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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 ToMr. T.N.Srivastava Head, Training & Placement Cell Graduate School of Business & Administration, Greater Noida,U.P
Submitted ByNitesh shah B-08-28
External GuideMr. Vijay Deepak Gupta Regional Manager, Orient Ceramics Industries Ltd.
Internal GuideProf. H.S.SHYAM Faculty, Marketing Dept., GSBA
GRADUATE SCHOOL OF BUSINESS & ADMINISTRATION,GREATER NOIDA
Topic Cover pageContent pageCandidate declarationAcknowledgement Chap-IPreface&Scope of the study Objective of the study Chap-IIGlobal Tiles Industry Global Sanitary Industry About Indian Ceramic tiles Industry Industry Statistics Export-Import Scenario Chap-IIIResearch Methodology&Findings Limitations Chap-IVAbout OCIL Financial Analysis &Recommendation Demand Drivers SWOT Analysis Distribution System Ceramic Marketing Chap-V Other Recommendations Risk & Concerns Conclusion References
Page No. 1 2 3 4 5-6 5 6 6-17 6-7 7 8-15 16-17 17 17-26 17-25 25-26 26-39 26-29 30-36 37 38 38 38-39 39-41 39 40 40-41 41
Candidate Declaration/Certificate of Supervisor
I hereby declare that the work which is being presented in this report entitled “Market Research on Ceramic Tiles Industry in Ghaziabad & Meerut Region And financial overview of company” is an authentic record of my own 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: 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.
Supervisor’Name:MR.VIJAY DEEPAK GUPTA Designation:REGIONAL MANAGER
Company-Orient Ceramics Industry LTD.
I express my profound gratitude to Mr. Vijay Deepak Gupta, Regional Manager,
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. I am also grateful to DR. P.L.Maggu –Executive Director, Graduate 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
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 used to 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 industry has evolved to find its place in the market for sophisticated insulators, 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 the last two decades, the technical ceramics segment has recorded 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 of financing options for housing is enabling rapid growth in housing 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 making deeper inroads into urban homes. And they are getting more designer 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.
Global Tiles Industry
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 2nd and 3rd largest producers with production of 635 million sq.mt. and 589 million sq.mt. respectively. India ranks at 5th position with production of 270 million sq.mt., which is around 2.5% of global production. The ratio between consumption and production has been stable at around 94 per cent. Ceramic tile production has been increasing at a cumulative rate of close to 6 per cent. Asia is the most signifcant region by production, as well as consumption, accounting for more than 50 per cent of both. China is the leading country in 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 for 26 per cent and USA accounting for 18 per cent of the total global ceramic tile consumption.
Global Sanitaryware Industry
The global sanitary ware industry is estimated to be 187 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-about 30 per cent, is much lower than even neighbouring Asian countries, indicating signifcant growth potential for this sector in the 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.
INDIAN CERAMICS INDUSTRY
India’s ceramic tile industry emerged in the 1950s. Tiles form the most 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 faster as compared to wall tiles. Vitrifed and porcelain tiles are recent entrants into the ceramic tile industry and have increased the size of the market considerably. It is expected that this segment will 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 in India. The per capita consumption of ceramic tiles in India is 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 future in India as more and more development takes place. Ceramic Tiles 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. Growth of the unorganized sector accounted for 44 percent of the 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.
MARKET SIZE OF THE INDIAN CERAMIC INDUSTRY
The Indian ceramic tile industry is estimated at US$ 0.35 billion. It Comprises of wall tiles, floor tiles and vitrified tiles. The per capita Consumption of ceramic tiles in India is just 0.15 square metres per Annum, which is quite low as compared to developed countries.
The industry has been experiencing increased demand, which, in recent years, has matched the installed capacity. While capacity has also increased significantly, 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 million tonnes. Ceramic tiles are produced by organised, as well as unorganised players. The share of production of organised players is around 55 per cent. The organised sector is characterised by the existence of a few large players, such as H. & R. Johnson, Kajaria Ceramics, Bell Ceramics, SPL, Spartek and Murudeshwar Ceramics,OCIL and Nitco.
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 MARKET SHARE OF TILE PRODUCER COMPANIES IN NORTHERN INDIA
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 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 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 plans 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:
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 wall and floor solutions' to create and enliven exclusive designer homes and offices.
It is the largest ceramic floor and wall tile manufacturer in the second 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 across two facilities at Sikandrabad, (Uttar Pradesh) and Gailpur (Rajasthan). It has been equipped with eight stock points, eight Kajaria World showrooms, 19 officescum-display centres and 7,000+ dealers and sub-dealers on a pan-India basis. It is the most prominent Indian ceramic tile brand with a favourable recall. The largest exporter of ceramic tiles in India. It has unmatched product offering (wall, floor, vitrified, Spanish and Italian tiles). It has brand-enhancing customers like Unitech, DLF, Parsvnath, Magarpatta, Sobha Developers, DSK, Mantri Group,Prestige Group, Ansals, Hiranandani, Raheja Developers, Omaxe and EMAAR-MGF, among others.
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 European tiles, with the promise of extremely accurate size control, to add brightness and depth to the glaze.
H & R JOHNSONS:
H. & R. Johnson (India) Limited is 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, 13
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.
Part of “Euro Group” Integral part of the Decorative industry in India. Promoters: Mr. Nenshi Shah: Mr. Talakshi Nandu : Mr. Kumar Shah : Mr Paresh Shah Current Business Profile: Vitrified Ceramic Tiles : 79,971 MTPA. 1800 MTPA
Aluminium Extruded Sections : Calcareous Tiles : Sanitary ware :
45,000 MTPA 11,000 MTPA
Trading in Wall Tiles through a 100% subsidiary
Technology: SACMI (For Vitrified Tiles & Sanitary ware) Quality focus: Vitrified Tiles : ISO 13006. Applied Consumer Florida, U.S.A. VJTI, Mumbai ISO 9001:2000 certified Services Inc.
Manufacturing facilities :
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 in offering unique Floor Tiles, Mosaico, Wall Tiles and Marble, Nitco has gone to become the most preferred name and the ideal choice of millions of house-holds and the real estate fraternity. An avant-garde at the core, the company has continued to pioneer ground breaking innovations in all its offerings. Ceramic Tiles, Vitrified Tiles, Pavers, Imported Marble, Engineered Marble, Intarsia-splendours of inlay marble and Mosaico- artistic creations in mosaic rendered in stone, ceramic 14
and marble, for instance. Winning 13 Capexil awards for innovation and design is the perfect testament to all of its achievements.
In the Indian tiles sector, Somany has achieved a clear leadership position by wholeheartedly adopting forward thinking and an innovative and futuristic 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 dedicated and talented people is continuously working towards 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 spread across the country. A wide cutting-edge array of designs and material make up the inspiring Somany range of tiles. Somany strives to bring its customers floor, wall, vitrified, 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 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 15
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 major in-roads into this market. With its range of high quality products 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. Somany has a production capacity of 15.7 million sq mt per annum from its Haryana and Gujarat units. It has always focused on acquiring and 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 establishing the very first Government Recognized In-house Research & 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 ceramic tiles with glazes, using a serigraphic decorating system that employs silicon cylinders. This integrated system that optimizes decoration of tiles enables any kind of random design and also a marble effect. A truly trend-setting 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 Guided Vehicle system. This cutting-edge material transportation system has automated the movement of ceramic materials in the production system. The Laser Guided Vehicle facilitates optimal and accurate handling, 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.
1. 2. 3. 4. 5. 6. 7. World production: India's Share: World ranking (in production): Per capita consumption: Global Industry Growth Rate: Growth Market): Rate (India 6900 Million sq.mt. 340 Million sq.mt.. 5 0.30 sq.mt. 6%
Organized industry turnover (India): Rs 3000 crores Glazed Wall Tile share: Glazed Floor Tile share: Unglazed share: Vitrified 40% 46% Tile 8%
Glazed Porcelain Tile Share: 6% Unorganised Industry Turnover Glazed Wall Tile share: Glazed Floor Tile share: Unglazed share: Vitrified Rs 3500 crores 57% 35% Tile 6%
Glazed Porcelain Tile Share: 2% 8. 9. Investments in last 5 years: Organized sector: Share of Production: No. of units: Revenue (excise duty): 56% 16 Rs 300 crores Rs 2000 crores
Unorganized sector: Share of Production: No. of units: 17 44% 200 (approx..) (70% based in
Gujarat region) Revenue (excise duty): 11. Job Potential: Rs 350 crores per annum or less 50,000 direct 500,000 indirect
Export & Import Scenario
Apart from domestic demand, exports of ceramic tiles from India have also been increasing. From a level of US$ 33.3 million in 2001-02, exports 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
To determine the perception about various tile’s quality, brand equity, price and customer service. 18
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.
• • • 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:
This is a limited study which takes into consideration the responses 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 and its future prospects. Also recommending measures to improve the present scenario of a company would boost up the confidence of the researcher.
Research Design: Type of Research: Exploratory and descriptive experimental research Size of sample: 20 Architect, 25 dealers and 150 customers. Area of study: Ghaziabad and Meerut City
Sampling procedure: Convenience Sampling Method: The research is primarily both exploratory as well as descriptive in
nature. The sources of information are both primary & secondary. A well-structured questionnaire was prepared and personal interviews were conducted to come to the conclusion.
Brand Awareness Analysis:
BRAND AWARENESS RATING
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.
According to the Architect’s, quality wise Kajaria Tiles is leading the market followed by H.R.Johnson Pvt. Ltd., Somany Tiles, Orient Tiles and Nitco Tiles.
Dealer’s Network Rating
Dealer’s Network’s Mean
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:
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. Price 2. Durability and quality 3. Awareness 23
4. Response pace 5. Availability 6. Variety
Overall Customer Rating
Overall Customer Experience Mean
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 24
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
Overall Dealer’s Experience Rating
Overall Dealer’s Experience Mean
In terms of dealer’s study, Kajaria Tiles is the most sought after brand followed by Somany Tiles,Orient Tiles, H.R.Johnson Ltd. And Nitco Tiles.
Limitations of the Study:
• The sample size is very less, hence it does not imply for the complete population.
There was lack of time and resources that prevented from carrying out an in depth study.
The findings of the survey are based on the subjective opinion of the respondents and there is no way of assessing truth of the statements.
There is some respondent’s bias which cannot be removed. 26
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
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 27
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. 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 industry’s potential appears attractive, following the realty 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 utility and hygiene reasons. To capitalise on the latent demand, the industry players have 28
expanded their distribution networks significantly. 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 delivery promptness, well-equipped dealer stocks and wide market 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 also benefit from 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 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 29
Exterior Range Floor Tiles (in cm.) 30*30 39.5*39.5 40*40 Wall Tiles (in cm.)
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
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. Liquidity ratios 2. Profitability ratios 33
3. Investors interests 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 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.
2. LIQUIDITY RATIO- (acid test ratio or quick 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 = 985072204-423999406/435494357 = 1.28 34
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.
3. DEBT EQUITY RATIO- the debt-equity ratio is determined to ascertain the
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 cost due to high inflation. b. The maximum projects that company undertook were in bulk discounted so they increased the sales revenue but could not increase profit margin. c. High competition from local players.
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 200708 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 =20% 36
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<KAJARIA<ORIENT<BELL This suggests that orient and bell are less par performing than to the euro and kajaria, so they are over valued than to the kajaria and euro.
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 200708).
2,145,679,729 (Year Ending Jan 2009).
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. Price The price range is very vast. Due to capacity expansion supply is increased so price is lowered down by 35%. Moreover price war from china has also lowered 39
down prices. Promotion Advertising is done in leading Construction magazines and interior design journals. Taking part in international exhibitions is routine. Place Wide distribution network in and outside state. Products delivered within feasible timeline of order.
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 introduce three dimensional catalogue visual experiences to 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 range. As example, the 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 grow its institutional business, the company should organize more interactions with architects, developers and government agencies at its dealer outlets. This would serve a dual purpose: it would enable 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 introduce a specific dedicated team to look after the overall 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 material which creates an eye on look-and-feel, resulting in a holistic branding approach. More focus on Research and design-development activities to achieve the cost and product design leadership.
Risks and Concerns:
Some of the key risks affecting the Company are explained below: 1. The instability in the fuel prices due to continuous increase in energy prices in the international market has significantly put pressure on margins. 2. Due to withdrawal of certain export concession by China and the general increase in freight has increased the landing cost of certain raw materials. 3. After the imposition of anti dumping duty on Vitrified tile, dumping is taking place in glazed wall and floor tiles which has put pressure on the domestic tile manufacturers. The amount of anti dumping duty was 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 skilled professionals is also a cause for concern. However, best HR practices are in place to retain the talent and reduce the attrition. 5. Due to high inflation and tightening of credit by RBI, finance costs may be adversely affected in the coming year.
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 report, published in June 2008, stated that the growth in demand 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 malls, commercial complexes and multiplexes also lend support to the growth prospects of this industry. The low per-capita consumption of ceramic tiles in India, which is currently around 0.5 sq. m per person as compared to 2.0 sq. m per person 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 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 41
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) Scheme would also help accelerate the modernisation process in ceramics industry.
For secondary data• • • • • www.icctas.com Company websites Annual reports Previous summer training projects Magazines, web-articles and catalogues
For primary data-
Questionnaire Supervisor’s advice and information
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