within a compressed period of time. The words were responsible for Somany Ceramicsarriving at a watershed in its existence and embarking on its largest expansion. They wereresponsible for optimism that the organised TIndian ceramic tiles sector is headed for amulti-year hese words were responsible for disproportionate growthgrowthopportunity.
The first structural shift I would like to talk about is the sharp growth in theIndian economy following the unprecedented lockdown in the first quarter. The Indianeconomy reported the sharpest growth across any major economy following the first quarter.The economy turned positive in view of the possibility that three down cycles long-term medium-term and short-term were reversing at the same time. Thelong-term downtrend as a result of non-performing assets scams and overcapacityappeared to have run its course; the medium-term downtrend that was caused by the ILFScrisis select banks collapse and weakening NBFCs also appeared to have ended; theshort-term downtrend on account of the pandemic weakened after the first quarter. Theresult was an unprecedented economic recovery despite the fact that the country continuedto suffer through the pandemic. Even as the country was affected by the second pandemicsurge from March 2021 onwards there was a robust optimism that the rebound in theeconomy barring minor interruptions was there to stay and that India had entered amulti-year economic recovery.
The second structural shift transpired during the challenging days of the lockdown.As working professionals found it impossible to operate from their formal workplaces theywere compelled to work from home. This handicap turned into an opportunity; as soon asindividuals and their employers realised that working from home enhanced productivityeliminated commuting costs / time and probably presented a better way of working therewas a greater willingness to consider this as a long-term possibility. A number of largecompanies (especially from the space-intensive IT sector) announced a long-term directionto have a sizeable proportion of their employees work from home to enhance their personalsafety and reduce their costs.
The third structural shift was the recovery of Indias real estate sector.Indias real estate sector passed through nearly seven years of an extendeddowntrend marked by a plateauing of real estate prices and offtake. When realty pricesturned sluggish serious buyers stayed away on the grounds that perhaps prices woulddecline and they would be able to buy homes at a lower cost. By the third quarter of theyear under review it was becoming evident that this multi-year sluggishness was probablyover.
The improvement in the health of the real estate sector was the result of variousconcurrent realities: rising disposable incomes decline in interest rates to probably thelowest in India for a long time rising pent-up demand that had remained bottled for yearsand the most affordable price-value proposition in around two decades. By the thirdquarter it was evident that a decisive shift in market sentiment had commenced and thetime had arrived for the consumer to go out and buy homes (the sentiment catalysed by thedecision of the Maharashtra government to reduce stamp duty and construction premiums).
The fourth structural shift is likely to happen within the countrys tilessector. As the strong get stronger (as I believe companies like Somany Ceramics will)there could be a sectorial churn and consolidation through the mergers and acquisitions ofbrands capacities and companies.
The fifth structural shift represented the positive outcome of a formalisationpresently sweeping Indias industry. Following demonetisation and GST introductionthere was a perception that with the cost difference narrowing between organised andunorganised players there would be a demand shift for products away from the unorganisedto organised players. This did not happen for a number of months; a large part of thetrade system within Indias ceramic tile sector bought from unorganised players oncash and worked outside the tax network. Then came the pandemic when the unorganisedplayers were extensively affected for various reasons: their labourers returned to theirstates of origin they could not access unorganised or organised sources of finance; theycould not supply to their trade partners. Besides when the unorganised players werefinally able to resume operations the export market became attractive and these playersdiverted a large part of their output to the international market.
The ceramic tiles dealer was the most affected by this turn of events. The dealerencountered an unprecedented market demand with a decline in the availability of materialfrom unorganised manufacturers resulting in a notional loss of revenues and profits. Onthe other hand the dealers who worked consistently with organised and branded players didnot just do more business; they were able to carve away a market share at the expenses oftheir competitors who had depended disproportionately on unorganised manufacturers.
In the space of a few months the structural shift from unorganised to organisedintermediates (and manufacturers) became visible: a larger number of trade partners beganto engage with organised brands like Somany: for an ethical approach engagementstability brand visibility consumer pull pride of association access to trade schemesand incentives and a digitalised engagement that enhanced operational trust andtransparency. The dealer may have now been trading marginally higher but was enjoying astability in volumes margins and business predictability.
The sixth structural shift came with our decision to embark on the journey ofsustainability and reciprocate the trust our stakeholders have put in us. We arepresenting sustainability disclosures as a part of this report which will showcase ourefforts towards responsible growth. Going ahead we will remain committed to fulfillingour stakeholder expectations enhance our health and safety performance and report apositive impact on the environment and society.
The coming together of these structural shifts resulted in a creditable year for ourCompany. Revenues were H164371 Lakhs in 2020-21 compared with H160023 Lakhs in 2019-20;cash profit wasH 11844 Lakhs compared with H6146
Lakhs in the previous year; profit after tax was H5770 Lakhs in 2020-20 compared withH1500 Lakhs in the earlier year. Considering that the first quarter of the year underreview was virtually lost to us we believe that our performance in the subsequent threequarters represented more than just a rebound: the performance represented a watershed inour existence.
The convergence of the structural realities provides me with the optimism that thisoutperformance represents the start of a new journey. This journey will be marked bylarger capacity investments quicker revenues growth higher margins better return onemployed capital and superior value in the hands of our stakeholders.