analysis of ceramic industry

Executive Summary Ceramic industry in India is about 100 years old. Over the years, the industry has been modernizing through new innovations in product profile, quality and design to emerge as a modern, world-class industry, ready to take on global competition. With increase in population,a changing life style, better cost of living etc, there is high growth potential for this sector. With the growth in the housing sector the demand of ceramic is expected to increase. Also more emphasis has been given to infrastructure and construction which will increase demand for ceramic. The Indian ceramic industry is growing at 15% which is higher than global growth rate of 11%. India is considered to be third largest producer and consumer of ceramic products. In this report, the study of overall picture of ceramic industry, its growth potential and overall attractiveness will be done. The analysis of various economic, political and technological, governmental factors affecting the industry and the major issues faced by the company and the reason behind huge debt condition of the industry will be found out. I will try to find out the export opportunities and market of ceramic companies. The fuel cost of ceramic companies is also rising so steps which can be taken to reduce fuel cost will be found out.The ceramic industry is under huge financial stress. Some of the ceramic industries are running in huge debt and restructuring of loans is considered. The different credit options used by ceramic companies for funding through bank and what changes would they would like conditions and terms of credit would be studied. So the report would provide strategic analysis of ceramic industry which can be helpful to banks for making certain credit decision for ceramic companies.

Objective:1. To find out overall attractiveness and growth potential of ceramic industry.2. To find out various economic, governmental, political and technological factors affecting the industry and difficulties faced by ceramic industries.3. To find out the current trends and developments in the industry and future of industry4. To find out opportunities and threats faced by the industry5. To find out ways of reducing fuel cost of ceramic production. 6. To study reasons for financial stress in ceramic industry. 7. To study Export market of ceramics and its opportunities and ways of becoming competitive with overseas manufacturers.Type of Research:The research is descriptive as the study has been completed based on the data collected from the internet and secondary sources like news, magazines, database of sbi , reports etc. It is also analytical in nature as the data collected from questionnaire is analyzed and necessary findings and conclusion is derived based on the data from collected from questionnaire.Sampling: The sampling units for the study would be the ceramic companies and the state bank of India staff. The companies will be contacted and data would be obtained regarding growth prospectus, the need of finance of company etc using online questionnaire.Necessary information will also be obtained from staff members of state bank of India regarding ceramic company potential and growth prospectus. As staff members are dealing with ceramic clients, so they can have better insight about the industry and problem faced by it.

Methodology:Necessary data is being collected using the secondary sources like the internet, reports and databases at sbi. The data containing news relating to the industry and the major trend in the industry has also been gathered.Data has also been collected using the primary source using questionnaire as a tool for obtaining data .The discussions and interview with staff members of sbi is also used for obtaining necessary information.The data collected from questionnaire is analyzed using excel and other software. The necessary recommendation and conclusion is arrived at using findings and analysis of collected data .The limitations of the study is also stated and necessary annexure i.e. Questionnaire used to obtain information is also attached.

Ceramics: Ceramic is a refractory, inorganic and non metallic material. Ceramics can be divided into two classes. 1) Traditional ceramics 2) advance ceramics1) Traditional ceramics: Traditional ceramics include clay products, silicate glass, And Cement etc. 2) Advanced ceramics: They consists of carbides (sic), pure oxides(AL2O3), Nitrides (si3n3), non silicate glasses etc. They are used in Aerospace industry as space shuttle tiles, automobile as pressure sensors, joint replacement in medical field, Insulators and resistors in computer etc.

Ceramics offer many advantages compared to other materials. They are harder and stiffer than steel, more heat and corrosion resistant than metals and their alloys, and their raw materials are both plentiful and inexpensive. The use of traditional and advanced ceramics is believed to be increased in the years to come. Ceramic Industry Introduction Ceramic Industry in India is more than 100 years old. Indian ceramic industry emerged in 1950. It comprises mainly of ceramic tiles, sanitary ware, tableware and more recent the technical ceramics etc. Ceramic products are manufactured both in the large and small-scale sector. State-of-the-art ceramic goods are being manufactured in the country and the technology adopted by the organized sector within Indian ceramic Industry is of international standard. A major change that took over ceramic tiles industry was the introduction of vitrified and porcelain tiles. These entrant tiles are said to be the future tiles which account for 50% of total tile sales by value in this country. Highlights of industry:Ceramic Tiles today have been used increasingly for interior decorations and home improvement. The Indian tile industry, despite an overall slowdown of the economy continues to grow at a healthy 15% per annum. Investments in the last 5 years have aggregated over Rs. 5000 crores. The overall size of the Indian ceramic tile industry is approximately Rs 18,000 crores (FY1c2). The production during 2011-12 stood at approx. 600 million ores meters.The use of ceramics in crockery, sanitary ware is also on increasing pace and is also beneficial for ceramic industry.The Indian tile industry is divided into organized and unorganized sector. The organized sector comprises of approximately 14 players. The current size of the organized sector is about Rs 7,200 Crores. The unorganized sector accounts for nearly 60% of the total industry bearing testimony of the growth potential of this sector.India ranks in the top 3 list of countries in terms of tile production in the world. With proper planning and better quality control our exports (presently insignificant) contribution can significantly increase.

Background:Apart from their decorative looks, Ceramic Tiles are primarily hygiene products. It is used in bathrooms and kitchens in average Indian households to medical centers, labs, governments, schools, public conveniences, shopping malls and numerous other centers; which dot our day to day life. Popular housing projects are increasingly switching over to Ceramic Tiles moving away from the traditional use mosaic and even granite or marble, owing to several factors viz. Ease in laying ability, versatility, low price and hygiene.Concentration of ceramic industries in India:There is concentration of ceramic industries in Morbi, Thangadh, Himmatnagar, Wankaner, Sabarkantha etc. There are some ceramic units in south Indian states like Andhra Pradesh, Karnataka also. The major concentration of ceramic industries is in Gujarat state. The Morbi region of Gujarat accounts for 70% of the total ceramic production of India.Morbi: Morbi is a bustling town of Rajkot district (Saurashtra). Just before 10 years Morbi was seen as a remote place of Gujarat with limited resources. Today, it caters to the 8% of the world's ceramic requirement. Major products of this ceramic city are wall tiles, floor tiles, polished porcelain tiles, sanitary ware and mosaic tiles. The leading manufacturers of Morbi are Vrundavan ceramics, Oreva, Argil tiles, Excel ceramics, Face ceramics, Simpolo and Eros sanitaryware.The quality of the Morbi's ceramic products is becoming comparable to that of international standards. Some of these products are also qualifying stringent European norms. This ceramic cluster is categorized as unorganized sector with many of the family owned companies. But it is surely a good place to source the requirements of ceramics. Morbi's products are considered as medium range products. The reason behind Morbi ceramic success is the availability of red soil (fire clay) which is raw material for ceramic industry. Fuel gas is supplied from Porbandar. The vicinity of the city with major ports (such as Kandla and Mundra) also lowers down the transportation costs and thus helps exporters of ceramics from the region. The region will surely be one of Asias key driving forces over the next 10 years.

AMLfor Antique Marbonite Pvt. Ltd., Morbi, GujaratAGLfor Asian Granito (India) Ltd., Sabarkantha, Gujarat CGTfor Coral Gold Tiles Pvt. Ltd., Morbi, Gujarat CGLfor Coral Granito Pvt. Ltd., Morbi, Gujarat CTLCengres Tiles Ltd., Dist. Mehsana, Gujarat ECLfor Euro Ceramics Ltd., Kutch, Gujarat GCLfor Gokul Ceramics Pvt. Ltd., Rajkot, Gujarat HRJfor H & R Johnson(India) A Division of Prism Cement Ltd., KCLfor Kajaria Ceramics Ltd., Sikandrabad-UP, Gailpur-Rajasthan, Morbi-Gujarat MCLfor Murudeshwar Ceramics Ltd., Karaikal-Pondicherry, Hubli, Bangalore-Karnataka, OGLfor Oracle Granito Ltd., Sabarkantha, Gujarat OCLfor Orient Ceramics & Industries Ltd., Sikandrabad, UP OVLfor Jaxx Vitrified Pvt. Ltd. (Formerly Ozzy Vitrified Pvt. Ltd.), Morbi, Gujarat RAKfor R.A.K Ceramics India Pvt. Ltd., Samalkot, AP RGLfor Regent Granito (India) Ltd., Himatnagar, Gujarat SGLfor Senso Granito Pvt. Ltd., Rajkot, Gujarat SCPfor Sentini Cermica Pvt. Ltd., Krishna, AP SICfor Silica Ceramics (P) Ltd., West Godavari, AP SCLfor Somany Ceramics Ltd., Bahadurgarh-Haryana, Kadi-Gujarat SVPfor Simpolo Vitrified Pvt. Ltd., Morbi, Gujarat SJTfor Spectrum Johnson Tiles Pvt. Ltd., Rajkot, Gujarat STLfor Sunshine Tile Co. Pvt. Ltd., Rajkot, GujaratClusters of ceramic industry:

The Naroda Centre of CGCRIset up in 1977 is situated in Ahmedabad in Gujarat State. The Centre caters to the needs of the ceramic industries in Gujarat and neighboring States, manufacturing traditional ceramics such as ceramic floor & wall tiles, vitrified & porcelain tiles, sanitary ware, stone ware, table ware & decorating wares, LT insulators, high tech ceramics, refractorys, industries manufacturing ceramic raw materials such as china clay, ball clay etc. A cluster is sectoral and geographical concentration of enterprises employing similar process scale of operation and producing similar products but faced with common opportunities and threats. There are four major force ceramic clusters in Gujarat. They are as under. 1 Ahmedabad Cluster 2 Himmatnagar Cluster3 Thangarh Cluster 4 Morbi-Wankaner clustersRole of ceramics in economy: Ceramic sector makes an important contribution to the economy, housing sector, export earnings and employment of India. With the growth in the housing sector the demand of ceramics is expected to increase considering the competitiveness of Indian tiles in the international market. The potential is huge considering the present per capita consumption (0.50 square meters per person) of ceramic tiles in Indian comparison to over 2 square meters per person for countries like China, Brazil and Malaysia. .

Overall Picture Of The Industry: Ceramic industry has become a grand and huge company over the years. The Indian ceramic industry has a production capacity of 680 million square meters annually. The main product segments are the Wall tile, Floor tile, Vitrified tile and Industrial tile segments. The market shares (in value terms) are 20%, 23% 50%, and respectively for Wall, Floor, Vitrified, and Industrial tiles. The tiles are available in a wide variety of designs, textures and surface effects. They cater to tastes as varied from rustics to contemporary marble designs in super glossy mirror finishes. The ceramic tiles industry in India has followed similar trends internationally which have been characterized by excess capacities and falling margins. Countries like Malaysia, Thailand, Indonesia, Sri Lanka and Vietnam are setting up their own plants. China has emerged as a major competitor. Producers from Spain and Italy have the advantage of lower transportation costs while exporting to USA and Germany. A major change that took over the ceramic tiles industry, was the introduction of vitrified and porcelain tiles. These new entrant product types are said to be the tiles of the future.These new products and the conventional wall & floor tiles have together made the organized industry grow to a formidable Rs. 7,200 crores industry. This coupled with a spate of expansions by many players make the industry look very promising in the future. The Indian Industry has developed an export market although at the lower end. Indian exports are rising at an accelerating growth annually. The top-end of the global export market is presently dominated by China (36.8%) and Italy (15.1%).

Ceramic Tile Industry Statistics1.World production:9515 Million sq.mt

2.India's Share:600 Million sq.mt.

3.World ranking (in production):3

4.Per capita consumption:0.50 sq.mt.

5.Global Industry Growth Rate:11%

6.Growth Rate (India Domestic Market):15%

7.National Player's Turnover (India):Rs 7200 crores

A). Glazed Wall Tile share:20%

B). Glazed Floor Tile share:23%

C). Vitrified Tile share:50%

D). Industrial Tile Share:7%

8.Regional Player's Turnover:Rs 10800 crores

9.National Sector:

A). Share of Production:40%

B). No. Of units:14

10.Regional Sector:

A). Share of Production:60%

B). No. Of units:200 (approx) (70% based in Gujarat region)

11.Job Potential:50,000 direct & 500,000 indirect

12.Investments in last 5 years:Rs 5000 crores

Scenario of Ceramic Industry:

The Ceramic Tile Market in India is showing remarkable growth owing to the booming real estate sector along with the rising disposable income of the consumers. Consumers are becoming style conscious and this aesthetic sense of the consumers is leading to its increased consumption. Moreover, the user industries of ceramic tiles are also growing steadily due to its price competitiveness compared to marble leading to its increased demand from these sectors.

1. Ceramic tiles: Indian tile industry is 681 MSM as of March 2013. Industry size is estimated to be Rs 19500 Crores as of March 2013. The industry has been growing at a CAGR of 13 14% per annum in last 4 5 years. The growth of the unorganized sector which accounted for 60% of total production bears testimony of the attractive returns from the industry. The organized sector accounted for 40% of total production. Industry ranks in the top 3 in terms of production in the world. Market share of India has risen from a little over 2.7% to 5.6% in terms of ceramicTile production.

2. Sanitaryware: The sanitary ware industry in India is clearly divided into two sectors, the organized and unorganized sectors. In the former, Hind ware is market leader with two factory locations followed by Roca which has 4 plants in India. Other large players in this industry are Kohler, Cera, and Duravit. With a total number of nine units, production capacity totals150000 Million TPA, the actual production, however, stands at around 125000 Million TPA. In the unorganized sector around 250 companies produce basic sanitary ware under various brand names. Their production capacity totals 500 000 Million TPA, although actual annual production reaches 400 000 Million TPA. They are concentrated in Gujarat because ofAvailability of cheap raw materials and low overheads and hence sell their products in the domestic market cheaper than the products of the organized sector. The industry has been growing by about 15-18% over the last two years.

3. Tableware: India is exporting bone china tableware to all the European countries including UK, Canada, Australia and Egypt etc. At present production capacity of bone china tableware in India is 200 MTPD and nearly 25% of total production is exported. New bone china units in India are using latest technology and equipment and even old stoneware industry has come up a long way.

Major Players In Ceramic Industry Of India

Name of companyName of brandMarket share

Kajaria ceramicsKajaria14.9

H & R JohnsonMarbonite10.2

Somany ceramicsSomany7.3

Asian grantinoAsian7

Murudshwar ceramicsNaveen4.1

Other players like SPL having brand name of gravity and Somany and companies like Spartek , Regency , Bell ceramics ,Vrundavan are also doing good and having good presence in Indian market.

Apart from organized players there are many unorgorganized players of ceramic industry in Morbi, Wankaner , Himmatnagar etc. Morbi, the most promising ceramic tiles manufacturing hub of India, is a city located in Saurashtra region of Gujarat.

Boom in construction:

Construction industry is expected to grow at 15.5 % annually during the five year 2013-2017. This will led to increase in demand for ceramic products.

Mergers and acquisitions:

There is a global shut down and hence only large companies will be able to expand their base. There is many mergers in the recent years like Asian tiles merged with Asian Grantio.

Trends in the industry:

Most of the ceramic companies have understood the need for better distribution for maintaining market share in the competitive market. The use of digital print technology and move to vitrified tiles has been observed. The use of promotions using exhibitions, print media, television, radio is also important for maintain sales. Companies have started realizing the importance of brand building.

Regulatory /policy scenario:

1. Raw material: Feldspar and quartz are critical raw materials in the manufacturing of ceramic tiles and sanitary ware. The global demand for these rare minerals has been growing forcing the domestic industries to rely heavily on imports of these inputs. The export of both raw materials has gone up substantially and hence the Board of Indian Council of Ceramic Tiles and Sanitary ware (ICCTAS) has already appealed to the government for ban on export of these raw materials.

2. Fuel Prices: High fuel price, especially of natural gas, is a major challenge faced by the ceramic industry, and has been one of the key reasons affecting the profitability of the ceramic industry. It comprises of 35-40% of the total cost of production of ceramics.

3. Dumping:One of the major problems faced by the Indian tile manufacturers is dumping. Cheap Imported vitrified tiles are being dumped by countries such as China. India had levied an anti-dumping duty on import of vitrified tiles from China in 2003 based on the findings of anti-dumping cases.

4. Quality and scale economiesThe ceramic tiles industry is dominated by unorganized players with a market share of approximately 60%. The major ceramic cluster is Morbi in Gujarat which still uses obsolete technologies for production and printing, except for few organized players.

SWOT analysis of ceramic industry:Strengths: 1. There are many experienced and old ceramic industries in India. 2. There are many skilled people working in this industry. 3. The industries are having huge capacity of production. 4. Strong relationship with vendors is there in the industry. 5. The management team is committed and capable in the field.Weakness:

1. The industries in India are operating under high operating costs as compared to companies in china2. There are huge idle capacities therefore fixed cost per unit is higher.3. The working conditions for staff are not satisfactory. There need to be adequate safety provisions to be kept in the industry.4. There are conflicts going on between the management and the union.5. New technologies result in loss of job and learning of new skills. There is lag in technologies adopted in foreign countries and in India. 6. High fragmentation of the industry with few large players and a number of Small and medium size units facing the problems of poor economies of scale And squeezing margins 7. Substitutes of ceramics like terracotta tiles and PVC floorings which are Capturing the markets in some areasOpportunities:

1. The construction and housing boom to increase demand for ceramic product.2. The hotels and tourism industry is also given huge emphasis thereby increasing demand for ceramic tiles.3. There is increase in the living standards and disposable income of people so better opportunities for ceramic maybe developed.4. Growing urbanization can also increase demand for ceramic tiles.5. There is constant increase in the population of India therefore demand for housing and in turn ceramic will going to rise.6. The concept of nuclear families and increase in aviation and hospitality industry will increase demand for ceramics.7. The government has decreased excise duty on ceramics from 15% to 10%

Threats:

1. The dumping of ceramic tiles by China is the major problem. Although anti dumping duties are applied on it still Chinese products are cheaper.2. The increasing cost of raw materials like electricity, natural gas etc used in production of ceramic is also threat.3. There is some slowdown in real estate business which may affect ceramic 4. Industry.5. Feldspar and quartz which are important minerals used in the production of ceramic tiles are exported and there is increase in the demand of these products.6. There has been decrease in demand of Morbi tiles and increasing cost of operating it7. Many environmental clearances and problems are associated with it.

Difficulties faced by Indian ceramic industry:The profit margin of Indian ceramic companies is continuously shrinking. The major reason behind shrinking of profit margin is dumping and anomalous custom duty structure in India. The different factors posing difficulties on ceramic companies are discussed below:

1. Dumping of Chinese products: With a total import value worth over $497 million (mn), China leads the countries importing ceramic products into India thereby accounting for a share of over 64 per cent followed by Germany (over seven per cent share) and France (four per cent share). The rate of growth for import of Chinese ceramics into India has substantially increased from just about eight per cent till a few years ago to over 42 per cent." The shortage of ceramic tiles' production has provided a readily available market for Chinese industry thereby leaving little room for ceramic exports from India

Solution:1. The prevailing anomalies pertaining to Basic Customs Duty on import of ceramic tiles from China and raw materials imported from abroad need to be corrected to prevent dumping of tiles from China.2. Also Chinese ceramic products are cheaper in quality and cost, so India can put emphasis on better quality product and built technology for superior quality product. This can help in moving decision from cost to quality of product.3. The company can go for expansion therefore leading to achieving economies of scale and reducing the overall cost of production of ceramic products.

2. Rising fuel and cost of manufacturing: Fuel costs comprises of 30 -40% of the total input costs of ceramic products. The supply of power and gas is through government. Freight, supply of power and gas remain other key cost-related issues impacting Indian ceramics sector. Besides, rise in raw material costs together with soaring fuel prices are other major problems faced by the industry.

Ceramics manufacturers are not able to pass on the rise in input costs to the consumers owing to the emerging competition from Chinese ceramic imports which further hurts their profitability and has even lead to closure of certain ceramic units unable to bear rising production costs," highlights the ASSOCHAM study. The costs related to raw material, power and fuel rose by about 23-28 per cent during the 2011-12.

Ceramic units used coal as source of fuel but because of pollution related problems the high court had passed law stating use of natural gas as fuel which led to increase in price of the product.

GSPC Gas Company Limited, a group company of state government-owned Gujarat State Petroleum Corporation (GSPC), is finding it difficult to meet the increased PNG demand. Presently, the GSPC Gas is supplying PNG at Rs 37.40 per standard cubic meter (SCM). With the addition of value added tax, per SCM gas costs around Rs 40 to industry houses. Ceramic industry sources say compared to PNG, coal gas is much cheaper.

Solution:1. The demand of PNG (piped natural gas) is more than its supply. The GSPC Gas has decided to start rationing of PNG. The company has informed around 170 units that they would get PNG by turn2. The alternative and pollution free sources of fuel must be developed. So there must be increase in R &D expenditure to develop better and less pollutative source of energy.3. Procedures must be adapted to reduce per unit fuel consumption and improve fuel efficient methods of production.4. The government must depend for fuel supply on more countries so as to ensure consistent supply of fuel.5. The company can enter into contract with ONGC and other gas providers for getting quantity discount and low cost of energy.

3. Rising raw material cost: Consistent availability and supply of raw materials with optimal pricing are crucial for growth and profitability of Indian ceramics industry. The industry is facing problem of inconsistent and non uniform quality of raw material along with increasing cost of raw materials. There has been huge exports of Feldspar and Quartz which are important raw material for production of ceramic , which may result in increase in price of these components in future due to shortage. There has been increase in price of raw materials like zirconium and titanium.

Solution:1. Adoption of backward integration model to secure flow of raw materials and investments in exploration of mines considering as consumption rises, the cost of raw material would eventually increase.2. The Board of Indian Council of Ceramic Tiles & Sanitary ware is planning to appeal to the Government for a ban on the export of two minerals Feldspar & Quartz from India. Feldspar & Quartz are critical minerals which are used as key raw materials in the manufacturing of ceramic tiles & sanitary ware.3. There can be cheap import of certain raw materials required in production of ceramic products.

4. Rising production costs and shrinking margin: The cost of ceramic production is increasing because of rise in cost of fuels and other necessary raw materials required in production of ceramic products. Also, the units are not able to pass increasing cost to the consumers because of low price of Chinese products which results in shrinking of profitability and margin of ceramic companies.

Solution:1. There must be expansion of production facilities to achieve economies of scale and thus reducing the cost of production of ceramic tiles.2. The decision of consumers must be moved from price to quality. The companies should adopt better and latest technologies like digital technology, nano technology etc which will result in better quality of product.3. The company should understand benefits of brand building as good brand can charge high price.

5. Increase in transportation cost:There has been continuous increase in the price of petroleum products. The rise in transportation costs leads to rise in price to the final customer.

Solution:1. The factory location should be appropriate so as to minimize distance of factory from market and raw material sources.2. The country should depend on more number of countries for its import of petroleum and other fuel products.3. The vehicles using alternate source of energy should be encouraged and government should grant subsidies for research projects for developing alternative sources of energy.

6. Rising finance cost:Rising finance costs have been adversely impacting tile Industry. The companies which saw interest costs rising more than 50% in 2012 are Asian Grantio Tiles, Cera sanitary ware, Kajaria etc Solution:1. The company should reduce its external source of borrowing rely more on equity2. The leverage ratio of the company should maintain so as to reduce finance and borrowing cost. 3. Different sources of finance should be properly analyzed and best Source should be selected so as to reduce cost and risk.

7. Low per capita consumption in India: The per capita consumption of ceramic tiles is low in India. It is only 0.50 tiles in India as against 2.46 tile consumption in China. Consumption of tiles is high in Brazil, U.A.E. etc

Solution: The per capita consumption in India is about to increase with Growing disposable people and standard of living of people.

Global Scenario of Ceramic Industry During the period from 2001 to 2011, total ceramics trade grew at a CAGR of 7.56%, from US$ 39.6 billion to US$ 87.9 billion. During the period exports increased from US$ 19.8 billion to US$ 44.6 billion (CAGR of 7.74%), while imports increased from US$ 19.9 billion to US$ 43.2 billion (CAGR of 7.38%).China is the largest trader of ceramics in the world, with total trade of US$ 14.7 billion during 2011, followed by US and Germany, Italy with total trade of US$ 7.4 billion, US$ 7.0 billion and US$ 6.18 billion, respectively.

The major production of ceramic is from the continent of Asia. It accounts for more than 50% of the world production of ceramics. China is the largest producer of ceramic tiles in the world. India has increased its capabilities of producing ceramics and has become the third largest producer of ceramic tiles in the world Indigenous companies have faced several problems because of dumping of ceramic products by China. Indonesia, Sri Lanka, Malaysia .and U.A.E. also indulge in dumping ceramic products. The India has also signed Bangkok agreement according to which India will have free trade with china but this can be proved harmful for the indigenous ceramic companies. As far as India is concerned, it majorly exports to Saudi Arabia, U.K. and U.A.E. Top 10 Manufacturing Countries 2012: China leads the other countries in the ceramic production. India is at 3 rd position producing 550 million sq. Meters per year. Earlier in 2008 it was on the 8th position.

Consumption of ceramic tiles:

The consumption of ceramic tiles is highest in Asia. It comprises 66.1 % of consumption of ceramics by the whole world. The breakdown in consumption by geographical area is very similar to that of production .In Asia, the consumption grew at 4.4% in the year 2012. Global per capita consumption of tile is given in figure

Top 10 Consuming Countries (2012)China is both the largest producer and consumer of ceramic product. India is on 3rdposition.

Thus, Indias consumption of ceramic tiles is more than its production so India has to rely on import of ceramic products from abroad. However the dependence of India from foreign market can be reduced by increasing domestic production.

Top 10 exporting countries:

China is the largest exporter of ceramic products. It exported 705 million sq. Mtrs in a 2012. India is not among the top exporter of ceramic products.

Top 10 importing countries:

U.S.A. is the largest importer of ceramic products. In 2012, it imported 130 million sq. Meters of ceramic tiles. Saudi Arabia is the next largest importer of ceramic products

.

Major international players of ceramic industry include:

Name of companyPlace of origin

RAKU.A.E

Siam cement groupThailand

NankaiChina

Indias ceramic production:There has been increase in capacity of ceramic production in India. In 2008, India was able to produce less than 400 million square meters annually, while in 2013, its capacity increased to 681 million square meters.

India ceramic export market :As a foreign exchange earner or a global player, Indian Tile industry has captured the attention of the world in the ceramic tiles segment. The Indian Industry has developed an export market although at the lower end. In volume it constitutes less than half a percent of the global market. (Presently India does not figure in the list of major exporting countries). But this reality could change as Indian exports are rising at an accelerating growth annually. The top-end of the global export market is presently dominated by China (36.8%) and Italy (15.1%). From a global perspective India face stiff competition from the much more cost efficient Chinese and Brazilian products. The Indian industry is also miles behind producing the quality goods that Spain and Italy do have and has to almost exclusively rely on imports for high quality goods.

Import and export of India: India exported ceramic products worth over a total of $435 millionin 2012 which is way below the total imports of over $734 million.However, there is a slight ray of hope in favour of Indian ceramics industry considering that growth of exports outpaced the import rate by a margin of about six per cent, the analysis noted. Indias imports of ceramics grew at a CAGRof about 13 per cent during the course of past six years (2007-12) while exports grew at about 19 per cent. As evident from the graph, Indian exports are continuously increasing from period of 2007. The exports are further expected to grow at 18.5%. Export composition:The major ceramic products which are exported are:1.sanitaryware2.ceramic tiles & vitrified tiles3.crockery items & other household articles4.ornamental ceramic tiles

Major importers of ceramic products from India:

Saudi Arabia, Kuwait and U.A.E are among the largest importer of ceramic products from India . However, in terms of growth, Nepal has clocked the highest growth rate of about 60 per cent in imports of Indian ceramic products followed by Iran (41 per cent), Turkey (32 per cent), Saudi Arabia (27 per cent) and USA (19 per cent).Opportunities in the export market U.S.A, Germany and France are potential markets for glazed ceramic tiles and unglazed ceramic tiles.1. With the economic slowdowns in Europe threatening local industry, coupled with Yuan's appreciation and the Rupee's depreciation, we have an opportunity to establish Indian products in the international market at competitive rates.2. Global tiles market has witnessed ups and downs in the last few years due to 2009 crisis. However, the global tiles market has shown an upward trend since 2010 with the major demand coming from emerging economies. The increased demand for ceramics in emerging markets like Ukraine, Russia ,Nigeria etc may be attributable to rapid economic growth and greater public and private sector investment in these countries. 3. The growing real estate market in countries such as Brazil, India, China and Indonesia has led to the demand for tiles. During 2011, India was the 20th largest ceramic trading nation in the world and accounted for a share of around 1% in total ceramics trade. During the period, from 2001 to 2011, Indias ceramics trade increased from US$ 143 million to US$ 984 million at a CAGR of 23.4%. 4. The demand of ceramic products depends on countrys construction activity. So we can target countries with heavy infrastructural development. 5. Ceramics are imperishable products and require less hassle so it is plus point for exporting of products.6. Recently many customers from Brazil have visited Morbi to source right partners to buy ceramic & porcelain tiles. Though Brazil is also producer of ceramic tiles they were till date depending on China for PORCELAIN Tiles. But currently there was lot of buzz around regarding Brazil imposing anti-dumping duty on Chinese made tiles.7 Next five years will offer good opportunities for Indian sanitary ware companies to export their products to Saudi Arabia. From India the leading exporters of Sanitary ware to KSA are CERA, Somany and Kajaria. Increasing number of individuals in high income group fuels the demand of higher end luxurysanitary waresin Saudi Arabia.8. Advance ceramics offers tremendous potential in global markets because of its applications in automotive, electronics and aviation. The demand for advance ceramics is increasing specially by U.S.A and Japan.Strategies adopted by Indian companies: 1. Somany ceramics which is Delhi based manufacturer of floor tiles entered into strategic partnership with Kaleseramilk, a Turkey based manufacturer to market its product in middle east.2. Nitco tiles have opened its exclusive showrooms in Qatar, Lebanon and some other Arabian countries.3. Merchant exporters are chosen to market their products .Maharani exporter is largest exporter of ceramic products from India which is based in Delhi. How to compete with overseas manufacturers:A comprehensive project has been taken by CAPEXIL (chemical and other products export promotion council) in order to push export of Indian ceramic and related products to markets such as U.S., Mexico, and U.K etc.

1.Learn new trend & technologies & innovative products: Indian companies need to update their knowledge and learn about new trends and technologies. This can be achieved by spending heavy amount of money on R&D and learn new methods and technologies of producing ceramic products.

Also, company can import new technologies from abroad for improving the quality of ceramic products. Also, companies can participate in certain exhibitions like Cersaie, Cevisama to learn about new trends and happenings in the market.

The ceramic sector of India needs to develop innovative product lines to improve export performance of Indian ceramics.

2.Global exposure:

It is necessarily to have global exposure in order to sell products. Many ceramic companies from morbid participate in THE BIG 5 SHOW and similar other exhibitions to get exposure to big middle east and African countries.

3.capacity expansion:

It is expected that capacity expansion will help domestic players to reap economies of scale This can help them to price their product more competitively in domestic as well as international market.

All major players including Kajaria ceramics, H& R Johnson, Murudeshwar Ceramics and Regency ceramics have made substantial investment in capacity expansion.

4.Proper sales network:

Though Indian ceramic industry is facing pricing war from Chinese products, Indian ceramic price is still low in premium markets like Europe, Canada and U.S., but we are lacking in effective sales network. So companies need to develop better and effective sales network. Co-operative partnership between suppliers, dealers, distributors, employees and the major customers must become a priority.5.Alternate source of fuel:

The companies should develop alternative source of fuel as fuel prices are rising constantly and it contributes about 30- 40 % of the price of ceramic production.

6.Focus on advanced ceramics:

Advanced ceramics products find use in electronics, automotive and aerospace industries. Thus new and expanding opportunities of use of ceramic must be explored.

7 .Product range:

The Indian companies should understand the cultural diversity and satisfy their demands of varying designs, price points, quality and style effectively in order to attain success.

8.Import of quality raw material:

The quality of indigenous clay used for ceramic is not much export oriented. So company can import better quality of raw materials from the foreign countries in order to improve quality of the product.

9.Branding:

Having a strong brand is more critical to ceramic tiles and sanitary ware industries as they are addressing individual customers. Players like H&R Johnson, Kajaria etc are investing substantially in advertising and brand building.

Fuel /gas cost of ceramics:

Fuel or gas cost constitutes the major cost in the production of ceramics. Also, there are many environmental issues associated with the type of fuel source used and its pollution emissions. The drying and firing process of ceramic production use much of electrical energy.

Problems:

Most of units in Morbi were using coal as source of energy but due to pollution problems, high court put ban on use of coal in ceramic production.1. The facility of piped natural gas (PNG) was provided to Morbi and other units by public sector organization named Gujarat State petroleum corporation (GSPC) and Oil and natural gas commission. (ONGC). But there has been almost 40% increase in price of gas given by these organizations and also there has been irregularity regarding the supply of fuels by this organization. Thus, there has been increase in cost of producing ceramics because of increase in ceramic prices. So companies need to take steps for reducing the fuel cost of operating.

There are two ways of reducing fuel cost:

1. Decrease in per unit fuel consumption of ceramic products.2. Decrease in cost of obtaining fuel

Let us discuss them in detail:

1. Decrease in per unit fuel consumption: The Company can reduce per capita consumption of fuel by using cost effective methods. Energy conservation efforts can be classified into three:

a) Good housekeeping: b) c) The elimination of minor waste, review of operation standards in production line, more efficient management, improvement in employee s cost consciousness etc can be made.e.g. unnecessary lighting of electrical lamps and idle operation of motor, repair of steam leakage , reinforcement of heat insulations etc.

b)equipment improvement:

Waste heat recovery equipment and gas pressure recovery equipment in combustion furnaces may be helpful.There must be use of new and advanced equipment spreading less pollution.

c) Process improvement: Technological development can be helpful in improving the production process. This is nothing but modernization of the process aimed at energy conservation, high quality, higher added value, improved product and manpower yield.

Suggestions:

1. The easiest way of energy conservation for using fuel without investment is to reduce air ratio.2. The faster the kiln car pushing speed, the less fuel will be consumed in tunnel kiln, thereby continue to energy conservation.3. The shape of the kiln also affects energy consumption.

2. Decrease in per unit price of fuel: 1. The company can go for specific contracts with the fuel proving organizations to reduce their per unit cost.2. Alternate, cheaper and environmentally friendly sources like wind energy etc must be explored to become cost effective.

Future outlook:1. Boom in construction:2. 3. The construction industry which is having major linkages with building material segment has been growing at 15 to 20% mainly on strength of manufacturing activities, industrial growth ,and heightened investment especially by government in infrastructure and real estate. Thus, ceramic industry is expected to grow in future and has positive future outlook.

Untapped rural areas:

while the demand for tiles is driven by construction, realty, housing and infrastructure sector, it is expected that expanding construction activities in largely untapped rural areas are also expected to provide a huge thrust to to construction building material market so ceramic industry is expected to grow in future.

Besides rising disposable income and growing middle class and increased urbanization, etc. It is expected that Indias per consumption of ceramic tiles will have healthy growth in period ahead.

While Indian growth story continues in spite of inflationary pressures, indications are that the long term scenario for the ceramic industry in general and tiles segment in particular will remain healthy.

Financial stress in the ceramic industry Kajaria ceramics financial results:Profit & Loss account of Kajaria Ceramics------------------- in Rs. Cr. -------------------

Income mar13 mar12

Sales Turnover1,707.261,401.76

Excise Duty119.0692.49

Net Sales1,588.201,309.27

Other Income0.39-8.64

Stock Adjustments4.9115.47

Total Income1,593.501,316.10

Expenditure

Raw Materials898.97724.93

Power & Fuel Cost232.72193.78

Employee Cost122.13103.66

Other Manufacturing Expenses8.003.31

Selling and Admin Expenses0.0085.33

Miscellaneous Expenses109.8011.70

Preoperative Exp Capitalised0.000.00

Total Expenses1,371.621,122.71

Mar '13Mar '12

12 mths12 mths

Operating Profit221.49202.03

PBDIT221.88193.39

Interest35.4839.21

PBDT186.40154.18

Depreciation38.3637.08

Other Written Off0.000.00

Profit Before Tax148.04117.10

Extra-ordinary items-2.12-0.96

PBT (Post Extra-ord Items)145.92116.14

Tax45.3735.44

Reported Net Profit100.5580.72

Total Value Addition472.65397.77

Preference Dividend0.000.00

Equity Dividend22.0818.40

Corporate Dividend Tax3.582.98

Per share data (annualised)

Shares in issue (lakhs)735.84735.84

Earning Per Share (Rs)13.6610.97

Explanation: 1. There is increase in sales turnover of Kajaria from Rs 1400 crores to Rs 1700 crores. So there is approximately 21 % increase in sales turnover of company.2. There is increase in profit(pbt) of kajaria in year 2013 as compared to last year. There is approximately 30%increase in reported profit of the company.3.But the miscellaneous expenses of company has increased drastically so company has to take note of it and try to reduce it so as to increase profitability.Balance Sheet of Kajaria Ceramics------------------- in Rs. Cr. -------------------

Sources Of Funds mar13 Mar12

Total Share Capital14.7214.72

Equity Share Capital14.7214.72

Share Application Money0.000.00

Preference Share Capital0.000.00

Reserves342.07267.18

Revaluation Reserves0.000.00

Networth356.79281.90

Secured Loans150.45174.80

Unsecured Loans20.000.00

Total Debt170.45174.80

Total Liabilities527.24456.70

Application Of Funds

Gross Block749.85722.95

Less: Accum. Depreciation285.14253.89

Net Block464.71469.06

Capital Work in Progress6.851.76

Investments37.1612.35

Inventories176.53175.78

Sundry Debtors136.58141.01

Cash and Bank Balance2.795.49

Total Current Assets315.90322.28

Loans and Advances61.3553.70

Fixed Deposits0.000.41

Total CA, Loans & Advances377.25376.39

Deffered Credit0.000.00

Current Liabilities316.35321.68

Provisions42.3781.19

Total CL & Provisions358.72402.87

Net Current Assets18.53-26.48


Total Assets527.25456.69

Contingent Liabilities50.9920.25

Book Value (Rs)48.4938.31

Explanation: 1.There is increase in total net worth from Rs 281.9 crores to Rs 356.79 crors. It shows that company has earned profits this year which are transferred to reserves thereby increasing total net worth of company.2. All other items of balance sheet are approximately same as the last year. The company has taken Rs 20 crores unsecured loan. 3. There is almost 5 times increase in work in progress of the company.4.But the contingent liabilities of the company is more than 2 times as compared to last year while the company has reduced provision as compared to last year.Financial ratios:

1. Current ratio: the current ratio of company stood at 0.62. It is same as last year. Though current ratio is below the standard of 1.33 , still there is no negative deviation in ratio so it can be considered acceptable.2. Debt equity ratio(tol/tnw): the debt equity ratio of company has reduced from 0.62 to 0.48. the company is paying loans installments and thereby reducing debt of the company. There is no change in equity of the company so change in this ratio is due to change in debt.3. Interest cover: it means the ability of company to pay interest from the earnings of company. If it is higher, than company is more efficient in paying interest. The interest cover ratio has increased from 4.6 to 5.25 in this year which is on positive side.4. Fixed assets turnover ratio: The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) . There is increase in fixed assets turnover ratio of company from 1.81 to 2.12 which is on positive side.5. Operating profit margin: A ratio used to measure a company's pricing strategy and operating efficiency. Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. The operating profit margin of the company has decreased because of increase in raw material and power and fuel costs.6. Gross profit margin: A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. the gross profit margin of the company has reduced to 11.59 from 12.53. The reason behind this is increase in raw material cost and power and fuel cost.7. Net profit margin: There is increase in the net profit margin from 6.16 to 6.31. it shows the company has more revenues after paying for all factory , administrative and selling expenses. the reason behind this is there is decrease in selling and distribution expenses as compared to the last year.8. Return on capital employed: A financial ratio that measures a company's profitability and the efficiency with which its capital is employed..ROCE of the company has decreased in 2013 as compared to 2012. It was 36.27 % in 2012 while it has decreased to 35.38 in the current year. There is change in the capital employed of the companys there is increase in the reserves and surplus of the company9. Earning per share: There is increase in earnings per share from 10.97 to 13.66. This is on positive side as the earnings of the company has shown positive trend.H & R Johnson(Prism cement):Profit & Loss account of Prism Cement------------------- in Rs. Cr. -------------------

Income mar13 mar'12

Sales Turnover4,768.474,845.61


Net Sales4,768.474,503.11


Stock Adjustments23.8333.49

Total Income4,799.454,528.96

Expenditure

Raw Materials2,231.692,175.78





Miscellaneous Expenses1,291.46113.82


Total Expenses4,532.334,257.27

Operating Profit259.97279.33

PBDIT267.12271.69

Interest190.31170.40

PBDT76.81101.29



Profit Before Tax-82.99-45.99

Extra-ordinary items0.000.00

PBT (Post Extra-ord Items)-82.99-45.99

Tax-23.51-15.98

Reported Net Profit-59.48-30.01

Total Value Addition2,300.642,081.49




Per share data (annualised)

Shares in issue (lakhs)5,033.575,033.57

Earning Per Share (Rs)-1.18 -0.60

Explanation: 1 There is 1%decrease in the sales turnover of the company in 2013 as compared to last year. It is minor and thus acceptable. 2. There is decrease in profit of the company. The company is actually incurring losses and there is almost double of the losses suffered by the company. The reason is increase in raw material cost and power and fuel cost. The miscellaneous expenses of company has increased drastically.3.The company has not declared any dividend in this year because of the weak condition of the company.Balance Sheet of Prism Cement------------------- in Rs. Cr. -------------------

Mar '13Mar '12

Sources of fund







Networth1,089.711,148.57

Secured Loans1,149.52854.49


Total Debt1,281.521,038.95

Total Liabilities2,371.232,187.52


Gross Block3,181.612,932.62

Less: Accum. Depreciation1,172.191,019.47

Net Block2,009.421,913.15









Total CA, Loans & Advances1,578.281,347.71


Current Liabilities1,635.241,460.74

Provisions43.4169.02

Total CL & Provisions1,678.651,529.76

Net Current Assets-100.37-182.05


Total Assets2,371.232,187.52


Book Value (Rs)21.6522.82

Explanation: 1.There is reduction in the total net worth of a company as compared to last year. The reason behind this is that the company is incurring losses in the current year so there is decrease in reserves of the company. 2There is increase in the secured loans of the company thereby increasing total outside liabilities. As a result of this, there is increase in the financial cost as company needs to pay more dividend.3.There is increase in the fixed assets of the company means the company has increased either its production capabilities or has incurred research and development expense .4 The contingent liabilities of the company stands high and is double as compared to last year..Financial ratios:1. Current ratio: There is decrease in the current ratio of the company in the year 2013 from 2012. The reason is increase in current liabilities of the company. The current ratio has shown negative trend and the company is in financial stress.2. Debt equity ratio(tol/tnw): There is increase in the debt equity ratio of the company from 0.9 to 1.18. This means the company is mainly financed by outside liabilities. The gearing ratio of the company has changed in negative direction.3. Interest cover: It means ability of the company to pay for interest from the earnings of the company. The interest cover of the company was low at 0.84 and now it has decreased to 0.56 , this clearly shows that the company is not in good financial condition.4. Fixed assets turnover ratio: A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E). The fixed asset turnover ratio of the company has decreased from 1.55 to 1.51.5. Operating profit margin: Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc.The operating margin of the company has decreased from 6.20 to 5.45 in the current year.6.Gross profit margin: : A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. The gross profit margin of the company has decreased from 2.93 to 2.10 which is on negative side.7. Net profit margin: The company is incurring losses and there is increase in the losses suffered by the company. This is evident from fall of net profit margin from( -0.66) to (-1.24). There is increase in the miscellaneous expenses of the company .8. earning per share: there is decrease in the earnigs per share and increase in losses per share. The loss incurred by company per share has increased from (-0.60) to (-1.18). All the ratios indicate that the company is not in good financial condition. The company has huge amounts of burden y in form of interest payments. The gearing ratio of the company has also degraded as compared to last year.3.Nitco ceramicsProfit & Loss account of Nitco------------------- in Rs. Cr. -------------------

Income mar 13

Sales Turnover770.28959.71


Net Sales770.28937.50


Stock Adjustments-173.1896.22

Total Income597.81999.61

Expenditure

Raw Materials370.91653.04







Total Expenses637.45947.28

Operating Profit-40.3586.44

PBDIT-39.6452.33

Interest151.6775.11

PBDT-191.31-22.78



Profit Before Tax-231.34-55.44

Extra-ordinary items0.000.00

PBT (Post Extra-ord Items)-231.34-55.44

Tax0.000.00

Reported Net Profit --231.34-55.45

Total Value Addition266.54294.24




Earning Per Share (Rs)-70.96-17.01

Explanation:1. The sales turnover of the company has decreased by approximately 20%as compared to 2012 in 2013.2. The PBDIT( profit before depreciation ,interest and tax) is negative .i.e. te company is incurring losses in this year.The financial condition of the company is not good.Balance Sheet of Nitco------------------- in Rs. Cr. -------------------

3. Sources Of Funds mar13 Mar12







Networth276.74480.07

Secured Loans1,162.83580.45


Total Debt1,162.83580.45

Total Liabilities1,439.571,060.52


Gross Block900.40889.13

Less: Accum. Depreciation190.85151.55

Net Block709.55737.58









Total CA, Loans & Advances835.24961.11


Current Liabilities138.67653.49

Provisions0.830.00

Total CL & Provisions139.50653.49

Net Current Assets695.74307.62


Total Assets1,439.571,060.52


Explanation: 1.There is decrease in the total net worth of the company. The reason is losses incurred in 2013 which led to decrease in the reserves and surplus of the company.2. The unsecured loans of the company have almost doubled. This means that the company will have high financial burden in form of interest payments and installments of the term loans.3. There is increase in the current assets of the company , this is because of increase in the debtors of the company which may be because the debtors are allowed more credit period. 4. There is increase in the contingent liabilities of the company in 2013 as compared to the last year. This can pose threat if they become operational.Financial ratios:1. Current ratio :The current ratio of the company has improved from 1.47 to 4.46. This is because the company has increased inventory and debtors and more credit is allowed to debtors. But current ratio as high as 4.46 is also not useful.2. .Debt equity ratio(tol/tnw): The debt equity ratio of the company has increased from 1.21 to 4.67. There is increase in the debt and outside liability of the company. This is clear because the company has increased loan .3. Interest cover: Interest cover means ability of the company to pay interest from its earnings. The interest cover ratio of the company has moved from 0.72 to (-0.53). This is because the company is incurring losses. So the company is not in position to pay for interest.4. Fixed assets turnover ratio: The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E). The fixed asset turnover ratio of the company has decreased from 1.05 to 0.86.5. Operating margin(%):Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc The operating margin of the company is negative .i.e. (-5.22%).6. Gross profit margin: A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. The gross profit margin of the company has decreased ,it was 5.73 earlier and now it has become (-10.43). Thus the company is not doing well.7. Net profit margin: Net profit margin of the company has become (-30.00). This clearly states that the company is incurring heavy net losses in proportion of its sales. The company is not in sound financial position.8. Earnings per share: The earning per share is (-70.91). This is very high and the company is incurring heavy losses. This need to be corrected in the short span or else the investors will lose confidence in the company.

Financial stress conclusion

1. Power and fuel comprises approximately 30 -35% of the operating cost of ceramic. There is increase in power and fuel expenses of all companies.2. Raw material also comprises 40-60% of the cost, there is increase in price of raw materials.3. There is increase in interest expenses in all the three companies. 4. The performance of debt equity ratio and current ratio is also not satisfactory.5. Operating profit/ sales is decreasing in all three companies.6. Also, the working cycle of ceramic industry is 8 to 10 months and thus there is blockage of fund for quite a long period. These are the main reason behind financial stress of the company.

Analysis and observation:For the purpose of analysis of ceramic industry, I have prepared questionnaire to site information from the companies dealing in ceramic industry. Companies like Cengress Pvt limited, Regent Granito etc have helped in this survey. I have also made Sabarmati gas limited who is one of the natural gas suppliers to these ceramic companies fill the questionnaire as they are dealing with ceramic customers and have knowledge about the industry. The presentation of information obtained from ceramic industry is as follows:1. The most important factor affecting the ceramic industry growth:

According to companys views, construction sector growth is the major reason behind the demand of ceramics. 50% of the company believed that ceramic industry growth will depend on construction sector growth. After construction sector growth, urbanization growth and rising income level are other important factors affecting ceramic industry growth. The factors like housing sector growth, tourism industry growth and population growth have negligible impact on ceramic industry growth. Hence, for ceramic industry to grow , there is requirement of growth in construction sector, urbanization growth etc

2. Macro environmental factors that can pose threat on ceramic industry:

Rising fuel costs is major concern for the industry. 66.66% of people consider fuel costs increase as a problem for the ceramic industry. Other than fuel costs, dumping by china has always been problem for ceramic companies. Government regulations regarding pollution etc also affect ceramic industry. The factors like substitutes do not affect ceramic industry much because of better quality of ceramic products. Thus, government needs to support ceramic industries by reducing fuel costs. The government should take steps against dumping of ceramic products by china in order to protect the indigenous ceramic companies as ceramic is one of the most important industry affecting economy of our country and also a good foreign exchange earner for the economy.

3. Substitute products that can affect ceramic industries:

As far as substitutes are considered, marbles and granite are the most important substitutes affecting ceramic industry. More than 50% of company responded that marble can be most important substitute product and hence strategies to negate the benefits of marbles over ceramic must be made using factors like price, quality etc. Nowadays, people have started preferring wooden and bamboo floorings etc which can also affect ceramic industries.

Ceramic industries still have benefit over substitute products because of easy availability and cheaper price compared to marble etc. Also ceramic tiles are available in more designs and colours and they have ease of cleanliness and low maintenance costs. Marbles are preferred by companies because of its cooling effect in summer but the same works against it in winter

4. Do you export ceramic products?

80% of the companies export ceramic products. Only 20% small industries do not export ceramic products. Thus, companies have started becoming global and serving foreign markets in order to reap benefits of economies of scale. Hence ceramic companies can have great opportunities in export market. Most of the companies are relying on foreign market to serve its products and achieve economies of scale in its production. The companies are now increasing their capacity utilization and serving foreign markets.

5. Strategies adopted by companies to remain competitive in the export market:

Providing better quality is the major strategies adopted by ceramic companies in order to export their product. Providing more product range with more variety and better designs are also being used by companies. Companies now have understood the impact of branding and better sales network as import driver affecting sales of ceramic products. Hence the companies is focusing on meeting foreign market demand by bringing better quality products, more product range and good promotional and marketing efforts. The companies are taking part in various ceramic exhibitions in order to increase awareness of the companies.

6. Different measures of increasing profitability and reducing cost adopted by your companies:

Fuel costs comprises of 30 to 40% of the cost of ceramic production. There has been continuous increase in natural gas and other fuels being used by ceramic industries. Increasing fuel costs has been major concern for the industries and hence different measures are adopted by companies to reduce the fuel costs in order to increase the profitability of the business. Apart from decrease in fuel costs, better technology is another measure for increasing profitability of the business. Better technology results in better quality of product at low cost and thus, companies can gain more profit.

Thus, fuel costs have been major concern for ceramic companies and they have been trying hard to decrease fuel costs by adopting better technology etc

7. Techniques for reducing fuel costs adopted by your company:

Using alternate sources of fuel is major remedy of fuel costs increase. The fuels like organic manure; solar energy etc can be utilized efficiency to reduce the costs of ceramic industry. Process improvement can be helpful as better process will result in less per unit consumption and better utilization of fuels. Better equipment can also be helpful in reducing fuel costs.

This is the analysis and observations drawn from the information collected from ceramic companies.

Findings:1. Construction sector, urbanization growth and rising income levels are most important factors affecting the ceramic industry growth. Growth in housing, tourism sector and population growth has less impact on ceramic industry growth.

2. Rising fuel costs has been major problem for the industry. Fuel costs comprises of 30 to 40 % of the cost of ceramic production and increasing in fuel costs has result in eroding of margins of the company as companies are not able to pass increasing costs to the consumers because of competition by the Chinese products.

3. Marbles can be the substitute posing threat on ceramic industries. Marbles have cooling effect in summer and it is the major reason behind usage of marbles. People also have started using wooden and bamboo flooring which can be threat for ceramic companies.

4. Ceramic products have certain benefits over other substitutes like standardized quality, more choices in terms of design, cheap price and ease of maintenance. Because of its anti resistant properties, it is in use in aerospace industry, telecommunications etc

5. Companies have started exporting ceramic products. Most of the companies rely on foreign market to meet its production. Based on financial data, companies are generally exporting 5 to 10 % of their production in the foreign market.

6. The companies have adopted various strategies like better quality products, more designs and product range and better marketing techniques in order to remain competitive in the export market.

7. Fuel costs have been major cost component of ceramic tiles and companies are taking various steps like using better technology, process and equipment improvement etc to reduce the rising fuel costs of ceramic operation.

8. The companies are in financial stress since some years. The reason behind financial stress is increase in fuel and finance costs of the operation. The companies are not able to pass increasing operating costs to the consumers because of intense competition from Chinese products. There has been increase in transportation costs of the company also. Every year company is required to incur heavy costs in research and development to bring better technology and equipment of producing ceramics.

9. The ceramic companies need to rely on outside financing options like banks for operation. The ceramic companies use various sources of credit like working capital loan, cash credit, letter of credit, bank guarantee, term loan etc available from banks for meeting its requirement.

10. I have contacted ceramic companies being dealt by sbi and found that they want certain concessions like competitive and low interest rates, longer period of credit, low demand of collateral etc from the bank. They feel that bank can help ceramic industries by reducing finance costs as ceramic companies are good source of income for banks. Banks have been earning crores of rupees by providing different credit facilities to the ceramic companies.

Conclusion:

1. Ceramic industries are facing difficulties of dumping by China, rising fuel costs, stricter governmental regulations relating to the environment etc. the companies are also facing difficulties from small and unorganized players as they are getting cost benefits because of taxation costs etc.

2. There seems a great export opportunity of ceramic products from India because of devaluation of rupee. As a result of these, exports from India will become cheaper. There has been increase in demand of ceramic products by emerging economies so they can be good export destinations for Indian ceramic products. Also countries like U.S.A, Saudi Arabia and other Arab countries are having high ceramic consumption but they are not producing much to satisfy their domestic demand so they rely on import from other countries. Thus, there seems great opportunity for export of ceramic products from India. To remain competitive in the export market, the companies are adopting strategies like better quality products, more product range, better marketing efforts through branding and effective sales network. The companies are participating in exhibitions etc.

3. The company is at present in financial stress. This is because of rising fuel costs, increase in finance and transportation costs of operating business. The company is also not able to pass increasing costs to the consumers because of competition from China and other unorganized and small players. The efficiency ratios of the company are degrading on year on year basic. The liquidity and solvency ratios of the ceramic companies are not satisfactory. Many large companies like NITCO, H & R Johnson, Kajaria etc are in financial stress. There has been degradation of ratings of many ceramic companies by rating agencies over last few years because of weak financial position of the ceramic companies.

4. Fuel costs have been major concern for ceramics as they constitute about 30 to 40 % of the ceramic operating costs. The techniques like better technology, alternate sources of fuel, process and equipment improvement etc are adopted by companies to reduce fuel costs of the business.

5. The future of ceramic industry seems promising because ceramic industry is dependent on construction, urbanization growth, housing demand etc for its growth. There has been 10 to 15% growth annually in construction sector. Also, rising income levels lead to increase in demand for ceramic products. There has been 11% growth in disposable income of people in India. Also, urbanization results in more housing demands thereby leading to increase in demand of ceramic products. Because of anti stain and anti corrosive and heat resistant capabilities, there has been increase in use of advance ceramics. The advance ceramics have use in many sectors like telecommunications, aerospace industry etc thus; there seems increase n demand and growth of ceramic products. The banks should support ceramic companies as there seem great opportunities for ceramics in future and also ceramic companies are great source of income for banks and banks earn crores of rupees through ceramic companies.

Limitations

1. The sample size has been small due to constraints of resources, time and cost. Also, many ceramic companies were not giving prompt reply, thereby resulting in small sample size. The companies of Gujarat are only contacted for obtaining information so this can be a limitation.

2. The results are based on information given by companies and any biasness on part of companies and subjectivity can affect this research.

3. There have been changes in laws and other environmental regulations, finance costs etc thus changes in status and situation of the industry and other macro environmental factors can result into inefficiency of the report.

4. The data has been collected through using secondary sources like internet etc. Any limitations in the secondary data and accuracy of secondary data sources can also affect research.

Ceramic industry research questionnaire

1. Name of the company 2. The overall expected Indian ceramic industry growth rate is 15%. According to you, which of the following is most important factor for achieving expected growth rate? Housing sector construction sector Tourism or hospitality sector rising income levels Urbanization growth population growth Any other, please specify3. Which of macro environmental factors can pose threat on your business? Stricter government regulations substitute goods Existing players in market environmental laws I increasing raw material cost fuel costs Dumping by china any other, please specify4 .Which substitute products can affect ceramic industry adversely? Wooden and bamboo flooring mosaic tiles

Marbles, granite and other metals recycled glass fibre

Any other, please specify5. What are the advantages of using ceramic over substitutes? Based on our survey, consumer said that they consider cooling effect of marbles in summer as important factor behind purchasing marble, how company can take to mitigate this risk?

6. Do you export ceramic products? Yes No7. If yes, what are strategies adopted by your company for remaining competitive in the export market? Low price better quality Product range better sales network Partnership any other, please specify8. If you do not export your products, what are reasons for not exporting? 9 .Which mechanisms are adopted by you for increasing profit and growth of company? Promotion through websites, papers taking part in exhibitions Expansion and modernization technology upgradation Cost cutting measures any other, please specify10. What different measures of cost cutting are adopted by your company? Better technology import of raw materials at cheaper price Decrease in finance costs decrease in fuel cost Any other, please specify 11. What techniques for reducing fuel cost are adopted by your company? Better equipment good housekeeping Process improvement alternate source of fuel Any other, please specify 12. Rank the different options of funding given by bank to ceramic industry according to their importance: Working capital loan term loan Cash credit letter of credit Bank guarantee other, please specify13. What changes in terms of credit offered by bank would you want bank to do. Please specify in bullet points.1.2. 34 Ratings of ceramic companies by some top rating agencies NAME OF COMPANYLONG TERMSHORT TERMRATIONALEName of agency

KAJARIA CERAMICS LIMITEDAA1The upgrade of ratings takes into account the improvement in the operational and financial profile of KCL in 9 months FY 2013 as reflected in a healthy growth in revenues in its core business of ceramic tiles and stable margins despite substantial increase in raw material and fuel costs.ICRA

R.A.K CERAMICSA-A2+The ratings continue to reflect RAK Ceramics established market position in the vitrified tiles and sanitary-ware segment in India, and the strong support that it receives from its parent, RAK UAE. These rating strengths are partially offset by the companys susceptibility to adverse movements in input prices and to intense competition.CRISIL

SOMANY CERAMICS PRIVATE LIMITEDA-A2+The ratings reflect SCLs established market position as the third largest player in the domestic tiles industry, backed by its established brand name and distribution network. The ratings also factor in the companys diversified geographical and customer base and its healthy financial risk profile, marked by its efficient working capital management and asset-light model. These rating strengths are partially offset by SCLs exposure to intense competition from organized and unorganized players in the tiles segment and the vulnerability of SCLs operating margin to fluctuations in raw material prices.CRISIL

SOMANY CERAMICS LIMITEDBBB+A2SCLs strong brand and established market position in the domestic tiles market in the Northern & Southern region, which coupled with healthy demand growth for tiles has resulted in a healthy top-line growth in the last five yearsICRA

SIMS CERAMIC PRIVATE LIMITEDBBBA2rating factors in the benefits that the group derives from its established market position in the domestic tiles industry, backed by wide distribution network, and its promoters extensive industry experience. These rating strengths are partially offset bythegroups vulnerability to cyclicality in the end-user industry and increasing competition as well as the susceptibility of its operating margin to raw material price volatility.CRISIL

ORIENT CERAMICSBBBA2The ratings assigned factor in the companys experienced management with significant track record in the tile manufacturing business, its established position in the domestic market in the northern region and its increasing focus on premium tiles segment.ICRA

M.M. CERAMICS AND FERRO ALLOYSBBB-A3The ratings take into account the experience of the promoters in trading of ferrous and non-ferrous scrap and metals for nearly four decades, established relationship with the reputed clients and suppliers, moderately diversified customer base with top ten customers accounting for ~38% of total sales, healthy growth in revenues over years, moderate financial risk profile of the group marked by healthy cash accruals,ICRA

TATA CERAMIC LIMITEDBBB-A3+CRISIL's ratings on the bank facilities of Tata Ceramics Ltd (TCL) continue to reflect the strong support that TCL receives from the Tata group and the financial flexibility TCL enjoys being a part of the Tata group. The rating also reflects TCL's established customer relationship supported by good product quality. These rating strengths are partially offset by TCL's weak financial risk profile marked by a high gearing and inadequate debt protection metrics, exposure to risks related to increase in raw material prices and highly working capital intensive nature of operationsCRISIL

M.M. Ceramics And Ferro AlloysBBB-A3The rating is based on experience of promoters in the business and strong client base of company. The company is in existence since 4 decades.BRICKWORKS

SOLARIS CERAMICS PRIVATE LIMITEDBBB-A3The ratings reflect the Varmora groups promoters extensive experience in the ceramic industry, Varmora groups established distribution network and strong brand name. . These rating strengths are partially offset by the Varmora groups susceptibility of its operating margin to raw material price volatility and low bargaining power, working capital intensive operations and aggressive capital structure.CRISIL

FUTURA CERAMIC PRIVATE LIMITEDBB+A4+The rating downgrade takes into account the deterioration in the financial performance of the company characterised by decline in profit margins and coverage indicators in FY 2011 and current financial year. ICRA

AKASH CERAMICS PRIVATE LIMITEDBB+A4+ratings take into account the long experience of the promoters in the manufacturing and marketing of ceramic tiles; and the established relationships with dealers and distributors across the country. The ratings also take into account the proximity of ACPLs plant to raw material sources, which reduces freight costs,ICRA

COSA CERAMIC PRIVATE LIMITEDBB+A4+The rating upgrade reflects CRISIL's belief that CCPL's business and financial risk profile will strengthen further over the medium term with its improved scale of operations and healthy profitability. With Kajaria Ceramics Ltd (KCL) acquiring a majority stake in the company in October 2012, CCPL began its operations and registered a healthy turnover of Rs.402.2 million during the six months ended March 31, 2013; 2012-13 (refers to financial year, April 1 to March 31) was the first year of the company's operations.CRISIL

RUBY CERAMICS PRIVATE LIMITEDBB+A4+CRISILs ratings on the bank facilities of Ruby Ceramics Pvt Ltd (RCPL; part of the Ruby group) continue to reflect the extensive experience of the Ruby groups promoters in the Zircon processing industry, and its established market position, strong customer and supplier relationship, and exposure to low product substitution risk. The ratings also factor in the groups moderate gearing and adequate debt protection metrics. These rating strengths are partially offset by the Ruby groups small scale of operations and constrained profitability.CRISIL

SORISCO CERAMIC PRIVATE LIMITEDBB+A4+The ratings reflect the benefits that SCPL derives from its promoters extensive industry experience and its association with Kajaria Ceramics Ltd (KCL); the ratings also factor in the companys improving financial risk profile marked by moderate debt protection metrics albeit a high gearing and modest net worth. These rating strengths are partially offset by SCPLs modest scale of operations in the intensely competitive ceramic tile industry, and large working capital requirements.CRISIL

PAVIT CERAMICS PRIVATE LIMITEDBBA4+CRISILs ratings on the bank facilities of Pavit Ceramics Pvt Ltd (PCPL) continue to reflect the extensive industry experience of PCPLs promoters, and the companys above-average financial risk profile, marked by healthy debt protection metrics and driven by efficient working capital management. These rating strengths are partially offset by PCPLs modest scale of operations and susceptibility of its operating margin to volatility in raw material prices.CRISIL

ASSOCIATE CERAMICS PRIVATE LIMITEDBBA4+ The rating downgrade reflects deterioration in ACLs operating performance, as reflected in the decline in its revenue to Rs.160.6 million in 2012-13 (refers to fina

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