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pg 32. INTERVIEW: Mr Rakesh Singh

pg 35. Indian Economy – Trend indicators

pg 37. PhillipCapital Coverage Universe – Valuation Summary

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1st Apr 2016 Issue 3 1st Mar 2016 Issue 2

1st Jan 2016 Issue 1 1st Dec 2015 Issue 9

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VOL 3 . ISSUE 4 . 1ST - 31ST MAY 2016

Vineet Bhatnagar- Managing Director and CEO

EDITORIAL BOARDNaveen Kulkarni, Manish Agarwalla, Kinshuk Bharti Tiwari

COVER & MAGAZINE DESIGN Chaitanya Modak, www.inhousedesign.co.in

EDITORRoshan Sony

RESEARCHBanking, NBFCsManish Agarwalla | Pradeep Agrawal | Paresh JainConsumerNaveen Kulkarni | Jubil Jain | Priyam ToliaCementVaibhav AgarwalEconomics Anjali Verma Engineering, Capital Goods Jonas BhuttaInfrastructure & IT ServicesVibhor Singhal | Shyamal DhruveLogistics, Transportation & MidcapVikram SuryavanshiMidcap Amol RaoMedia Manoj Behera | Naveen KulkarniMetals & AutomobilesDhawal Doshi | Nitesh Sharma | Yash DoshiOil & Gas Sabri HazarikaPharmaceuticals Surya Patra | Mehul ShethTelecomNaveen Kulkarni | Manoj Behera

PORTFOLIO STRATEGYAnindya Bhowmik

TECHNICALSSubodh Gupta

PRODUCTION MANAGERGanesh Deorukhkar

MID-CAPS & DATABASE MANAGERDeepak Agrawal

SR. MANAGER - EQUITIES SUPPORTRosie Ferns

FOR EDITORIAL QUERIESPhillipCapital (India) Private Limited No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400 013

SALES & DISTRIBUTION Ashvin Patil, Shubhangi Agrawal, Kishor Binwal, Bhavin Shah, Ashka Gulati, Archan Vyas

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[email protected]

Ground View - Previous Issues


4. COVER STORY: Indian tile industry: Playing field levelling out

Ground View examines the Indian tile industry and the meteoric rise of the unlisted players from Gujarat

32. INTERVIEW: Mr Rakesh Singh

President Marketing, at The India Cements, south India’s largest cement company and one of the leading ones in India.

35. Indian Economy – Trend indicators

37. PhillipCapital Coverage Universe: Valuation Summary

CONTENTS

Gujarat and Gujarati’s have long been synonymous with en-

terprise. It comes as no surprise that three of the richest Indi-

ans hail from this community. Our May issue of Ground View

delves into one such global ‘Gujarati’ success story -- that of

Morbi’s tile industry and its champions, most of whom are

first-generation entrepreneurs that built world-class compa-

nies from scratch.

With a large population and increasing urbanisation, build-

ing materials has seen a sharp growth trajectory in terms of

revenues and profits and market capitalisation as well. No-

where is this more evident than in the case of tile companies

like Kajaria and Somany Ceramics. Increasing scale, improv-

ing cash flows, and strong return ratios have seen this sec-

tor and stocks outperform the broader markets over the last

decade. India’s population of more than 1.25bn people has

generated favourable tailwinds, which have not only benefit-

ted these larger and listed players, but an entire pack of mid-

and small-sized companies, which were hitherto unknown.

Our cover story peers into the world of the ‘other’ tile com-

panies that have so far existed in the shadows of their larger,

listed peers. Our analysts, Amol Rao and Deepak Agarwal

travelled to Morbi to meet with the people behind these re-

markable tile companies to understand their journeys and

their sense of the future. These interactions provide not only

valuable insights into the birth and growth of a top-notch set

of companies, but also serve to affirm the belief that with

concerted efforts, manufacturing in India is capable of attain-

ing ‘best-in-class’ and ‘best-in-price’ competencies. Confir-

mation of this came from exchanges with other stake holders

in the value-chain including dealers, architects and devel-

opers. Short-term economic cycles and a sluggish economy

notwithstanding, the Indian tile industry, and mid-sized man-

ufacturers in particular, are at an inflection point with all the

makings of another interesting decade.

Also read in this issue –- a free-wheeling interview with Mr

Rakesh Singh, President (Marketing) of The India Cements,

south India’s largest cement company and one of India’s

leading ones, where he talks about the current state of the

market in southern India.

Best Wishes

Vineet Bhatnagar

From the MD


Indian Tile IndustryPlaying field levelling out


COVER STORY

BY AMOL RAO & DEEPAK AGARWAL

pg. 7 Quick primer: Key growth enablers ____________________________________________pg. 10 Tiles: The Indian market place: The competitive landscape in India ____________________________________________pg. 11 On the ground: The Morbi Factor____________________________________________ pg. 15 Unlisted tile manufacturers: Charge of Light Brigade! ____________________________________________ pg. 17 Market feedback: Frankly Speaking____________________________________________ pg. 25 Outlook: Future “Tense’ or Future ‘Perfect’: Which is it to be? ____________________________________________

The Mango Man’s (Aam Aadmi’s) Capex

“Chaan aahe na? (nice, isn’t it?),” enquired Dr Dnyandeo Patil of his under-construction retire-

ment home in Zombadi village, Chiplun (Ratnagiri district of Maharashtra). He is in the process

of outfitting the interior of his 4,000 sq. ft. house (mansion by Mumbai standards) with pol-

ished and glazed vitrified tiles (PGVT) and the terrace and walkway with unglazed porcelain

tiles. At Rs 60-70/sq. ft., this is no cheap spend! The winner – a brand of tiles that belonged

to an unlisted, but reputed Gujarat-based player. For the GV team, this conspicuously lavish

household capex in rural India turned a routine trip to purchase the famous ‘Ratnagiri hapus

(alphonso)’ into an intriguing fact-finding mission about the status of the ceramic tiles indus-

try.

Insatiable curiosity led the intrepid GV team to the supplier of these tiles – Mr Malani of M/S

Malani & Sons. “Abhi toh PGVT tiles sabse zyaada chalte hai, finish aur variety bahut acha

hai(today PGVT tiles are in vogue, the finish and choice of products is unmatched),” he said.

Better durability and lower costs of installation compared to other forms of flooring were

also compelling factors as far as cost-sensitive but quality conscious rural customers are con-

cerned. Further into the conversation, he casually revealed that his enterprise had an annual

turnover in excess of Rs 75mn, with a sizeable chunk from unlisted brands!

Which led to the following questions - Is this a flash in the pan limited to the cash-cropping

and wealthy, Konkan belt or a nationwide phenomenon? Are unlisted Indian brands (from the

famed town of Morbi) really that good?

What followed was an extensive road trip and meetings with listed and unlisted companies,

interviews with dealers and architects, and interesting conversations with end users – which

resulted in this GV on the Indian tiles industry.


Despite the sluggishness of the Indian economy, particularly

the real-estate construction space, the domestic tile industry

continues to grow at 12-15% per annum. Driven by individual

construction in hinterlands and government spending on the

social sector, the Indian ceramic tile industry achieved a size

of ~Rs 250bn and 760mn square meters (msm) in CY15.

India is the third-largest tiles market in the world, accounting

for about 7% of global production. A cursory glance at the

production and consumption statistics reveals some interest-

India’s production of tiles is seeing a CAGR of 13%, higher than China and Brazil’s growth.

World production CAGR of 6.4% over CY08-14

Indian Ceramic Tiles industry: A snapshot

ing details – while global tiles production CAGR over CY08-

14 was 6.4%, the Indian industry’s was 13%. During the same

period, the domestic rate of growth in production overtook

China’s 10% and Brazil’s 4%.

In the same period on the consumption front, India’s appe-

tite for tiles has seen a CAGR of 11%, indicating increasing

exports. As with demand, growth in domestic consumption

outpaced China’s 10% and Brazil’s 6%

Global tile production (%) Global tile consumption (%)

Sour

ce: I

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try D

ata,

Kaj

aria

Cer

amics


Sour

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ndus

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ata

Sour

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ata

Key growth enablers

Q U I C K P R I M E R

1. Changing consumption patterns

Over the past decade, the Indian market has seen a strong

structural shift in terms of consumption pattern of tiles driven

by variables such as innovation, price efficiency, and installa-

tion costs.

2. Favourable mathematics

Over the past decade and half, ceramic tiles of all hues (solu-

ble salt, vitrified, PGVT) have found an increased acceptance

over traditional Indian flooring materials such as marble,

kota stones, granite, and mosaic). Competitive per-unit costs

of purchase, lower installation cost, shorter lead times to

delivery, and ease of installation, are key variables influencing

purchase decisions in favour of tiles.

Value chain in tiles (India)

India tiles industry: Segmental volumes India tiles industry: Segmental value

Tile Industry: Structural shift towards vitrified tiles


3. Moving up the value chain

The upward migration in the ceramic-tiles value chain is most

visible in its segmental consumption – while volumes of the

domestic tile industry saw 10% CAGR in CY09-14, polished

vitrified tiles (PVT) and glazed vitrified tiles (GVT) CAGRs

were 14% and 23%. Increasing affordability and a wider

variety have seen consumers upgrade their choices from a

decade and half ago.

4. Low per-capita consumption

The potential for the industry is significant, considering the

low per-capita consumption of ceramic tiles in India – at 0.59

sq. mt. per person vs. more than 2 sq. mt. per person in

countries such as China, Brazil, Vietnam, and Iran.

Indian tile consumption: At the lower end vs. developing countries

Distribution of Households by Household size - India

Household Size (%) Total Rural Urban

2001 2011 2001 2011 2001 2011

All Households 100 100 100 100 100 100

1 3.6 3.7 3.5 3.7 3.7 3.6

2 8.2 9.7 8.2 9.8 8.2 9.5

3 11.1 13.6 10.4 12.6 12.7 15.9

4 19 22.7 17.7 21 22.4 26.4

5 18.7 18.8 18.5 18.9 19.2 18.5

6 - 8 28.1 24.9 29.6 26.9 24.4 20.6

9 + 11.3 6.6 12.2 7.2 9.3 5.4Source: Census 2011

5. Rising incidence of nuclear families

With the average Indian household size expected to decline

to about 4.4x from 4.8x, demand for housing units is expect-

ed to increase by ~10mn units (Source: Kajaria FY15 Annual

Report). With ~35% of India’s population between 15-35

years, demographics seem to support housing demand driv-

ing consumption of tiles over the next 15 years.

6. Continuing urbanisation

With ~10mn people moving to Indian cities each year and

per-capita income in urban India expected to treble to

US$8,300 in 2028 from US$2,800 in 2012, the construction

of new housing units is a likely source of demand for tiles

(Source: Kajaria).

Interactions with architects, real estate developers, tile manufacturers, and government agencies showed that there is solid growth argument for the domestic tile industry.

Sour

ce: K

ajar

ia C

eram

ics

High end Chinese tiles being sold in Mumbai


Flooring Material Use (%)

India Rural Urban

1991 2001 2011 2001 2011 2001 2011

Mud 67 57 47 72 63 18 12

Stone - 6 8 5 6 9 12

Cement 21 27 31 18 24 48 46

Mosaic/Floor tiles 4 7 11 2 4 21 26

Others 8 3 4 3 3 4 4 Source: Census 2011

Increasing use of tiles as flooring material in India

Rates (Rs. Sq ft) Marble Tiles

Unloading at Site 8-10 4-5

Laying labor cost* 20-25 10-15

Laying material cost* 60-90 40-50

Polishing 10-20 Nil

Total 98-145 54-70Note: Rate Varies from Location to Location *Laying Italian marble is even more expensive.

Source: Industry, Phillipcapital

Cost differential in installation of flooring material

Government policies Details Tiles industry optimism

Swachh Bharat Abhiyan To build 60mn toilets across the country by 2019 Envisaged demand of ~279msm

Smart Cities Covering 100 Smart Cities -(will construct approxi-mately 5mn new houses)

Construction of new structures to utilise ~92.9msm

Housing for all by 2022 To build 110mn houses by 2022 Requirement of ~1533msm

New Real Estate Bill All builders will have to complete ongoing projects in the next year

-

Source: Industry Data, Phillipcapital

Government schemes that could influence consumption of tiles

7. Increasing government spend on the social sector

The implementation of several crucial policies should facili-

tate investment and accelerate construction activities. These

schemes aim to meet the needs of around 40% of India’s

population and hold significant promise for the prospects of

the Indian tile sector.

8. Ease of use

Other traditional flooring materials (marble, Kota stone, gran-

ite) still pose a formidable threat to tiles at the higher end

of usage. However, lower installation costs and uniformity in

quality have seen these traditional choices being replaced by

ceramic tiles in India over the past decade, especially in the

middle of the customer pyramid.

9. Better affordability

Economies of scale and lower fuel prices have seen a dramat-

ic reduction in production costs for ceramic tiles. Coupled

with an increase in average domestic disposable income,

ceramic tiles have found widespread acceptance as flooring

material.

Kajaria Ceramics store, Mumbai


The competitive landscape in India

T I L E S : T H E I N D I A N M A R K E T P L A C E

The ceramic tiles industry in India is highly frag-

mented with small and mid-sized players account-

ing for a large chunk of production. The larger

(mostly listed) peers (~14 players) account for Rs

120bn (48% of total value). Within these, Kajaria,

Somany, H&R Johnson, and a couple of other

players are established leaders with an estimated

share of ~40% of the total domestic production.

Mid-small players account for ~60% of the total

industry (by volumes) – indicating the immense

demand for tiles; 80% of these are located in the

Morbi region in Gujarat – a production hub of the

domestic ceramic industry. The town has ~600

manufacturing units, which includes ~60 large fa-

While some of the significant manufacturers in Morbi (~60% companies) are currently classified

as mid-sized players, their scale of operation and growth potential would see a change in

classification over the next few years

Composition of the Indian tile industry (in volumes) Market share of large players (%) FY15

Source: Industry

cilities of mid-sized players. The location accounts

for ~70% of the total production of ceramic tiles

in India, a large chunk of which consists of vitrified

and polished tiles.

The output of India’s tile industry, classified along

broad product lines consists of wall tiles (20% by

value), floor tiles (23%), vitrified tiles (50%), and

industrial tiles (7%).

No of players Large / listed Small / mid-sized / unlisted

Turnover (Rs. bn) 120 130

Capacity (msm) 310 465

Share in volume 40% 60%

No. of players ~14 ~600

Key players Johson,Kajaria,Som-any,Nitco

RAK,Simpolo,Swastik, Var-mora,Sunheart,Other

Source: Industry Data

Difference between listed and unlisted players


Its a typical, blistering April in Ahmadabad when we meet up

with Mr. Girish Patel, CMD of Swastik Ceracon. Welcoming

us with a broad smile and avuncular hospitality, he talked at

length to the GV team about the evolution and current state

of the Indian tile industry. Some excerpts of the conversation:

Sir, as a first generation entrepreneur, how did you enter

the tile-manufacturing industry?

I come from a farming family and lived in a small village in

Gujarat. I always had the desire to venture into manufactur-

ing, which motivated me to try my hand at diamond crafting,

followed by a photographic colour laboratory. When I got the

chance to partner in a tile-manufacturing venture, I grabbed

the opportunity. Spenta Cera Tiles Pvt. Ltd. was my first man-

ufacturing unit, after which I branched out on my own and

formed Swastik Ceracon.

How would you describe your journey so far?

Every stage of my journey has been a learning experience. In

my initial years, I learnt on the shop floor about the intricacies

of manufacturing and product costing. Rejection, production

loss, and operating losses are concepts that I learnt first-hand

in the factory. Then came cash-flow management and working

capital. Along the way came lessons in manufacturing quality

and customer management. Even today, I try to keep learning

from my customers, my colleagues, and my peers from the

industry. Learning is a never-ending process.

At Swastik Tiles, what instances would you recollect as

turning points for your company?

While every moment has been special for me, I think one of

the most memorable moments in our history was the com-

missioning of our vitrified plant in CY07. Another important

milestone was the introduction of digital wall tiles in CY11-12,

which put us on the global map. Lastly, our international sup-

plies (Cengres Tiles), which started in CY13 was also a proud

moment for all of us.

Today, what are the important facets of the Swastik Tiles

brand? What is the USP of your operations?

We are known for providing high-end products with a lot of

innovation, which offers a very high-value-for-money proposi-

tion. And for this, it is vital to be very cost-efficient and world-

class in manufacturing.

Operational challenges today are quite different from a

decade ago. Could you give some examples of this and

how you surmounted them?

With the advent of ink-jet technology manufacturing, printing

on tiles has become easy. By adopting the latest technolo-

gies, we have been able to increase the tempo of our op-

erations and have migrated from the laid-back, artist-centric

process, to a fast-paced technologically driven setup.

The Indian tiling industry is set for some good growth

over the next several years. What is your strategy for

capitalising on this opportunity?

In order to remain relevant, we have taken a conscious deci-

sion to invest in newer technologies. Simultaneously, we are

expanding our marketing reach, not only in India, but also

through the world.

What factors could jeopardise the prospects of the tiling

industry in India?

Any untoward political situation, slower pace of reform or

executive decisions, stagnation in the rural economy – all of

these have the ability to hamper prospects.

As a successful entrepreneur, what future developments

or changes are you preparing your company for?

I see overlapping of various technologies in the coming days

to bring about novelties – which are not easy to match by con-

ventional processes. I also see lots of potential in renovation

and adoption of ‘green’ products by users. We, at Swastik,

are always quick to adopt new technologies. Additionally, we

are increasing our efforts in R&D, and are consciously going

green in our operations. This would definitely help us to sur-

vive the onslaught of competition.

Interaction with Mr. Girish PatelMD OF SWASTIK CERACON

Perseverance & focus, these mantras have enabled us to learn & grow“ ”


The Morbi Factor

O N T H E G R O U N D

Morbi, in the Saurashtra region of Gujarat, is a hallowed

name in the annals of the Indian manufacturing sector.

Synonymous with the concept of cluster manufacturing

of tiles, it is not commonly known that earlier this town

held the distinction of being the largest producer of wall

clocks as well as CFLs in India.

The sheer variety of housing materials manufactured

here is breathtaking. Vitrified tiles for flooring and walls,

quartz stone and mosaic tiles, tiles for roofing and sanitary

ware – the town has manufacturing units for all these and

more. Morbi accounts for 70% of all ceramic tiles manufac-

tured in India and generates in excess of Rs 170bn in annual

revenues.

On the face of it, there is sound logic for the town’s emer-

gence as a global manufacturing hub:

1. Easy availability of raw materials: Key raw materials like

clay, red and black soil, minerals (calcite and wallastonite),

frits and glazes are abundantly available locally or from

the neighbouring state, Rajasthan.

2. Reliable supply of power: Almost all the units in Morbi

have access to dedicated supplies of gas for power.

Stable supply of power ensures minuscule downtime and

higher utilisation. This is a significant driver of operational

profitability.

3. Logistics: Morbi enjoys excellent connectivity to national

and state highways. This facilitates timely and cost-effec-

tive transportation of finished goods to most parts of the

country (barring southern India). Proximity to large ports

like Kandla and Mundra not only helps manufacturers

access markets in southern India (through shipments to

Chennai and Vishakapatnam) but also large, lucrative in-

ternational markets in the SAARC region and the Middle

Morbi: Distinct logistical advantage

Royal Enfield converted into a passenger vehicle in Morbi

Kandla Morbi

MorbiMundra

By road 2hrs 10min (137km)

By road 3hrs 18min (187km)


Morbi: Distinct logistical advantage

Code Company Name City State Code Company Name City State

AML Antique Marbonite Pvt. Ltd. Morbi Gujarat KCL Kajaria Ceramics Ltd. Mobi Gujarat

AGL Asian Granito (India) Ltd Sabarkantha , Gujarat MCL Murudeshwar Ceramics Ltd. Karaikal Pondicherry

CGT Coral Gold Tiles Pvt. Ltd Morbi Gujarat MCL Murudeshwar Ceramics Ltd. Hubli Karnataka

CGL Coral Granito Pvt. Ltd. Morbi Gujarat OGL Oracle Granito Ltd. Sabarkantha Gujarat

CTL Cengres Tiles Ltd., Dist. Mehsana Gujarat OCL Orient Ceramics & Industries Ltd Sikandrabad UP

ECL Euro Ceramics Ltd. Kutch Gujarat OVL Jaxx Vitrified Pvt. Ltd. Morbi Gujarat

GCL Gokul Ceramics Pvt. Ltd Rajkot Gujarat RAK R.A.K Ceramics India Pvt. Ltd. Samalkot AP

HRJ H & R Johnson Dewas MP RGL Regent Granito (India) Ltd. Himatnagar Gujarat

HRJ H & R Johnson Kunigal Karnataka SGL Senso Granito Pvt. Ltd. Rajkot Gujarat

HRJ H & R Johnson Pen Maharashtra SCP Sentini Cermica Pvt. Ltd. Krishna AP

HRJ H & R Johnson Karaikal Pondicherry SIC Silica Ceramics (P) Ltd. West Godavari AP

HRJ H & R Johnson Baddi HP SCL Somany Ceramics Ltd. Bahadurgarh Haryana

KCL Kajaria Ceramics Ltd. Sikandrabad UP SCL Somany Ceramics Ltd. Kadi Gujarat

KCL Kajaria Ceramics Ltd. Gailpur Rajasthan SVP Simpolo Vitrified Pvt. Ltd. Morbi Gujarat

SJT Spectrum Johnson Tiles Pvt. Ltd. Rajkot Gujarat UCL Umiya Ceramic Pvt. Ltd. Morbi Gujarat

STL Sunshine Tile Co. Pvt. Ltd. Rajkot Gujarat VGL Varmora Granito (P) Ltd. Rajkot Gujarat

SWC Swastik Ceracon Ltd. Dist. Mehsana Gujarat

Indicates presence of ceramic tiles industries.

Location of major ceramic tile-manufacturing units in India

Largely located in Gujarat

East.

But there’s more to it than meets the eye. To

borrow from Po (Kung Fu Panda), “There has to

be a secret sauce!” Ground Zero’s two-day trip to

Morbi to find out what makes the town tick was

not just exhausting, but also most instructive and

enthralling.

In a candid conversation with GV,

Mr KG Kundalia, (President, Morbi

Ceramic Manufacturers Association)

explained’ “Yaha sab co-operation

se chalta hai, sab ek dusre ki madad

karte hai (everything here in Morbi

operates on the principle of co-opera-

tion, everybody helps each other out)”

– which pretty much sums up how

the town has metamorphosed into

the second-largest tile manufacturing

cluster in the world in a short span of

two decades.


Housing close to 600 units of var-

ious sizes, manufacturing in Morbi

is dominated by the enterprising

Gujarati Patel community. Said Mr

Kundalia, “Akda-shastra hamare

khoon me hai (numbers are in our

blood)”. He alludes to the skill of

cost management, born out of a

centuries-old tradition of thrift. He

went on to cite numerous instanc-

es of operational frugality – such

as the fact that many companies

outsourced specific functions

like operational maintenance to

specialists for a fraction of the cost

to lower their opex, which would

otherwise have been paid to in-

house employees. Often, manufac-

turers borrowed spares from each

other rather than block capital in

expensive inventory. In some cases,

manufacturers outsourced produc-

tion of tiles to neighbouring facto-

ries due to saturation of their own

capacities, thereby boosting utilisation levels at their peers’

facilities. The end result has been competitive operational

costs and lower selling prices.

Mr. Jagdish Varmora of SUNHEART Tiles recalled the forma-

tive years of tile manufacturing in Morbi – “Twenty five years

ago, there was an inordinately

high proportion of manual

intervention in the manufacturing

process. We owners spent most

of our time on the shop floor,

managing labour and process re-

jection. It was very tough. There

was no other way out, except for

collaboration.”

Cooperation between various

players in Morbi extends much

beyond operational resources –

to the extent of sharing precious

capital. There have been several

instances where Morbi-based

promoters have funded equity

stake in competitors for capex.

This has bred a culture of knowledge and skill transfer –

transforming the region into

a global power house in tile

manufacturing. Little wonder

that the town today boasts of

being able to manufacture one

of the largest tile sizes in the

world (2m x 1m) with relative

ease, the highest density of

digital printers globally, and the

ability to match the operational

cost of manufacturing in China

(excluding logistics costs).

Says Mr Bhavesh Varmora (MD,

Varmora Granito), who has one

of the largest units in Morbi –

“Our core strength has always

been cost control. That’s the

reason why even established

brands in the country tie up with

us or source a sizeable portion

of their products from here. It is

merely a perception that we are

only cost warriors. If it weren’t

for our quality, we would have perished long ago.” He adds

almost as an afterthought, “It is this perception of not manu-

facturing world class quality that we are trying to change.”

His competitor, Mr Jagdish Varmoa of SUNHEART Tiles

agrees. Drawing from his vast experiences, he says, “We

have nearly halved our manufacturing costs to Rs 12-13/

sq. ft. over the past decade.

Rejection today is less than

2% across any product man-

ufactured in Morbi. None of

the larger brands can match

our costs, hence they buy from

us.” He adds, “We aren’t very

active on the marketing front,

that’s where we lag behind.

Unless we market ourselves to

consumers in a big way, they

won’t know about our products

and consciously ask for our

brands. And unless they don’t

consciously use our products,

they won’t realise our quality”,

he shrugs.

“Things are changing, these are all various phases of

Trends in advertising & marketing spends (%)

Morbi based players are spending more on visibility

Ad. for Simpolo Tiles in Jet Wings, in-flight magazine of Jet Airways


growth”, muses Mr. Girish Patel of Swastik Tiles, when ques-

tioned about branding and pricing power. “The first phase,

from the early nineties till 2000, was the toughest. Everyone

was equally inexperienced, focus was on cash flows and

survival. Manufacturing scale and quality were a far cry. The

next phase was from the start of the millennium to 2007-08

where everyone had stabilised operationally and turned their

focus on growth and balance-sheet improvement, along with

quality control on the manufacturing side. I believe the last

phase which has been in play since 2007-08 has been very

interesting, as all of us have expanded nationally in terms of

distribution reach.” He adds, “With everything now in place,

the focus for mid-sized players like us is towards improving

visibility. Branding will now be a play an important role for

Swastik as well as other companies from Gujarat.”

So is this the start of cut-throat competition, a classic ‘David

versus Goliath’ saga in the making? “Not at all – there’s

enough room in the market for everyone, whether branded

or unbranded”, concludes Mr. Parth Shah, CFO of Swastik

Tiles. He adds that only brands that have control on costs

and offer contemporary products at the right price will have

good market share. Today the customer is spoilt for choice,

so a brand will succeed only if delivers on its promise of price

and quality simultaneously.” It comes as no surprise then

that all four unlisted manufacturers that GV interviewed are

already ramping up branding and advertising budgets. One

cannot help but get the feeling that competitive intensity in

the Indian tiles market is set to move up a couple of notches.

This precipitates another question – who will be casualties?

Will larger, listed brands languish or will challengers fare

badly and shut down? Some interesting food for thought on

this – 15-20 enterprises shut shop every year in Morbi due to

various reasons, but rarely insolvency. “Bankruptcy toh yaha

1% se kam hai. Kabhi kabhi kuch karan se unit band karna

padta hai(instances of bankruptcy are less than 1% in Morbi,

there are several other reasons for closure”, says a promoter

of a large manufacturing unit. For every shutdown, new fac-

tories spring up to make up for the void – a testament to the

grit of the Patel promoters. While a definitive answer to this

would only lie with those equipped with tarot cards and crys-

tal balls, Mr Patel of Swastik Tiles summed it perfectly – “The

marketplace is the best teacher, and nothing is certain. The

only way to succeed is to be ready to unlearn and re-learn.”

Somany Capacity Profile

Plant Name/Location Owned/JV/Others Capacity (msm)

as %

Vintage - Morbi JV 2.55 4.3%

Commander - Morbi JV 4.76 8.0%

Vicon - Morbi JV 3.98 6.7%

Amora - Morbi JV 4.58 7.7%

Acer - Morbi JV 5.10 8.5%

Fine - Morbi JV 4.30 7.2%

Total JV 25.27 42.2%

Kassar Owned 17.13 28.6%

Kadi Owned 8.42 14.1%

Total Owned 25.55 42.7%

Other* 9.00 15.0%

Total Somany 59.82 100.0%

Kajaria Capacity Profile

Plant Name/Location Owned/JV/Others Capacity (msm)

as %

Soriso - Morbi JV 4.60 6.7%

Cosa - Morbi JV 5.70 8.3%

Jaxx - Morbi JV 10.20 14.9%

Taurus - Morbi JV 5.00 7.3%

Vennar - AP JV 2.30 3.4%

Total JV 27.80 40.5%

Sikandrabad- UP Owned 9.8 14.3%

Gailpur - Raj Owned 24.5 35.7%

Malootana - Raj Owned 6.5 9.5%

Total Owned 40.80 59.5%

Total Kajaria 68.60 100.0%

JVs by large listed tile companies - Morbi based players are a large chunk

Kajaria and Somany ~40% manufacturing is through JV model..


Charge of the Light Brigade!

U N L I S T E D T I L E M A N U F A C T U R E R S

Listed companies like Kajaria and Somany have long been

the face of the Indian tiles industry. Increase in scale, reach,

and visibility has enabled these companies to register a

superlative performance financially – something that is well

reflected in the improvement of their valuation multiples.

However, the past decade has seen the emergence of several

unlisted players from Gujarat. A tight grip over manufactur-

ing costs, focus on quality, and increasing reach are some of

the common threads that have enabled these companies to

rack up credible growth in market share and revenues. With

their eyes firmly set on becoming sizeable national brands

in the next decade, GV interacted with some of India’s best

mid-sized unlisted tile companies

SIMPOLO CERAMICS“There is no substitute for quality. Right from the days

of our legacy business of roofing materials four decades

ago, we have believed that quality would get us repeat

buyers”, says Mr Jitendra Aghara (CMD) of Simpolo.

With a reputation of superlative quality, Simpolo was

started by Mr Aghara in 1991. Today, it is one of the

most successful Indian tile manufacturers operating out

of Morbi. With a turnover of Rs 7bn and PAT margin of

12%, it is well regarded in the dealer community. The

company also has sizeable exports to markets in the

Middle East and Europe, which it plans to ramp up in

the coming years.

VARMORA GRANITOFounded in 1994, the company is currently headed by Mr

Bhavesh Varmora. It enjoys a reputation for having an ex-

tensive product range and is coming to be regarded as a

‘One Stop Shop’ in the domestic tiling market. “We have

a capacity of 115,000 sqm p.a. today, but we have sold

more than that because we are outsourcing from other

units in Morbi’, says Mr. Bhavesh Varmora, matter-of-fact-

ly. “We export all over the world; our revenues from

international sales are in excess of Rs 1.7bn this year”, he

adds, with a dash of pride. With annual sales of ~Rs 10bn,

Varmora Granito is in the process of installing India’s long-

est tile kiln (292m) at one of its facilities in Morbi.

Significant automation and minimal human intervention at Simpolo Ceramics are reasons for lower costs and higher quality


SUNHEARTSunheart Tiles: Sunheart is the largest ceramic

tiles exporter from India. From a turnover of ~Rs

1.67bn in FY09 it has risen to clock revenues of

around Rs 7bn in FY16. “We have achieved this

scale purely through our relentless pursuit of qual-

ity, state of art manufacturing, and the firm resolve

of our team”, says Mr. BG Varmora, the Chairman.

The company holds the distinction of being the

first manufacturer to produce porcelain tiles of

1215x605 mm size in India with digital printing

technology – this makes it the world’s largest

digitally printed tile. It has a channel of more than

500 dealers in ~28 cities and exports to more than

25 countries.

exports to Europe, which undergo strict quality and other

procedural audits by international agencies. “We have always

passed these checks with flying colours”, says Mr. Patel. The

company is now focusing on improving penetration in do-

mestic markets and is increasing its marketing and ad spends

towards this.

SWASTIK CERACON“We started with Rs 15mn of capital in 1995. It was very

tough from 1996-2001, but we never gave up”, says Mr

Girish Patel, CMD (Swastik Tiles), with a hint of nostalgia.

Swastik registered a turnover of ~Rs 4.5bn and PAT margin

of 2% in FY15. Interestingly, the company has white-label

Proj

ect s

ales

offi

ce in

subu

rban

Mum

bai

India’s largest tiles ready for despatch at SunHeart, Morbi


Frankly Speaking

M A R K E T F E E D B A C K

Region

States

No. of Projects under Construction in India Geographical Break up of Sample Size

In Units In % In %

North Delhi 42 1.84% 4.2%

North Rajasthan 106 4.63% 12.5%

North Uttar Pradesh 227 9.93% 10.4%

North Total 375 16.40% 27.1%

West Maharashtra 558 24.40% 45.8%

West Gujarat 64 2.80% 2.1%

West Total 622 27.20% 47.9%

South Karnataka 274 11.98% 6.3%

South Tamil Nadu 223 9.75% 6.3%

South Telangana 112 4.90% 6.3%

South Total 609 26.63% 18.8%

East West Bengal 89 3.89% 6.3%

East Total 89 3.89% 4.3%

Total 1,695 74.11% 100.0%

Construction sector survey

In light of the significant construction activity all over India and the number of stake-holders involved, it was imperative to seek a balanced opinion of the state-of-affairs by interacting with all parties. These included developers, channel partners, and architects, all of whom play a vital role in determining the fortunes of domestic tile companies.

Architect Builder Dealer Total

North 4.3% 2.1% 21.3% 27.7%

West 17.0% 6.4% 23.4% 46.8%

South 4.3% 0.0% 14.9% 19.1%

East 0.0% 0.0% 6.4% 6.4%

Total 25.5% 8.5% 66.0% 100.0%

In the tile industry, dealers have become more stronger (top-100 dealers have a revenue of more than Rs1bn per annum)

by Mr. Tapan Jena (Industry Expert, CEO SunHeart)

Breakup of survey sampleSo

urce

: CM

IE, P

hilli

pCap

ital


Tiles Only Tiles & Sanitary Ware Total

North 11.1% 15.6% 26.7%

West 11.1% 35.6% 46.7%

South 4.4% 15.6% 20.0%

East 4.4% 2.2% 6.7%

Total 31.1% 68.9% 100.0%

Listed Unlisted Both Total

North 6.7% 4.4% 15.6% 26.7%

West 6.7% 11.1% 28.9% 46.7%

South 6.7% 0.0% 13.3% 20.0%

East 2.2% 0.0% 4.4% 6.7%

Total 22.2% 15.6% 62.2% 100.0%

Dealer comments:

- Players from Morbi were supplying all type of quality. The range and designs of tiles varied from ~Rs30-100 per sq.ft depending on quality, design, color and brand

Q3. Is there any quality difference between listed and unlisted players?

Q2. Are you selling/consuming tiles of listed, unlisted players or both?

Q1. Do you deal in Tiles only or sanitaryware as well?


Dealer comments:

- Average price difference between listed and unlisted players is 10-12%

Dealer comments:

- Unlisted players (Morbi and China) are more aggres-sive in new product launches. The initial launches are by global players from Italy and China , then Morbi players follow, then the listed players.

- India’s largest tile (6*4 feet) was first launched by a Morbi player – Sunheart

- India’s strongest tile was launched by Simpolo, another Morbi player

- Listed players launch new products, but with a lag of 5-6 months.

Dealer comments:

Dealer margins are similar between listed and un-listed players, largely due to unlisted players’ lower product.

- Some unlisted players offer better margins to push sales.

- Margins depend on the size of the order.

Q4. Is there any difference between listed and unlisted players’ products prices and how much?

Q5 Is there any difference between the dealer margin of listed and unlisted brands?

Q6. Who launches new products more frequently in the market – listed, unlisted or both?


Dealer comments:

- On an average, channel partners stock more products of unlisted players, Chinese, and Italian tiles due to the variety in range and price

Some interesting takeaways:

- Branded players were able to effect project sales without much marketing - Many people are aware that most tiles are manufactured in Morbi, either through outsourcing or JV . Hence, the design and price are clinchers at the point of sale.- Brand comes after product selection (So not much impor-tance)

Dealer comments:

- Demand is coming from residential projects, which include individual houses, replacement demand, and some small builders. - Commercial projects are few and far between- Government projects are also picking up – but are supplied to directly by companies

Dealer comments:

- Slow market: only some builders with strong balance sheet are constructing. This movement will continue going forward for next 1 years- Fewer large projects are being developed; only ex-isting or ongoing projects are alive.- There is some demand from individual consumers

Q7. What portion of shelf space / usage consists of unlisted /listed tiles?

Q8.Do brands play an important role?

Q9.How is the overall market shaping up? Q10. Which sectors are contributing to growth?


-

QUOTE - UNQUOTESome interesting tit-bits from GV’s interactions across the country

“Thoda slow toh hai (business is indeed slow),” says a Mum-

bai based dealer matter of factly. “But it isn’t as if business

has stopped”, he adds quickly. Metros across the country

reflect this scenario. Smaller constructions, coupled with

staggered purchases by builders (depending on individual

liquidity) have seen tile dealers and distributors growing at

a slower clip in the recent past. From the break-neck dou-

ble-digit growth of 2-3 years ago, a more conservative 8-10%

increase in revenues is what most channel partners are regis-

tering at the moment.

Hertz-Avis Redux?

“Chota hai toh kya hua, bhaav aur quality main toh yeh sab

world class hai (so what if they’re smaller companies, their

quality is world class),” said a dealer from Nashik.

With prompt service and comparable quality, homegrown

Gujarat brands like Varmora, Swastik, and Simpolo were

trying harder to win market share through improved business

practices like shorter turnaround time, prompt deliveries and

equitable trade terms. While the quality of products offered

were comparable to

larger, listed peers,

it was on servicing

that they seem to

be going the extra

mile. Dealers and

architects alike were

unanimous in their

feedback that Gu-

jarat-based compa-

nies have stepped

up follow-ups and

servicing over the

past few years and

are faster in closing

sales compared to

larger, listed brands.

This seems like a

replay of the famous

Hertz- Avis rivalry of yesteryears, wherein the smaller player

opted to highlight the improved quality of its servicing in-

stead of targeting the larger established competitor.

Horses for courses

While larger listed players have a vast repertoire of tiling

products, smaller, unlisted manufacturers are not far behind.

With the flexibility to customise the size of the tiles and

monthly introduction of new designs, they have carved out a

reputation for tailoring their products to match specifications

of architects and builders. “Quality and delivery were as per

specifications. The finish was superb”, replied a mid-sized

builder from Maharashtra. About the quality of the product

from a smaller brand he said that, “While the product costing

was very competitive, their speed and efficiency was amaz-

ing”.. Apparently, the adoption of digital printing technology

has enabled manufacturers today to close out supplies of

even smaller batch sizes, making them more amenable to

customizing for relatively sized orders.

Show me the money!

“Cash is always King”,

says Mr Aghara of

Simpolo Ceramics,

from Gujarat. Sales

were being made

against advanc-

es in many cases,

something which an

overwhelming majority

of dealers confirmed.

With the appetite

for counter-party risk

down dramatically,

credit offered by tile

manufacturers has

shrunk to 15-30 days,

from 30-45 days

Exquisite printed tiles, (~Rs 45,000/set) ready for despatch


-

previously. This practice has also been adopted by most tile

dealers on a pan-India basis, since they are becoming averse

to lending their liquidity to contractors/builders.

Chinese dragon being contained

Anti-dumping duty (levied a couple of weeks ago in Mar’16)

is forcing stockists of imported tiles to liquidate inventory.

With US$ 1.37/sqm of punitive duties on glazed, unglazed,

and porcelain tiles, imports are expected to subside – espe-

cially in the southern parts of India.

“Demand for Chinese tiles in the luxury/super-premium cate-

gories is relatively price insensitive – these will remain. It is in

the premium and economy ranges that the difference will be

felt”, says Ronak, a dealer of imported tiles into India. “It is

only in the economy range of tiles in southern India that the

impact will be really noticeable”, he adds.

This view was endorsed by all kinds of domestic tile manufac-

turers – they are upbeat about the revival of sales, especially

since southern India is a sizeable and stable market.

What’s in a name? Apparently, quite a bit!

With all manufacturers usually carrying out ‘point-of-sale’

promotional activities, smaller brands are stepping up their

game. Branding and advertising is now a top priority, as man-

agements of several smaller unlisted companies are keen to

increase brand awareness and visibility at the pan-India level.

Traditional media aside, focused

efforts are being made through

advertisements in business and

trade magazines. Participation

in trade shows and organising

specific events also seem to be

picking up. The use of social

media is also rising, with few

Gujarat-based brands encourag-

ing interactions through plat-

forms like Twitter, Facebook, and

Instagram.

Variety is the spice of life

Design additions in the tile port-

folio have now become a regular

feature every month, with 3-4

new designs being introduced

by companies on an average, every quarter. “Indian taste is

now sophisticated. Being contemporary is the name of the

game”, says Mr. Muthuraman of Lakshmi Ceramics, Coim-

batore. “If we’re not spoiling the customer for choice today,

we’re doing something seriously wrong”, he adds, emphasis-

ing the importance of breadth in product offering. This was

a common refrain across most channel partners in the tile in-

dustry. While international companies usually introduce new

patterns and designs every six months, companies operating

out of Gujarat usually introduce these every quarter and at

numerous SKUs. Larger domestic brands

usually follow suit in a couple of months.

Discipline, discipline, discipline!

The mantra is loud and clear for companies

like Simpolo Ceramics, Swastik Tiles, and

Varmora Ceramics who are currently just be-

low the Rs 10bn threshold for annual sales.

A strict control on the rejection rate, focus

on value-added products and lean manu-

facturing set up are some ingredients that

these companies are focusing on to make

the leap into the big league. “If we don’t

continuously streamline operations, we risk

losing out on opportunities in the future”,

says Mr. Girish Patel (M.D.), Swastik Tiles,

very succinctly.

Wood finished tiles are the rage currently and sell very well

Printed wall tiles with contemporary designs on display in Ahmedabad


Indian Tile EXIM trade: A transforming equation

Imports into India: Imports into the country paint an interesting

picture. While the upper-end of the premium range consists of

Chinese tiles, Italian and Spanish tiles make up for a vast major-

ity of imports at the luxury end. Accounting for about 8% of the

overall Indian market in CY15 (by volume), Chinese tiles were

being shipped in large quantities to southern India until recently,

given the freight disadvantage encountered by local compa-

nies in inland transportation. However, the recent imposition of

anti-dumping duty (ADD) on Chinese imports could see these

imports reducing gradually.

Increasing export focus: With domestic production outpacing

demand by a few percentage points, Indian tile manufacturers

have been increasingly focusing on exports. While the Middle

East is one of the largest export markets, countries such as

Bangladesh, Sri Lanka, Brazil, and Africa are also sizeable export

destinations.

Overseas sales account for ~5% of revenues of the Indian tile industry at present, but this metric is

expected to rise significantly over the coming decade on several factors such as capex by Indian man-

ufacturers, increasing customisation for international markets, and a globally competitive manufactur-

ing-cost profile. Global imposition of ADD on Chinese tiles should result in an abatement of supplies,

serving as a kicker for Indian manufacturers to ramp up exports.

Indian tile export (msm) Indian tile import (msm)

Imports to decrease from 7% to 4% (of the total Indian Tile Industry) with imposition of anti-dumping duty

Exports to increase with more value-added products introduced by the India and with anti-dumping duty on Chinese tiles in other countries

Sour

ce: I

ndus

try

Spanish tiles and sanitary ware are favourites in the luxury segment

Imported Italian tiles & sanitary ware being sold in Mumbai


The China factor – taming the dragon

As is with most other industries, China’s manu-

facturing might has swayed the dynamics in the

global tile market. With production of ceramic tiles

far outstripping consumption, China’s exports have

had a disruptive impact on production in various

parts of the world. To put things in perspective,

China produced about 6,000msm of ceramic tiles

in 2014, but consumed only 4,894msm.

What has made matters difficult for local manu-

facturers in India is the proximity of south India to

China. With shipping costs from south China to

southern India lower than the cost of transporting

from Gujarat, local manufacturers have faced stiff

competition in this large and lucrative geography.

In several instances, Chinese tiles have been 15-

20% cheaper than Indian tiles. Moreover, volumes

imported into India (largely into south India) have

also dented sales, which by

some estimates stood at

~38msm. Indian exports

to SAARC countries have

also encountered stiff

price competition from

Chinese tiles due to the

price differential arising

from the latter’s much

larger scale.

However, the past few

years have seen reme-

dial action globally, to

counter the threat posed

by cheaper Chinese

imports. The imposition

of antidumping/coun-

tervailing duties (ADD/

CVD) by several European

countries, Taiwan, Brazil,

etc, on imports of Chinese

tiles has opened the

export markets for Indian

tile companies.

Chinese tile production (msm)

Chinese tile consumption (msm)

India, too, has recently levied ADD to the tune of US$

1.37/ sqm, which is likely to be raised to US$ 2/sqm

over the next few quarters. This is likely to restore price

parity between domestic prices of tile and Chinese

imports, thereby boosting competitiveness of Indian

manufacturers. Channel checks indicate a reduction

in the competitive intensity of these imports, espe-

cially at lower price points – where demand is likely

to shift in favour of Indian manufacturers. However,

in the premium and luxury segments, competition is

likely to persist, in light of limited offerings by Indian

players. Indian players expect imports from China to

nearly halve from 7% of total industry size to 4% in the

One of the largest single piece tiles imported from China (64” x 32”)


O U T L O O K

Future “Tense’ or Future ‘Perfect’: Which is it to be?

On the Horizon (mid-term view)

1.Prices to soften / remain static in the near term

While a subtle increase in competitive intensity coupled with

subdued growth in consumption (8-10%) could contribute to

static prices across tiling products, the decline in manufactur-

ing costs (Power & fuel) and the dip in logistics costs could

result in a mark-down in prices across the industry. While

all this is contingent on gas prices and transportation costs

maintaining their current trajectory, channel checks point to

such a scenario panning out over the next few quarters.

2. Frequency of product range expansion by unlisted

players to rise

Most companies in the industry follow the norm of intro-

ducing 3-4 new designs of tiles every month. Dealers and

architects point out that in order to step up their game and

compete effectively against imports and larger, listed players,

players from Gujarat are gradually stepping up the tempo

of designs and SKU introductions. While this could not be

individually verified from Gujarat-based unlisted players, it

seems perfectly logical since this would contribute immense-

ly towards brand development and customer acquisition.

3.Export focus to intensify

The imposition of punitive duties on Chinese tile exports

in most global markets has opened up avenues for exports

for Indian companies, either through white-label supplies or

under their own brand. While markets in the neighbouring

SAARC countries have always been targeted, manufacturers

in Morbi are increasing their shipments to the Middle East

and Europe. Using dynamic feedback, exporters from Morbi

are stepping up customisation and broadening their range.

This, coupled with competitive pricing, is enabling several

unlisted Indian manufacturers on increasing their quantum of

exports – a trend that should gather momentum in the near

term.

A little bit of both, actually. Extensive interactions with companies (listed and unlisted), channel partners, architects, and in-

dustry observers indicate several changes on the horizon for the domestic tiles industry. The real questions are really about

the extent and timing of these shifts, and not the probability of their occurrence.

Into the wild blue yonder (long-term view)

1. Growth through the JV model to be pursued more

aggressively

Several rounds of capacity expansions are envisaged over

the next decade, as manufactures move to satisfy the volume

and variety demand at home and overseas. However, capital

efficiency and compartmentalisation of competencies could

lead to companies collaborating with each other through JVs.

These alliances could be for outsourcing production, sharing

of specified output, marketing tie-ups, or a combination of all

three in a hybrid form.

2. Shelf size to increase, but share to drop

With the entry of additional players into the branded tile

segment, most dealers and distributors said that the range of

products stocked at their end was definitely expanding. How-

ever, competition and a wide variety of products would result

in a change in the market share dynamics of older players,

despite the market growing.

3.Smaller players may have to up their game or face

stagnation

The gradual build up in competitive intensity in the domestic

tile industry would necessitate innovation and operational

flexibility in production, distribution, and financial control.

Thus, companies with smaller scale may have to invest more

bandwidth and material resources to be fleet-footed in order

to survive and grow. “Traditional soch se hatna padega, nahi

toh mushkil ho jayegi (it will be difficult unless the conven-

tional thought process is modified),” responded Mr. Kunda-

lia, when questioned about the future of small-scale manu-

facturers in Morbi.


One could easily mistake the office of Mr. Abhishek Somany (JMD,

Somany Ceramics) for a museum of miniature cars. An afficianado of all

things automotive and racing, Mr. Somany took time out to patiently

talk about the operations of Somany Ceramic, detailing with mechanical

precision the transformation of the Indian tile market. Key takeaways of

the chat:

Could you tell us about your company?

Somany Ceramics was founded in 1969 by Mr HL Somany in collabora-

tion with Pilkington’s Tile Holding, UK. Today, we are one of the leading

manufacturers and marketers of tiles, sanitary-ware, and bath fittings in

India, and produce 60 mn sqm of vitrified and ceramic tiles from two

fully-owned facilities (one in Kadi in Gujarat and one in Kassar, Haryana)

and seven six joint-venture facilities at Morbi in Gujarat.

We have a pan-India presence with vast distribution network comprising

of 10000-plus dealers and sub-dealers, and 180 franchisee-managed

showrooms and owned display centres.

What are the market trends for 2016?

Greater utility, decorative qualities, easier maintenance are some of the

reasons for tiles becoming popular over the last two decades. Inter-

national trends are the first ones to be adapted by consumers in India

and as more and more Indians have started often visiting/living abroad,

expectations have transformed completely.

Buyers today are looking beyond traditionally designed tiles and are

moving towards specialised tiles for different usage areas. Mainte-

nance-resistant, hygienic, yet stylish tiles are preferred for kitchen and

bathrooms. Consumers pick up design options that reflect their lifestyle,

but are cost effective as well. Taking the technologically driven route,

3D tiles add an additional aspect to space. These tiles have started

picking up in the market and are expected to experience an upsurge in

the coming year. The demand for ‘green’ tiles is also on the rise and is

likely to increase. Tiles using leather, metal, and other non-traditional

natural hues and surfaces are a popular choice these days, especially

when used as decorative embellishments. Mosaic patterned tiles, to

create a picture or a repeating design are now preferred over bland

printed tiles.

Even the size of the tiles is expanding to suit the modern needs. It is a

growing trend to prepare large continuous surfaces and minimize joints,

Interaction with Mr. Abhishek SomanyJMD, SOMANY CERAMICS

Innovation has been the key to our success. Increased capacity utilisation and wider footprint have enabled us to stay ahead.

“

”


allowing them to install with minimal grout lines.

Somany produces tiles in various sizes – 600x1200,

800x1200, and 800x800mm.

What is the USP of your company?

Innovation is our USP. Somany has been investing

its energies in product innovation and increas-

ing capacities across segments, with more focus

on the higher-margin segments. To cater to the

dynamic sentiments of our consumers, we have

a product basket of tiles (floor and wall), sani-

tary-ware, and CP fittings.

What are your future plans?

We are focusing on doubling output in the next

three years. New construction and renovation of

existing properties will boost demand for ceramic

tiles. Over the years, we have realised that the

best way to grow is to outsource production to

smaller players and leverage our brand and distri-

bution network for marketing and selling. We shall

continue with our asset-light model for growth,

where we will keep adding to our capacity by tak-

ing stakes in the equity of smaller manufacturers,

who will then produce exclusively for us.

We shall also expand the plants of our existing

associates and continue to enhance our offerings

through more value-added products. To be a one-

stop destination for all home-decor needs, we will

ramp-up our sanitary-ware and bathroom-fittings

segments.

We will strengthen our retail footprint further by

adding more franchisee-run stores year-on-year.

In addition, tier-2 and tier-3 towns and exports

would be thrust areas for enhancing sales. These

strategies should result in sustainable top- and

bottom-line growth. We will invest accordingly for

expanding our business operations and upgrad-

ing our manufacturing facilities. We are targeting

+20% growth in FY16, as there is high growth

potential in the ceramic tile industry.

We have no diversification plans for the time

being, and will continue with the existing business

verticals.

What strategies do you follow to handle com-

petition from your organised and unorganised

counterparts?

Every company has a different business strategy.

We believe in ours. We offer multiple platforms to

customers, so that we are in their reach radius. We

have highly equipped centres with a wide range

of tiles, sanitaryware, and bath fittings to offer.

The number of stores, either dealer-operated or

company-owned, across the country, enhances

our brand visibility through improved accessibility

for customers. Our website is also a major touch

point, which is regularly updated.

For beating competition from the organied sector,

we have been investing our energies in prod-

uct innovation and increasing capacities across

segments – with more focus on the higher-margin

segments. To cater to the dynamic sentiments of

the consumers, we offer a comprehensive bouquet

of products, thus becoming a ‘One-Stop-Shop’ for

customers.

Our strategy for beating competition from the

unorganised sector is basically to increase our

footprint in the country and increase our range

to more and more tier-2 and 3 towns, as most of

the construction activity is going on there. These

markets have a huge potential, as more people

are switching over to the use of tiles in their homes

as well as in commercial areas.

Apart from this, we are also focusing a lot on

branding – at the end of the day, it is the brand

that sells as customers are aware that a good

brand not only guarantees consistent quality but

also offers a huge range.

What is the demand scenario like outside tier-1

cities?

With urbanisation spreading to tier-2 and 3 cities,

there is healthy demand for tiles, sanitary-ware,

and bathroom fittings. These cities are growing

commercially, industrially, and have rising popula-

tion and education opportunities. These markets

have a huge potential; our distribution network

covers almost all tier-2 and tier-3 cities in India.


Interaction with Mr. Tapan JenaCEO OF SUNHEART CERAMICS

As an industry veteran of the Indian tile market, there are very few

district headquarters in India that Mr. Tapan Jena hasn’t visited to

sell his product. By virtue of more than two decades in the business,

handling numerous functions ranging from sales, marketing, logistics

etc he is CEO of SunHeart Ceramics. A cheerful disposition and

keen sense of humour apart, his incisive observations about the tile

industry formed the basis of this GV report. A selection of some of

the choicest bits of conversation with him are enclosed below:

Today, players from Gujarat, and from Morbi in particular, have

created an enviable reputation for themselves. Yet, the quality

of their output is sometimes questioned. Your thoughts on this?

In the current tiles market, Morbi controls around 60% market share

(in volumes) and every year around 40 to 50 new plants enter the

market. All these plants start with good product quality and con-

temporary designs. However, sometimes, due to costing pressures,

some companies compromise on quality and gradually lose their

reputations.

Thankfully, the occurrences of such cases is reducing, as operations

these days are handled by the new second-generation entrepre-

neurs who are educated and understand the importance of good

quality.

How important is it to have a brand in the tile industry today?

How do you see brands evolving over the next decade?

A brand plays a vital role in in this industry, but only if you can match

quality expectations and produce sufficient quantities. If you look at

the previous decade, there were fourteen brands operating in India,

but today there are only six to seven. Several companies perished

because they could not sustain the pressure of supply and quality.

There are ample opportunities for brands to grow, as most of them

are buying/sourcing from Morbi as per their quality requirements.

This enables them to be more competitive and affordable and

simultaneously provide customers with a wide choice.

Additionally, the price gap between branded and non-branded has

narrowed significantly over the past decade, mainly due to efficien-

Quantity is not the only factor today, Quality is equally important. Without quality, the consumer will not come back to a brand.

“

”


cies in manufacturing and lower logistics costs. As

a result, customers are opting for branded prod-

ucts. This is a huge opportunity for players who

are competent, but do not have a brand.

How do you see brand development evolving

for the smaller and mid-sized tile manufacturers

over the next few years?

The change is happening as we speak. Until

recently, such spends were ~1-2% of net sales –in

the form of distribution of free samples. Howev-

er, several prominent unlisted companies have

earmarked 3-4% of their sales in coming years for

brand-building activities like trade exhibitions,

radio jingles, appointing brand ambassadors etc.

In the light of the anti-dumping duty imposed

on Chinese imports into India and in other

countries, what is your outlook for the tile

trade in the country?

Imports have picked up in the last one year and

are available 15-20% cheaper, specifically in the

polished vitrified segment. The imposition of

anti-dumping duties in several European countries,

Taiwan, and Brazil among others on imports from

China may have prompted Chinese tile manufac-

turing companies to look at the Indian market in a

big way.

The import of these tiles has been rampant in

port towns such as Mumbai, Chennai, Kolkata,

and Kochi. So far, the practice has been mainly

concentrated in port cities, but it will soon spread

and can reach out to the hinterland.

With the imposition of anti-dumping duties, the

PVT segment will definitely grow, specifically in

ports and surrounding areas. Meanwhile, Indian

exports are growing at an extremely encouraging

clip and should be able to sustain this tempo in

the future.

What new concepts do you see evolving in

the tile industry that would carry the industry

forward?

The Indian consumer is very quick to adopt the

latest trends. Consequently, manufacturers are also

upgrading technology to keep pace with global

trends. Five years ago, there were no digital-print-

ing technology, but today there are more than 250

machines – a number that is growing.

Tiles are no longer only a flooring medium, but a

style statement. New and exciting products, which

are relevant, are quick to be accepted in the coun-

try. A good example of this is that larger-format

GVT and slim tiles are finding increasing accept-

ance in India.

Going forward, interesting innovations in terms of

thickness, finish, design, and size will continue to

drive growth for the industry, which I think will be

in double-digits for the next decade.


Annexures: Tile manufacturing process

STEP-1

STEP-7

STEP-2

STEP-8

STEP-3

STEP-9

STEP-4

STEP-10

STEP-5

STEP-11

STEP-6

STEP-12

STEP-13

- Raw material procurement and weighing: Various raw materials used are procured and accurately weighed,

Shaping:-The granules are then compressed under high pressure to form a biscuit by means of an automatic hydraulic press. It facilitates formation of tiles of different sizes and shapes.

Raw material feeder: Raw material is fed into the ball mills for crushing and grinding via conveyor system.

Speed pre drying: The tiles are then moved into a horizontal dryer, where the moisture content in the tile evaporates and the tile picks up its strength.

Crushing, grinding, and milling: Raw material is crushed and ground to the requisite particle size and subsequently milled down to as low as 1.0 micro-meter in diameter.

Kiln firing: Firing is the process by which ceramics are thermally consolidated into a dense, cohesive body composed of fine, uniform grains. The peak temperature is approximately 1250C. The flux in the body melts and re-solidifies to form porcelain stoneware.

Storage vats: The slip is discharged into storage Vats and agitated continuously with high efficiency stirring blades to ensure homogeneity.

Calibrating /sizing: Calibration is done to make the surface even by removing a certain amount of material to provide a flat surface. Diamond tools are employed for calibration.

Spray drier: The slip from storage vats is sieved and is fed into the spray drier at constant pressure by means of a high-pressure piston pump to convert slip into granules.

Polishing: Polishing employs to give the tile a mirror like finish without any scratches, shadows or signs of machining. Not all ceramics are polished.

Powder storage: The spray-dried granules are stored in silos for their ageing which increases its working properties by homogenizing the moisture and making the granules more pliable.

Sorting: The tiles are automatically sorted into different grades depending on the categorization. The tiles are checked for dimensions and flatness automatically.

Packing: The finished products are then packed and stored or shipped.


BY VAIBHAV AGARWAL

President (Marketing)

The India Cements

Mr. Rakesh Singh

We talked to Mr Rakesh Singh, President (Marketing) at The India Cements, south India’s largest cement company and one of the leading ones in India. He has been working with ICL for the last 18 years, before which he was with behemoth ACC for 12 years in its marketing division. Mr Singh has been in marketing for about 30 years. He is a mechanical engineer from IIT-BHU (1977-83) and a PGDBM (1984-86) from XLRI, Jamshedpur.

Disclaimer: These are Mr Rakesh Singh’s personal views and not India Cements’


Q. What is your outlook on demand?

My views are a bit different on the spike that we saw

in Q4 in terms of growth across the country includ-

ing south, which was otherwise showing negative

growth through and through. This is good news,

but I am not too sure if it can sustain at the same

pace. What we have seen in February-March is an

outlier in my view, and growth numbers are likely to

taper off. If I have to compare Q4FY16 to Q4FY15,

there seems to be almost 45% growth in Andhra and

Telangana combined, while Tamil Nadu did not grow

beyond 1.5%-1.6% and Karnataka was at a modest

8%. Overall, south had a growth of around 13.5%.

Q. Why do you think demand growth may taper

off?

It is interesting to note that during Q4, the move-

ment from south into the rest of India – specifically

west and east – came down by almost 7%. This indi-

cates that the south growth numbers were skewed.

Possibly because of low prices in AP/TS , cement

that was meant to go to the west or east was being

sold in south itself. In other words sale recorded in

AP /TS was partially moving to neighbouring state,

unofficially. Therefore , it is not an apple-to-apple

comparison.

Moreover, large portion of the sales during Febru-

ary-March in AP/Telangana was driven by contrac-

tors’ demand. In these two states contractors were

to finish their work and submit bill by the end of

March, so they went on an overdrive. In addition,

Lower Cement price acted as a motivation for dis-

tributors to buy more in anticipation of price hikes.

There was a bit of inventory built at secondary level,

coupled with a cut in inter-region movement (to

Maharashtra or to east India). All of above lead to

inflated demand in Q4 which I believe will taper off

going forward.

Q What would south India demand growth num-

bers look like in your opinion?

For the past 5-6 years in a row, Andhra specifically

has seen negative growth; this was the first year

after a very long time that we have seen positive

growth of 5% in Andhra and Telangana. So while Q4

growth was good, the year’s growth was 5% – which

is reasonable. Going forward, this 5-8% growth in

Andhra and Telangana should be sustainable. You

should not expect double-digit growth that we saw

in Q4, but we should definitely see a modest growth

of 5-8%. Obviously, we have to really keep a close

watch on what happens to the capital, the many

promises that the Telengana government has made,

demand triggers from the so-called Swachh Bharat

Scheme, and also on the road projects.

Q. What is your take on the demand growth in

other states in the south?

I do not see much growth coming from Tamil Nadu

and Kerala because of elections for the first 3-4

months of FY17. Until the new government settles, I

do not see much activity happening. In these states,

normally, the money spent before and after elec-

tions is more on social welfare and not construction.

Kerala is seeing some strain because the Middle East

not doing well. Karnataka will see a modest growth

of 8%, mostly from south Karnataka, and because

of some of the activities that the government has

taken up at the rural level. Maharashtra saw 15%

growth last year, and this pace should continue. This

is a very important state, given its close integration

to the south. Obviously, all these numbers have a

bearing on how the monsoon behaves this year;

things are pretty bad now and if the monsoon is

below average, construction activity will definitely

get majorly impacted.

Q. What is your take on cement prices?

This is where I have a different view from people

who get very bullish on growth. My view is that

growth without profit makes no sense. Earlier in

south India, because of lack of growth, companies

used to sell cement while maintaining their brand

equity – trying to position themselves at higher price

levels, and cutting distribution costs – because fight-

ing for market share was not a viable route. Howev-

er, in Q4, as growth came back, a little greed set in

– which resulted in prices falling, quite substantially

in Andhra and Telengana. Prices in Hyderabad in Q4

touched ~Rs 230-240 while they were as high as Rs


340 a few months ago. Rs 70-80 has just gone down

the drain because a few companies were trying to

increase their market share. In one of the cases, a

smaller player apparently got an assurance from a

third party to fund its expansion plans, which made

them greedy and this accelerated the pace of price

war . I believe good sense will prevail in the long

run, and we will start focusing on better prices again.

Even if the growth comes (my guess is 5-7% or even

10% at best), demand-supply gap of around 80mn

tonnes will take about five years to match. What we

were doing was best – maintaining our positioning

while trying to sell in the right market at the right

price. We have to go back to that era instead of try-

ing to fight for market share in a commodity space.

Q. How is the current price scenario?

Prices have now improved by Rs 50/bag in markets

where a sharp price correction took place. We ex-

pect another Rs 50-60 price improvement in a couple

of tranches over the next few months, for it to reach

its original levels.. In other markets, cement prices

remain fairly stable. Just to give you an indication,

I believe Bangalore is in the range of Rs 380-390,

Chennai Rs 390-395, and Kerala Rs 400-410. Since

we operate a little bit in the north, I think north has

seen an improvement, but again in specific pock-

ets – some pockets have gone up smartly and some

pockets, not so well. Gujarat remains Rs 260-280,

Rajasthan Rs 265-270, and further north it is Rs 275-

285. Similarly, Orissa, which used to hover around

Rs 340 a few months ago, is down to Rs 290-300.

However, because of demand improving, I see price

improvements happening. While it cannot be seen

at the ground level yet, I expect prices in the east

rising.

Q. What are the bottlenecks for demand growth?

Basically – stuck for funding. There is no fund with

most of these governments. Telengana for exam-

ple – structurally, its revenue is good, but I think the

priority is different and therefore the government is

not able to spare enough money for projects that

they had talked about. They were supposed to have

done a lot of flyovers, white topping across Hydera-

bad, two bedroom houses for all those who are below

poverty line, a little bit of irrigation projects which are

only at very initial stages), and of course the Swacch

Bharat and Smart City projects. While they were

supposed to have funds, at least on paper, they have

possibly spent them on welfare activities. In fact, the

contractors tell us that even the jobs that were done

are facing delayed payments. Coming to Andhra, they

do not have money to implement the grand plans

they have. I always say I have tremendous confidence

in the chief minister, but unfortunately, he is not able

to get things started. Activity will ultimately happen,

question is timing ! What is happening today is only

activity in terms of transaction of land – more of spec-

ulative trading. However, this will eventually lead to

construction and thus cement consumption.

Q. How will you summarise the industry scenario?

In a nutshell, at the ground level, nothing earth-shak-

ing is happening – which strengthens my assumption

that the demand will not grow at the pace in which it

had grown in Q4. I do not see major construction hap-

pening around the capital of Andhra in near future.

We were expecting a lot of activity from Telangana –

in the form of roads and houses. We thought National

highway projects will add to lot of cement consump-

tion, but if you look at the list, except for two major

projects that have been awarded recently, there are

no other road projects in the south – anywhere – right

from Andhra to Kerala. Most of the projects that have

been cleared are in central and north India.

The most important contributor to demand creation

is driven by middle class and from the rural areas – it

accounts for almost 55% of cement demand in India in

terms of individual houses, plus 15% in terms of what

you call the builder segment, which adds upto 70%.

In this component, we are not seeing anything great

happening, because it is linked to the economy and

job creation and people becoming comfortable that

they can repay loans or have savings to invest. One

has to really wait for those real turnaround triggers.

Given the low base and lack of economic activity, I see

5-8% demand growth with reasonably fair prices in

south India.


Indian Economy – Trend Indicators

Monthly Economic Indicators

Quarterly Economic Indicators

Growth Rates (%) Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16

IIP 4.8 2.5 3.0 2.5 4.2 4.3 6.3 3.7 9.9 -3.4 -0.9 -1.5 2.0 0.1

PMI 51.2 52.1 51.3 52.6 51.3 52.7 52.3 51.2 50.7 50.3 49.1 51.1 51.1 52.4

Core sector 2.3 -0.7 -0.4 4.4 3.0 1.1 2.6 3.2 3.2 -1.3 0.9 2.9 5.7 6.4

WPI -2.1 -2.3 -2.4 -2.2 -2.1 -4.0 -5.1 -4.6 -3.7 -2.0 -0.7 -0.9 -1.0 -0.9

CPI 5.4 5.3 4.9 5.0 5.4 3.7 3.7 4.4 5.0 5.4 5.6 5.7 5.3 4.8

Money Supply 11.2 10.8 10.8 11.0 11.0 11.5 11.3 11.0 10.9 10.7 11.0 11.1 11.3 10.3

Deposit 11.2 10.7 10.7 11.5 11.4 11.8 11.9 11.3 11.1 10.4 10.9 11.1 11.0 9.9

Credit 7.2 8.7 9.2 8.8 9.5 9.4 9.0 7.5 9.0 9.8 11.1 11.4 11.6 11.3

Exports -13.3 -20.8 -14.0 -20.2 -15.8 -10.3 -20.7 -24.3 -17.5 -24.4 -14.7 -13.6 -5.7 -5.5

Imports -14.7 -14.2 -7.5 -16.5 -13.4 -10.3 -9.9 -25.4 -21.2 -30.3 -3.9 -11.0 -5.0 -21.6

Trade deficit (USD Bn) -6.7 -11.4 -11.0 -10.4 -10.8 -12.8 -12.5 -10.5 -9.8 -9.8 -11.7 -7.6 -6.5 -5.1

Net FDI (USD Bn) 3.2 2.7 3.3 3.8 1.7 1.7 2.2 2.8 4.9 2.7 3.6 4.1 2.8 1.5

FII (USD Bn) 3.8 2.0 3.1 -2.8 -2.0 -0.7 -3.5 -2.4 4.5 -3.8 -2.6 -1.5 -2.4 4.3

ECB (USD Bn) 2.3 2.7 7.3 2.4 3.2 2.1 0.8 2.6 2.1 3.2 3.0 1.4 1.4 1.5

NRI Deposits (USD Bn) 61.8 62.5 63.4 63.8 63.7 64.1 66.5 65.6 65.3 66.7 66.2 67.8 68.4 66.2

Dollar-Rupee 338.1 341.4 344.6 352.5 355.2 353.3 355.4 350.0 353.6 351.6 352.1 349.2 346.8 355.6

FOREX Reserves (USD Bn) 295.8 291.9 293.4 296.4 287.9 284.6 280.2 275.5 276.3 283.0 291.3 295.7 292.2 294.4

Balance of Payment (USD Bn) Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16Exports 79.8 83.7 81.7 85.3 79.0 70.8 68.0 67.6 64.9Imports 112.9 114.3 116.3 123.9 118.3 102.5 102.2 105.0 98.9Trade deficit -33.2 -30.7 -34.6 -38.6 -39.3 -31.7 -34.2 -37.4 -34.0Net Invisibles 29.1 29.3 26.7 28.5 30.9 30.2 28.0 29.2 26.9CAD -4.1 -1.3 -7.9 -10.1 -8.4 -1.5 -6.1 -8.2 -7.1CAD (% of GDP) 0.9 0.3 1.6 2.0 1.7 0.3 1.2 1.6 1.3Capital Account 23.8 9.2 19.2 16.5 23.6 30.7 18.1 7.2 10.5BoP 19.1 7.1 11.2 6.9 13.2 30.1 11.4 -0.9 4.1

GDP and its Components (YoY, %) Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16Agriculture & allied activities 3.8 4.4 2.6 2.8 -2.4 -1.4 1.6 2.0 -1.0Industry 5.5 5.5 8.1 6.2 3.4 7.2 7.1 8.4 11.0Mining & Quarrying 4.2 11.5 4.3 7.0 9.1 2.3 8.6 5.0 6.5Manufacturing 5.9 4.4 8.4 5.8 1.7 8.4 7.3 9.0 12.6Electricity, Gas & Water Supply 3.9 5.9 10.1 8.8 8.8 4.2 4.0 7.5 6.0Services 8.3 5.6 8.4 9.9 11.7 8.0 8.5 8.3 8.6Construction 3.8 1.2 6.5 5.3 4.9 1.4 6.0 1.2 4.0Trade, Hotel, Transport and Communications 12.4 9.9 12.1 8.4 6.2 14.1 10.5 8.1 10.1Finance, Insurance, Real Estate & Business Services 5.7 5.5 9.3 12.7 12.1 10.2 9.3 11.6 9.9Community, Social & Personal Services 9.1 2.4 2.8 10.3 25.3 0.1 6.1 7.1 7.5GDP at FC 6.6 5.3 7.4 8.1 6.7 6.1 7.2 7.5 7.1


Annual Economic Indicators and Forecasts Indicators Units FY8 FY9 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Real GDP growth % 9.3 6.7 8.6 8.9 6.7 4.5 4.7 7.2 6.8 7.5

Agriculture % 5.8 0.1 0.8 8.6 5.0 1.4 4.7 0.2 2.0 4.0

Industry % 9.2 4.1 10.2 8.3 6.7 0.9 -0.1 6.6 5.7 6.7

Services % 10.3 9.4 10.0 9.2 7.1 6.2 6.0 9.4 8.5 8.8

Real GDP Rs Bn 38966 41587 45161 49185 52475 54821 91698 98271 104953 112825

Real GDP US$ Bn 967 908 953 1079 1096 1008 1517 1611 1615 1684

Nominal GDP Rs Bn 49864 56301 64778 77841 90097 101133 113451 126538 137626 153212

Nominal GDP US$ Bn 1237 1229 1367 1707 1881 1859 1876 2074 2117 2287

Population Mn 1138 1154 1170 1186 1202 1219 1236 1254 1271 1302

Per Capita Income US$ 1087 1065 1168 1439 1565 1525 1518 1655 1666 1757

WPI (Average) % 4.7 8.1 3.8 9.6 8.7 7.4 6.0 2.0 -2.0 4.0

CPI (Average) % 6.4 9.0 12.4 10.4 8.3 10.2 9.5 6.0 5.0 5.0

Money Supply % 22.1 20.5 19.2 16.2 15.8 13.6 13.5 12.0 12.0 13.0

CRR % 7.50 5.00 5.75 6.00 4.75 4.00 4.00 4.0 4.0 4.0

Repo rate % 7.75 5.00 5.00 6.75 8.50 7.50 8.00 7.50 6.75 6.25-6.5

Reverse repo rate % 6.00 3.50 3.50 5.75 7.50 6.50 7.00 6.50 5.75 5.25-5.5

Bank Deposit growth % 22.4 19.9 17.2 15.9 13.5 14.4 14.6 11.4 12.0 13.5

Bank Credit growth % 22.3 17.5 16.9 21.5 17.0 15.0 14.3 9.5 10.0 12.0

Centre Fiscal Deficit Rs Bn 1437 3370 4140 3736 5160 5209 5245 5107 5351 5339

Centre Fiscal Deficit % of GDP 2.9 6.0 6.4 4.8 5.7 5.2 4.6 4.1 3.9 3.5

Gross Central Govt Borrowings Rs Bn 1681 2730 4510 4370 5098 5580 5641 5920 5850 6000

Net Central Govt Borrowings Rs Bn 1318 2336 3984 3254 4362 4674 4536 4531 4406 4252

State Fiscal Deficit % of GDP 1.5 2.4 2.9 2.1 1.9 2.0 2.5 2.4 2.0 1.5

Consolidted Fiscal Deficit % of GDP 4.4 8.4 9.3 6.9 7.6 6.9 7.1 6.6 5.9 5.0

Exports US$ Bn 166.2 189.0 182.4 251.1 309.8 306.6 318.6 316.7 270.0 283.5

YoY Growth % 28.9 13.7 -3.5 37.6 23.4 -1.0 3.9 -0.6 -14.8 5.0

Imports US$ Bn 257.6 308.5 300.6 381.1 499.5 502.2 466.2 460.9 406.0 428.3

YoY Growth % 35.1 19.7 -2.5 26.7 31.1 0.5 -7.2 -1.1 -11.9 5.5

Trade Balance US$ Bn -91.5 -119.5 -118.2 -129.9 -189.8 -195.6 -147.6 -144.2 -136.0 -144.8

Net Invisibles US$ Bn 75.7 91.6 80.0 84.6 111.604 107.5 115.2 116.2 118.8 121.1

Current Account Deficit US$ Bn -15.7 -27.9 -38.2 -45.3 -78.2 -88.2 -32.4 -27.9 -17.2 -23.7

CAD (% of GDP) % -1.3 -2.3 -2.8 -2.6 -4.2 -4.7 -1.7 -1.4 -0.8 -1.0

Capital Account Balance US$ Bn 106.6 7.8 51.6 62.0 67.8 89.3 48.8 90.0 50.4 75.5

Dollar-Rupee (Average) 40.3 45.8 47.4 45.6 47.9 54.4 60.5 61.2 65.0 67.0

Source: RBI, CSO, CGA, Ministry of Agriculture, Ministry of commerce, Bloomberg, PhillipCapital India Research


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