A SUMMER TRAINING REPORT ON “MARKET RESEARCH ON CERAMIC TILES INDUSTRY IN GHAZIABAD AND MEERUT REGION AND FINANCIAL ANALYSIS OF ORIENT CERAMICS LTD.” SUBMITTED TOWARDS THE PARTIAL FULFILLMENT
OF
POST GRADUATE DIPLOMA IN BUSINESS ADMINISTRATION (APPROVED BY AICTE, GOVT OF INDIA) (EQUIVALENT TO MBA) ACCADEMIC SESSION (2008-2010)
Submitted By-
Submitted To-
Mr. T.N.Srivastava
Nitesh shah B-08-28
Head, Training & Placement Cell Graduate School of Business & Administration, Greater Noida,U.P
External Guide -
Internal Guide-
Mr. Vijay Deepak Gupta
Prof. H.S.SHYAM
Regional Regional Manager, Manager, Orient Orient Ceramics Ceramics Industries Industries Ltd. GSBA
Faculty, Faculty, Marketing Marketing Dept., Dept.,
GRADUATE SCHOOL OF BUSINESS & ADMINISTRATION,GREATER NOIDA
1
Content Topic
Page No.
Cover page-
1
Content page-
2
Candidate declaration-
3
Acknowledgement
4 5-6
Chap-I-
Preface&Scope of the study
5
Objective of the study
6
Chap-II-
6-17
Global Tiles Industry
6-7
Global Sanitary Industry
7
About Indian Ceramic tiles Industry
8-15
Industry Statistics
16-17
Export-Import Scenario
17 17-26
Chap-III-
Research Methodology&Findings
17-25
Limitations
25-26
Chap-IV-
26-39
About OCIL
26-29
Financial Analysis &Recommendation
30-36
Demand Drivers
37
SWOT Analysis
38
Distribution System
38
Ceramic Marketing
38-39
Chap-V
39-41
Other Recommendations
39
Risk & Concerns
40
Conclusion
40-41
References
41 2
Candidate Declaration/Certificate of Supervisor I here hereby by decl declar are e that that the the work work whic which h is bein being g pres presen ente ted d in this this repo report rt enti entitl tled ed “Market Research on Ceramic Tiles Industry in Ghaziabad & Meerut Region And financ financial ial overvie overview w of compan company” y” is an auth authen enti tic c reco record rd of my own own work work carried out under the supervision of Mr. Vijay Deepak Gupta, Regional Manager, Orient Ceramic Industries Ltd. The matter embodied in this report has not been submitted by me for the award of any other degree.
Dated: Dated: 4-7-09 Student
Name of NITESH KUMAR SHAH
This is to certify that the above statements made by the candidate are correct to the best of my knowledge.
Signature
Supervisor’Name:MR.VIJAY DEEPAK GUPTA Designation:REGIONAL MANAGER
Company-Orient Ceramics Industry LTD.
3
Acknowledgement Deepak Gupta, Gupta, Regional Regional Manager, Manager, I express my profound gratitude to Mr. Vijay Deepak Orient Ceramics Industries Pvt. Ltd who assigned me as a Summer Trainee in
Orient Ceramics Industries Pvt. Ltd. I want to give my sincere thanks to his kind advice and guidance that had made my project successful. Many of the sound advices have been well taken by me and it is largely due to his patience that I was able to achieve my goals successfully. P.L.Maggu ggu –Execut I am also also grat gratef eful ul to DR. P.L.Ma –Executive ive Direct Director, or, Gradua Graduate te
School of Business & Administration, Greater Noida, Mr. T.N.Srivastava –Head ,Training and Placement Cell, GSBA, Prof.V.N.Rai, Dean, GSBA, Mr. Vijay Deepak Gupta, Regional Manager, Orient Ceramic Industries
Ltd., and all the faculties of GSBA who supported a lot and gave me the permission of Summer Training in Orient Ceramics Industries Ltd.. Also I would like to give regards to my Parents, seniors, friends who have in some way helped me in completing this project.
Nitesh kumar shah PGDBA-III, B08-28
Chapter I 4
Preface The word "Ceramic" has originated from the Greek word, "Keramos", which means pottery. It also relates to an ancient Sanskrit word whose root meaning is “to burn,” but it is predominantly predominantly used to indicate indicate "burnt stuff". Almost 10,000 years later, with the establishment of settled communities, tiles were manufactured in Mesopotamia and India. The first instance of functional pottery vessels being used for storing water and food is thought to be around 9,000 or 10,000 BC. Clay bricks were also made around the same time. The ceramics industry in India came into existence about a century ago and has matured over time to form a industrial base. From traditional pottery making, the indust industry ry has evolve evolved d to find find its place place in the market market for sophis sophistic ticate ated d insula insulator tors, s, electronic and electrical items. Over the years, the industry has been modernising through new innovations in product profile, quality and design to emerge as a modern, world-class industry, ready to take on global competition. Though there are a number of large companies in the ceramics sector, small and medium enterprises (SMEs) account for more than 50 per cent of the total market in India, offering a wide range of articles including crockery, art ware, sanitary ware, ceramic tiles, refractory and stoneware pipes among others. Most of the players are grouped together in clusters. Over Over the the last last two two deca decade des, s, the the tech techni nica call cera cerami mics cs segm segmen entt has has reco record rded ed an impressive growth propelled by the demand for high-alumina ceramics, cuttings tools and structural ceramics from the industry. Overall, the Indian ceramics industry has emerged as a major manufacturer and supplier in the global market.
Scope Of The Study
Ceramic tile comes under ‘Building Material Industry’. Over the years, Indian Building Material Industry poised to grow at a fast pace of almost 16%/annum due to boom in 5
real estate and construction industry. Increase in income levels and availability of a range range of fina financ ncin ing g opti option ons s for for hous housin ing g is enab enabli ling ng rapid rapid grow growth th in hous housin ing g construction. In India, particularly in NCR region, growth rate of building material industry is at very high and constantly growing. By this project finding, we have been trying to catch the opportunities and demand of various tile making organisations for their commercial and residential needs in Ghaziabad and Meerut region. Also as marble prices begin to pinch purses in these times of meltdown, tiles are maki making ng deep deeper er inro inroad ads s into into urba urban n home homes. s. And And they they are are gett gettin ing g more more desi design gner er makeovers to suit market demands.
Objective Of The Study Our soul objective of this report confines with these facts•
•
•
•
To know the nitty-gritty of Ceramic tile industry as much possible Determine the market size and potential of all the organise and unorganised players A comparative analysis among some major players of tiles industry , especially in Ghaziabad and Meerut region in terms of Quality, Brand Equity, Price and Customer Service. Further scope and opportunity analysis.
Chapter-II Global Tiles Industry
6
There are three major regions in the world, namely, Asia, Latin America and European Union (EU), that produce and export ceramic tiles in bulk. In 2008, they had jointly produced more than 87% of the global output. World production of ceramic tiles was 7565 million sq.mt. in 2008.China was the largest producer with a total production of 2200 million sq.mt. Spain and Italy were the 2 nd and 3rd largest producers with production of 635 million sq.mt. and and 589 million sq.mt. sq.mt. respectively. India ranks at 5th posi positi tion on with with prod produc uctio tion n of 270 270 mill millio ion n sq.m sq.mt. t.,, whic which h is arou around nd 2.5% 2.5% of glob global al production. The ratio between consumption and production has been stable at around 94 per cent. Ceramic Ceramic tile production production has been increasin increasing g at a cumulative cumulative rate of close to 6 per cent. Asia is the most signifcant region by production, as well as consumption, accountin accounting g for more than 50 per per cent cent of of both. both. China China is the the leading leading country country in the the production of ceramic tiles with a share of 33 per cent at a total production of 2,200 million square metres, followed by Spain and Italy. Europe accounts for 30 per cent and USA accounts for 14 per cent of the total global production of ceramic tiles. In terms of consumption the pattern remains similar, with Asia accounting for 51 per cent, Europe Europe for 26 per cent and USA accounting accounting for 18 per cent of the total global ceramic tile consumption.
Global Sanitaryware Industry The global global sanitary sanitary ware industry industry is estimated estimated to be 187 million million pieces and growing at about 7 per cent Y-o-Y. The main sanitaryware producing countries in the world are China, Italy, Mexico, Brazil and Spain, which together account for about 35 per cent of global production India, with a size of 6.7 million pieces, accounts for about 3.3 per cent of global production. Penetration of sanitaryware in India-abo India-about ut 30 per per cent, cent, is much much lower lower than even neighb neighbourin ouring g Asian countries, countries, indicating signifcant growth potential for for this sector in the Indian Indian market. The Indian sanitaryware market has been growing at about 10 per cent a year, as compared to the global average growth of about 7 per cent.
7
INDIAN CERAMICS INDUSTRY Ceramic Tiles India’s India’s ceramic ceramic tile tile industry industry emerged emerged in the 1950s. 1950s. Tiles Tiles form the most most significant significant part of the Indian ceramics industry and consist of floor tiles (46 per cent), vitrified and porcelain tiles (12 per cent) and wall tiles (42 per cent). The floor tiles segment is growing growing faster faster as compared compared to wall tiles. Vitrifed Vitrifed and porcelain porcelain tiles are recent entrants into the ceramic tile industry and have increased the size of the market considerab considerably. ly. It is expected expected that this segment segment will capture capture the bulk of the market gradually, replacing the conventional floor and wall tiles segment. These tiles are light and have the added advantage of being offered in designer looks as compared to mosaic tiles, which are heavier and more expensive to transport. Both organised and unorganised sectors play a key role in the manufacturing of ceramic tiles tiles in India. India. The per capita capita consump consumptio tion n of cerami ceramic c tiles in India India is very very less as compared to the other countries in the world. It is as low as 0.15 sq.mtr per annum. This low per capita consumption shows the likely demand that is going to arise in the futu future re in Indi India a as more more and and more more deve develo lopm pmen entt takes takes plac place. e. Cera Cerami mic c Tile Tiles s are are furnishing material apart from being utility or hygiene products. Despite an overall slowdown of the economy this sector continues to grow at a healthy 12 percent per annum. annum. Growth Growth of the unorgan unorganize ized d sector sector accoun accounted ted for 44 percent percent of the total total Production and the revenue earnings from the organized sector accounted to over Rs150 crore. India ranks 7th in terms of production in the world and the market share of India have risen from 1.7 percent to 2.7 percent in terms of ceramic tile production.
8
MARKET SIZE OF THE INDIAN CERAMIC INDUSTRY The Indian Indian ceramic tile industry is estimated estimated at US$ 0.35 0.35 billion. It Comprises of wall wall tiles, floor tiles and vitrified vitrified tiles. The per capita capita Consumpti Consumption on of ceramic ceramic tiles in Indi India a is just just 0.15 0.15 squa square re metr metres es per per Annu Annum, m, whic which h is quit quite e low low as comp compar ared ed to developed countries.
9
The industry has been experiencing increased demand, which, in recent years, has matched matched the installed installed capacity. capacity. While capacity capacity has also increased increased significan significantly, tly, from 120 million tonnes in 2004, to 215 million tonnes in 2008, the demand has grown nearly two and a half times in the same period, from 97 Million tonnes to 207 millio million n tonnes tonnes.. Cerami Ceramic c tiles tiles are produc produced ed by organi organised sed,, as well well as unorga unorganis nised ed players. players. The share of production production of organised organised players players is around around 55 55 per cent. The organised sector sector is characterised by the existence of a few large players, such as H. & R. Johnson, Johnson, Kajaria Kajaria Ceramics, Ceramics, Bell Ceramics, Ceramics, SPL, Spartek Spartek and Murudeshw Murudeshwar ar Ceramics,OCIL and Nitco.
ORGANISED PLAYERS
10
Some of the major players of Indian ceramics industry are-
o o o o o o o o
Asian Granito (India) Ltd. Euro Ceramics Pvt. Ltd. H. & R. Johnson (India) Ltd. Kajaria Ceramics Ltd. Nitco Tiles Pvt.Ltd. Orient Ceramics And Industries Ltd. RAK Ceramics India Pvt. Ltd. SPL Ltd.
PRESENT PRESENT MARKET MARKET SHARE OF TILE PRODUCER PRODUCER COMPANIES COMPANIES IN NORTHERN INDIA
11
A Brief Description of Major Players
Orient Ceramics Industries Ltd. Headquartered at New Delhi, Orient was incorporated as a Public Limited Company on 18th May 1977 for the manufacture of ceramic tiles with an installed capacity of 0.4 Million sq. mtrs. per annum which has now grown to 14 million sq. mtrs. per annum. Mr. Mahendra K. Daga currently heads Orient Ceramics as Chairman & Managing Director with the credo of delivering products of sustained excellence and superior quality. Orient’s Orient’s state of the art manufacturi manufacturing ng unit at Sikandrabad Sikandrabad (Bulandshar (Bulandshar,, U.P.) is spread across 40 acres of land and conforms to the IS 13753-56:1993 of BIS, ISO 10545-1/17 & ISO 13006 specifications. Orient has also been accredited with the ISO 9001:2000 certification for quality control management. Since inception, OCIL has been scaling new heights and has evinced a steady growth rate. OCIL’s commitment to excellence and quality has earned it a wide and diverse customer base, which spreads across Europe, South East Asia, Middle East and the SAARC countries. It plan plans s to dive divers rsif ify y into into impo import rtin ing g and and dist distri ribu buti ting ng othe otherr buil buildi ding ng mate materi rial al products. This shall be accomplished through a strong network of over 800 dealers and 2500 sub-dealers spread all over the country. The operative keywords are: •
Quality 12
• •
Durability Aesthetic Appeal
Thus, it 'creates tiles with a distinct persona'. OCIL is not just a tiles manufacturer but a company devoted to offer 'extraordinary create and enlive enliven n exclus exclusive ive design designer er homes homes and wall wall and floor floor soluti solutions ons'' to create offices.
KAJARIA TILES: It is the the larg larges estt ceram ceramic ic floo floorr and and wall wall tile tile manu manufa fact ctur urer er in the the seco second nd most most populous country in the world. It is promoted by Mr. Ashok Kajaria and Kajaria Export Limited (Group Company) in technical collaboration with Todagres, S.A., Spain. It commenced operation in 1988 in Sikandrabad, (Uttar Pradesh) with an annual capacity of 1 MSM of floor tiles. It possesses an annual installed capacity of 21 MSM MSM acro across ss two two faci facili liti ties es at Sika Sikand ndra raba bad, d, (Utt (Uttar ar Prad Prades esh) h) and and Gail Gailpu purr (Rajasthan). It has been equipped with eight stock points, eight Kajaria World showrooms, 19 offices-cum-display centres and 7,000+ dealers and sub-dealers on a panpan-In Indi dia a basi basis. s. It is the the most most prom promin inen entt Indi Indian an cera cerami mic c tile tile bran brand d with with a favourable recall. The largest exporter of ceramic tiles in India. It has unmatched produc productt offeri offering ng (wall, (wall, floor, floor, vitrif vitrified ied,, Spanis Spanish h and Italia Italian n tiles) tiles).. It has brandbrandenhancing customers like Unitech, DLF, Parsvnath, Magarpatta, Sobha Developers, DSK, Mantri Group,Prestige Group, Ansals, Hiranandani, Raheja Developers, Omaxe and EMAAR-MGF, among others.
ASIAN TILES: This company is the result of the dreams of three entrepreneurs, materialized with the grassroots of passion, experience & dynamism… With starting a quest for excellence a decade ago, today Asian tiles have blazed a trail in the tile industry. With humble beginning in the field of floor tiles, today it has expanded till the horizon, covering almost each of the aspects of the industry. Supported by vast man power along with mind power, Asian Tiles possesses the strength of over 3000 business associates spread across the nation. Asian is all set to reach the goal of supplying world class product, through a network of 18 depots with display centres & ultra modern plant in the ceramic zone of Sabarkantha, Gujarat, spread over an area of 2, 30,000 Sq. Mtr. and production capacity of two plants is 32300 Sq. Mtr. Per day of tile. Asian has become India's leading wall tile manufacturer in large format size, with the biggest size of 300 X 900 mm, where we provide wall tiles of white body similar to Euro Europe pean an tile tiles, s, with with the the prom promis ise e of extr extrem emel ely y accu accura rate te size size cont contro rol, l, to add add brightness and depth to the glaze.
H & R JOHNSONS: 13
H. & R. Johnson Johnson (India) Limited Limited is India's India's No. 1 tile company offering a wide range of wall and floor tile products across various segments v.i.z. Wall, Floor, Vitrified, Exterior and Industrial. The company also has diversified interests in sanitary ware and bathroom accessories. With a vast portfolio comprising of 5 well-known brands in India (Johnson, Marbonite, Porselano, Endura & Milano) the company provides the most innovative products of international standards that is coupled with the best of pre and after sales service.
EURO CERAMICS: Part of “Euro Group” Group” Integral part of the Decorative industry in India. India. Promoters:
Mr. Nenshi Shah: Mr. Talakshi Nandu : Mr. Kumar Shah : Mr Paresh Shah Current Business Profile :
Vitrified Ceramic Tiles :
79,971 MTPA.
Aluminium Extruded Sections Calcareous Tiles : Sanitary ware
:
:
1800 MTPA
45,000 MTPA 11,000 MTPA
Trading in Wall Tiles through a 100% subsidiary
Technology:
SACMI (For Vitrified Tiles & Sanitary ware) ware) Quality focus:
Vitrified Tiles
:
Manuf anufac actu turi ring ng faci facili liti ties es
ISO 13006. Applied Consumer Florida, U.S.A. VJTI, Mumbai :
Services
Inc.
ISO ISO 9001 9001:2 :200 000 0 cert certif ifie ied d
NITCO TILES: A foundation laid on innovation. Since 1953.Going beyond the ordinary and leading by example is a common tradition practised at Nitco. No wonder, the company is renowned and revered for its revolutionary concepts, pioneering endeavours and premium products in the construction industry for over five decades.Today, with its rich repertoire repertoire in offering offering unique Floor Tiles, Tiles, Mosaico, Mosaico, Wall Tiles and Marble, Nitco has gone to become the most preferred name and the ideal choice of millions of hous housee-ho hold lds s and and the the real real esta estate te frat fratern ernit ity. y. An avan avantt-ga gard rde e at the the core core,, the the 14
company has continued to pioneer ground breaking innovations in all its offerings. Ceramic Tiles, Vitrified Tiles, Pavers, Imported Marble, Engineered Marble, Intarsiasplendours of inlay marble and Mosaico- artistic creations in mosaic rendered in stone, ceramic and marble, for instance. Winning 13 Capexil awards for innovation and design is the perfect testament to all of its achievements.
SOMANY TILES: In the Indian tiles sector, Somany has achieved a clear leadership position by whol wholeh ehea eart rted edly ly adop adopti ting ng forw forwar ard d thin thinki king ng and and an inno innova vati tive ve and and futu futuri rist stic ic approach. Whether ceramic glazed tiles, vitrified tiles, sanitary ware or porcelain floor tiles, Somany prides itself in being at the very forefront of style and quality. From raw material imported from Italy and Spain, to the constant endeavor to be the first to introduce new products in India, Somany has been, and will always strive to be a dynamic leader in its field. It began as a vision of things to come, and is today a trail-blazer that others follow. In 1969 Shri H L Somany incorporated a company called Somany Pilkington's, which later became Somany Ceramics Ltd. It was the power of a dream and the zeal to excel, that drove Shri H L Somany to forge a path of unparalleled success for this company. The dynamic leadership team in Somany not only spans three generations of able leaders, it also brings together their staggering breadth of experience and wisdom. With Shri H L Somany at the helm as Founder, Shri Shreekant Somany as the CMD and Shri Abhishek Somany as the JMD, the company is heading towards an exciting phase of expansion and growth. This core leadership team along with a large team of highly highly dedicated dedicated and talented talented people is continuou continuously sly working working towards towards creating creating more value for all stakeholders. Their commitment to excel in every sphere and to fuel growth in the core as well as new sectors has truly created a powerful vitality within the company, both in mind and spirit. In 1971 the very first unit of Somany started production in Kassar, Haryana. Since then Somany has reached and surpassed many milestones – setting-up of second unit in 1981, buyout of all equity shares by Somany's Indian promoters in 1994; achieving Government recognition for its R&D Department in 1996 (a first in the tiles industry); getting ISO 9002 certification in 1998; achieving ISO 14001 for environment friendly facilities, in 1999; ventured in retailing in 2007, joint venture with Keraben under brand name “Synergy”, got patent for VC technology-a first ever in Indian Ceramics industry and incorporation of HL Somany group. Somany Global flagship retail showrooms are currently located in Delhi, Gurgaon, Ludhiana and Mumbai, Pune and Indore. Many other retail showrooms are about to be opened in leading centres. These showrooms cater to high-end customers and offer imported tiles as well as exclusive Aquaware brand sanitary ware. A large network of Somany display centers are also a lso spread across the country. A wide cutting-edge array of designs and material make up the inspiring Somany range of tiles. Somany Somany strives strives to bring its customers customers floor, floor, wall, vitrified, vitrified, ceramic, ceramic, porcelain and innovative tiles that are the very latest in the world. Somany prides itself in the sheer variety of design and finish, and constantly looks to bring new 15
and trend-setting ideas into the tile industry. The futuristic patented VC Shield range of tiles from Somany, are the world's most durable floor tiles. Created using the breakthrough, 'Veilcraft technology', that creates a special layer on the tiles that keep them free from abrasion, scratches and stains, these tiles retain the original glaze and finish for years. No wonder then, that these tiles comprehensively outperform ordinary ceramic tiles including PEI grade 5 tiles. Venturing into the burgeoning sanitary ware sector, Somany has already made majo majorr in-ro in-road ads s into into this this mark market et.. With With its its rang range e of high high qual qualit ity y prod produc ucts ts and and offerings under the brand name of Aquaware, Somany is focusing on creating a niche for itself in this sector, by bringing in and adopting the latest in design, concept and technology. In the endeavor to bring the very best to customers, we source our raw material from as far as Italy, Spain, and China besides Rajasthan, Uttar Pradesh, Madhya Pradesh and other major centers in the country. Soma Somany ny has has a prod produc ucti tion on capaci capacity ty of 15.7 15.7 mill millio ion n sq mt per per annu annum m from from its its Haryana Haryana and Gujarat Gujarat units. It has always focused on acquiring acquiring and leveraging leveraging the latest technologies and know-how. A commitment to bring to life new ideas and design innovations is driven by the huge amounts of funds invested in research and development. This has borne fruit in the form of Somany's achievement of esta establ blis ishi hing ng the the very very firs firstt Gove Govern rnme ment nt Reco Recogn gniz ized ed In-h In-hou ouse se Rese Resear arch ch & Development Centre. Somany has also brought in some ground-breaking technologies into the Indian market. Their highly advanced Rotocolour Machine has the capacity to decorate cerami ceramic c tiles tiles with with glazes glazes,, using using a serigr serigraph aphic ic decora decoratin ting g system system that that employ employs s silicon cylinders. This integrated system that optimizes decoration of tiles enables any any kind kind of rand random om desi design gn and and also also a marb marble le effe effect ct.. A trul truly y tren trendd-se sett ttin ing g achievement, it has helped Somany to set new industry benchmarks in quality and production standards for ceramic tiles. Another exceptional technological advantage has been achieved with Somany's new Laser Laser Guided Guided Vehicl Vehicle e system system.. This This cuttin cutting-e g-edge dge materi material al transp transport ortati ation on system system has automa automated ted the moveme movement nt of cerami ceramic c materi materials als in the produc productio tion n system system.. The Laser Laser Guided Guided Vehicle Vehicle facili facilitat tates es optima optimall and accura accurate te handli handling, ng, thereby minimizing rejection of in-process materials during the production of tiles. All of this is a result of Somany's commitment to bring the best and the latest to its valued stakeholders and customers in India.
16
INDUSTRY STATISTICS: 1.
World production:
6900 Million sq.mt.
2.
India's Share:
340 Million sq.mt..
3.
World ranking (in production):
5
4.
Per capita consumption:
0.30 sq.mt.
5.
Global Industry Growth Rate:
6%
6.
Growth Market):
7.
Organized industry turnover (India): Rs 3000 crores
Rate
(India
Domestic 15%
Glazed Wall Tile share:
40%
Glazed Floor Tile share:
46%
Unglazed share:
Vitrified
Tile 8%
Glazed Porcelain Tile Share: 6% Unorganised Industry Turnover
Rs 3500 crores
Glazed Wall Tile share:
57%
Glazed Floor Tile share:
35%
Unglazed share:
Vitrified
Tile 6%
Glazed Porcelain Tile Share: 2% 8.
Investments in last 5 years:
9.
Organized sector:
10.
Rs 2000 crores
Share of Production:
56%
No. of units:
16
Revenue (excise duty):
Rs 300 crores
Unorganized sector:
Share of Production: 17
44%
11.
No. of units:
200 (appro (approx.. x..)) (70% (70% based based in Gujarat region)
Revenue (excise duty):
Rs 350 crores per annum or less 50,000 direct
Job Potential:
500,000 indirect
Export & Import Scenario Apart from domestic demand, exports of ceramic tiles from India have also been been increas increasing ing.. From From a level level of US$ 33.3 33.3 millio million n in 2001-0 2001-02, 2, export exports s of ceramic tiles from India have gone up to US$ 58.5 million in 2006-07, at a CAGR of 12 per cent. India exports tiles to other parts of Asia, Africa and West Europe. The other main exports of ceramic products consist of chemical porcelain and insulators, handicraft artware and stoneware crockery. Imports of tiles have gone up rapidly in recent years, to almost match the level of exports. From around US$ 8.3 million in 2001-02, imports have gone up to nearly US$ 55 million in 2006-07, at a CAGR of 46 per cent. Rising imports indicate the rapid growth in domestic demand for tiles, due to boom in real estate construction.
CHAPTER-III Research Methodology Title: 18
To determine the perception about various tile’s quality, brand equity, price and customer service.
Title Justification: Title is self-explanatory. The study mainly deals with the quality, brand awareness, price analysis and above all customer experience about the various tile products and categories.
Objective: •
•
•
To determine the awareness level of different major tile players among the architects. To determine the customer awareness level, particularly for new users of tiles. In depth study on the dealer network of various tiles manufacturers.
Significance of the study: Significance for the industry: Thi This s is a limi limite ted d stud study y whic which h take takes s into into cons consid ider erat atio ion n the the resp respon onse ses s of 20 architect’s, 25 dealers & 150 customers. This data can be explorated to take in the trends across the industry. The significance for the industry lies in studying these trends that emerge from the study. It is a rapidly changing and evolving sector. A study like this can attempt to guide the future of the industry based on current trends. Also the views of the architects and dealers would help in determining the future strategies of the companies and add to the betterment of end user requirement.
Significance for the researcher: To have a firsthand research experience about tiles industry. Various primary and secondary data sources would help in shaping a good notion about the industry trends trends and its future future prospe prospects cts.. Also Also recomm recommend ending ing measur measures es to improv improve e the present scenario of a company would boost up the confidence of the researcher.
Research Design: Type of Research: Exploratory and descriptive experimental research 19
Size of sample: 20 Architect, 25 dealers and 150 customers. Area of study: Ghaziabad and Meerut City Sampling procedure: Convenience Sampling Method: The research research is primar primarily ily both both explor explorato atory ry as well well as descrip descriptiv tive e in nature. The sources of information are both primary & secondary. A well well-s -str truc uctu ture red d ques questi tion onna nair ire e was was prep prepare ared d and and pers person onal al inte interv rvie iews ws were were conducted to come to the conclusion.
Brand Awareness Analysis: BRAND AWARENESS RATING
MEAN RATING
20
INTERPRETATION: According to the architect’s brand awareness, Kajaria Tiles is on the top followed by Somany tiles, H.R.Johnson’s Pvt. Ltd., Orient tiles and Nitco Tiles.
Quality Analysis: Quality Rating
Quality Mean
21
INTERPRETATION: According to the Architect’s, quality wise Kajaria Tiles is leading the market followed by by H.R.Johnson Pvt. Ltd., Ltd., Somany Somany Tiles, Orient Tiles Tiles and Nitco Tiles. Tiles.
Dealer’s Network: Dealer’s Network Rating
Dealer’s Network’s Mean
22
INTERPRETATION: According to Architect’s view, Kajaria ceramics has the widest dealer’s network in the sample area followed by Orient Tiles, Somany Tiles, H.R.Johnson Pvt. Ltd, and Nitco Tiles.
Overall Architect’s Choice:
INTERPRETATION: 23
Overall view of the Architect’s leads to this fact that the surveyed region is mostly favoured by Kajaria Tiles Pvt. Ltd., followed by Somany Tiles Pvt. Ltd., Orient Tiles Pvt. Ltd. And Nitco Tiles in the branded and organised ceramic tiles segment. Customer Experience Study: A total number of 100 customers (new user) being interviewed at various locations of Ghaziabad and being asked to rate the above mentioned tile brands in terms of their awareness and choice and usage. The parameters are as follows: 1. 2. 3. 4. 5. 6.
Price Durabi Durabilit lity y and and qual quality ity Awar Awaren ene ess Resp Respon onse se pac pace e Avai Availa labi bili lity ty Variety
Overall Customer Rating
Overall Customer Experience Mean
24
Interpretation:
The above mentioned graph shows a very tough competition among all the major organised players. Kajaria tiles is ahead in terms of customer rating followed by Orient Tiles, H.R.Johnson Ltd., Somany Tiles and Nitco Tiles.
Dealer’s Experience Study:
A total number of 25 dealer’s of various tiles manufactures had been interviewed in Ghaziabad and Meerut Region on the basis of following parameters: • • • • • • • • • • •
Brand availability in the store Frequency of the inventory Timely delivery Special/urgent supply Supply time Representative relation Cash/dealer’s discount Frequency of taking dealer’s advice Customer’s prerequisite specification needs, if any Variety in quality and size of the tiles Dealer’s ranking
25
Overall Dealer’s Experience Rating
Overall Dealer’s Experience Mean
Interpretation: In term terms s of deal dealer er’s ’s stud study, y, Kaja Kajari ria a Tile Tiles s is the the most most soug sought ht afte afterr bran brand d followed by Somany Tiles,Orient Tiles,Orient Tiles, H.R.Johnson H.R.Johnson Ltd. And Nitco Tiles. Tiles. 26
Limitations of the Study: •
•
•
•
The The samp sample le size size is very very less less,, henc hence e it does does not not impl imply y for for the the comp comple lete te population.
There was lack of time and resources that prevented from carrying out an in depth study.
The The find findin ings gs of the the surv survey ey are are base based d on the the subj subjec ecti tive ve opin opinio ion n of the the respondents and there is no way of assessing truth of the statements.
There is some respondent’s bias which cannot be removed.
•
•
some amount of error exists in the data filling process because of the following reasons: Influence of others. Misunderstanding of the concept. Hurried filling of the questionnaire. The research is confined to a certain parts of Ghaziabad and Meerut and does not necessarily shows a pattern applicable to all of Country.
•
Some respondents were reluctant to divulge personal information which can affect the validity of all responses.
•
In a rapidly changing industry, analysis on one day or in one segment can change very quickly. The environmental changes are vital to be considered in order to assimilate the findings.
Chapter – IV 27
ORIENT TILES
. (OCIL)
spearheaded by Mr. Mahendra K.Daga, has earned a reputation of being the frontrunner in innovation in home décor. In line with the company's credo of sustained excellence and superior quality, we constantly endeavour to provide customers with the finest ceramic floor and wall tiles, through our exhaustive product range, innovative designs & sophisticated colours. This endeavour is accomplished using a state-of-the-art environment friendly manufacturing unit at Sikandrabad, UP. Here, the latest technology is employed to manufacture products that adhere to international quality standards. The patterns used ensure that the tiles crafted provide both aesthetic appeal and durable functionality. Such commitment to quality and product innovation has earned us a wide and diverse customer base. Our clientele extends beyond house builders, architects, and institutions in India to Europe, South East Asia, Middle East and the SAARC countries. We plan to diversify into importing and distributing other building material products. This shall be accomplished through a strong network of over 800 dealers and 2500 sub-dealers spread all over the country. The operative keywords are: • • •
Quality Durability Aesthetic Appeal
Thus, we 'create tiles with a distinct persona'. We are not just a tiles manufacturer but a company devoted to offer 'extraordinary wall and floor solutions' to create and enliven exclusive designer homes and offices.
History of OCIL: Headquartered at New Delhi, Orient was incorporated as a Public Limited Company on 18th May 1977 for the manufacture of ceramic tiles with an installed capacity of 0.4 Million sq. mtrs. per annum which has now grown to 14 million sq. mtrs. per annum. 28
Mr. Mahendra K. Daga currently heads Orient Ceramics as Chairman & Managing Director with the credo of delivering products of sustained excellence and superior quality. Our state of the art manufacturing unit at Sikandrabad (Bulandshar, U.P.) is spread across 40 acres of land and conforms to the IS 13753-56:1993 of BIS, ISO 105451/17 & ISO 13006 specifications. We have also been accredited with the ISO 9001:2000 certification for quality control management. Since inception, OCIL has been scaling new heights and has evinced a steady growth rate. Our commitment to excellence and quality has earned us a wide and diverse customer base, which spreads across Europe, South East Asia, Middle East and the SAARC countries.
Market Potential of OCIL The The indust industry’ ry’s s potent potential ial appear appears s attrac attractiv tive, e, follow following ing the realty realty growth growth in the housing, retail, IT and BPO sectors. The low per capita consumption projects a rising demand for ceramic tiles in India as they are used for aesthetic, besides utilit utility y and hygien hygiene e reason reasons. s. To capita capitalis lise e on the latent latent demand demand,, the indust industry ry player players s have have expand expanded ed their their distri distribut bution ion netwo networks rks signif significan icantly tly.. Owing Owing to the delicate nature of the product, distribution and logistics costs form a substantial portion of the total costs and the success of the distribution chain – marked by delive delivery ry prompt promptnes ness, s, well-e well-equi quippe pped d dealer dealer stocks stocks and wide wide market market reach reach – is critical to the success of retail sales. Indian economy is poised to grow at 7-8 percent and with growing incomes and urbanization, demand for houses is slated for growth. The increasing focus on rural areas, by government and corporate, the demand for housing would also increase in rural areas. The ceramic industry will will also benefit from the the above developments. Increasing demand is just one part of the story the availability of Finance is the other part. With the availability of loans at low interest rate and tax incentives have enabled the people to buy houses and build up their own establishment. With the increasing competition amongst both Banks and Housing Finance Companies the people are avail of getting better financing options and that too at a cheaper rate. This would further increase the demand for tiles.
THE WORLD OF ORIENT Tiles Range: Interior Range Floor Tiles
29.5*29.5 30*30 39.5*39.5 29
40*40 49.5*49.5 60*60 60.5*60.5
Wall Tiles (in cm.)
14.8*14.8 20*20 20*30 20*40 29.5*59.5 60*60 60.5*60.5
Exterior Range Floor Tiles (in cm.)
30*30 39.5*39.5 40*40 Wall Tiles (in cm.)
14.8*14.8 20*40
Price Analysis 30
The price of ceramic tiles depends on the various size and measurements of the tiles. Although we have noticed that tile dealers are not ready to give price details fairly, somehow we have managed to extract some of the tiles prices of various players. the mostly used vitrified tile size for living room is 2’ X 2’, for kitchen and for toilet people used to install ceramic tiles of 16’ X 16’ and 12’ X 12’. For dining they used to stick with vitrified tiles of 2’ X 2’ size. Now , in wall tiles segment, the general market price in Ghaziabad starts from Rs.21/sqft,in floor it is Rs.22/sqft and in vitrified it is Rs.35/sqft.
Financial Overview of OCIL
31
32
33
FINANCIAL ANALYSIS AND RECOMMENDATIONS
After the analysis of profit & loss account and balance sheet of orient ceramics we have got some financial analysis about the company and tried to give our recommendations according to it. We went for ratio analysis to find the actual financial condition of the company. 1. Liqu Liquid idit ity y rati ratios os 2. Profit Profitabi abilit lity y ratios ratios 34
3. Invest Investors ors inte interes rests ts ratios ratios
1. CURRENT RATIO- It is an indicator of the firm’s commitment to meet its
short term liabilities. It is expressed as follows- current assets/current liabilities From balance sheet=inventories+sundry debtors+cash+bank Balances+short term loans & advances/ Current liabilities +provision =423999406+404470339+6962801+149639658/ 411841400+23653137 =2.26 RECOMMENDATIONS- An ideal current ratio is 2.this is just above 2 but a company should maintain ratio between 1.5-2 so company should decrease it some points as it is showing less efficient use of funds.
This is due to because of high dependence on long term sources of raising raising funds. Long term liabilities are costlier than current liabilities therefore this will result in considerably lowering down the profitability of the company. In balance sheet of 31-03-2008 and 31-03-2007 we can also observe that long term liabilities has grown up by 599525935 rs.to 942762466 rs.in 2008 by 57% increased.
RATIO - (acid test ratio or quick ratio) 2. LIQUIDITY RATIO This ratio is the indicator of the short term solvency of the company. It shows the comparison of inventory holds up. We will not consider prepaid expenses and stocks in liquid assets. Liquidity ratio- liquid asset/current liabilities = 985072204-423999406/435494 985072204-423999406/435494357 357
35
= 1.28
Recommendation-satisfactory ratio should be 1.so it is just above 1 so company needs to reduce its inventory level as it blocks cash of the company.
rati o is determined to ascertain the 3. DEBT EQUITY RATIO- the debt-equity ratio soundness of the long term financial policies of the company. =long term debt/equity =942762446/479817704 =2:1 So it can be said as satisfactory that company has 2/3 part debt and 1/3 part as equity.
4.RETURN ON INVESTMENT/RETURN ON CAPITAL EMPLOYEDIT INDICATES THE PERCENTAGE OF RETURN ON THE TOTAL CAPITAL EMPLOYED IN THE BUSINESS. =operating profit/capital employed =43685580/14939220722=2.92%(in2007-08) And comparison with 2006-07 =173837365/1122303254=15%(2006-07)
In 2008 the ROI was very less and will called as totally unsatisfactory as your operating cost is higher than to return.no one can dare to run a investment in just 3% which is below than to the interest of bank’s saving account.
Company gave some reasons behind thisa. High operating operating cost cost due to to high high inflation inflation.. b. The maximum maximum projects projects that company company undertoo undertook k were in bulk discounted discounted so they increased the sales revenue but could not increase profit margin. 36
c. High High competi competitio tion n from local local playe players. rs.
5.RETURN ON EQUITY SHARE HOLDERS FUND=PROFIT AFTER TAX/EQUITY SHARE HOLDERS FUND =24873117/479817704 =5.1%(2008) In compare to 2007-25% So the return has been decreased by 80%.and it could not be said as satisfactory as 8-10% is easily available through in fixed deposits,bonds ,debentures so investors will go away. Recommendation-company needs to decrease its operating cost such as inventory cost, manufacturing costs because this year they were having higher percentage in operating costs.
6.GROSS PROFIT RATIO- this ratio is the relationship between gross profit and net sales. =gross profit/net sales =net sales-cost of goods sold/net sales =2145679729-(199560672+1829127984)/2145679729 =5.45%(poor) Suggested reasonsa. The cost of goods sold has grown up without corresponding increase in the selling price of goods. b. There may be decrease in the selling price of the goods sold without corresponding decrease in the cost pf goods sold. We found out from the company sources that due to bulk discounted orders in 2007-08 which were got by dealing high competition resulted decrease in selling prices without decreasing in the cost of goods. 7DIVIDEND PAYOUT RATIO=DIVIDEND PER SHARE/EARNING PER share =.50/2.46 37
=20%
8. DIVIDEND YIELD RATIO=DIVIDEND PER SHARE/MARKET PRICE PER SHARE =.50*100/30 =1.67% On this ratio investors will not go for investing in company as they will get high yield in other investments so company should consider shareholders benefits or try to increase dividend yield. 9.EARNING PER SHARE- THE EPS HELPS IN DETERMINING THE MARKET PRICE OF THE EQUITY SHARE OF THE COMPANY. =PROFIT AFTER TAX/NO OF SHARES COMPARISON – Euro ceramics=16(F.V.=10) 160% KAJARIA=2.3(F.V.=2)115% Orient=2.46(F.V.=10)24.6% So in comparison with other company orient has got less EPS.so we can say that the capital of shareholders is not being effectively used. 10. PRICE EARNING RATIO=MARKET PRICE PER SHARE/EARNING PER SHARE EURO-2.5=40.05/EPS=16.02(F.V.=10) KAJARIA-24.9=29.25/EPS=1.17(F.V.=2) BELL-46=6.90/EPS=.15(F.V.=10) ORIENT=16.9=30/EPS=1.79(F.V.=10) P/E RATIO COMPARISONEURO
38
Demand drivers: The demand for value-added tiles (large-format) outpaced that of the plainer variants, thanks to two important realities: rising incomes and growing urbanisation, catalysing housing demand. Growing affluence : The average Indian’s per capita income increased from Rs. 11,672 in 2003-04 to Rs. 24,321 in 2007-08, and is estimated at Rs. 31,448 by 2010. Annual household incomes between Rs. 90,000 and Rs. 2,00,000 increased from 41.3 million in 2001-02 to 53.3 million in 2005-06, and are expected to rise to 75.3 million by 2010.Families with Rs. 2,01,000 to Rs. 10,00,000 annual income grew from 10.7 million in 2001-02 to 16.4 million in 2005-06, and is expected to reach 28.5 million by 2010. More surprisingly, families whose annual income is above Rs. 10,00,000 grew from a mere 0.8 million in 2001-02 to 1.7 million in 2005-06, and is expected to be 3.8 million by 2010. Interestingly, a majority of this affluent class will stay in cities and create an income pool comparable with the major US cities by 2015 (Source: India Infoline). Increasing urban demand : The urban population (28% of the total Indian population) grew 2.77%, higher than the overall population growth of 2.3%. Going forward, the overall population will grow at 1.5%, while the urban population will maintain a 2.27% growth till 2010. As a result, urban population is expected to touch 590 million by 2030 [Source:IBEF], leading to a robust housing demand of over 24.3 million dwelling units in urban India by 2015 (Source: Housing Skyline of India 2007-08).
2008 Sales
Employees:
2,145,679,729 (Year Ending Jan 2009).
750
39
SWOT ANALYSIS :
Distribution System:
Ceramic Marketing: The 4Ps of ceramic marketing are like different levers that can be used in different degrees to achieve the same objective. Product There is a wide range of designs and sizes to choose from. Introduction of two new categories-i.e., Vitrified and Concept tiles.
40
The pric price e range range is very very vast vast.. Due Due to capa capaci city ty expa expans nsio ion n supp supply ly is Price The increased so price is lowered down by 35%. Moreover price war from china has also lowered down prices. Promotion Advertising is done in leading Construction magazines and interior design journals. Taking part in international exhibitions e xhibitions is routine. Place Wide distribution network in and outside state. Products delivered within feasible timeline of order.
CHAPTER-V RECOMMENDATIONS: MARKETING: •
•
•
•
• •
Should adopt the widest distribution network model to deliver products to the end user in quickest and most effective way. It would also accelerate the sales. It may include company owned showrooms, franchises, multi-product dealers and sub-dealers. Distribution network should be clearly segregated towards specific product segments. May May intr introd oduc uce e thre three e dime dimens nsio iona nall cata catalo logu gue e visu visual al expe experi rien ence ces s to its its customers and also give customer a chance to design product in their own way of choice (customized design specification). Setting up exclusive showrooms for special products instead of keeping with with the regular regular range. range. As example, the upcoming upcoming product ORVIT-a product in high glaze tiles segment should have an exclusive place to showcase. It would add to the exclusive ambience of the product. More introduction of matching wall and floor tiles. To To grow grow its its inst instit itut utio iona nall busi busine ness ss,, the the comp compan any y shou should ld orga organi nize ze more more intera interacti ctions ons with with archite architects cts,, develo developer pers s and govern governmen mentt agenci agencies es at its deal dealer er outl outlet ets. s. This This woul would d serv serve e a dual dual purp purpos ose: e: it woul would d enab enable le the the company to acquire an insight into evolving preferences of some of the most prominent and trend- influencing architects; on the other hand, it helped the company cater to their evolving preferences.
BRAND: • •
•
More focus on packaging and product merchandising. It may introduc introduce e a specif specific ic dedica dedicated ted team to look look after after the overal overalll brand brand equity. They will ensure that all showrooms and dealer display centres were in sync with the Orient profile. Also they will look after the external packing mate materi rial al whic which h creat creates es an eye eye on look look-an -andd-fe feel, el, resul resulti ting ng in a holi holist stic ic branding approach. More focus on Research and design-development activities to achieve the cost and product design leadership. 41
Risks and Concerns: Some of the key risks affecting the Company are explained below: 1. The instabilit instability y in the fuel prices due due to continuous continuous increase increase in energy energy prices in the international market has significantly put pressure on margins. 2. Due Due to with withdr draw awal al of certa certain in expo export rt conc conces essi sion on by Chin China a and and the the gene genera rall increase in freight has increased the landing cost of certain raw materials. 3. After After the imposi impositio tion n of anti dumping dumping duty on Vitrif Vitrified ied tile, dumping dumping is taking taking place in glazed wall and floor tiles which has put pressure on the domestic tile manufacture manufacturers. rs. The amount amount of anti dumping dumping duty was significantly significantly reduced in April 08 by the Govt. However, it is still prohibitive enough. Therefore, only a few of the Chinese companies who were exempted from anti dumping duty are supplying to companies in India. 4. To retain retain skille skilled d professi professiona onals ls is also also a cause cause for concern. concern. Howeve However, r, best HR practices are in place to retain the talent and reduce the attrition. 5. Due Due to high inflat inflatio ion n and and tigh tighte teni ning ng of cred credit it by RBI, RBI, fina financ nce e cost costs s may may be adversely affected in the coming year.
Conclusion: The prospect and the future of ceramic tiles lies not only in northern region but it spread across the country. I would like to produce some of the evidences aligning with this and with this I would like to conclude my project•
•
•
A repo report rt,, publ publis ishe hed d in June June 2008 2008,, stat stated ed that that the the grow growth th in dema demand nd for for ceramic products has been further strengthened by the boom in the Indian real estate sector, which is registering 30 per cent growth per annum, for the last few years. The growth in the hospitality industry and the advent of new mall malls, s, comm commerc ercia iall comp comple lexe xes s and and mult multip iplex lexes es also also lend lend supp suppor ortt to the the growth prospects of this industry. The low per-capita consumption of ceramic tiles in India, which is currently arou around nd 0.5 0.5 sq. sq. m per per pers person on as comp compar ared ed to 2.0 2.0 sq. sq. m per per pers person on in countries, like Malaysia, Brazil and China, offers huge growth potential. The industry can reap the benefit of its low cost of production, which is 25-30 42
per cent lower compared to the US and Europe, primarily owing to labour costs. Production of ceramics through conversion from coal-fired to gas/oil fired- furnaces is likely to enhance fuel efficiency and reduce cost as well as ensure better quality and reduction of environmental pollution. •
Reduction in threshold limit under Zero Duty Export Promotion Capital Goods (EPCG (EPCG)) Scheme Scheme would would also also help help acceler accelerate ate the modern modernisa isatio tion n proces process s in ceramics industry.
References: For secondary data•
www.icctas.com
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Company websites
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Annual reports
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Previous summer training projects
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Magazines, web-articles and catalogues
For primary data-
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Questionnaire
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Supervisor’s advice and information
43
44
