After dressing up homes pan India, Somany Tiles eye exports

Abhishek Somany, joint managing director, Somany Ceramics Ltd is a third generation entrepreneur and part of a Delhi based business family that has seen the capital’s transformation and changing business climate. From anti-competitive laws to the clutter of unorganized sellers Somany Ceramics leading tiles and sanitaryware manufacturer has weathered many a storm and today is a Rs 750 crore company. Abhishek Somany is the new face of this over 40 year old company and is now responsible for cementing Somany’s future as a pan India room.

Founded in 1969 Somany Ceramics today is over a Rs 750 crore venture with a production capacity of 20 million square meter per annum. Listed on both the BSE as well as the NSE, Somany today has an 8% market share in the tiles and sanitaryware market.

Talking about Somany's expansion plans going forward, Abhishek reveals that the company is looking at manufacturing sanitaryware. On the global front, the company is looking to double its revenue on exports to Rs 25-30 crore by next year. On the other hand, Somany looks to swell its showrooms in the franchisee mode from the current 100 to another 50-60 next year.

Below is an edited transcript of Somany's interview on CNBC-TV18. Also watch the attached video.

Q: I believe you enjoy racing cars. You were a Formula-2 and Formula-3 racer, what made you join the family business and give up a career in racing?

A: Well, I didn’t have a career in racing, definitely wanted to. I guess I am the third generation in the family business, so I guess it was taken for granted that I would join the family business and somewhere down the line I think it’s ones comfort too, I am not regretting that but I definitely would have want to pursued racing a little more.

Q: When did you join the business and what have you brought to the table?

A: When I joined the family business, we had a family split and my father used to look after the Hindware Glass division in Hyderabad and then after the family split, we came to Delhi which is when we took over a tile company. I was new to business as a whole. My father was groomed in the glass and sanitaryware business prior to tiles. So from that point of view, it was a new learning. I think what we have got to the table is completely a new way of looking at tiles.

When I joined, there were around 20-30 SKUs, 20-30 designs and tiles were predominantly looked at as a hygiene product. So you would think of tile when you think of bathroom and kitchen, now of course it’s far more than that. So it’s not completely our doing. We have had a large part to play in the tile industry in India. The other thing which we brought about in tile is the VC shield, which is a patented product by us, so that’s something new to the table.

Q: You have taken the franchisee route for expansion. Tell us how important has this been for the growth of the business?

A: In Delhi, if I had one single flagship store that wouldn’t suffice. It’s such a large city. We need at least 10-20 different stores around the city panning from Faridabad on one end to Noida, to Gurgaon to wherever else. Therefore, there was no option but to use the franchisee route.

The margins in the business are not so significant to own your own stores, therefore franchisee model was the only way forward and in that respect we have approximately 60 Somany exclusives which does only the domestic products what we manufacture and we have another 35 Somany Globals which only does the imported products. So approximately, we have 100 showrooms which are operational currently in the franchisee mode and we hope to expand it by another 50-60 next year.

Q: Greater Kailash Part 2 is a much sort after commercial address but with Delhi emerging as a hub for malls the GK2 market has seen a scene change in the last few years. Has being a Delhi headquartered company given you an insight into what customers in North India wants?

A: Delhi is a large and very tough market. Every single manufacturer wants to come and dump their products in Mumbai and Delhi. So from that point of view, it’s an extremely fierce and very competitive market, but it’s a good market. Delhi itself is a very high end, mostly imported tiles market but it pans from Ghaziabad, to Noida, to Gurgaon, Faridabad, all across NCR that’s where our large market for our manufactured products is. So it is a great market.

Q: To stay ahead of the competition, Somany Tiles recently acquired a 26% equity stake in Gujarat based tiles manufacturing company Vintage Tiles for Rs 5 crore. So what was the driver behind this strategic stake purchase?

A: It’s a brand new, state-of-the art plant and it generates revenue of approximately Rs 80-85 crore and 100% of the products will be sourced by us or they would be made for us. The designs and the quality would be controlled. The manufacturing will be done by our partners. These JVs, like any other business, only help. We have our own manufacturing where we are doing a lot of value additions and a lot of vanilla products, we are contract manufacturing and by buying stake, we have ensured that this supply would be continued. We are looking at many more such takeovers or such joint ventures in the future.

Going forward, we have reached a critical mass in sanitaryware. So we are not sure but we are toying with the idea of getting into manufacturing for sanitaryware also. Globally, we were hardly exporting. We were doing about a 1-2% of our revenue but we have doubled it now. Last year, we did about Rs 8 crore of revenue on exports, we are already at Rs 14-15 crore this year. Next year, we are looking at a target of Rs 25-30 crore.

Q: You mentioned the fact that you are now looking at growing inorganically. Are there any acquisitions in the pipeline?

A: We are looking at both - the south of India and in the Morbi region. In the south, there is not much to find, but in the Morbi region, there are a few people. I guess within the next one or two quarters, we would definitely look at one more such acquisition.