BackSanitaryware makers expect demand surge on back of Swachh Bharat Abhiyan
Shares of sanitaryware makers have risen in anticipation of an increase in demand for toilet construction
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Mumbai: Companies making sanitaryware and bathroom fittings are expecting a surge in demand on the back of Swachh Bharat Abhiyan, the cleanliness mission Prime Minister Narendra Modi will launch on Thursday to rid the country of the practice of open defecation and equip every household with a toilet in five years.
After Modi’s Independence Day speech on the need for greater hygiene consciousness, various ministries have disbursed funds for sanitation campaigns and companies have announced they will construct toilets.
Modi is launching the five-year mission on the birthday of Mahatma Gandhi. After his announcement, shares of sanitaryware makers have risen in anticipation of an increase in demand for toilet construction, which could lead to production constraints in the sector dominated by small manufacturers.
“At the low end, the manufacturing capacities may get exhausted, as gauging from the Prime Minister’s speech, mass-market toilets would be needed," said Bharat Mody, strategic advisor at Cera Sanitaryware Ltd, a premium bathroom products maker.
The company is waiting to see if the cleanliness wave spurs demand for toiletware across segments. For instance, it may encourage companies to build toilets for working women in metro cities that may benefit premium brands too, Mody said.
“The sanitaryware sector’s estimated revenues are at ₹ 3,000 crore, with annual growth of 12%. “The Swachh Bharat scheme may push the growth to 15%," Abhishek Somany, joint managing director of Somany Ceramics Ltd, which intends to contribute to the cleanliness drive.
“We believe it’s more of a social initiative than a business opportunity, and we are looking forward to providing durable, easy-to-maintain and cost-effective sanitaryware systems to local municipalities to maintain hygiene at public places," said Somany.
During the same period, Kajaria Ceramics Ltd rose 7% to ₹ 644.65 and HSIL Ltd rose 35% to ₹ 355.25. These stocks have outperformed the BSE Sensex, which rose 1.78% to 26,567.99 points during the same period.
Cera Sanitaryware saw small gains on the BSE, closing on Wednesday at ₹ 1583.25, up about 2% from 14 August. Cera’s Mody said though the company is not immediately being seen as a beneficiary of the hygiene drive, it could gain indirectly, say, in distribution of toiletware products across India due to its vast marketing network.
Toilet cleaner makers are also preparing for a surge in demand and at the same time participating in the cleanliness campaign.
RB India (formerly Reckitt Benckiser), the maker of Dettol and Harpic brands, is investing in building toilets under the initiative and has committed ₹ 100 crore to spreading hygiene and sanitation awareness over the next five years through an initiative called Banega Swachh India.
“We expect such initiatives to increase the overall demand for our sanitation and hygiene brands," said Nitish Kapoor. managing director of RB India, The campaign plans to cover around 400 villages across eight states—Haryana, Rajasthan, Uttar Pradesh, Bihar, Jharkhand, Chhattisgarh, Madhya Pradesh and Maharashtra—for increasing hygiene and sanitation awareness.
India’s sanitaryware and bathroom fittings industry is estimated to be valued at a combined ₹ 8,000 crore and is expected to grow at a compounded annual growth rate of 12% between 2013 and 2018, Reliance Securities Ltd’s analyst Chintan Modi said in a 24 September note, differing from Somany’s estimate above.
“The confidence in growth rate arises from the fact that only 40% of the total population in India has access to sanitation facilities," Modi said in the note. “Besides, PM Narendra Modi’s mission of ‘Swachh Bharat’ by 2019 if implemented in right direction can be a big boon for the industry."
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