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27
Annual Report 2011-12
26 Kajaria Ceramics Limited
Drivers of consumption
1. The Urban growth
•
Increase in earning family members:
The dependency
ratio among Indian families declined from 58% in 2005 to
55% in 2010 and is expected to decline to 52% in 2015
and 49% in 2020
(Source: ENAM).
•
India gets younger:
In India, the working age declined
sharply, providing high disposable incomes. Close to 65%
of Indians between 20-60 years are working, leading to
higher disposable incomes and lifestyle aspirations. Among
BRIC nations, India is expected to remain the youngest with
its working-age population estimated to rise to 70% of the
total demographic by 2030 – the largest in the world. Some
estimates suggest that India will see 70 million new
entrants into its workforce over five years
•
Increasing earnings and disposable income:
The salary of
the average Indian grew 12.6% in 2011, higher than most
other global nations. India’s per capita income is estimated
to rise 14.3% to
`
60,972 in 2011-12
(Source: Deccan Herald)
.
In line with economic growth, estimates suggest that PFCE
is expected to scale from US$790 billion in 2010 to US$3.6
trillion by 2020
(Source: ENAM)
This segment contributes 47% to the
Company’s net sales. Kajaria is the
market leader in this segment
primarily due a large product portfolio
comprising diverse sizes, designs and
finishes.
The Company’s Gailpur facility
manufactures wall tiles in nine
different sizes 20x20cm, 30x20cm,
25x33cm, 30x30cm, 15x45 cm,
30x45cm, 30x60cm, 30x90cm and
15x60cm) and matching floor tiles in
30x30cm.
The Sikandrabad facility manufactures
in 30x30cm size and recently
acquired unit at Morbi manufacture
(39.5x39.5cm, 60x60cm sizes). Some
wall tiles (45x90cm) are also
outsourced.
The Company’s products are marketed
through a robust distribution network
of dealers and sub-dealers as well as
Kajaria Prima and Kajaria Galaxy
showrooms in major towns.
2011-12 in retrospect
•
Altered the feeding technique to the
kiln, shoring of kiln capacity at the
Gailpur unit
•
Introduced five new wall tile sizes –
15x45cm Digistone, 30x45cm
interlock, 30x90cm and 30x60cm
(digital) with matching floor 30x30cm.
These digitally-printed tiles
comprised high-end gloss finish, satin
finish, stone finish, among others,
which reinforced the value-added
category
•
Increased the proportion of digitally
printed tiles.
Blueprint for 2012-13
•
Improve product packaging to
protect product integrity during
delivery
•
Stabilise the new capacity at the
Soriso unit to optimum levels
•
Introduce novel product sizes and
niche designs and finishes
•
Penetrate deeper in southern
markets through the newly formed JV
– Vennar Ceramic, at Vijaywada
(Andhra Pradesh) – to manufacture
high-end wall tiles
•
Create new markets by reaching into
the interiors of the country
2 Semi-urban markets
•
Bharat Nirman:
The Build India government initiative
expects to build world-class infrastructure across rural land
areas.
•
Preferred locations:
Increasing corporates are shifting
focus to Tier-II and III cities, accounting for over 61% of the
total job creation in India in 2010-11. The IT/ITeS sector is
expected to add 14 million direct and 55 million indirect
job opportunities pan-India
(Source: ENAM)
3. Housing demand growth
•
Population growth:
India’s population rose to 1.21 billion
in the last 10 years, an increase by 181 million; overall
growth is pegged at 1.76% in 2011, which will catalyse
residential demand.
•
Urbanisation:
India is the fastest urbanising country; UN
estimates that 40% of India’s population will be living in
urban areas by 2030
(Source: Forbes India).
Rising disposable
income (FY08-11 CAGR of ~15%), growing middle-class
and increasing urbanisation (currently ~30% of the
population) will boost the demand for improved flooring
solutions and value-added products.
Per capita income (
`
)
40,605
46,492
54,835
60,972
2008-09 2009-10 2010-11 2011-12
Average salary increase (%)
8.2
10.6
12.6
11.9
2009
2010
2011
2012
Growth in middle class population highest in India among
large EMs
India
0
China Russia Indonesia Brazil Turkey Mexico South
Africa
186
366
172
314
91
123
48
103
44
59
48
69
34
33
17
22
400
2010
2015
(Mn)
Growth in urban population
0
26
28
30
220
290
340
590
40
400
45
20
Urban population
Urbanisation rate
(Mn)
(%)
CERAMIC WALL
AND FLOOR TILES
Business segment
PRODUCT BASKET
PRICE RANGE
SOURCING
DISTRIBUTION CHAIN
Sizes:
11 (8 wall and 3 floor)
Designs:
750
`
200-900 psm
Own manufacturing, JV’s
and outsourcing
Network of dealers and
sub-dealers, Kajaria Prima
showrooms and Kajaria
Galaxy
The Company introduced
five new wall tile sizes –
15x45cm Digistone,
30x45cm interlock,
30x90cm and 30x60cm
with matching floor
30x30cm. These digitally-
printed tiles comprised
high-end gloss finish,
satin finish, stone finish,
among others.
1991
2001
2008
2030