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Despite offering quality, time, man power and long-term cost benefits, ready mix concrete is still a long way from realising its potential in India. The ongoing financial crunch has certainly impacted the industry’s prospects for now but there is hope in the long run. At least the mid-sized organised players are confident. Niranjan Mudholkar reports
Ready mix concrete (RMC) business is still in its infancy but holds great significance in the light of the massive construction and infrastructure activities taking place across the country. Although fragmented in nature with only 5-6 national players, the industry has seen unprecedented growth in recent times.
“The Indian RMC market has been fast developing for the last few years and it has come up in new cities and locations,” says Alex Thomas, MD, Neptune Readymix Concrete (P) Ltd expressing his personal views. Neptune is a wholly-owned subsidiary of RDC Concrete and presently operates only in the state of Kerala where it is a market leader with more than 35% share with premium pricing.
“There has been good scope in the market and new players have put up plants even where there are existing players,” Thomas says illustrating the growth.
AB Marathe, manager-service, Aquarius Engineers Pvt Ltd agrees with Thomas. Marathe, whose company provides equipment to the RMC companies, says the Indian market for RMC has been showing a consistent positive growth, year after year, in spite of a few policy hurdles.
“From the first commercial RMC plant set up in 1993 by Ready-Mix Concrete Industries to the state-of-the-art plants currently producing over 37-lakh cu.m annually, it has been an eventful journey for the industry. With the big infrastructure projects slowly turning to RMC, experts in this segment had predicted a business growth rate of 25% in the Indian market.”
The industry too has been gearing up to meet the growing demand. “Though no conclusive figures are available it is estimated that commercial RMC manufacturers put together are producing around 1.5 million cu.m each month which is roughly 3% of India’s total cement consumption. If we consider mechanically converted concrete using batching plants of minimum 30 cu.m/hour at various sites also as RMC it will add up to another 4 or 5 million cu.m,” states Thomas.
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In fact, a lot of existing players had announced expansion plans and many new players were planning to enter this sector. It was just when things had started to get brighter for this sunrise sector that the recession hit. With the construction industry – particularly the realty sector – taking a big blow during the ongoing financial crisis, the RMC market has been badly hurt. “It is a chaotic situation for RMC players catering to the realty segment,” says Vikaas Ahluwalia, MD, Ahlcon RMC.
“Everybody is saying that real estate sector will bounce back but till then these RMC companies will have to hold on,” he adds. Incidentally, Ahluwalia’s firm hasn’t been affected to a great extent. “That’s because we changed our strategy sometime back and reduced our exposure to the realty sector. We have been focusing more on government and infrastructure projects,” he says.
Ahluwalia also says the recession has forced many local players to shut down their plants. “RMC sales have come down by at least 15-20% in the last few months due to the slowdown and no new plants are coming up. Also some companies have closed down operations at certain locations,” says Thomas.
Since the RMC equipment players are directly linked to the RMC industry, their business too has been affected. “The ongoing financial crunch has resulted in a rough phase for the Indian real estate sector. This scenario, coupled with high interest rates, has taken a toll on the RMC equipment business segment, as there has been a significant fall in demand from customers,” says VG Sakthikumar, chief operating officer, Schwing Stetter India Pvt Ltd. Marathe echoes the sentiment. He says: “The residential and commercial building segments, which has been a major market for RMC, is seeing a slowdown. This has affected the RMC industry and in turn the RMC equipment sector.”
Of course, even before the recession hit, the RMC industry was facing quite a few challenges. The current phase has only intensified the situation. Besides regular issues like competition, pricing, distribution, market structure, and capacity utilisation that is faced by any industry, the RMC sector has also had to deal with other issues. The biggest competition to RMC comes from its cousin - site mixed concrete (SMC). This despite offering clear quality, time, man power and long-term cost benefits over SMC.
There are various reasons for this including the immediate extra cost. But most customers deterred by the cost factor are primarily unaware about the benefits. “If the RMC industry is to grow, customers should be made aware of the advantages of RMC like savings on capital investment, benefits of input tax credit, lesser man power and better control over materials,” says Thomas.
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COMMENT
information was good