Modi wave is taking us along. He said
“Swatch Bharat” and whole country lifted brooms. Big corporate houses announced
big plans for bringing cleanliness in villages under their CSR activities. We
are counting sanitryware companies to be the biggest beneficiaries of this (Our HSIL is
doing great, it is at 415/- from our price of Rs. 90/-). But we just forget the humble cement fibre
sheets because every toilet made in villages or town is going to use these. We
can’t forget the rocket…E-commerce sector…which is going to create huge
investments in warehousing which is also about cement fibre sheets.
These sheets use Asbestos fibre which
is banned in almost all of western countries due to perceived lung
complications but as our poor in villages still use Kutcha roofs…these provide
affordable roofing option to them so they aren’t going anywhere atleast over a
medium term. Also the variant of Asbestos (Chrysotile) used in india is not perceived as
dangerous.
But my reason for choosing these is
not because of Modi Wave. But because these companies are investing heavily in
next generation building materials. Indian building material industry is still
about red clay bricks, high doses of steel and cement. Clay bricks are natural
disaster as they are destroying much needed and in short supply soil. One Sq
feet of carpet area with clay bricks walling consumes around 25 kg of top soil
and around 8 Kg of coal. More emphasis is being put on energy efficiency rather
than energy consumption.
Cement Fibre Boards/panels and Autoclave
Aerated Concrete Blocks (AAC Blocks) are going to revolutionize the
way we build our structures. Cement Fiber boards are made of cement, wood
particle, fine silica, quartz and some other minerals...they are then cured
under high pressure steam to get the desired high strength and stability. They
act as substitute for wood and plywood but provide added protection against fire,
water and termites.
Visaka is making Cement fibre Boards
and panels, while HIL is also making the both but it has also entered into
making AAC blocks ( Autoclaved Aerated Concrete) which are being used as a
substitute for clay bricks. While cement
fiber boards and panels are mainly used for their aesthetic features (apart from some
major functional benefits over their precursors) as substitutes for
wood boards and drywalls, AAC blocks are a serious business.
AAC blocks are made by combining fly
ash, quartz sand, cement, lime, water and aluminium (paste or powder). These
are mixed and then aluminium (powder or paste) reacts with lime and fly ash,
resulting in the formation of millions of microscopic hydrogen bubbles.
The hydrogen bubbles cause the concrete to expand to roughly double the times
its original volume. The hydrogen escapes into the atmosphere and
is replaced by air leaving a high
closed – cell aerated concrete. This concrete is cut into blocks and then baked in autoclave which uses
steam and pressure to speed up the curing process and finish the other chemical
processes. Curing at high pressures and high temperature
steam in autoclaves finishes the curing process in hours in place of days. Temperature
of steam is around 190° Celsius and at this temperature various
materials reacts and gives AAC its strength and other unique properties.
However our routine red clay bricks are generally cured at temperatures around
1200° Celsius, hence AAC blocks are not regarded as Fired bricks but a
lightweight concrete.
Around 70% to 80%
of the total volume of AAC block is air, which renders it lightweight. So due
to low density its compressive strength is relatively lower, almost 50% of the
regular clay bricks. The
compressive strength is the capacity of a material or structure to
withstand loads tending to reduce size. Like if you press a tomato with both
hands, it will deform and break fairly easily as its compressive strength is
weak. A sold brick or concrete has fairly high levels of compressive strength.
Then there is Tensile strength which is when we try to expand something by
force like we do it for rubber band. On an atomic level, the molecules or atoms
are forced apart when in tension whereas in compression they are forced
together.
Concrete is low in tensile strength,
that’s why we reinforce it with steel for making roofs of our homes as steel
has very high tensile strength. So RCC for roofing provides compressive as well
as tensile strength required for a roof to withstand both types of pressures.
The porous AAC structure
So AAC blocks due to their unique properties
provide many advantages:
1.
As
these are around 80% lighter so using these can save costs related to steel and
cement since the weight of the building is lower. Costs related to labour ,
transportation and fuel are also reduced.
2.
Its porous structure and inorganic materials acts
as a strong fire proofing component. They can withstand fire for up to 7 hours
as compared to 2 of normal clay bricks.
3.
It
is 100% eco friendly as it doesn’t use natural clay, no pollutants, no
wastages, uses very less energy, uses industrial waste fly ash. So it is
qualified for LEED credits and lowers carbon footprints.
4.
Due to the
presence of high number of (80% of volume) air pores in it…it acts as a great
thermal insulator. As air is one of the best thermal insulator…hence its porous
structure acts as a great thermal insulator. A detailed study on the same is
done in the later part of this analysis.
5.
AAC blocks block
sounds better as they absorb it. They can also withstand earthquakes better due
to their light weight and high comparative strength per unit of area.
6.
They can save
energy costs by around 30% due to their superior thermal insulation
capabilities.
7.
As their making
is of high quality with sharp defined edges as compared to uneven structure of
clay bricks, they require much less material in giving them a smooth, flat
finish as compared to clay bricks as they require a lot of cement covering to give
them a smooth finish.
It is being used globally at a much larger
scale than India. In USA it comprises around 40% market share, 60% in Germany…its
use is growing very fast in china. Some of the most iconic
buildings in the world such as the The Palm, Burj Khalifa, Emirates
Palace, Dubai Marina in Dubai; Four Seasons hotel in China; Royal Crescent
Flats in London; One Central Park in Sydney to our very own world’s tallest
residential building, the ‘World One’ by Lodha Group, leading hotels such as
ITC, Marriott, The Leela, Lodha Bellisimo and Wockhardt hospital in Mumbai have
used AAC blocks. The material has now seen tremendous acceptance amongst a vast
range of developers, such as L&T, Lodha, Shapoorji Pallonji, Kanakia,
Rustomjee, Raheja, Ahluwalia Contractors, Westcon, Mantri Developers, Embassy
Group, etc.
Few
years back, cost of clay bricks were around Rs. 2000/- per cubic meter (which comprises around 600 bricks) as
compared to around Rs. 3500/- of AAC blocks…after that due to rising cost of
labour and fuel and restrictions on clay mining, clay bricks now cost around
4000/- per cubic meter in most parts of the country…AAC blocks also cost around
the same levels. In the North, the installed cost of 1 cu m of
AAC blocks is approximately Rs 6,800 while the installed cost of 1 cu m of red
brick is approximately Rs 5,800. Builders still prefer using AAC blocks
considering the numerous benefits it offers.
There
are around 1 lakh clay brick manufacturers existing across India. However, the
method of manufacturing these bricks is inefficient as a large land spread is
wasted in the process; the top layer of the agricultural soil is excavated,
further damaging the land. Compared to clay bricks, AAC blocks are 10 times
larger and 70 per cent lighter. They are factory made and their size helps to
speed up construction unlike clay bricks.
However
supporters of clay bricks challenge the claim made by AAC block manufactures
that it saves 25-30% energy cost of the building. And I feel this is the most
challenging part on the part of architects to convince any prospecting
consumer. I am not a civil engineer so can’t claim to have in depth knowledge
of the same but I have made an attempt to understand the real facts.
Supporters
of clay bricks are of the view that as clay bricks have high Thermal Mass, so
they can better withstand the climate variations than AAC Blocks which is high
in Thermal Insulation but low in Thermal Mass. Some researches also conclude
the same. Thermal
Mass is the ability of a material or liquid to absorb or store heat.
As bricks have high mass so they can absorb high amount of heat like from sun
and then the same is released into the environment…this whole process takes
long time (which
is called Thermal Lag) which is the main factor in reducing energy
costs of the building, Like bricks absorbs heat in the summer throughout the
day and in the evening when outside climate is cooler, it releases the heat
back to the environment keeping the house cool.
Thermal Resistance (insulation):
Heat transfers from hotter to a colder body either by
conduction or thermal radiation. Like steel…heat can transfer from or onto it
fairly easily as it is a good heat conductor. Hence thermal insulation is the
reduction of heat transfer…by reducing thermal conduction and by reflecting
thermal radiation in place of absorption. Wood, cloth, Thermocol (polystyrene), Glass wool,
rockwool, air etc. are examples of insulators. They can block the flow of heat
and can thus save huge amount of energy.
However some are of the view that
Mass is much more important than insulation (R) and it is too such an extent
that insulation is not required at all. But this is not true. It can be true in
an area where there is huge variation in the day and night time temperature
like in desert. For the day time, it’ll absorb heat from external climate thus
maintaining a cool interior climate…in the nights when temperature falls
considerable as compared to day time…then stored heat in the bricks will
release to external climate as heat will flow to cooler climate which is
outside and thus maintains the comparatively warm interior climate as it will
also give some of their heat to interiors. Next morning, their external walls
will be cool and will be ready to absorb heat from fresh sun.
But in warmer climates like india…this
Mass will not suffice as in the night there will not be much difference in
day-night temperature and if interior is cooler due to any reason like Air
conditioning then the stored heat will be released into the interiors and the
AC unit will have to work harder to keep the interior cool. This is where
insulation will come handy…if the interior is insulated from inside then it’ll
prevent the outside stored heat from penetrating into the interiors and AC unit
will use lesser energy. Thermal mass in summer conditions works like a heavy
metal frying pan…if you want to fry an egg…it will take longer time to heat and
if you put the flame off, it’ll still release the heat and your egg will be
overcooked if not removed from the pan.
Placing insulation inside the interiors
will work wonders in summer but not that well in winters as it’ll block the
exterior heat but in the same way it’ll also block the heat released from the
internal environment like our bodies. Hence the role of Insulation can’t be
ignored and it’ll save a lot of energy if planned properly. Care needs to be
taken of using insulation on the roofs also as roofs will be in contact of the
sun most of the time. Flooring also due to its high mass absorb a lot of heat…so
use of insulating materials like wooden flooring, use of mats etc. will also save energy costs.
Insulation materials like mineral
wool, rock wool, vermiculite, foams, expanded polystyrene and extruded
polystyrene are not yet proven and their impact can be dangerous to the humans.
So it is best to integrate the insulation into the design of your building like
keeping the inner walls separated from the exterior surface, which is exposed
to weather conditions, just like a Thermos flask. In hot and humid climates,
architects make use of natural ventilation with light construction and high
roof of organic material like thatch, keeth (interwoven coconut leaves) or
plain terracotta tiles. These can be seen in the houses of Kerala and Tamil
Nadu. Rooftop garden can also be a good option for providing good insulation, it can also provide good supply of fresh home grown vegetables. Cavity wall insulation is another effective way.
Cavities
in the walls
Thermal performance of modern buildings can be
improved with intelligent architecture. Replacing conventional material like
brick and concrete with autoclaved aerated concrete blocks, hollow blocks or
other material with inherent higher R-values can improve buildings’ insulation.
So the future really seems bright for AAC
blocks. HIL which commands nearly 23% share in Asbestos cement sheets in india
clocks turnover of around 900-1000 crores…out of which AAC block is around 100
crore and growing at around 25%, its boards and panels business also
contributes around 50 cr. It has also entered into CPVC and uPVC pipes…which
are growing very fast. It sells all of its products except asbestos sheet under
Aerocon brand. Asbestos sheets are sold under charminar brand.
Its asbestos sheets business is going to
outperform in the future. The demand for asbestos sheets will rise alongwith
rising rural income and spending. Indian asbestos sheets companies import
asbestos fiber ,Chrysotile, which constitutes around 50% of total cost of Asbestos
sheet production. Due to huge fall in oil prices, import bill of India for the
oil is also going to half which will make rupee strong against dollar thus
reducing cost of import for these companies. As global investors are pouring
money into india due to better business climate and hopes of high growth, this
will also make rupee strong.
Rupee hasn’t risen against the dollar much
inspite of the fact that oil prices have more than halved. It is mainly because
Indian oil companies generally take 6-8 weeks credit line for buying oil and as
fall of the oil is sudden hence true impact of the same will be felt in coming
months.
HIL is investing heavily for being a complete
building products solution company. As I have explained earlier also that companies
providing basic lifestyle products enjoy strong and better brand loyalty than companies
providing flashy and sensory products like jubilant and coca cola. Sensory
choices and preferences change quite easily as we also want to experiment…but
we don’t compromise with basic life style needs so easily. A person having a
liking for “India Gate Rice” would not easily change the brand as product differentiation
with other companies is not very high…almost all rice taste same…so minor
positives become big drawing factors. Finolex cables fits this perfectly. HIL
is also investing big in creating “Aerocon” building material brand as a
testimony of high quality and customer centric approach.
Visaka Industries is also having high share in
Indian asbestos sheet sector of around 17% and derives turnover of around 1000
crores with its textile division contributing around 178 crores. It is also
investing big in promoting its cement Fibre Board brand Vnext which is also a
variant of AAC blocks but these are mainly used as a substitute for wood. But it
is having relatively high debt of Rs. 246 cr as compared to around 60 cr of
HIL.
HIL seems better prepared in its
diversification journey with better balance sheet. But still I have added
Visaka at Rs. 120/- as it has got scale of around 100 crores but I have yet to study the demand and benefit scenario of
Vnext boards and its future plans. However HIL is a great buy. I am adding this
from 680 to 640 today.
(I
am not a civil engineer; hence it is highly possible that my views on Thermal
Mass and insulation are wrong. Reviews and corrections are welcome)
(Views are personal and should not be taken as a recommendation for buy or sell a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing)