Fixing the tiles

Vikram Somany, Chairman and Managing Director, Cera Sanitaryware

It has been about making the right moves at the right time for Ahmedabad-based Cera Sanitaryware. The Star SME award winner's strategy to adapt to the latest industry trends appears to be working well.

Seven years ago, Cera realised that it needed to graduate from being just a sanitaryware player to offering entire bathroom solutions. "We caught on to the psychology of customer spending and offered lifestyle products. Earlier, we were just a mass segment player, now we have moved up the value chain," Vikram Somany, chairman and managing director, said.

The company is gradually making in-roads into faucetware and tiles as well, and has been able to successfully identify opportunities. It plans to set up a 51:49 joint venture with Anjani Tiles to manufacture ceramic vitrified tiles in Nellore, Andhra Pradesh.

Around 42 per cent of Cera Sanitaryware's revenues come from southern India, so a manufacturing facility there was an obvious move, says the company.

Cera is now not only engaged in manufacturing sanitaryware such as ceramic washbasins, washbasin pedestals, bidets, water closet pans, flushing cisterns, urinals and similar sanitary fixtures, but also increasing its share in vitrified tiles and faucetware. Cera's rapid growth, especially in the last five-to-seven years, means that it is now the second largest sanitaryware company in India after Parryware Roca, with a market share of more than 20 per cent.

Cera's compounded annual growth rate in the last five years has remained at 35 per cent, much above the industry average of 12-14 per cent.

Lately, Cera has also been chalking out strategies of expansion as well as diversification with an enlarged product basket, which is where the joint venture with Anjani Tiles comes into the picture. This plant will be set up at a cost of around Rs 68 crore and will manufacture the Cera brand of vitrified tiles with an initial capacity of around 10,000 sq metres per day.

Since the plant will be located close to the new capital of Andhra Pradesh being built at Amaravati, and even to Chennai, Bangalore and Hyderabad, the joint venture will be better able to cater to the southern region. In the Rs 22,000-crore tiles industry, the organised market has a share of some 30 per cent, and of this, the southern region accounts for 55 per cent. The Nellore plant would, therefore, increase Cera's share of the tiles market.

Of the company's 2014-15 revenue of Rs 822 crore, about 60 per cent was from sanitaryware, 16 per cent from faucetware, 12 per cent from tiles and the rest from lifestyle products.

The unseasonal rains that hit Tamil Nadu and Andhra Pradesh recently and the resultant slowdown in construction activity may hurt the demand for tiles. Also, 2015-16 has seen Cera Sanitaryware so far clock revenue growth of 13 per cent, the worst in over two years, at Rs 225 crore in the second quarter ended September 30, 2015.

On the bright side, Somany's move to take Cera Sanitaryware into other verticals such as tiles and faucets, where a low base could mean incremental growth, could pay off well in the long run.

(As published in business-standard 10th Feb 2016)