Will surprise market 'pundits' by achieving ambitious targets: Vikram Somany

Interview with CMD, Cera Sanitaryware

In an effort to have a "flexible" business plan, Cera Sanitaryware has not only forayed into tiles manufacturing but is now also eyeing international acquisition. While Vikram Somany, CMD, Cera Sanitaryware agrees there is a long way to go for the company, he believes both acquisitions and tiles manufacturing will propel the company's growth in the coming years. In an interview with Kalpesh Damor, Somany also talks about the challenges that sanitaryware industry is facing. Edited excerpts:

Cera Sanitaryware was looking for an acquisition in Italy. Is the acquisition plan on track or has it been dropped?
Our plan to acquire an European brand is still on. What essentially we are looking forward is to buy out an internationally acknowledged 'brand'. The company already has world class plant set up in the state of Gujarat.

Is the company looking at acquisitions in India as other companies are acquiring stakes in small companies mainly in Morbi?
The business plan for a growing company like 'Cera' is always flexible. Any kind of business acquisition may become possible within India and would fit in, provided the product of the acquired company has synergy with existing product portfolio; where 'Cera' current sales network can be of support.   Yes, Morbi has been one of the most attractive target place many payers.

The company has recently entered into tiles business. What are the reasons behind company entering this business after so many years?
Some of the reasons are our strong brand image; wide spread distribution network across India as well as the product itself. Tiles have a synergy with our company's current product line. There will be more products for dealers and distributors to sell for Cera and increase their business interest; offering wider platform to earn. The other reasons include a correct strategy for product positioning vis a vis pricing structure; being able to offer large range of designs across floor and wall both in ceramic as well as vitrified range; mainly relying on outsourcing capabilities without any significant capex commitment.

How much revenue are you expecting from tiles business this year? Do you plan to manufacture tiles or outsource the same?
Cera is just a beginning to make inroads, there may not be any sizeable business during this FY 2012-13. However, eventually this product line is expected to contribute more than 10—15 per cent of the top line. The management hopes that next FY 2013-14 should witness a better contribution from this product line.

The company has set the target of Rs 500 crore revenue for 2012-13? Don't you think it is a bit ambitious target given the current market conditions?
All the targets have be essentially ambitious in a business situation. Historically, Q3 and Q4 has always remained very encouraging for the company. The company has already registered top line of over Rs 200 crore for the first six months. With this pace, company may surprise market 'pundits' with ambitious targets being turned into realities.

Is the industry facing tough times in the wake of sluggish real estate market? What has been the impact of subdued realty market on sanitaryware products?
We disagree with this. The company has registered a CAGR of over over 25 per cent during last five years where 'ups and down' in realty industry has been weathered out. Besides results of Q1 and Q2 evidently supports this contention. Albeit, any sluggishness in country’s economy, including realty market will definitely have its baring  and Cera cannot be an exception. What is more important in a situation like this is that whether company has inner strengths? The answers to this is in affirmative.