Somany Ceramics eyes over 20% growth

Abhishek Somany
Joint MD, Somany Ceramics
Talks to Sanjeev Sharma

Prime Minister Narendra Modi’s Swachh Bharat campaign has enthused the ceramic tiles and sanitary ware industry. Abhishek Somany, Joint Managing Director, Somany Ceramics, talks about the slowdown in the real estate sector, rising disposable income and growth in smaller cities.

Q: What has been the growth of ceramics industry?
A: Ceramics industry in India has witnessed outgrowth following the increase in the disposable income of India’s population. Today, India’s ceramic tiles market is worth Rs 20,000 crore while the sanitary ware market is worth Rs 3,000 crore, and both are growing at around 12% every year.
The sector is quite divided between the unorganised and organised market. The unorganised players make up 60% of the total ceramic tiles market of India. The key driver for the ceramic tiles demand in India is the boom in housing sector along with the government policies favouring the Indian housing sector.
Not only the tiles, but also the sanitary ware industry is up for the boom in the years to come. Prime Minister Narendra Modi’s Swachh Bharat programme that attempts to build toilets across the country to eradicate exposed defecation is expected to push growth in sanitary ware market from 12% to up to 15%. We have also associated ourselves with the movement.
What is, however, more significant is the increase in business confidence since the new government has taken over.

Q: What is the share of unorganised sector?
A: India ranks in the top three list of countries in terms of tile production in the world. Organised sector share in value terms is now increasing as we are taking more & more unorganised players in our fold by either doing a JV with them or doing a simple contract manufacturing agreement.

Q: What are the issues on imports?
A: India is the 3rd largest producer in the world. The Made in India perception is slowly changing in the export market also. We will soon overtake Spain in perception but Italian design developed is much ahead of us. As for India, the Indian tiles rule the market and all others are only 10% of the market.
Also, there could be a risk of anti- dumping duty not being levied on cheap imports from other countries like China. At present, the Government of India and state of Gujarat where the majority of the tile production happens are supporting Indian manufacturers against dumping of tiles.

Q: What is the growth strategy of Somany Ceramics?
A: Somany Ceramics has grown by 20% year-on-year, and has achieved sales of Rs 1,252 crore in 2013-14 as compared to Rs 443 crore in 2008-09. This has been possible through continuously investment in product innovation through extensive research & development effort.
Over the years, we have realised that the best way to grow is to outsource the production to smaller players and leverage our brand and distribution network for marketing and selling the same.
Additionally, we are enhancing our consumer touch-points, across metros and tier 2 & 3 cities. Our cumulative investment will be over Rs 100 crore over the next couple of years. We are targeting 20% plus growth in FY15 as there is high growth potential in the ceramic tile industry.

Q: What is the impact of slowdown in the real estate sector on demand?
A: Slowdown in the realty sector has led to low sale volumes even in the bigger centres of the country. There has been lack of adequate funds and lack of buyer interest in the market which has resulted into many residential projects being delayed by the developers.
Amid this slowdown, the tile and sanitary ware segment has not been affected much by this. Comparing with the normal times, the market growth was 14% y-o-y and it has been 11-12% over the past two years. This difference is not that significant as compared to the real estate industry.

Q: How is the demand from tier II and III cities?
A: With the urbanisation trends escalating to the tier 2 and 3 cities, there is more  demand for tiles, sanitary ware and bathroom fittings. These cities are not mere centres of art and culture now but they are growing into indispensable centres of government, commerce and industry with growing population and education opportunities.