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37
Annual Report 2011-12
36 Kajaria Ceramics Limited
MINIMISING RISKS.
MAXIMISING RETURNS.
At Kajaria, we understand
the impact of industry
uncertainty and their
possible outcomes. It is
through this deep
knowledge that we survived
and succeeded.
Fiscal 2011-12 vindicated
the robustness and
resilience of our business
model and the effectiveness
of our de-risking strategies.
As a result, we continued on
our growth path despite
external volatilities.
As a responsible corporate,
the management has a
robust de-risking discipline
which is centrally initiated
and progressively
decentralised across
hierarchies, facilitating
organisation-wide risk
mitigation.
“Often the difference
between a successful
man and a failure is not
one's better abilities or
ideas, but the courage
that one has to bet on his
ideas, to take a calculated
risk, and to act.” -
Maxwell Maltz
Mitigation argument:
The Indian tiles
industry is expected to grow 15-16%
annually till 2015 owing to strong
demand from user segments:
•
Increasing affordability and soaring
aspirations for superior products pan-
India will continue to accelerate the
demand for superior products – a
marginal upward movement will shore
volumes significantly, correcting the
low per capita tile consumption at
0.46 sq mtr towards the global
average.
•
Institutional demand is expected to
emerge from the large planned realty
development. Credible sources
suggest that office space, malls and
retail demand is likely to be 410 msf
during 2011-15 (Cushman and
Wakefield Research). Additionally,
India is likely to add 150,000 hotel
rooms in five years, 1.8 million
hospital beds by 2025 and an
additional 30 airports by 2017.
A FALL IN DEMAND
FROM USER SECTORS
COULD IMPACT THE
COMPANY’S GROWTH
Mitigation argument:
Over the years,
the Company strengthened
competitive barriers to outperform
sectoral growth.
Capacity and locational reach:
The
multi-locational manufacturing
capability (North, West and South
India) makes it possible to service
large consuming markets cost-
effectively and with speed.
Across the value chain:
The Company is
present across the entire value chain
comprising affordable and high-end
ceramic tiles, basic and high-end and
polished vitrified tiles, glazed vitrified
tiles and high-end imported tiles
covering floor and wall applications in
a range of sizes, designs and finishes.
Its product basket comprises tiles
ranging between
`
200 to
`
3,000 per
sq mtr.
Distribution network:
The Company’s
robust pan-India distribution network
helps extend products to the deepest
consuming region in the domestic
market The Company’s distribution
policies and clearly demarcated areas
ensured business growth for dealers.
Recall:
The Company created a strong
recall among institutional and retail
customers to pioneer new product
concepts, designs and sizes.
INCREASING
COMPETITION FROM
ORGANISED AND
UNORGANISED
PLAYERS COULD
IMPACT MARKET
SHARE AND MARGINS
Mitigation argument:
The threat of
cheaper imports reduced significantly.
This is due to the following reasons:
Rising costs:
China posed a major
threat for cheaper imports till a few
years back. However, increasing
labour costs, environmental concerns
and the depreciation of the Chinese
currency in the last two years made
Chinese products dearer.
Currency depreciation:
Depreciation of
the rupee against the US dollar makes
imports from China more expensive.
Freight costs:
Inland transportation
costs from the ports to the northern
states made imports from China
almost unviable.
CHEAPER CHINESE
IMPORTS COULD
DAMPEN THE
DOMESTIC MARKET,
IMPACTING VOLUMES
AND MARGINS