ANNUAL REPORT 1999-2000
SUN EARTH CERAMICS LIMITED
Your Directors are pleased to present the Twenty Second Annual Report on
the business operations of the Company together with the audited statements
of accounts for the year ended 30 June, 2000. The year 1999-2000 was yet
another year of good performance.
Dividend & Bonus Issue
Your Directors are pleased to recommend a final dividend of R 1.00 per
equity share. The total dividend for 1999- 200C was Rs 3.50 per equity
share, this includes an interim dividend of Rs 2.50 per equity share
(previous year Rs 3.50 per share). The consequent outflow including
preference dividend paid and dividend tax, is Rs 4.95 cr (previous year Rs
The Board has also recommended the issue of Bonus shares in the ratio of
1:1. The record date for the same will be announced in due course.
During the year under review, sales and non-manufacturing income registered
a sharp rise from Rs 117.07 cr to Rs 175.59 cr, a growth of almost 50
percent over the preceding year. Consequently, the gross profit improved
from Rs 35.86 cr to Rs 55.45 cr during the same period. Net profit was Rs
26.87 cr for 1999-2000 compared to Rs 14.80 cr in 1998-99.
Your Company performed well in a year that saw the revival of the ceramic
tile industry. It is well on its way to attaining the premier position
amongst the domestic players
Wall Tile Division
The wall tile division commissioned in 1995 at Alibaug, Maharashtra,
achieved a capacity utilization of 124 per cent, substantially higher than
the industry average. The Company became the first in India to launch the
'Lustre' series targeted at the premium segment. These tiles possess a
metallic effect with high gloss property.
Sun Elarth was also the first company in India to launch 'Perfect form'
tiles, a new concept popular in the developed markets of Western Europe and
USA. These tiles possess straight edges instead of the traditional rounded
ones, helping eliminate the problem of dust accumulation. The response to
both these tiles was encouraging.
The market for large wall tiles continued to grow. Your Company is well
positioned to cater to the incremental demand. With the release of 40 cm x
20 cm tile, Sun Earth is expected to capture a bigger share of this value-
added segment. Your Company built a-design laboratory at the cost of Rs 25
lacs to add better designs and colour combinations to its existing library.
Your Company continued to break new ground by providing excellent quality;
the number of 'First Quality' tiles reached above 90 per cent, another
industry landmark. Savana Ceramics Limited, a 100 per cent subsidiary of
the company with a plant at Bharuch, achieved a capacity utilization of 100
As a result of these pioneering and quality-driven initiatives, the market
share of 'Sonora' wall tiles reached 19 per cent within five years of
Floor Tile Division
The floor tile division was commissioned in May 1998 in a record time of 11
months at Karjat in Maharashtra. The capacity utilization of this plant
touched 100 per cent within the first year; currently the plant is
operating at a capacity utilisation of 119 per cent.
Third Fired Tile Division
A plant for third fired tiles exists at Bharuch. It has an installed
capacity to produce 800 sq. meters per day. Sun Earth is also in the
process of installing a plant for third fired tiles at Karjat. After the
commissioning of this plant, the total capacity of third fired tiles is
expected to reach 2800 sq. meters per day.
Vitrified Tile Division
Sun Earth is also in the process of launching vitrified tiles. Production
is expected to commence within the next three months at Bharuch and Karjat.
These tiles are expected to corner the existing market for granite and
imported tiles, estimated in excess of Rs 600 cr. Your Company intends to
become the largest domestic producer of these premium tiles by the end of
2000-1 with an installed capacity of 10,500 sq. meters per day. Vitrified
tiles are expected to contribute more than half of the Company's turnover
in the coming years.
A wider distribution network, a diverse product basket and increased
availability helped Sun Earth achieve national status and recognition. This
helped your Company increase its market share in wall tiles from 14 to 19
per cent in 1999-2000. The Company's share in the floor tile segment
reached 11 per cent in the year under review. The acquisition of Savana
Ceramics Ltd. helped your Company penetrate the northern and eastern
markets deeply. The dealer network crossed 400 and approximately 500 new
sub-dealers were introduced to make 'Sonora' and 'Savana' easily available
across the country.
Allotment of equity shares
The equity share capital increased from Rs 7.59 cr in 1998-99 to Rs 8.53 cr
in 1999-2000. Your company successfully placed 4,36,470 equity shares of Rs
10/- each, as per SEBI guidelines at a price of Rs 90 per share with C F,
Mauritius. Additionally, 10,63,530 equity shares of Rs 10 each were issued
to the promoters on a preferential basis at Rs 90/- each. The Company also
placed 1,72,222 equity shares with Gujarat Venture Fund at an issue price
of Rs 90 each (premium Rs 80).
As per the terms of allotment, 3,83,333 Optionally Fully Convertible
Debentures held by Nandi Investments Limited have been converted into equal
number of shares of Rs 10 each, at a premium of Rs 80 per share.
The presence of an overseas long-term investor in your Company indicates
the attractive potential of growth.
Your Company has just taken the first step in becoming a global layer. Sun
Earth is in the final stages of acquiring a plant each in Spain and
Romania. These plants will be acquired through a special purpose
acquisition vehicle for $ 5 mil ion; $ 1.25 million is expected to be
raised from internal accruals, the rest through loans. The production from
the two companies will be sold in the markets in Europe and the USA where
realizations range from $ 5 to $ 6 per sq. metre, resulting in a revenue of
around $ 50 to $ 55 million per annum.
Co-generation Power Plant
To help rationalize the fuel cost - the biggest item of expenditure,
accounting for 20 per cent of the total cost of production - your Company
is in the process of setting up co- generation power plants at each of its
manufacturing locations. The first will be set up at Karjat shortly and is
expected to bring about a reduction in the fuel cost by approximately Rs 6
cr. Your Company hopes to set up other plants by the end of the year.
Your Company registered a remarkable growth in revenues from the overseas
markets. Exports jumped to Rs 4.65 cr in 1999-2000 from Rs 87 lacs in 1998-
99. Exports for the coming year are expected to be around Rs 15 cr from the
markets in West Europe, the Gulf countries and Asia Pacific. Your Company's
products are world class and sell at a premium when compared with other
Indian ceramic tile manufacturers.
Your company has embarked on a capital expansion programme of around Rs 105
cr, which will be funded from internal accruals and debt. The expansion
will result in new lines for third fired and vitrified tiles at Karjat and
Bharuch. The lines are expected to be completed during the financial year
The statement required under section 212 of the Companies Act, 1956, in
respect of subsidiary company is appended herewith.
The outlook for the current financial year appears to be promising for the
industry and Sun Earth. Industrial growth in 1999-2000, measured by the
Index of Industrial Production (IIP), was a robust eight per cent compared
to 3.9 per cent in the previous year; this growth is expected to sustain in
2000-1. Early indications in April and May 2000 point to buoyant production
in sectors such as sugar, steel and motorcycles. With infrastructure
getting top billing and given the shortage in dwelling houses, the housing
industry looks set to post attractive growth.
Your Company is attractively positioned to draw on this evolving market
place reality. Your Company has set up plants at low cost, possesses
attractive economies of scale, has proximity to raw material sources, has
low fuel costs and depreciated plants that are expected to enable it to
capitalise on the increase in demand.
Your Company's marketing focus will increasingly shift from the
institutional towards the retail. The ability of the ceramic tiles industry
to generate significant demand growth by influencing a shift from mosaic
tiles to ceramic tiles (thereby countering the over capacity situation to
an extent) will play an important role in improving the topline for most
companies in the sector.
Sun Earth will leverage its quality, designs and distribution to deepen its
penetration in the domestic market. The strengthening of the brand is
expected to help in improving margins and fetching higher than average
Mr. Suresh G. Motwani has resigned as Managing Director during the year,
since he will be mainly involved in managing the operations of the overseas
companies to be acquired by Sun Earth. Mr. Vinod G. Motwani was appointed
as the Managing Director of the Company with effect from 1 June, 2000. He
will be designated as the Vice Chairman and Managing Director of the
Mr. . M. Trivedi was appointed as Additional Director of the Company during
the year and his term expires at the ensuing Annual General Meeting. The
Company has received notice under Section 257 of the Companies Act, 1956
from a member proposing his candidature for the office of Director liable
to retire by rotation. Accordingly your Directors recommend approval of the
Mr. Ashok Kamble has been appointed as Nominee Director of IDBI on the
Board of Company.
Mr. Pramod Kumar Bhuchar, Mr. G. Philip Stephenson, Mr. Ashok Paranjpe
retire by rotation at the ensuing Annual General Meeting and being eligible
offer themselves for re-appointment.
The Board wishes to place on record its appreciation of the contribution
made by all employees in ensuring good operational performance and growth
that your Company has achieved during the year. During the year, the
industrial relations with the employees were cordial. Information as per
Section 217 (2A) of the Companies Act, 1956 read with the Companies
(Particulars of Employees ) Rules, 1975 (as amended) forms part of the
report and is annexed herewith as Annexure 1.
Energy Conservation, Technology Absorption and Foreign Exchange Earning &
Additional Information on conservation of Energy, Technology Absorptions,
Foreign Earnings and Outgo as required to be disclosed in accordance with
the Companies (Disclosure of Particulars in the report of Board of
Directors) Rules, 1988 is annexed to the Directors' Report as Annexure ll.
The Auditors, M/s. K. P. Kapadia & Co. Chartered Accountants, retire at the
conclusion of this Annual General Meeting. They have signified their
willingness to accept re-appointment and have further confirmed their
eligibility under Section 224 of the Companies Act, 1956.
The Board wishes to place on record its appreciation of the hard work and
dedication of employees at all levels. Industrial relations in all the
units of the Company continued to be cordial during the year under review.
Your Directors also convey their grateful thanks to the Financial
Institutions, Bankers and Shareholders for their continued co-operation and
For and on behalf of the Board
Place : Mumbai Suresh G. Motwani
Date : 30 October, 2000. Chairman
ANNEXURE -II TO THE DIRECTORS' REPORT
CONSERVATION OF ENERGY
FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION:
* Specific areas in which R & D carried out by the Company.
- Development of Ceramic Tiles of new designs, textures and colours.
- Development of alternative raw materials.
* Benefits derived as a result of the above R & D.
- Improvement in quality of Tiles.
- Reduction in Cost.
* Future plan of Action.
Continuous efforts are being made in the above areas along with efforts to
improve the quality while reducing costs.
* Expenditure on R & D.
Rs. in lacs
Particulars 1998-99 1999-2000
a) Capital -- --
b) Raw Materials 19.05 24.05
Total 19.05 24.05
Total R & D Expenditure as a 0.17% 0.13%
percentage of total turnover
(Ceramic division only)
FOREIGN EXCHANGE EARNINGS AND OUTGO
CIF value of goods 1998-99 1999-2000
i) Capital Goods 32,31,002 6,30,23,257
ii) Materials 3,63,89,021 2,12,89,152
iii) Spares 80,75,092 90,21,418
iv) Others 13,66,873 0
Total 4,90,61,988 9,33,33,827
Expenditure incurred in Foreign Currency:
(On Payment basis)
i) Technical Know-how -- 60,800
ii) Travel 2,16,555 6,97,116
iii) Dividend- -- 88,29,669
Total 2,16,555 95.87.585
Earning in Foreign Currency,
FOB Value of Exports:
Export Turnover 86,65,061 4,64,65,391
For and on behalf of the Board
Suresh G Motwani
Mumbai, 30 October,2000 Chairman