The year 2010-11 was our best ever.
We crossed Rs.10 billion turnover milestone, our revenue grew 29% and
bottomline jumped 69%. Returns on investment in the business
strengthened ROCE grew 600 bps and ROE climbed 905 bps.
Our positive performance divergence resulted from the following
Sales growth: Sales volumes increased by 18% from 25.28 MSM in 2009-10
to 29.71 MSM in 2010-11. What is heartening is that we strengthened our
average realisation per sq. m we sold more large-format ceramic and
Value-addition: We increased the share of value-added tiles in our
product mix from about 43% in 2009-10 to 52% in 2010-11, strengthening
- Cost edge: We received gas for our Gailpur unit (major share of our
production capacity) from May 2010 replacing high-cost propane,
significantly reducing energy costs.
- Operational excellence: We operated our facilities at peak capacity;
our R&D and operation teams strengthened materia management and
production processes to counter inflation and ncrease first quality
- Stronger financials: We ploughed our cash flow into capital-intensive
growth initiatives (capacity expansion and creation) - our tota capex
in 2010-11 stood at about Rs.564.42 million, the net addition to
external debt was only ^168.51 million - reducing our debt-equity
ratio. Besides, we negotiated for better coupon rates, which reduced
nterest liability in 2010-11 by 20% even as general interest rates
Rather than merely address the requirements of the moment, we created
the building blocks of our future in 2010-11.
Capacity expansion: We increased value-added capacity. We commissioned
our 6 MSM brownfield expansion in March 2011 at Gailpur to manufacture
high-end vitrified tiles (glazed and polished). Our additiona 2.60 MSM
vitrified capacity (conversion from ceramic tiles) at Sikandrabad also
commenced operations in March 2011. The result is that in 14 months
(February 2010 to March 2011), we added 11 MSM of vitrified tile
capacity, the largest by any single company in India, which will emerge
as the game changer for important reasons: selling vitrified tiles
through import impacted our ability to cater to the market in North
India due to the logistics cost. The manufacturing facilities will
strengthen our competitive advantage to carve a sizeable market share
in this segment and our shift from trading to manufacture is expected
to improve operating margins from this business segment.
Capacity acquisition: We acquired a 51% stake in Soriso Ceramic Pvt
Ltd, having a 2.30 MSM per annum ceramic floor tile manufacturing
facility in Gujarat in February 2011 for an investment of ^56.20
million -- a first in our history. This is important for Kajaria for
two reasons. Firstly, this extended our geographica presence with
manufacturing facilities in the North and West, allowing us to
effectively cater to arge tile consuming markets and secondly, the unit
manufactures arge format tiles, which is a fast growing segment in
ceramic tile flooring.
New business verticals: We initia te d new businesses bathware and
wooden flooring to leverage our distribution and brand competencies.
We tied up with a leading European brand VitrA, a brand of Eczacibasi
one of the largest industrial groups in Turkey for the marketing
and sales of the innovative product line of VitrA products as an
exclusive and sole marketer and distributor for India. This trading
venture will enable us to emerge as a complete bathroom solution
provider. To start with, we opened two exclusive showrooms showcasing
the entire product range.
Wooden flooring, a high perception-value flooring solution has emerged
as an important lifestyle product. Its demand is increasing rapidly
driven by high aspirations of the modern apartment-purchasing community
(28-32 years) the customer buying tiles are likely to buy wooden
flooring. Hence, this business vertical was a perfect fit in our
business model. We expect to grow this vertical into a meaningful
business over the medium term.
New products: We developed digital wall tiles in two sizes (30x60 cm
and 15x45 cm). These products are increasingly gaining acceptance in
the Indian market. We have developed more than 50 unique designs
through our newly commissioned digital printing machine we expect
these tiles to gain market acceptance, driving volumes and revenue.
Branding: We expect to strengthen our recall -- Think tiles. Think
Kajaria! by reaching products wide and deep, investing in print and
electronic media promotions and earmarking a sizeable amount for brand
strengthening initiatives in 2011-12.
Optimism over the medium term
The Indian tile segment is expected to grow significantly over the
coming years. This optimism is based on credible estimates and sectora
realities. Indias per capita ceramic tile consumption at 0.42 sq m is
the owest globally while China stands at 2.26 sq m. The replacement
market is also much lower than in China, providing tremendous growth
opportunity. This upward revision is based on an important fact. India
is ikely to remain a work-in-progress economy in the near future on
the back of massive infrastructure and housing space creation.
Message to shareholders
We are on the threshold of the second growth phase, one that we expect
will surpass our previous achievements. The challenges are sizeable -
producing quality products and tapping the deepest demand pockets. The
anticipated returns are expected to be satisfying. We expect business
growth between 25% to 30% in 2011-12 with a higher growth in
The management team