the revenue potential in the market.

Moreover, amid the broader optimism in the industry, the key companies are working to increase their production capacities in order to meet the rising demand. Furthermore, along with the domestic players, the major global corporates in the segment have also set-up manufacturing facilities in India, few of the prominent names are Cera India, Roca India, Kohler India, Toto India and Jaquar among others.

If one looks at the growth of the top 3 players in the Indian sanitaryware industry, particularly the revenue in the last few years, there has been a healthy increase led by a strong rise in the production and sales volumes in addition to increasing product base. The major contributors in the sector are Hindustan Sanitaryware & Industries Limited (HSIL), Cera Sanitaryware and Parryware Roca. 

HSIL is the market leader in India with ~26% market share. It markets its products under the umbrella brand Hindware. HSIL’s increased its investment in manufacturing facilities by 189.7% (INR 779.3 million in FY 2016 to INR 2,258.104 million in FY 2017) to expand its capacity from 3.8 million units to 5 million units per annum in FY 2017-18. The company possesses the largest distribution network comprising more than 3,200 dealers and a strong retail network of 21,000 plus retail touch points. HSIL is planning to add roughly 100 large format retail stores per year and nearly 600 small stores across the country in order to boost its retail expansion. Parryware Roca, which is now a wholly owned subsidiary of Roca is the second largest player and is privately held. It provides limited information about its operations and financials. Cera Sanitaryware Limited is the third biggest player and has 18% of the Indian market share. Over the years, it has expanded its distribution network across the country and presently has 1,600 dealers and 16,000 retailers as compared to 600 dealers and 6,000 retailers in FY 2011. It has a manufacturing capacity of 5.6 million units per annum.

HSIL and Cera Sanitaryware together account for 45% share of the Indian market. These firms saw a substantial increase in revenues in the past, this is further expected to increase. HSIL's revenue grew by 7.98% and reached INR 10,376.55 million in FY 17 compared with INR 9,609.65 million in FY 16. Cera's revenue grew by 7.81% and reached INR 10,066.1 million in FY 17 compared with INR 9,336.87 million in FY 16. Although, the EBITDA margin for HSIL declined to 14.4% in FY 17 compared with 17.7% in FY 16 because of a rise in power, fuel and other expenses, the firm largely maintained it around a 15% level. EBITDA margin for Cera increased in the past few years, which was backed by a better capacity utilisation and increase in the demand of mid-level to premium sanitaryware products.

In conclusion, it can be stated that rapid urbanisation, distinct government initiatives like the building of smart cities, focus on housing for a larger segment of the society, Swachh Bharat Mission among others are major aspects for the overall growth of the sanitaryware market in India. This together with a change in preferences of consumers, rising personal disposable incomes, shift towards nuclear families is adding to the demand for housing and in turn, for sanitaryware. There are optimistic projections for an above average growth in the industry compared to the economy and Televisory presume a healthy growth potential for the players and the industry in the upcoming years.

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