Sep 15 2014 | Q&A

Somany Ceramics

The trend in use of tiles in India is in-line with the trend internationally. As Indians are inclined internationally for latest styles and fashion, new and refurbished homes in India are increasingly looking like those in the West. And, as Indians have increasingly also lived abroad, they expect the same finish and look when they are back home. Hence, the consumption of tiles is set to grow in India in the coming years.

Abhishek Somany, JMD, Somany Ceramics Ltd shares his views with Sandeep Sharma about his company, growth, manufacturing base, new technology, trends, upcoming plant, market share, challenges faced, labour shortage, plans for diversification etc. Edited Excerpts...

Could you tell us about your company, product offerings and core competencies?
Somany Ceramics was founded in 1968 by Mr. H.L. Somany in collaboration with Pilkington’s Tile Holding, UK. Today, we are one of the leading manufacturer and marketer of tiles and sanitaryware in India. We are listed on BSE and NSE and produce 41 million sq. m of vitrified and ceramic tiles from three fully-owned facilities (two in Kadi in Gujarat and one in Kassar, Haryana) and six joint venture facilities at Morbi in Gujarat. Along with the large size manufacturing facility, we have pan India presence with vast distribution network comprising of 6500 plus dealers & sub-dealers and 233 franchisee managed showrooms/ own display centres.

Somany manufactures a broad range of tiles (wall and floor) in various sizes, designs, textures & finishes across the widest product selection categories – ceramic wall and floor, polished vitrified tiles, and glazed vitrified tiles and digital tiles along with a wide variety of CP fittings, shower panels, basins, faucets etc. Specifically for outdoor usage we have India’s toughest tiles – Durastone (Heavy Duty Vitrified tiles), which are best suited for outdoors as it has high-load bearing capacity, abrasion resistance and anti-skid features. Full Body Glazed Vitrified Tiles under Duragres brand not only have durability but also come with VC shield technology which makes these tiles India’s Most Durable Tiles. We are the first and the only company in the Indian tile industry to have a patent for its highly abrasionresistant tiles, VC Shield.

One of the latest innovations from the house of Somany are ‘Slip Shield’ tiles which are highly functional in nature and easy to maintain. A coating applied on these tiles keeps the co-efficient of friction high even when the surface is wet and soapy.

‘Glosstra’ from Somany, are India’s glossiest tiles for walls and are available in 30x60 cms. Available in bright and vibrant colours, ‘Glosstra’ is created using “Ultra Gloss technology”. Options in Glosstra include fabric texture, undulated surfaces and stone finishes, and use of motifs and floral in patterns.

How was the last financial year, in terms of business generated, growth achieved in both domestic and international markets?
We recently reported our unaudited results for the quarter that ended 30th June 2014 and our performance for the 1st quarter has been very heartening. Our net Sales have increased by 27% to Rs 328.30 Crore in Q1’FY15 as compared to Rs 257.97 Crore during the same period last year. The PAT stood at Rs 8.07 Crore during the same period. We have grown our topline by 27% on YoY basis. We continue to invest our energies in increasing capacities across segments with increased focus on high margin segments. We have increased our touch-points by adding 36 dealers and 10 showrooms nationally during the quarter. Also, the exports are showing a positive trend with the growth rate of 108% to Rs 13.38 Crore.

Could you share with us details about your manufacturing base, technology adopted and production capacity?
We produce 41 million sq. m of vitrified and ceramic tiles from three fully-owned facilities (two in Kadi in Gujarat and one in Kassar, Haryana) and six joint venture facilities at Morbi in Gujarat.

We have our own R&D department which is diligently looking forward to design the most technologically advanced and aesthetically appealing tiles for the market. We are known for innovative products which are functionally as well as aesthetically advanced.

Our machinery is regularly updated and new technology is utilized to provide world class tiles. In near future, we should see the use of Digi printers and bigger Tonnage Presses in manufacturing process of tiles that will be more technologically and thus functionally advanced. As the consumer demands are evolving, we can also see innovative Kinetic Tiles, and thin tiles coming in the market. Also, tiles with larger formats are being preferred by the consumers now.

What are the latest tile trends and styles capturing the attention of the Indian customer?
Tiles are made from either ceramic or stone, with a number of different options available within each category. With the recent advancements, a lot more modern and eco-friendly tiles are also available in the market, such as Green tiles, Antibacterial tiles and Digital tiles.

The trend in use of tiles in India is in-line with the trend internationally. As Indians are inclined internationally for latest styles and fashion, new and refurbished homes in India are increasingly looking like those in the West. And, as Indians have increasingly also lived abroad, they expect the same finish and look when they are back home. Hence, the consumption of tiles is set to grow in India in the coming years.

Buyers are increasingly looking beyond the functionality of easy and hygienic maintenance of utility areas like kitchens and washrooms with tiles, to the aesthetic appeal of tiles in propagating style and personal taste, which reflect their lifestyle. Coupled with their functionality, tiles are increasingly getting sought for living room walls and facades.

Top runners in the preferred list are the anti-bacterial tiles, for indoor as well as outdoor purposes, 3D tiles, ‘Glosstra’ tiles, Slip Shield tiles, Nano polished digital glazed vitrified tiles that come with a high look surface finish and are super glossy, while being sturdy at the same time.

Tiles are being produced in large formats to prepare large continuous surfaces and minimize joints. And buyers continue to value the cost-effectiveness and low-maintenance attributes of tiles. Somany has 800*1200 large format tiles.

Do you have any plans for a new plant in India? If Yes! please share details with us.
Somany is among the frontrunners in the ceramic tile industry in India. The Company currently has access to manufacturing capacity of 44 mn sqm of tiles per annum spread across two own manufacturing plants in Haryana and Gujarat (19.15 mn sqm), five associate plants in Morbi, Gujarat (15.47 mn sqm) and other outsourcing tie ups (9.5 mn sqm).

We are investing majorly in the Kadi brownfield in our Gujarat facility. Along with expansion of the current JV’s of Somany Ceramics, we are also aiming towards investment into two new JVs as well.

We are adding 2.3 million sq. meter a year at Kadi, Gujarat facility through brownfield expansion. We are planning to invest Rs 150 Crore over the next 12 to 24 months for capacity expansion and brand building.

What can be the size of Ceramic industry in India? What’s your market share?
The overall size of the Indian ceramic tile industry is approximately Rs 18,000 Crore (FY12). India ranks in the top 3 list of countries in terms of tile production in the world. As per the industry stats, Somany Ceramics is among one of the top three tile manufacturers in India with a 6% market share in total tiles sector and 12% unorganized tiles sector.

We come under the best tile companies in India and are one of the leading vitrified tiles manufacturers along with a varied range of Wall Tiles, Floor Tiles, Sanitary Ware and Bath Fitting. Somany Ceramics’ tiles are also available in Europe, Middle East and from Asia to Africa, being the undisputed leader in the segment.

What are the challenges being faced by the Ceramic industry in India?
Being a developing country, India is on its growth track. There is a lot to be achieved. As we are the 3rd largest tile producers in the World, it is the response to the growing demand.

Organized sector share in value terms is slowly increasing as we are taking more & more unorganized players in our fold by either doing a JV with them or doing a simple contract manufacturing agreement.

Non-availability of skilled and well trained masons is an area of concern in the tiling industry.

What’s your take on the shortage of skilled labour in the Ceramic Industry? What’s the way forward to overcome the labour shortage?
By 2025, it is estimated that 70 per cent of Indians will be of working age. This ‘demographic dividend’ could give India an edge over the developed countries where a larger segment of the population would by then be past retirement. However, this demographic dividend can easily turn into a demographic disaster if a majority of the working age population remains unemployable due to lack of skills. Even today, one hears of a shortage of skilled workers across industries, which does not augur well for sustaining India’s economic growth. For instance, the construction industry lacks sufficient masons, resulting in a slowing of construction activity and increasing the overall cost of projects, posing a major challenge to India’s infrastructure development plans.

The tile laying sector is not organized and the tilers are not formally trained in our country. This makes the consumer wary of dealing with the tile laying activities. There was high growth rate in the construction industry in the last decade. This has created a shortage of various construction related skill Manpower. In spite of the fact that India produces world class tiles in terms of technical parameters but when it comes to laying of tiles our tilers are abysmally ill trained and noncompetent leading to poor quality of laying, shabby finish, lot of wastage of material and time.

Training of Tilers is vital to overcome the shortcomings being faced by the Tilers fraternity. Which can be summarized as under:-
• Highly un-organized building material industry
• Lack of trained masons/ Tilers.
• Non-usage of right equipments that results into bad workmanship and very long delivery time
• Uninformed consumers unsure of what to expect
• Lack of initiative from construction industry

To overcome the shortage of skilled labour, Tile master is an initiative started by Somany Tiles as a corporate social responsibility (CSR) with the purpose of Enhancing Tile Laying skills of Masons through Training of Masons on Tile Laying in totality enabling them to improve their skills & productivity and in turn their livelihood.

The other important & strategic purpose was to contribute in the growth of Tile Industry by way of creating pool of expert Masons so that world class tiles being produced in India should be laid perfectly in finish & aesthetics ensuring satisfied customer having high level of preference for Tiles in future Considering the practical nature of the course, 70% of the course hours is dedicated to practical hands-on training & practice of using the tools. The course allows the participants to achieve & develop the professional skills necessary to perform the various task of tile laying with the desired skill, safety required. Demonstrative method is used for use of most advanced tools sourced from world over. Most advanced ergonomically designed tools are used in the school for tile laying operation.

Where do you see your company five years from now? Do you have any plans for diversification?
Ceramic tiles industry is directly related to the real estate industry. Thus, the tile industry looks promising in the coming time, owing its credit to the growing economy, real estate boom, construction growth & infrastructure developments and the upcoming retail sector. We are focussing on doubling ourselves in the next three years. New constructions and renovations of existing properties will further boost the demand for ceramic tiles.

Over the years, we have realized that the best way to grow is to outsource the production to smaller players and leverage our brand and distribution network for marketing and selling the same. We shall, therefore, continue with our asset light model of growth wherein we would keep adding more and more capacities by taking stake in the equity of smaller manufacturers who shall exclusively produce for us.

We shall also expand plants of our existing associates and continue to enhance our product offerings through more value added products. To be one-stop destination for all homedecor needs, we will ramp up the sanitary ware and bathroom fittings segment.

Retail footprints would be strengthened further by adding more and more franchisee run stores year on year. In addition, Tier 2 & Tier 3 towns and the exports would be the thrust area for enhancing sales further. The strategies outlined above should result into a sustainable growth of our top and bottom line going forward. Recently, we have launched exclusive showrooms in Tirupati, Lucknow, Kolkata and Trichi and Somany studios in Gorakhpur and Agra. We will invest accordingly for expanding our business operations and upgrading our manufacturing facilities. We are targeting 20% plus growth in FY15 as there is high growth potential in the ceramic tile industry.

We have no diversification plans for the time being and will continue with the existing business verticals.

What is the way forward for the stakeholders to boost growth of the ceramic industry?
As a foreign exchange earner or a global player, Indian Tile industry has captured the attention of the world in the ceramic tiles segment. To compete internationally, our plants must be geared up to large units like currently operating  in China and Turkey which are driven by economies of scale. This will also help us in lowering our cost of production significantly.

Also, infrastructural support is a key factor that determines the speed of growth. Better infrastructure will bring in better growth in terms of consistency and sustenance. Freight, supply of power and gas remains the key cost-related issues impacting the industry. Availability, consistent supply and reasonable rates are extremely important for the growth of the ceramic tile industry.

A major change that took over the ceramic tiles industry, was the introduction of vitrified and porcelain tiles. These new entrant product types are said to be the tiles of the future. Internationally these tiles are already the major sellers. These category of products account for almost 50% of total tile sales by value in this industry. To offer the best, the machinery should be regularly updated and new technology should be utilized to provide world class tiles.

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