KAJARIA CERAMICS LIMITED.
WE BELIEVE THAT WHEN WE ALIGN OUR STRATEGY WITH NATIONAL PRIORITIES GROWTH IS ANATURAL COROLLARY."
The subdued environment prevailing in the real estate sector continued to dampen demandfor building products and the tile sector was no exception to this reality.
The Government's demonetization initiative (November 2016) dealt a severe body-blow toanyway stuttering tile demand. Against this backdrop we grew business profits andprofitability which in our opinion is a significant achievement of the entire Kajariateam. Although our growth was lower than our historical average the excitement at Kajariais palpable for we stand at the cusp of unprecedented opportunities arising fromGovernment reforms. Goods and Services tax (GST): The single biggest driver of achange in our sectoral and corporate realities is the introduction of the Goods &Services Tax. This is the most important financial policy following India's Independence.From a reality where India is 30 partitioned states the GST will immediately graduate thecountry into one large seamless market place. We have no doubt that this legislation whenintroduced will prove to be a game-changer for India's organised players. For twoimportant reasons One GST promises to create a level playing field between the informalsector and the organised/ branded players. And as consumer affordability and consequentlyaspiration are multiplying we expect the tile demand to shift towards branded products.Two we believe that following the GST implementation the sector's supply chain willstrengthen. For example trucks earlier needed 5-6 days of travel time to get from ourGailpur facility to Benaras; we will now be able to cover the distance in 3 days. Thisacceleration will make it possible for our inventory turns to increase and our rawmaterial-to-receivables working capital cycle to shorten strengthening our financialefficiency and profitability.
Housing: In 2017 the government provided infrastructure status to the country'sAffordable Housing segment. This is a significant step that should transform the prospectsof the real estate sector home buyers and material providers. According to CLSA PrimeMinister's drive to bring homes to the country's 1.3 billion people rising incomes andthe best affordability in two decades will unleash a US$1.3 trillion wave of investment inhousing. The firm expects 60 million new homes to be built between 2018 and 2024. Whilethe affordable segment is expected to rise almost 70% to 10.5 million annually by 2024increase in the premium segment is stated to be about 33%. RERA: This legislationwhich came into force on May 1 2017 promises to protect the home purchaser. It putsgreater accountability on the developers in terms of disclosure timely development ofprojects and maintaining good corporate governance practices all of which shouldstrengthen the confidence of the buyer leading to greater offtake.
We grew business profits and profitability which in our opinion is a significantachievement of the entire Kajaria team.
Sanitation: The Government's goal to make India open defactation free by 2019 (asper the Swachh Bharat Mission) has made reasonable progress. But needs to coversignificant ground over the coming years at an accelerated pace. For India has constructedabout 1.32 million toilets (by March 2016) against a target of 2.5 million by 2019. Thisdrive holds potential for increased demand for tiles over the coming years. Thesepath-breaking policies and ambitious programmes hold significant promise for healthygrowth of the tile industry over the medium term. Given this sectoral optimism KajariaCeramics initiated important measures in 2016-17 to strengthen its competitive advantage. Capacity:Following GST we expect sectoral consolidation to emerge. We will look to partnerquality-conscious manufacturers to enlarge our manufacturing infrastructure apart fromGreenfield/brownfield initiatives.
Products: We will continue to enrich our product basket with unique designs alignedwith global trends. In 2016-17 we added more than 500 designs across product verticals.In addition we ensured that each product segment possesses trending sizes resulting in aproduct for every enquiring customer.
Value-addition:2016-17 we launched a number of a number of large-format tiles andniche products. Awareness of these products is expected to grow through innovativeout-reach communication translating into a larger offtake of more profitable products.
Dealers: Even as we make product basket additions we recognise that our dealersare often unable to showcase all our products due to funding constraints impacting theirbusiness and ours. In view of this we embarked on the decision to create distributionchannels dedicated to specific product verticals on the one hand while widening our dealernetwork on the other. The heartening initial response provides us with the encouragementto sustain this initiative.
Visibility: Even as the Kajaria brand generated a strong urban recall we havestill not fully covered a significant part of the market in Tier 1-3 cities and towns. Wetook two definitive steps in this regard; we increased our visibility through branding andpromotions in prominent public locations (airports) and events (IPL international cricketmatches and other national sporting events); we increased our distribution network throughthe addition of new dealers in 2016-17 with a focus on strengthening our presence andvisibility in Tier 1-3 cities and towns.
In 2016-17 we launched a number of large-format tiles and niche products.
Chairman & Mg. Director