Dear Readers,

As you must be aware that Cera Sanitaryware Ltd is our Alpha Recommendation for Jan’11, so we and our members have a vested interest in the stock.

Even as the Indian ceramic industry is reeling under high costs, Cera Sanitaryware is looking ahead. The sanitaryware player is bullishly looking at acquisitions and retail expansion. Vidush Somany, Executive Director, Cera Sanitaryware listed out his plans in a recent interview. Some of the highlights of the same are as below:

  1. The company is aggressively looking at acquisitions in Italy. The rationale behind the same is Europe’s financial crunch, which is throwing dirt cheap valuations (A sign of a prudent management, making the most of adverse situation).
  2. The company is aiming to achieve and stabilize at over 30-32 per cent of the market share, from 21% currently, in 3-5 years.
  3. China is not a threat, as is normally presumed. The company itself outsources some of the products from China. Also sanitary ware being a bulky product, the cost of freight ensures that there’s no dumping of low priced products from China.
  4. The company has been able to pass on the rise in cost of production to its dealers and distributors and still not witnessing any slowdown in demand.
  5. In the bathroom products and fittings segment, tastes and preferences are gaining priority over cost. The customers are very much brand and quality conscious.

The complete excerpt of the interview is as below:

Q. At a time when the Indian ceramic industry is reeling under high costs and inflationary pressures, Cera Sanitaryware is looking at acquisition. How is the move set to reap benefits in the long run?

Growth is a continuous phenomena. One of the best ways to combat rising cost is through achieving economy of scales, more so, when we have been able to pass on the Cost·Push on account of inflation to our dealers and distributors.

Strategically, we are planning In-Organic growth as this could turn out to be a better deal when entire Europe is reeling under financial crunch. According to our information, there may be some units available for sale at dirt cheap price. Needless to add, we are extremely cautious on this front. Any decision on these, when we take, will be well considered one.

Q. Moving on from selling sanitary ware, the company is trying to establish itself in the luxury segment. Why? Please elaborate on the company’s strategy behind it.

We have been selling Wellness product for a very long time. This is not a new thing to us. We have been outsourcing these products from China and selling under brand Cera. The response to these product has been exceedingly well and the market is growing at faster pace than conventional sanitary ware.

Q. From a 20 odd per cent market share, where does the company see itself in next 3-5 years?

We are increasing our in house manufacturing capacity in sanitary ware from 2 million pcs per annum to 2.7 million pieces per annum. This will make us a largest plant a single location.

Servicing clients from one location would give us better absorption of overheads and put us to Cost advantage vis a vis competition.

Our market share is bound to rise. We are aiming to achieve and stabilize at over 30-32 per cent of the market share in 3-5 years down the line.

Q. Apart from entering aggressively into luxury segment, is the company also looking at some other segments in the near future? If so, why?

We have recently added Faucet ware in our manufacturing range. The current manufacturing capacity is 2500 pcs per day. We have ambitious plan to raise these capacity to 7500-10000 pcs per day in next 3-5 years time span.

The market size of faucet ware is more than double of that of the size of sanitary ware. Besides it has synergy with Cera current product range which goes into the bathroom.

With established brand and settled distribution channel of over 6000 retailer dealers, we are poised to capture larger share.

Q. The company has been opening its own ‘Cera Bath Studios’ across the country. What other ways is the company exploring in retailing?

We may like to clarify, we are not selling any of the products directly into the retail market. The Cera Bath Studio is only a display centre of all the products company has to offer. This allows end·users as well as architects to have a close look at the entire product range.

Some the studios offer facility to actually experience the product  touch and feel Eventually if the customer decides, he will have to go to the dealers to buy the products of his choice. This methods inspire more confidence in company products with committed after sales service.

Q. How do you think the lack of anti-dumping duty in the ceramic and sanitary ware industry is impacting the players?

It hardly matters as there is no dumping at all. Ceramic sanitary ware is a bulky product. The cost of freight is a major concern rather than the any levy or duty.

Some high end and designer products are able to bear this kind of cost. Now a days lots of people are obsessed with bathroom to be made very tastefully where cost becomes subordinate to taste and preferences.

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