Professional Documents
Culture Documents
OF
Cera sanitaryware
ltd
ON
Submitted by-
Abhishek Gera
(+91-9711972217)
Amity Business School
1
Self Certification by the Intern
2
PREFACE
3
Acknowledgement
No task is a single person effort, same is with this project. Thus I would
like to extend my sincere thanks to all those people who helped me in
accomplishing my project.
4
Table of Contents
1 Acknowledgement 4
7 Analysis 17
5
OBJECTIVE
6
Introduction to Sanitary ware industry
7
access to sanitation facilities. Condition of the rural areas abysmal that
only 6% of the population are covered by sanitation.
8
Indian technology to manufacture the basic sanitaryware products. Since
the availability of raw material is in abundance and also very cheap in the
state of Gujarat & Rajasthan, various companies have established their
factory in these areas. They are producing the basic sanitaryware in
various brands. Unorganized sector's percentage of production capacity
and also their sales in the local domestic market are higher than that of
the organized sectors' sales. Unorganized sanitaryware manufacturer
comes under small sectors and hence enjoy the benefit of Nil Excise Duty
and Sales Tax and hence they sell their products in the domestic market
approximately 70% cheaper than the organized sector products.
9
Indian sanitaryware are very competitive in the neighboring countries and
hence export from India is also growing everyday.
10
Outlook for Sanitaryware Industry in
India:
In the next decade, India is expected to be one of the world's fastest
growing countries for sanitaryware consumption. The sanitation
penetration has more than trebled from 8% in 1982 to 18% in 1994 and to
29% in 1999.
11
Company Profile
Introduction to CERA Sanitaryware
Limited:
. The first sanitary ware company to use natural gas, Cera has been on the
forefront of launching a versatile color range and introducing the bath
suite concept. It also launched innovative designs and water-saving
products. The twin-flush model launched in India by Cera for the first
time, it reduces the water needs of households considerably. WCs
designed to flush in just 4 liters of water is another notable innovation by
Cera. Based in Kadi, Gujarat, Cera Sanitaryware Ltd. uses German
technology, which has ensured Cera’s superiority over others in quality.
Established with an initial capacity of 3,600 MTPA, the plant has
undergone several periodical up gradations and modernizations to expand
to 15,000 MTPA.
12
To achieve growth in the rapidly changing retail market in the country,
Cera, has launched its one of a kind Cera Bath Studios in Ahmadabad,
Bangalore, Chandigarh, Kolkata, Cochin and Hyderabad. With the
opening of the Cera Bath Studios, the discerning consumers, architects
and interior designers can have full view of the Cera’s premium ranges of
WC’s, Wash Basins, Shower Panels, Shower Cubicles, Bath Tubs,
Shower Temples, Whirlpools, CP fittings etc. Cera Bath Studios will
complement its existing network of 400 distributors and 4000 retailers.
Several Bathrooms are displayed live, so that the customers can get a feel
of Cera’s vast range of products. Soon, Cera will also launch premium
Spanish Tiles in Indian market….
13
History of Cera Sanitary ware Limited
Vikram Somany, Chairman & Managing Director of Cera Sanitaryware
Limited. Mr. Somany possessed entrepreneurial spirit even while he was
managing Madhusudan Industries Limited in Gujarat. This company was
into production of vegetable oils and vanaspati. The turning point came
into the company when Mr. Somany met a government delegation in
1978.When he signed the MoU to commence the sanitary ware
manufacturing unit in Kadi in North Gujarat using natural gas, the first of
its kind in India. It was a kind of milestone. And it was just the
beginning.
14
Bathroom is a Room Too…" An entrepreneur is successful because he
understands and respects the three Cs: customer, change and competition.
Apart from Cera, the other two major players are Parry ware and Hind
ware. Both have larger production capacities than Cera currently Cera,
however, is now expanding its capacities
To maintain that edge in the market, Cera keeps upgrading and increasing
its product portfolio regularly. Cera also recognizes its responsibility
towards environment. Like the other two major players in the organized
sector,. In fact, it’s gone a step ahead.
Well, looking at Cera's track record, Mr. Somany's vision is soon likely
to be transformed into reality. He is himself quite confident about it
because he has built a strong team. Success tips from Mr. Somany of
Cera Identify market opportunities Create a dedicated team and give it
full operational freedom Concentrate on brand- building right from the
beginning Recognize social and environmental responsibilities Follow
international norms of quality Keep innovating the product offerings
Provide good after-sales service.
15
MISSION OF THE COMPANY:
To setup and carry out research and development for the
manufacture and
development of Sanitaryware products.
Provide high quality to sanitaryware products.
The Company is aiming to achieve 50-60% of market share for
every product.
16
International presence and exports:
CERA has exported, in the past, to developed countries like the US, huge
quantities. However, as the domestic market was giving better
realization, CERA has to curtail its exports. Currently, CERA has
presence in several markets like Gulf, New Zealand, Greece, South
Africa, etc. With the production going up in the coming months, CERA
is now looking at export market more seriously and talks are on with
certain parties for OE supplies.
World Technology:
To keep ahead of competition, Cera has always kept its technology ahead
of rest of the players in India. It took help from ceramic technology
suppliers from several countries in Europe time and again so that its
process and products are of international norms. It also helped Cera bag
large export orders from the US, unmatched by any other Indian
sanitaryware company. Cera could easily make products conforming to
ANSI, apart from European, Australian, Canadian and Indian norms.
CERA has been constantly using internationally renowned consultants in
the ceramic field to upgrade its
production
processes,
yield
and
finished
goods
quality.
Product innovation has been Cera’s forte. One after the other, Cera
launched not only new designs, but even new innovations in India. The
first was bathsuites—a unique design concept consisting of WCs, wash
17
basins, bidets and accessories, giving the bathroom a distinct personality.
A series of bathsuites—Crowne, Conca, Capri, Cornet, Comet, Clair,
Cognac, Celebrity, Celeste, etc.—were launched in quick succession.
Cera is also credited with launch India’s first monoblock EWC, Cologne
and now has an array of one piece ewcs & wash basins to its kitty.
Innovation:
Water scarcity has always been a concern in most parts of India. When
there is shortage of water, can we not think of conserving it, by sending
less water per flush down the drain? This concern was brainstormed by
our technical and research personnel, designers and quality assurance and
marketing personnel and thus the concept of twin action flushing was
born. CERA found that in most households, a WC is used more as a
urinal and still it was using 8 to 12 liters of water for each flush. Cera
then came up with the idea of half flush along with full flush. A
household can
For the economy range, Cera have also launched twin flush model of
Plastic Cisterns
18
Credit analysis
CERA SANITARYWARE LTD.
Long-term bank loans/facilities CARE AShort-
term bank loans/facilities PR1
Ratings
CARE has retained the ‘CARE A-’ [Single A Minus] rating assigned to
the long-term
bank loans/facilities of Cera Sanitaryware Ltd. (CSL). This rating is
applicable for
facilities having tenure of more than one year. Facilities with ‘Single A’
rating are
considered to offer adequate safety for timely servicing of debt
obligations. Such
facilities carry low credit risk. CARE assigns '+' or '-' signs to be shown
after the
assigned rating (wherever necessary) to indicate the relative position
within the band
covered by the rating symbol.
Further, CARE retained the ‘PR1’ [PR One] rating assigned to the short-
term bank
loans/facilities of CSL. This rating is applicable to facilities having tenure
up to one year.
Facilities with ‘PR One’ rating would have strong capacity for timely
payment of shortterm
debt obligations and carry lowest credit risk. Within this category,
facilities with
relatively better credit characteristics are assigned PR1+ rating.
Total facilities rated by CARE aggregate to Rs.50.40 crore including
outstanding/sanctioned term loans of Rs.19.65 crore, sanctioned fund
based working
capital limit of Rs.18 crore and sanctioned non-fund based limit of
Rs.12.75 crore.
The ratings continue to factor in CSL’s experienced promoters, its long
track record of
operations, strong position with established brand name in the retail
segment of the
Indian sanitaryware market, good manufacturing capabilities, healthy
profitability,
19
comfortable gearing level and liquidity position. The ratings are,
however, constrained
by working capital intensive nature of operations and CSL’s linkage with
the real estate
sector which, being cyclical in nature, directly affects the demand for
CSL’s products.
Revival in demand for sanitaryware due to change in outlook for the real
estate sector in
India and maintenance/improvement in the overall financial profile are
the key rating
sensitivities.
Company Background
Incorporated in 1998, as Madhusudan Oils & Fats Ltd., the company
acquired 20 years
old ceramic business of Madhusudan Industries Ltd. under the scheme of
arrangement in
2001, followed by the change in name to Cera Sanitaryware Ltd. The
company is
promoted by Shri Vikram Somany of the Madhusudan group. Its
manufacturing facilities
are located in village Kadi in Mehsana district of Gujarat. CSL has also
setup up its
display centres at various locations across India for its retail customers.
CSL is one of
CREDIT ANALYSIS & RESEARCH LIMITED 2
the leading players in the organized sector in the Indian sanitaryware
industry which
also consists of a large unorganized sector.
Operations
CSL is into manufacturing of ceramic sanitaryware (60% of gross sales in
FY09) and
trading of bath fittings (38%) in various design and sizes. Positioned as
the third largest
player in the Indian sanitaryware market, CSL has pan-India marketing
network for
retail market in addition to direct institutional sales to reputed
construction companies.
20
CSL has an installed capacity of 2 million pieces of sanitaryware per
annum.
Manufacturing of bath fittings, which are sold along with sanitaryware
products under its
own brand CERA, is outsourced by CSL.
Raw material and power cost are the two major costs in manufacturing of
sanitaryware,
accounting for about 55% of the total cost for FY09. CSL has installed
2.4 MW gasbased
captive power plant and 4.98 MW windmills to meet its power
requirements. The
company uses natural gas as its primary fuel, which is sourced from
GAIL. CSL’s
operations are working capital intensive in nature as it requires
maintaining significant
finished good inventories in order to respond to demand from the retail
segment for
various designs and sizes of its products.
Ongoing Projects
CSL has planned to setup a plant for manufacturing of bath fittings,
which the company
presently outsources from various units/parties in India and also imports
some of its
requirements. The total cost of the project is estimated at Rs.5 crore
which will be
financed entirely by way of internal accruals. The project is expected to
start from
October 2009 and the commercial production is expected to start at the
end of FY10.
Financial Performance
CSL’s total income has grown at CAGR of 27% over the past four years
due to increase
in demand from the real estate market coupled with increase in sales
realizations of
bathware. CSL’s total operating income grew by 25% during FY09
compared to FY08
while PBILDT margin improved to 18.68% during FY09 compared to
16.62% during FY08
21
due to improvement in sales realization. PAT margin, however, increased
marginally
during FY09 compared to FY08 due to extraordinary loss suffered during
the year in a
foreign currency swap transaction.
Both, long-term debt equity ratio and overall gearing improved and stood
at 0.22 times
and 0.41 times as at Mar.31, 2009 compared to 0.29 times and 0.55 times
as at Mar.31,
2009 due to accretion of profits to networth and repayment of term loans.
With the
improvement in profitability, interest coverage ratio improved to 6.03
times during FY09
over FY08 level of 5.15 times.
Liquidity position of the company was comfortable as indicated by
current ratio of 1.51
times as at Mar.31, 2009 which improved from 1.26 times as at Mar.31,
2008 due to
CREDIT ANALYSIS & RESEARCH LIMITED 3
increase in cash & cash balances and sundry debtors. CSL had a cash and
bank balance
of Rs.21.64 crore as on Mar.31, 2009. Overall operating cycle marginally
improved
during FY09 to 134 days compared to 139 days during FY08.
Latest quarterly performance: For the first quarter of FY10 ended Jun.30,
2009
(Q1FY10), CSL reported a PAT (profit after tax) of Rs.3.35 crore on a
total income of
Rs.40.24 crore as against the PAT of Rs.2.54 crore registered on total
income of
Rs.33.90 crore during the corresponding quarter last year.
Industry Scenario
The sanitaryware industry is characterized by its cyclical nature and
working capital
intensive operations with close linkages to the real estate market. The
domestic sanitary
ware market is largely unorganised, with just 5-6 key players like
Parryware – Roca,
Hindware, Cera, Neycer, Classica, Raasi, Johnson Pedder and Liberty in
branded
22
segment. Shifting customer preferences towards branded products is
leading to declining
share of unorganized sector despite their selling of products at lower
prices. Growth
drivers for the industry include growth in the real estate sector in India
including
residential and commercial property, shopping malls, multiplexes, hotels,
hospitals,
airports, business/IT parks etc. which is currently facing a slowdown.
Initiatives taken
by the government to boost the sales of residential properties through
interest rate
benefits is likely to impact the demand for sanitarywares. This is further
augmented by
increasing spending power of the Indian consumer. Increase in demand
from
replacement market is likely to increase from around 10% as compared to
80% in
developed countries due to increasing preference for branded products
and availability of
new and better designs.
Prospects
CSL’s prospects would be driven by its ability to maintain sales volume
growth and
profitability in light of weak scenario for the real estate sector. Control
over working
capital cycle and continuous introduction of new designs and products
would be critical
for the growth prospects of the company.
CREDIT ANALYSIS & RESEARCH LIMITED 4
Financial Results
(Rs. crore)
For the period ended / as at 2007 2008 2009
Mar.31, (12m, A) (12m, A) (12m, A)
Working Results
Net Sales 106.67 128.05 159.52
Total operating income 106.67 128.05 159.85
PBILDT 18.89 21.28 29.85
23
Depreciation 3.54 4.94 5.93
Interest 2.28 3.17 3.97
PBT 13.98 15.54 19.90
PAT (after deferred tax) 9.07 10.05 13.11
Gross cash accruals 14.58 18.16 20.43
Financial Position
Equity capital 3.59 3.09 3.11
Networth 47.58 58.71 70.53
Total capital employed 86.22 110.07 118.43
Key Ratios
Growth
Growth in total income (%) 33.42 20.05 24.83
Growth in PAT [after deferred tax] (%) 53.70 10.84 30.45
Profitability (%)
PBILDT / Total operating income (%) 17.71 16.62 18.68
PAT / Total income (%) 8.50 7.85 8.20
ROCE (%) 21.50 16.65 20.94
Average cost of borrowing (%) 9.17 9.24 10.82
Solvency
Long-term debt equity ratio (x) 0.29 0.29 0.22
Overall gearing ratio (x) 0.52 0.55 0.41
Interest coverage (x) 6.74 5.15 6.03
Term debt / GCA (years) 1.13 1.21 1.11
Liquidity
Current ratio (x) 1.28 1.26 1.51
Quick ratio (x) 0.86 0.79 1.06
24
Turnover
Capital turnover ratio (x) 1.49 1.30 1.40
Working capital turnover ratio (x) 5.03 4.24 4.00
Avg. collection period (days) 56 63 60
Avg. inventory period (days) 82 84 80
Avg. creditors period (days) 8 8 7
Total operating cycle (days) 130 139 134
25
What set the plant apart from the rest in 1979 was the use of natural gas
in its kiln. It was a conscious choice. Those days most furnaces used coal
or other fuel that left specks on the ceramic. Somany decided to use
natural gas and that made a huge difference in quality. In fact, right from
day one, Cera was focused on just one aspect – quality.
Of late, Cera has given a new thrust to its marketing and product range. It
has earmarked a Rs 15-20 crore budget for an ad campaign across print,
TV and outdoor. It has launched the Italian wellness brand, Novellini, to
gain a foothold in the bathroomware segment, including shower
enclosures and hydro massage bath cubicles. And it has yielded rich
dividends for the company. Cera is now ready to launch the next phase of
its growth. The company is betting big on the mid-to-premium segment
of the market.
26
outlets, Cera Bath Studios and also through premium retail showrooms.
To further consolidate its position in the premium segment, Cera is in
talks to acquire a leading Italian sanitaryware brand. "We are negotiating
with a few of the Italian players and we hope to close a deal within the
next six months," Mr Somany who is back from a recent trip to Italy,
said.
Today, Cera has a stronghold in western India states and in Kerala, Goa
and Punjab. Apart from marketing strategy, the company is investing
some Rs 100 crore in expanding capacity at its Kadi facility. While it will
spend Rs 50 crore on new faucet unit, another Rs 50 crore will be spent
on expanding its sanitaryware line. In revenue terms too, it has started
giving results. Last year, it notched up Rs 190 crore in revenues, while
this year it plans to earn around Rs 300 crore. In next 2-3 years, Cera has
set a sales target of Rs 500 crore.
27
Cera Sanitaryware eyes acquisition in
Europe
With a view to tap high end sanitaryware market, Cera Sanitaryware Ltd,
India's third largest sanitaryware manufacturing company, plans to
acquire a company or a brand in Europe. Apart from this, the company
intends to infuse Rs 60 crore for capacity expansion.
The company, which enjoys 20 per cent share of Rs 1000 crore organised
sanitaryware market in India, has already taken up substantial expansion
in last four year involving an investment of Rs 53 crore. It is now in the
process of setting up a green field plant to make faucets, popularly known
as CP fittings, with a production capacity of 2500 pieces per day at Kadi,
28
where it already has its existing facility for sanitarywares. The new unit
for faucets is scheduled to start operations from September this year.
"We have further decided to double the production of new facility for
faucets. In addition to this, the existing unit for sanitaryware will also see
capacity addition of 35 per cent to 2.7 million pieces from current 2
million pieces. We have earmarked capital outlay of Rs 60 crore for the
capacity expansion," Vidush Somany informed.
Cera today announced a bonus issue of shares in the ratio of one share for
every share held. Also, the company declared dividend of 50 per cent on
the back of encouraging financial results. The net sales of the company
have risen by 20 per cent to Rs 191.36 crore for the fiscal 2009-10 as
compared to Rs 159.52 crore in 2008-09.
29
their operations in India. For the starters, Indian sanitary wares are
comparatively cheaper as opposed to our western counterparts,
courtesy availability of ample raw materials and low cost labor in
comparison to other countries. This in fact has given Indian sanitary
ware products an edge over the competitors from the nearby countries
and naturally the exports of sanitary wares from India is scaling up.
On other hand, India’s population is growing at a growing at a
significant rate. Of which 27 percent of the population hails from
urban areas. However, there is large difference in distribution of
amenities between the urban and rural population of the country. As
per 1994 study, almost 70 percent of the urban population has access
to sufficient sanitation, when it comes to the rural population only 14
percent has access. According to current government’s estimation,
almost 50 percent of the urban population lacks proper sanitation
facilities, while the condition of rural market is terrible. In the last
five, six years, the Indian sanitary ware market has witnessed
exponential growth, with major companies increasing their production
capacities. Certainly, Industry’s growth is directly related to the
development in real estate. Today, housing’s demands are on rise.
And interestingly people have started taking interest in top sanitary
wares, thanks to the rise in purchasing power parity. Actually the
increased demand for sanitary ware is not just emanating from the
new projects but there is a huge market for replacement products also.
The remarkable growth by the industry has inspired industry majors to
enhance their manufacturing system and even apply latest technology
to give customers value for their money. Moreover, Indian companies
are taking a step further to enlighten people about the advantages of
premium sanitary wares. With 15 to 17 percent growth per year,
Indian manufacturers have strengthened their dealer network all
across the country. Demand for Made-in-india Sanitary Wares in the
International Markets
30
Mumbai, Noida, Bhopal, Dhuva, Ernakulam, Kochi. Made-from-
india.com, a leading B2B portal from India has listed on its portal top
manufacturers, suppliers and exporters dealing in sanitary products.
Keywords B2b portal,market, sanitary
India had a GDP of 6-7 per cent per annum even when other countries
were dying of recession. The sanitaryware market has grown almost
double to 2000 crore in 2009. All big international brands regardless of
their category are entering India, the fastest growing country which has a
young population of more than 50 per cent. The newer generation wants
better homes, better services, better quality and better facilities; which is
the reason enough for the sanitaryware market to grow in India.
31
becoming extremely value conscious. People are also aware of leading
global brands in the space with high growth potential. India is being
looked upon by the entire world as an emerging market and potential
global hub for many products”, says Mathew Job, CEO, Grohe India.
Target Audience
Everyone needs a toilet! But sanitaryware isn’t only about toilets; the
range goes from bath tubs, bath tiles, basins to shower accessories.
Everyone requires them, be it your home, small shops, salons, corporate
offices or restaurants, so the consumer is everyone. “Broadly speaking
our target consumers are divided into B2B (business to business) and
B2C (business to consumer). B2B primarily comprises developers,
engineers, contractors and specifiers like architects, interior designers,
purchase managers, sourcing managers, project heads etc. B2C is
focused on the end consumer” adds Job.
Product Innovation:
The Indian consumer which is the direct consumer is not very easy to
tackle. It’s well educated, well placed, well travelled and ambitious;
tracking it isn’t an easy job so how do you cater to their needs? “Known
for its products and technology, Grohe has carved out a niche for itself in
the premium segment with a strong backing of superior product quality
and customer service. Most of the Grohe products that are available
globally are already on offering in the Indian market. In fact, we are now
launching a product line that will specifically cater to the Asian market.
The new Grohe Baulines IS available in the market from April 2010”
Retail Channels
For a foreign sanitaryware brand, there are various channels through
which it can enter India. Job states that a retailer can come in with help of
32
various channels. You can have a joint venture (JV) with an Indian
company who can sell your products in India. You can take help from
wholesales, small retailer and also with your own outlets across the
horizon. Having a JV with an Indian company surely helps as the Indian
company is already known in India and also helps you to have a better
image in front of the customers.
Hurdles in India:
Other than the obvious hurdles of FDI and other licensing issues, what
other threats does the sanitary ware market see? “The lack of sufficiently
trained plumbers was a huge concern for us when we came to the Indian
market. Globally, plumbers (installers) are a major focus group for us.
We work with them; we don’t just train them, we get feedback from them
about what is it that the consumers like and don’t like. Plumbers are our
greatest marketing research tool. But, we are concerned that plumbers in
India are not organised to a great extent to allow us to benefit from this
resource. This is something we hope to change gradually in the coming
years” contemplates Job.
33
bathrooms look and feel good. These factors when taken together will
ensure a robust growth for the industry in the future.
34
business value and the carrier, not a luxury but necessary choice. Brand
positioning is the most important issue the operation, but also the future
development of corporate strategic issues. Facts have proved that the
enterprise has never been outside their range, and no all-encompassing
brand. Flooding and flooding in the information age products, accurate
positioning of the brand can only be consumer awareness and choice.
Through the study of international brands, and with reference to current
market structure point of view, the future development of sanitary
industry in China will be a number of trends: First, a few will appear in
the "comprehensive sanitary ware brand," the second will be a
"professional brand "Third, there are" personalized bathroom brand. "
35
This study gives detailed view about customer satisfaction towards after
sales assistance by Cera Sanitaryware Ltd. The study focuses on to make
a solution for the customer dissatisfaction towards technical assistance
those facing by Cera Sanitaryware Ltd. The analysis would be helpful to
the management for taking decision regarding marketing strategies and
formulating suitable policies to make their business more effective and to
make customer satisfied.
Data collection:
Primary Data:
Through Questionnaire
36
Findings:
Having shown a growth rate of more than 20% since last 3 years,
Cera Sanitary
ware Ltd. today is the fastest growing sanitary ware company in
India.
37
More then 50 % of customers has got technical information from
the user manual. Because user manual is available with every
products. Other customers have got it from website or helpline no.
because they were unable to find information in User Manual.
About 84% customers are not satisfied with the technical
assistance provided by company.
Mostly customers are not satisfied with the information available
in User Manual. . According to them; It’s not about, how to use,
how to fit it, at any problem what should do etc.
According to all data analysis customer have dissatisfaction
towards technical assistance. Company is unable to give full
satisfaction to its customer.
Suggestions:
38
Company should provide technical expert employee for every
specific area. Those can personally solve the problem of customer.
If company is not providing service to its customer timely. Then
there should be provision of compensation to its customer.
Introduction of designs to suit handicapped people, closets which
are the height of an average chair and therefore more comfortable,
lavatories with interesting shapes and designs.
The technology of water saving should be in every product. So
customer will definitely attractive towards products.
The company should launch low unit packs in all categories to
drive market penetration and to push volume.
The product should be diversified in its maximum categories.
More interest should be taken to increase the employee
participation in the management of the company.
Mechanization should be done at each stage of the production
process, which will reduce the number of workers and then reduce
the cost of the production.
100% production capacity should be utilized to increase the
volume of production.
It is advisable to conduct market surveys before the introduction of
new products.
Conclusion:
39
40
41