Corporate Reports B U S I N E S S I N D I A ◆ T H E M AG A Z I N E O F T H E C O R P O R AT E WO R L D

Leadership initiatives

PHOTOS: SAJAL BOSE

Ashok
Kajaria with
sons Chetan and
Rishi: enjoying
the leadership
position
Kajaria, the leader in the tile industry, is expanding its growth and we make
marketing reach steady moves to achieve
that,” says Ashok Kajaria founder
and chairman of the company.

T
he tile industry’s growth is the slowdown, the Delhi-based Kajaria The market size of the tile industry
dependent on the growth of Ceramics Limited has grown steadily. in India is roughly R28,000 crore, of
the real estate sector, which has With an annual capacity of 73 million which organised brands constitute 45
experienced many ups and downs sq m Kajaria is the largest manufacturer per cent. The remaining 55 per cent are
in the past decade. In boom times, of ceramic/vitrified tiles in the coun- unbranded. “We are the market leader
the tile industry had put up myriad try and the 9th largest globally. “Our and hold 20 per cent of the organised
plants and in times of slowdown the USP lies in a focussed approach, good market,” says Chetan Kajaria, joint
demand remained subdued. Many had dealer network, branding and being managing director. The R3,000 crore
to operate at lower utilisation and this close to the markets across the coun- Kajaria Ceramics with a market cap of
affected the margin. Notwithstanding try. It is important to have sustainable R8,400 crore, achieved a CAGR of 7 per

Five year’s results (R crore)

Net sales PBT Net profit

396.30

252.81

234.96
231.33
2,956.20

362.87
360.82

354.57

226.57
2,710.60
2,549.63
2,413.45

175.60
2.186.89

276.08

FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY14-15 FY15-16 FY16-17 FY17-18 FY18-19

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cent in the past three years when the grown tremendously. Ashok Kajaria is
industry witnessed a flat or negative actively involved in the business and
growth. The company reflects a mind- has a hands-on approach at the macro
set where manufacturing is accompa- level. His sons Chetan (45) and Rishi
nied by large investments in research, (41) – joint managing directors – are
branding and services. To strengthen now taking the company to the next
its market share, Kajaria has recently level. The promoter holds 47.58 per
set up a new manufacturing facility in cent of the company, 15.72 per cent is
the south. held by the public, FIIs hold 26.22 per
cent; MFS 9.42 per cent and 1.07 per
Multi-location presence cent is with other institutions.
The new plant at Srikalahasti, Chittor The company had witnessed sev-
district in Andhra Pradesh was com- eral upturns and downturns but always
missioned in September this year at a remained profitable for the past 30
cost of R150 crore. The funding was met years. “Our EBITDA margin of above 15
through internal accruals. This green- per cent is the highest in the industry.
field project is spread across 150 acres We are a cash surplus company,” says
of land. The plant was built on 40 acres; Sanjeev Agarwal, CFO, Kajaria Ceram-
the rest is for future expansion. The ics. H&R Johnson and Somany Ceram-
fully automatic state-of-the-art facility ics are the second and third largest
can produce 5 million sq m of Glazed players in the segment. But in terms of
Vitrified Tiles (GVT). The machine has profitability, Somany commands sec-
been imported from Sacmi of Italy, ond position.
a world leader in tile manufactur- Agarwal: presenting a creditable report card “Kajaria Ceramics is built around
ing machines. The modern kiln saves proactive management, brand visibil-
almost 15 per cent of the fuel, com- engineering goods to the Middle East. ity, distribution network and invest-
pared to the industry. The polishing Kajaria shifted to Delhi in 1982, with ing in efficient logistics management,
lines from Keda China give the final an ambition to set up his own busi- which has defined its success. It main-
surface of the tile. The well-equipped ness. He explored the opportunity in tained an impressive growth even in
laboratory does the raw material anal- the tile industry and moved into the the toughest phase of the industry,”
ysis and monitors the production. segment. In 1988, he tied up with says Girish Choudhary, vice president,
Kajaria uses LNG, a clean technology Todagres of Spain for technical collab- Spark Capital Advisors.
from Ennore port. The plant is capa- oration and set up his first ceramic tile After consolidating its position
ble of producing several sizes ranging plant at Sikandrabad in Uttar Pradesh, as leader in the tile industry, Kajaria
from 600/600 mm to 800/1600 mm. with a capacity of 1 million sq m per diversified into the plywood business
“The new GVT plant reflects our annum with an investment of R14 last year. It formed Kajaria Plywood,
strategy of multi-location presence. crore. “Todagres was one of the top a wholly-owned subsidiary offering
This will not only bring us closer to global tile manufacturers of ceramic wood panel products under the brand
the market but also improve our logis- glazed tiles. They helped us in design, Kajaria PLY. “Today, 80 per cent of the
tics for the southern markets, to which drawing and training,” recalls the plywood industry (estimated at R30,000
currently we are supplying GVT from 70-year-old Kajaria. crore) is in the hands of unorganised/
the north,” says Rishi Kajaria, joint From 1 million sq m per annum unbranded players. So we found there
managing director. The company is in 1988 to 73 million sq m at present is huge opportunity in the segment.
increasing the dealer strength. The with multi-location plants employ- We leverage our brand and market
south is the second largest market for ing 2,600 people, the company has knowledge,” says Chetan who had con-
tiles, with 30 per cent share, after the vinced the board to venture into ply-
north. Kajaria claims to have 25 per SHARE HOLDING PATTERN wood. However, the company adopted
cent share in the south. The new plant an asset light model. Kajaria has tied up
(%)
will benefit the company. Andhra has with some manufacturers with good
abundant raw materials like clay, talc, Public production facilities and technology
potash feldspar, etc. Rishi, who spent 15.72 in Rudrapur in Uttarakhand and in
several nights at the site during con- Gandhidham, Gujarat for outsourcing.
struction, expects the Srikalahasti GVT Promoters
There are several hundred small ply-
plant to add R250 crore to the compa- FII 47.58 wood units in the country struggling
ny’s topline, when it reaches its full 26.21 with the GST regime. Kajaria is taking
production capacity next year. advantages of the disruption in the
Ashok Kajaria, a veteran in the MF market. Currently there are only two
tile industry, has seen the revolu- Other 9.42 large national players in the segment –
tion through his journey. His family Institutions Centuryply and Greenply.
in Kolkata was in trading, exporting 1.07% Though Kajaria is a new entrant

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tiles in the world and, with 800 units,

accounts for 50 per cent of India’s pro-
duction. They are mostly unbranded
and unorganised. These low cost pro-
ducers compete with organised brands.
But the GST regime is set to change the
game. It will gradually shift the unor-
ganised to the organised sector due to
tax compliance. India, once dependent
on China, has now almost stopped
importing tiles. “A mere two per cent
of tiles now come from China. Today,
India is the most cost-efficient tile pro-
ducer. With several countries impos-
ing anti-dumping duty on China, it is
no longer competitive and the indus-
try is struggling. There are about 1,600
tile manufacturing plants in China of
which many have closed down due to
Srikalahasti plant will strengthen the southern market lack of domestic demand,” explains
Ashok Kajaria.
in the plywood business, its perfor- value-added products like glazed vitri-
mance proves it is here to stay. The fied tiles, polished vitrified tiles, large- Consumer preferences
company has hired industry experts size slabs, wall ceramic tiles, etc., have Kajaria has 8 tile manufacturing facil-
from Centuryply and Greenply. It has also been launched. ities across the country with a capac-
built a strong marketing and distribu- India has retained its position as the ity to produce 73 million sq m (msm)
tion network. Kajaria PLY roped in Bol- second largest producer and consumer of ceramic wall & floor tiles, polished
lywood star Ranveer Singh as brand in the industry after China. India’s pro- vitrified tiles and glazed vitrified
ambassador. “We have received a good duction increased from 1,080 to 1,145 tiles. Its plants are situated in Sikan-
response from the market. We want to million sq m, while domestic con- drabad, with a capacity of 8.40 msm,
progress steadily. We have started with sumption fell marginally to 750 mil- Gailpur (34.30 msm), Malutna (6.50
plywood and flush doors; once we lion sq m, down by 10 million sq m. msm), Srikalahasti (5 msm), three
have an in-depth understanding, we Morbi, an industrial town in Rajkot, units at Morbi with a total capacity
might go for in for laminate MDF in is the second largest manufacturer of of 18.80 msm and Vijayawada (2.90
the future,” explains Chetan. In FY19 msm capacity). The units at Morbi and
the business clocked R17 crore, which SEGMENT-WISE REVENUE (R crore) Vijayawada are joint ventures, where
is likely double by the end of this fis- Kajaria holds majority shares. All the
cal. Chetan expects a revenue of R200 TILES BATHWARE PLYWOOD plants run at 95 per cent capacity as
crore from plywood, in the next five opposed to the typical 70 per cent util-
years. While Kajaria plans for growth
in plywood, tiles will always remain
2,752 185 16 isation in the industry.
The company’s Gailpur plant in
the core business of the company. Rajasthan – set up in 1998 – with
There has been a major evolu-
tion in the ceramic tile industry. Two PEER COMPARISON
decades ago one would choose a mar- For the financial year ended 2018-19 (R crore)
ble, mosaic or wooden floor. Today Kajaria H&R Johnson Somany Asian Granito Orient Bell
with a wide range of designs, tex-
tures and colours available, as well as
aesthetic finishes the tile industry in
India has witnessed a sea change in Net Turnover 2,956 1,827 1,715 1,187 571.00
flooring and wall decorative solutions. EBITDA 449 60 163 87 37.00
Not only are they used in bathrooms EBITDA Margin (%) 15.20 3.28 9.53 7.29 6.48
and kitchens but also in drawing Depreciation 89 NA 44 27 7.00
rooms, bedrooms, on stairs, terraces as EBIT 378 5 138 63 22.00
well as in commercial areas. Ceramic Interest 16 NA 46 35 9.00
tiles help increase surface lifespan and PBT 358 NA 80 29 14.00
make it easy to clean. The usage of tiles Tax 129 NA 27 10 5.00
has grown multifold. With technolog-
PAT 227 NA 46 21 9.00
ical advancements, the ceramic tile
PAT (%) 7.66 NA 2.70 1.76 1.63
industry has not only grown but many

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34.30 msm, is the largest single-loca-

tion ceramic tile unit in the country.
It produces 25.20 msm of ceramic wall
and floor tiles and 9.10 msm of glazed
vitrified tiles. Gailpur produces almost
half the company’s total production.
While ceramic tiles continue to be
the highest selling category for the
company, vitrified tiles are the major
growth driver. In the past decade reve-
nue from glazed vitrified tiles rose from
zero to R775 crore. Ceramic, glazed vit-
rified tiles and polished vitrified tiles
contribute 36 per cent, 25 per cent and
33 per cent respectively to the compa-
ny’s net sales. A vitrified tile has zero
water absorption, which makes it rela-
tively harder than ceramic tiles.
“Indian consumers have devel-
oped an appetite for style and aesthet- Glazed Vitified Tiles: growing faster
ics and we are continuously working
to keep up with their aspirations. country and it is certain that almost 70 has been through a tough time due to
We have to move with the times to per cent of them will have the Kajaria the challenging phase of the economy
retain our leadership position,” says brand visible on luggage trolleys or dis- and tight liquidity which has led to a
Vivek Goyal, vice president, market- plays above baggage carousels. “Brand- slowdown in the real estate sector. The
ing, ceramics division. The company’s ing is important and we have been tile industry’s growth is highly depen-
tiles are produced in a wide range of doing it for years. We always had our dent on the real estate sector. Chetan,
colours, designs and textures for home brand endorsed by celebrities from the who is also the present chairman, ICC-
architecture and commercial usage, at film industry; now others are copying TAS (Indian Council of Ceramics Tiles
all price points. It offers 2,400 types us. We spend close to R100 crore on and Sanitaryware) believes the market
of products showcased pan-India branding,” says Rishi. Bollywood hero has touched bottom and it is now only
through its 1,700 dealer network. “Our Akshay Kumar is the current brand going to go up due to some positive
target is to spread our dealership net- ambassador for the Kajaria tile. initiatives by the government. “The
work in all the 543 constituencies in GST and e-way bill compliances are set
the country in the next one year. Cur- Government initiatives to create a level playing field for the
rently we have a presence in 343 con- “Kajaria is an excellent company, industry. Besides, the government’s
stituencies,” says Chetan. Kajaria has which has been growing well. It has various initiatives to leg up the real-
designed four templates – Galaxy, Star, large network and wide product ranges. estate segment and the expected per-
Prima Plus and Ambience – for brand But quality-wise we are superior in sonal income tax reduction will bring
display at dealers’ showrooms. The the industry,” says Abhisekh Somany positive sentiments,” says Chetan.
company also has 30 large experience managing director Somany Ceramics, “GST has done wonders for the indus-
centres across the country, that display a competitor. Six months ago, Somany try. It has made the movement of goods
all the products of the company. had put up a new facility of 3.5 msm easy and reduced delivery time signifi-
While manufacturers in the seg- capacity in Srikalahasti. cantly,” remarks Ashok Kajaria. “Today
ment largely depend on the real estate Lakshmi Ceramics, an exclu- our dealers are happy as they do not
market, Kajaria has changed the trend sive dealer in Coimbatore for Kajaria, need to pile up a huge inventory. The
and focused more on the retail sale by has 12 stores across Tamil Nadu. It supply is much faster now,” says he.
strengthening the branding exercise. has been associated with Kajaria for In a recent development, the Guja-
“The strategy pays dividends. Today, the last 18 years. “Kajaria has stron- rat High Court put an end to using
the company’s retail and project ratio ger brand recall in the industry than coal-based gasifiers for tile manufac-
is 70:30 as against 50:50 among its any other players,” says S. Muthura- turing in Morbi. The verdict came
peers. The retail margin is 5-6 per cent man, who owns the dealership. “Its after some 100 small manufacturers
higher than the projects,” clarifies large product basket meets customer had filed a petition in the high court
Agarwal, CFO. The company claims to requirements. The management’s pol- to allow them to use coal gasifiers. Ear-
enjoy a premium on its brand. icy is to allow loyal dealers to grow lier in March, the National Tribunal
Kajaria is aggressive in branding with the company,” he adds. However, Bench directed all units to stop using
to increase its visibility whether it is Muthuraman wants Kajaria to focus coal gasifiers as they cause pollution.
through print media, TV commercials, more on product innovation in this It suggests the use of LNG/PNG. The
cinema commercials, airports or in fiercely competitive market. judgement ensured the move to clean
cricket stadia. Visit any airport in the For the past 2-3 years, the industry technology.

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improved the margin,” recalls Rishi.

The Morbi unit’s capacity expanded
from 5.40 lakh pieces to 7.50 lakh
pieces per annum of sanitaryware. In
2015, Kajaria set up a faucet plant at
Gailpur adjacent to the company’s tile
manufacturing unit with an invest-
ment of R43 crore. The faucet unit has
the capacity to produce 10 lakh units
per annum. The company uses Kajaria
and non-Kajaria dealerships to sell its
bathware brand Kerovit.
With the changing tide of bathware
requirements, Kerovit is focussed on
completely redefining the bathroom
experience of Indian consumers. Their
contemporary design and elegant aes-
thetic are suitable for modern living
New plant is close to the raw material spaces. The company has signed on
Bollywood actor Anushka Sharma as
its brand ambassador. “Kerovit received
overwhelming response in the market.
Last year we grew almost 35 per cent,”
says Rishi. In FY19 the bathware seg-
ment clocked a turnover of R185 crore.
Jaquar is the leader of the R12,000 crore
segment. Rishi claims the company will
become a significant player in bathware
within the next four years.
Kajaria reported a net sales of R2,956
crore in March 2019 as against R2,711
crore in March 2018 – a growth of 9
per cent. The net profit marginally
decreased to R227 crore in 2019 from
R235 crore in March 2018. The current
stock price is hovering around R537 on
the bourses. “Our growth is consistent.
The company has not made any losses
Kajaria gets the benefit of multi-location plants since inception,” claims Agarwal.
For the six months ended Septem-
Gas is more expensive than coal, clean business environment. The ver- ber 2019, the company achieved a rev-
but a kiln fired by gas lasts more dict is good for the industry.” enue of R1,426 crore as against R1,389
than ten years. However, a coal- crore during the corresponding previ-
fired kiln needs to be replaced every Redefining the bathroom ous period. The net profit till Septem-
three years. Though the cost for set- experience ber 2019 is R143 crore as against R96
ting up gas-based kilns is greater, it Kajaria entered the bathware segment crore in September 2018.
has long-term benefits and less pol- with a brand called Kerovit in 2014 by Commenting on the company,
lution. In Morbi, out of 800 units, setting up a plant in Morbi. It is a nat- Rohan Gupta, Research Analyst of
500 unorganised units were buy- ural extension of the segment. Kajaria Edelweiss Securities says, “Kajaria’s sus-
ing coals in credit from local suppli- Bathware is a subsidiary of Kajaria tained gain in market share, higher
ers. The arrangement was dubious Ceramics, which owns the Kerovit than industry margins and return
as the transactions were mostly in brand. Kajaria owns 85 per cent of the ratios, has led to continuous rerating of
cash. These units now have to pay company and the remaining 15 per the stock that attracts more investors.”
in advance to GSPC (Gujarat State cent is with Aravali Investment Hold- Kajaria has established markets, newer
Petroleum Corporation) to get their ings, Mauritius. “Initially we started markets, new business, and immense
gas supply. This triggered a liquidity importing sanitaryware and faucets scope to leverage. With all these favour-
crisis and many of them have closed from Victra, a leading company in able factors, the company is expected to
down their units. Welcoming the Turkey in 2011, and this continued for retain its leadership position.
Gujarat High Court order, Chetan three years. Then we decided to set up ◆ SAJAL BOSE

says, “Inequality does not create a our own manufacturing facility that [Link]@[Link]

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