GLOBAL
AUTOCLAVEDRsAERATED CONCRETE INDUSTRY Overview
According to Report Linker, the Global AAC market is projected to grow
from $13.03 billion in 2021 to $14.17 billion in 2022, witnessing an increase of 8.77%. By
2026, the market is expected to reach $20.8.billion, growing at a CAGR of 10.12%. This
growth is mainly attributable to the post-pandemic recovery, wherein companies are
rearranging their operations to welcome back their workforce in full swing. COVID-19 had
led to restrictive containment measures involving social distancing, remote working and
the closure of commercial activities that resulted in operational challenges, subdued
construction and a weak demand environment in general. However, as the cloud of the global
pandemic slowly drifts away with passing time, businesses have regained their confidence
to move to working from an office environment. AAC blocks have been around for a while,
however, their utility and importance has grown tremendously over the last decade. With
more awareness being created about AACs environment-friendly properties, it has
found utility in the development of green buildings, which is an increasingly growing
phenomena in the construction industry. With a huge potential for growth, it presently
only accounts for 3% of the total walling material market globally. There still exists a
lack of awareness in the market for AAC Blocks and Panels, as is evident 3 %
With a huge potential for growth, AAC presently only accounts for 3% of
the total walling material market globally
What makes green buildings unique are their energy-eRscient and
sustainable characteristics, and their ability to lower carbon footprint and minimise
impact on the environment
from their low penetration. Still, it also gives a significant
opportunity for the AAC block industry to expand as an innovative green building solution
going forward. What makes green buildings unique are their energy-eRscient and sustainable
characteristics, and their ability to lower carbon footprint and minimise impact on the
environment. Further, the growing importance of certifications such as LEED opens up
considerable opportunities for AAC manufacturers as it binds them to use sustainable
building materials for construction. The other factor that is contributing to the rise in
green building development and propelling the AAC market forward is its energy-eRscient
feature. According to EnergyStar, a government-Rsbacked energy efficiency symbol
headquartered in the United States - approximately 6,500 commercial buildings received the
ENERGY STAR in 2020, saving costs to the tune of $1.6 billion and avoiding more than
5Rsmillion metric tonnes of greenhouse gas emissions. In developed countries, such as
Germany and the UK, AAC accounts for more than 60% and 40% of the building material,
respectively. Over the years, the construction sector in China has expanded significantly.
At present, there exist more than 3,500RsAAC manufacturing facilities around the world,
with a significant number of them concentrated in countries such as China, Russia, Poland,
Germany, Sweden, and theRsUK.
APACs AAC block Industry
The APAC region is witnessing a surge in infrastructure projects, owing
to its economic growth as well as its growing prowess in the manufacturing sector.
Therefore, this region is also expected to dominate the market for AAC blocks in the near
future, due to the high demand for construction activity in countries like China and
India. Moreover, the growing adoption of sustainability in real-estate sectors in the APAC
region, coupled with over 23% of office buildings in sixRsmajor cities, including
Shanghai, Beijing, Tokyo, Sydney, Hong Kong, and Singapore, achieving green
buildingsRscertification in 2018, has stimulated the demand for AACRsblocks even more.
China, a significant producer of AAC, has undertaken green building
initiatives to protect natural resources, reduce energy usage, and improve air quality,
which is now a growing concern for China. In 2013, Chinas State Council launched the
Green Building initiative, intending to construct at least 20% of all new buildings under
this initiative. Further, the Chinese government has also recently rolled out massive
construction plans, including making provisions for the movement of 250Rsmillion people to
its new mega-Rscities, over the next ten years. This will add impetus to the construction
sector in China, and create a booming need for sustainable building materials such as AAC
blocks.
3,500Rs Rs
At present, there exist more than 3,500RsAAC manufacturing facilities
around the world, with a significant number of them concentrated in countries such as
China, Russia, Poland, Germany, Sweden, and theRsUK
INDIAN AAC BLOCK INDUSTRY
While the Indian AAC block industry still appears to be niche, its
growth is projected to double as more and more infrastructure is built sustainably. The
market for AAC blocks and non-reinforced panels in India is expected to reach RsRsRs11000
crores by 2027 from Rs Rs5300 crores in 2019, growing at a solid CAGR of 14.3%, as per
Research Dive. Since this is a relatively new industry, it witnesses a lot of regional
competition with very few multi-location players. As per BigBlocs internal
estimates, there are currently 150-180 AAC plants operational in India, consisting almost
entirely of unorganised and smaller players. Recent developments indicate that Indian
markets are increasingly accepting AAC blocks as a sustainable alternative for clay and
red bricks. However, a lot more traction will follow in the near future as builders and
architects increasingly become aware of the cost, sustainability and structural advantages
of AAC blocks.
In the last couple of years, India has warmed to the concept of
creating green buildings, which is still a fairly new concept in the country. With Rs11000
Rs
The market for AAC blocks and non-reinforced panels in India is
expected to reach RsRsRs11000 crores by 2027 from Rs Rs5300 crores in 2019, growing at a
solid CAGR of 14.3% as per Research Dive
150-180
AAC plants operational in India, consisting almost entirely of
unorganised and smaller players growing knowledge and awareness about eco-friendly
options, this sector has gained momentum in these short years. In fact, in 2021, India was
ranked third in the US Green Building Council (USGBC) annual list of top 10 countries
outside the US for leadership in Energy and Environmental Design (LEED). As per
Transparency Market Research, two decades ago, the green building footprint in India was
almost nonexistent, and now, it has reached one billion square feet. At present, India has
1,300 registered green building projects in total. These factors indicate significant
expansion of the AAC market in India.
Indian Real Estate Industry
India is emerging as one of the fastest-growing economies in the world
and is projected to reach a GDP of USD 5 trillion by FY25. Furthermore, as the country
witnesses a massive trend of growing consumption, it is set to become the third-largest
consumer economy, with its consumption predicted to triple to USD 4 trillion by 2025. This
is attributable to the changing consumer patterns and expenditure habits, which indicate
that more individuals and households are increasingly spending on goods and services,
including acquiringRsproperty. With an industry size of Rs 10.5 trillion, the Indian
construction industry is the second-largest employer in the country after agriculture.
This sector has not only received a policy boost from the government, but it has also
witnessed demand from the private sector, owing to Indias economic advancement which
necessitates infrastructure development. This demand is expected to further rise as the
need for residential and commercial spaces goes up in the coming years. Indias
start-up culture and business prowess is enabling the demand for office spaces in the
country, which has been growing rapidly for many years now, as about 35 million square
feet of office space was absorbed in the year 2019 alone. Moreover, the country has also
beenRs 10.5 M
With an industry size of Rs 10.5 trillion, the Indian construction
industry is the second-largest employer in the country after agriculture
receiving significant interest from foreign investors in the commercial
construction industry.
On the public sector side, the Indian governments sharp focus on
affordable housing policies is expected to increase the rate of availability of affordable
housing to around 70% by 2024. This surely comes as good news, since it will not only
render good results for the countrys social goals but also create industry
opportunities for businesses. Around an estimated USD 1.3 trillion is likely to be
invested in housing over the next seven years, during which an estimated 60 million new
homes will be built. AAC blocks being a cost-eRsective and sustainable alternative to
traditional building materials, stands to gain from this boost. Further, the government is
also keen on developing sustainable green buildings, which gives AAC unparalleled
advantages. Indias real estate sector has performed significantly well in the last
few decades, and is expected to continue on that trajectory going forward. However, the
sectors contribution to GDP lags behind in comparison to developed countries such as
the USA and Canada and other developing countries like China. While the gap between
Indias figures and other countries figures is sizable, it does bring to focus
the immense growth potential for India in the coming years.
Real estate share in GDP
USA: 17.5% of GDP, Real estate investment directly contributes 14-Rs15%
of GDP, including construction and residential property development, and about 29% of GDP
if taking into account upstream and downstream sectors in China, in Canada the share of
real estate in GDP is around 10%, which when compared to India, where the contribution is
just 6%, which is expected to increase to 13% by 2025.
Share of the Real Estate industry in GDP (%)
Source: IMF, Invest,gov, Statistics Canada, Congress.gov
Recent Investments and Developments
The Indian governments push to maximise infrastructure investment
and development in the country has encouraged multiple Indian and overseas infrastructure
companies that are now looking at India as an emerging market for the same. Some of the
positive developments in the recent past include, lowering of minimum application value
for Real Estate Investment Trusts andRsencouraging FDI inflow into theRscountry. In India,
between January 2021 and September 2021, private equity investment inflows into the
realRsestate sector stood at US$Rs3.3Rsbillion. The Securities and Exchange Board of India
lowered the minimum application value for Real Estate Investment Trusts from RsRs50,000
(US$ 685.28) to RsRs10,000- RsRs15,000 (US$ 137.06 - US$Rs205.59), between January 2021
and September 2021, to make the market more accessible to small and retail investors. As
per ICRA estimates, Indian firms are expected to raise more than RsRs3.5fitrillion
(US$Rs48 billion) through infrastructure and real estate investment trusts in 2022 alone,
as compared with raised funds worth US$ 29 billion to date. While this facilitates easy
entry into the sector, companies are still expected to go through rigid compliance
regulationsRsduring project development processes. Further, according to the data released
by the Department for Promotion of Industry and Internal Trade Policy (DPIIT),
construction is the third largest sector in India in terms of FDI inflow. As per Savills
India, FDI inflow stood at $1 Billion in Q4FY22, witnessing a jump of 4.5x as compared to
Q3FY22.
Government Initiatives to push infrastructure development
In the last couple of years, the Indian government has announced
multiple schemes and policies targeting the development of infrastructure for both public
and private use. Its ‘Housing for All initiative is one such example, looking
to create broad-fiscale affordable housing for the urban poor, whereas its various
highways and roadways projects are aimed at improving connectivity within the country. As
per the revised estimate for 2022, the government
Government Initiatives to push infrastructure development
‘Housing for All
Initiative is one such example, looking to create broad-fiscale
affordable housing for the urban poor, whereas its various highwaysRsand roadways projects
are aimed at improving connectivity withinfithe country
RsRs10,000 Rs
Of initial corpus has been established in the Affordable Housinf Fund
at the National Housing Bank to to finance HFCs using priority sector loan shortfalls from
banks and financial institutions
6 M
Jobs to be created over the course of the next 5 years which will not
only boost the employment sector but also boost the commercial real estateRssector
1,600
Stalled housing projects to be revived with the investment fund
established by the UnionRsCabinet has allocated Rs 48,000 crores to construct 80 lakh
houses, under its Pradhan Mantri Awas Yojana (Housing for All) initiative. Further, the
government has established an Affordable Housing Fund (AHF) at the National Housing Bank
(NHB), with an initial corpus of RsRs10,000Rscrores to finance HFCs using priority sector
loan shortfalls from banks and financial institutions. The government also aims to create
6 million jobs over the next 5 years, which is good news not only from the employment
perspective but also for the commercial real estate sector, which is going to be the
nucleus of the growth of office space demand. Additionally, the Union Cabinet has approved
the establishment of an alternative investment fund with an outlay of RsRs25,000 crore to
revive about 1,600 stalled housing projects throughout the nation.
COMPANY OVERVIEW
Incorporated in 2015, BigBloc Construction Limited ("BigBloc"
or "the Company") is Indias premier AAC block and related products
manufacturing company. Originally a part of its parent company, Mohit
Industries Limited, it demerged to form its own identity in 2016 under
the name of BigBloc. At present, the Company has two state-of-the-art manufacturing units
located at Vapi and Ahmedabad, Gujarat, making it the second-largest AAC manufacturer in
India. However, with the Companys aggressive capacity augmentation plans expected to
commercialise within the next year, it will catapult to a higher orbit, making it the
largest AAC manufacturer in India. Going forward, BigBloc aims to become an unparalleled
name in the industry, manufacturing quality building materials that focus on
sustainability. It also hopes to aid the construction and infrastructure industry in
adopting green and sustainable practices for a betterRsfuture.
OUTLOOK
BigBloc is poised for growth in the coming years on the back of its
capacity expansion, its joint venture with SCG International, as well as its strategies to
penetrate the Indian market and create a pan-India presence. These factors align well with
the Companys overall vision of becoming an industry leader and provide it with the
necessary fuel to realise this vision. As a result, the Company is well on its way to
becoming the largest manufacturer of AAC blocks in the coming years.
FY22 PERFORMANCE REVIEW
BigBloc was able to achieve excellent capacity utilisation during FY22.
In this period, the Company was able to utilise 87% of its 5,75,000RsCBM installed
capacity. Importantly, production during the year was 33% higher than that in the previous
year, which was 3,75,000RsCBM. Moreover, the Company could add 25,000RsCBM of further
capacity, by undertaking a debottlenecking exercise at its Umargaon facility, thereby
enabling organic enhancement of its capabilities. As a result, the increased capacity
utilisation and volumes coupled with healthy improvement in realisation enabled the
Company to achieve a healthier top line.
During the past year, the Companys Revenue from Operations grew
to RsRs17,552Rslakhs, as against RsRs10,296Rslakhs in FY21, thereby recording a 70%
year-on-year growth. Consequently, the EBITDA margin expanded by 378 bps to 15.81% in FY22
against 11.94% in the previous year. Most significantly, the Companys Profit After
Tax (PAT) showed a whopping increase of 551%, from RsRs247 lakhs in FY21 to RsRs1,608
lakhs in FY22.
FINANCIAL RATIOS
In accordance with the SEBI (Listing Obligations and Disclosure
Requirements 2018) (Amendment) Regulations, 2018, the Company is required to give details
of significant changes (change of 25% or more) as compared to the immediately previous
financial year) in key financial ratios, which are as follows:
| Ratios |
FY21 |
FY22 |
% Change |
Remarks |
| Total debt to equity |
1.91 |
0.91 |
-52 |
Due to debt repayment coupled
with increase in Equity base. |
| Current ratio |
1.00 |
1.26 |
25 |
Due to a proportionate
increase in current assets. |
| Interest Coverage |
1.60 |
5.84 |
265 |
Driven by a significant
increase in EBIT during the year. |
| Debtors Turnover |
4.74 |
6.99 |
47 |
Driven by optimisation of
trade receivables coupled with significant sales growth. |
| Inventory Turnover |
5.89 |
9.79 |
66 |
Driven by better inventory
management. |
| Operating Profit Margin |
11.94% |
15.81% |
Increase of 387 bps |
Due to increase in scale of
operations, better pricing power and operating leverage. |
| Net Profit Margin |
2.40% |
9.18% |
Increase of 678 bps |
Due to increase in scale of
operations, better pricing power and operating leverage. |
RISK AND RISK MITIGATION
Risks are an inherent part of any business, and while many of these
risks can be identified, evaluated, prioritised and mitigated through proactive actions,
some of these risks are associated with macroeconomic factors that are beyond ones
control. The Companys risk management function efficiently manages such risks by
creating management frameworks that are aimed at maximising shareholder value.
Macroeconomic Risk
Any change in market conditions due to theORDINARY BUSINESS: worsening
global or Indian economy may result in a lack of demand for our products.
Inflation and Cost of Production Risk
Construction industry being energy intensive, any insignificant rise in
cost of raw materials and energy, will resultantly impact the Companys
profitability.
Financial risk
This risk includes exposure to interest rates, foreign exchange rates
and commodity price fluctuations. Any extreme fluctuation can negatively affect the
Companys profitability.
Credit Risk
Credit risk is the risk of loss that may occur from the failure of any
party to abide by the terms and conditions of any financial contract. Any such liability
may have a bearing on the Companys balance sheet.
Legal and Compliance risk
This risk is associated with the failure to comply or inadvertent
violation of prescribed laws and regulations. Hefty penalties may be levied for
non-compliance, which could potentially lead to reputation damage as well.
Human Resource risk
This risk includes inadequate employee management, employees
unfavourable behaviour, or risks associated with recruitment and severance. The Company
endeavours to minimise such risks by creating a healthy work environment, as well as by
attracting and retaining top quality personnels.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has a sound and adequate internal control system that
ensures all assets are safeguarded and protected against loss from unauthorised use or
disposition, and that those transactions are authorised, recorded and reported
appropriately. The internal controls are exercised through documented policies, guidelines
and procedures, and is supplemented by an extensive program of internal audits conducted
by a trained in-house professional. The audit observations, and corrective action taken
thereon, are periodically reviewed by the audit committee to ensure effectiveness of the
internal control system. The internal control is designed to ensure that the financial and
other records are reliable for preparing financial statements and other data, and for
maintaining accountability of persons.
ENVIRONMENT, HEALTH AND SAFETY RsHSERs
BigBloc is committed to providing a safe and healthy workplace for its
employees, thereby ensuring their well-being and minimising its impact on the environment.
The Company has always been proactive in its approach and has taken several measures and
introduced various policies to monitor its sustainability parameters constantly. Some of
its policies include policies on quality and health and safety, which guide the
organisations actions and decisions. The Company strives to improve the
effectiveness of its policies continuously, and even the employees are encouraged to
contribute to the creation of these policies. Employees are mandated to fully understand
these policies and comply with the requirements.
CAUTIONARY STATEMENT
Statements in the Management Discussion and Analysis and other parts of
the report describing the Companys objectives, projections, estimates and
expectations may be forward-looking statements. Actual results may differ materially from
those expressed or implied due to various risks and uncertainties. Important factors that
could make a difference to the Companys operations include economic and political
conditions in India and other countries, in which the Company may operate. Other factors
that may impact the Companys operations include volatility in interest rates,
changes in government regulations and policies, tax laws, statutes, and other incidental
factors. The Company does not intend to update these statements.
+91-9892691696
