EXECUTIVE SUMMARY

Today, cera sanitaryware ltd is considered as one of the pioneers in

the sanitaryware segment in India. It is now the third largest

company in the organized sector with over 20% market share.

Incidentally, it is also the largest and only listed company in pure

sanitaryware space.

To maintain the edge in the market, cera keeps upgrading and

increasing its product portfolio regularly. Moreover, it enjoys a

strong distribution network of 500 dealers and 5000 retailers.

CERA has production capacity 1.3mn pieces but they are

upgrading it to 2.2 mn pieces.

It is never easy to reach top position and it’s more difficult to

maintain or improve on that position. You need to constantly

innovate and add value. CERA is doing that by realizing that it is

available up to the premium segment and thus they felt to have

their presence in luxury segment too. To achieve this CERA has

tied-up with Pozzi –Ginori, an Italian designer Sanitaryware which

is part of Sanitec Group, the European Sanitaryware Leader.

In fact, sanitation is major issue in our country. And it would not

be wrong to say that sanitaryware industry is in a way of

promoting proper sanitation. Government is treating sanitaryware

1

as a luxury product. Our stand has been that basic sanitaryware is

not a luxury product, but a utility product for the common man.

Even after 60 years of independence, there is almost 40% of

population, which is in need of access to proper sanitation

facilities. The government policy of not treating sanitaryware as a

luxury product by reducing excise duty can go a long way in

promoting sanitation. A lot of diseases are spread due to improper

sanitation. Thus. Proper sanitation in turn can help government

save on its health related spends.

The Company's principal activities are to manufacture and sell

sanitaryware and glazed tiles. The Company product includes

ceramic sinks, wash basins, wash basin pedestals, baths, bidets,

water closet pans, flushing cisterns, urinals and similar sanitary

fixtures.

The growth of Ceramic/Sanitaryware industry entirely depends on

allied sectors like housing/real estate, Government quadrilateral

projects, N-E-W-S-Corridor all performing well ahead and is

expected to post a healthy growth in 2004-05. The restoration of

natural gas and recent new gas finds would also bring cheer to the

industry players and R-LNG would play a vital role in reducing the

fuel cost.

2

China has the world’s biggest bathroom equipment and taps and

mixers market by volume followed by the US with Brazil in third.

One surprising feature about the world market is that despite India

having a population of over 1 billion people it actually has the

smallest baths market of the 22 countries covered with just under

16,000 units sold in 2002.

Here the study is made of the financial Analysis, the marketing

management how the marketing is done in order to achieve the

organizational goals and objectives, the study is done on

recruitment procedure followed by the CERA and how they

maintain them. This report describes about the types of services

provided by the CERA and their benefit on the part of the CERA

which type of additional benefits they provides to their customers

in order to maintain them and attract them to invest more and more

with Cera. In this report it is described about the CERA as whole

and is analysis is done according to its information collected like

Porter Analysis, PEST Analysis, SWOT Analysis and GE Models,

which helps in formulation of strategies of the company.

3

SECTION B

RESEARCH METHODOLOGY

OBJECTIVES AND SCOPE OF THE PROJECT:

As we know in the Indian Economy the ceramics industry is one of

the fastest growing industries and the growth in highly due to

sanitary segment, whose prospect is reflective of the economic

resilience.

The Major Objectives of the Study:

1. To understand the basic functional areas and their respective

functions.

2. To evaluate the company’s performance in overall industry

growth.

3. To measure individual functional areas in the company’s

performance.

4. to know the effect of various political, social, economical and

technological factors

4

Sources of data:

Data collected for study was primary as well as secondary data.

Research instrument:

Research tools were in depth interview of company employee.

Sample unit:

Data collection from various departmental heads including

manager and executive.

Sampling procedure:

Non probability judgment sample was selected for accurate

information.

Contact method:

Here we have conducted personal interview for data collection.

5

HISTORY OF SANITARYWARE:

Unlike body functions like dance, drama and songs, defecation is

considered very lowly. As a result very few scholars documented

precisely the toilet habits of our predecessors. The Nobel Prize

winner for Medicine (1913) Charles Richet attributes this silence

to the disgust that arises from noxiousness and lack of usefulness

of human waste. Others point out that as sex organs are the same or

nearer to the organs of defecation, these who dared to write on

toilet habits were dubbed either as erotic or as vulgar and, thus,

despised in academic and social circles. It was true for example of

Urdu poets in India, English poets in Britain and French poets in

France. However, as the need to defecate is irrepressible, so were

some writers who despite social as well as academic stigma wrote

on the subject and gave us at least an idea in regard to toilet habits

of human beings. Based on this rudimentary information, one can

say that development in civilization and sanitation have been

coterminous. The more developed was the society, the more

sanitized it became and vice versa.

Toilet is part of history of human hygiene which is a critical

chapter in the history of human civilization and which cannot be

isolated to be accorded unimportant position in history. Toilet is a

6

critical link between order and disorder and between good and bad

environment.

In our own country i.e. India, how can any one ignore the subject

of toilet when the society is faced with human excretions of the

order of 900 million liters of urine and 135 million kilograms of

faucal matter per day with totally inadequate system of its

collection and disposal. The society, thus, has a constant threat of

health hazards and epidemics. As many as 600 out of 900 million

people do open defecation. Sewerage facilities are available to no

more than 30 per cent of population in urban areas and only 3 per

cent of rural population has access to pour flush latrines.

Seeing this challenge, we think the subject of toilet is as important

if not more as other social challenges like literacy, poverty,

education and employment. Rather subject of toilet is more

important because lack of excremental hygiene is a national health

hazard while in other problems the implications are relatively

closer to only those who suffer from unemployment, illiteracy and

poverty. Thus the study of the history of toilet is an important

subject matter.

As long as man did not have an established abode, he did not have

a toilet. He excreted wherever he felt like doing so . When he

learnt to have a fixed house, he moved toilet to courtyard and then

7

within his home. Once this was done, it became a challenge to deal

with smell and the need was felt to have a toilet which can intake

human wastes and dispose these out of the house instantly and,

thus, help maintain cleanliness. Man tried various ways to do so

i.e. chamber pots, which were cleaned manually by the servants or

slaves, toilets protruding out of the top floor of the house or the

castle and disposal of wastes in the river below, or common toilets

with holes on the top and flowing river or stream underneath or

just enter the river or stream and dispose of the waste of the human

body. While the rich used luxurious toilet chairs or cross stools, the

poor defecated on the roads, in the jungle or straight into the river.

It was only in the 16th century that a technology breakthrough

came about and which helped the human beings to have clean

toilets in houses. This breakthrough did not come about easily and

human race had to live in sanitary conditions for thousands of

years.

8

INDIAN CERAMIC INDUSTRY: A FUTURISTIC VIEW

Ceramic industry is generally classified into the following major

groups: 

a. Ceramic sanitaryware

b. Ceramic tiles for wall, floor and facing

c. Ceramic insulators

d. Refractory, common bricks and clay pipes;

e. Ceramic table ware

f. Glass-ware;

g. Cement, lime, dolomite and gypsum products;

h. Abrasives.

Indian Ceramic Industry can emerge as a major

manufacturer/supplier in the global market. It has an annual output

of 8.5 lakh metric tons. Advanced Ceramics manufacture has also

been embarked upon. Progress in the White ware Ceramics market

has been impressive, with the induction of advanced technology.

However, the Tableware sector has lagged. The Sanitaryware,

Tiles and Insulators sectors have successfully negotiated the

transition from sheltered to global economy and has accounted for

US$ 47.39 million positive export import balance in the year 1996-

97. The fast globalization process will no longer protect the Indian

industry and the unorganized small-scale sectors need to gear up

9

for the changes. There exist many constraints including high fuel

costs.

Exports have steadily increased over the years but the present

sluggishness in the market and the recent currency crisis may

induce a marginal decline. Porcelain Electrical Insulators have

maintained a rising growth curve from the beginning and have

played a major role in the export turnover. Bulk of the exports is

being absorbed in Asia and Africa, with increasing acceptance in

the industrialized West. Insulators are in great demand in Asia,

Africa and West Europe. Tiles and Sanitarywares are being

exported to Asia, Africa and USA. Pottery wares find a market

mostly in America and Europe. The global demand of ceramic is

chiefly in Tiles, followed by Tableware, Art ware, ceramic

products, Sanitaryware, Insulators and technical ceramics. There

has been steady shift of industry and technology from the

10

developed to the developing world. India, being a slow starter is

presently ranked seventh in terms of exports. China has emerged as

a market leader in the ceramics field. India is expected to profit

from the shift of production base.

Despite substantial increase in exports, India continues to enjoy

negligible market presence. In view of the recent progress, Indian

exports are projected to rise by 2000-01. The Tile industry is

expected to double with the support of technological inputs.

Sanitaryware, with lesser production charges, is growing at an

average of 10% p.a. Insulator Industry having met expected quality

standards is also projected to make considerable progress. Pottery

ware and Art ware can make substantial progress with the

induction of advanced technology.

The Indian Ceramic Industry faces unprecedented opportunities.

These must be translated into achievements to make India a major

ceramic industry center.

11

Ceramic Industry

 Ceramic Industry in India is about 100 years old. It comprises

ceramic tiles, sanitaryware and crockery items. Ceramic products

are manufactured both in the large and small-scale sector with

wide variation in type, size, quality and standard. India ranks 7th in

the world in term of production of ceramic tiles and produced 200

million sq. meters of ceramic tiles, out of a global production of

6400 million sq. meters during 2003-04. State-of-the-art ceramic

goods are being manufactured in the country and the technology

adopted by the Indian ceramic Industry is of international standard.

 

Capacity and Production

 There are, at present, 16 units in the organized sector with an

installed capacity of 21 lakh MT. It accounts for about 2.5% of

world ceramic tile production Ceramic tiles industry has been

growing at about 12% per annum. In India, per capita consumption

of ceramic tile is 0.15 sq. meter. Per annum compared with 2 sq.

meters Per annum in China and 5-6 sq. meter. Per annum in

European countries. With the growth in the housing sector the

demand of ceramic is expected to increase. Indian tiles are

competitive in the international market. These are exported to East

and West Asian countries. The exports during 2003-04 were about

Rs. 180 crore.

12

 Sanitaryware is manufactured both in the large and small sector

with variations in type, range, quality and standard. At present

there are 7 units with capacity of 86,500 tonne per annum and,

there are about 200 plants with a capacity of 50,000 tonne per

annum in small scale sector. The industry has a turn over of Rs.

400-500 crore. This industry has been growing at the rate of about

5% per annum during the last 2 years. There is significant export

potential for sanitaryware. These are presently being exported to

East and West Asia, Africa, Europe and Canada. The exports were

of the order of Rs.60 crore during 2003-04.

13

SANITARYWARE INDUSTRY IN INDIA:

India is a large, highly populated Country of around one billion

people, with an economy, which is steadily growing. As per the

study, there were an estimated 125 million dwellings in India

(1995), but 200 million households. This reveals an acute housing

shortage. The U.N. predicts an increase in the population of 1.6%

per annum. There is a gradual migrant shift from rural to urban

areas and 27% of the population now lives in urban areas as

compared to 20% in 1971. There is a large difference in amenities

between the urban population and the rural. In 1994, 70% of the

urban population had access to adequate sanitation, whereas in the

rural community only 14% had access.

In 1991, approximately 64% of urban households had some kind of

toilet facility compared with 9% of the rural areas. There is a

widening difference in income between different regions, the rich

and the poor.

Sanitation is a must for every individual of our society. According to the Government

estimates, more than 50% of the urban population does not access to sanitation facilities.

Condition of the rural areas abysmal that only 6% of the populations are covered by

sanitation.

Population Covered by Sanitation Facilities

14

1985 1990 1997

Rural 0.7 2.4 6.4

Urban 28.4 45.9 49.3

Sanitaryware demand:

Sanitaryware Industries in India for the last 6-7 years has shown

very dramatic growth with major players doubling their production

capacity. The Companies have also upgraded their manufacturing

system by introducing Battery Casting, Beam Casting and have

gone in for latest imported Fast Firing Cycle Kiln Technology.

These Companies have also upgraded their quality and have

introduced high value range in the market, which has been

accepted and appreciated. The demand for high value sanitaryware

in India is growing very fast. The Companies are trying to meet the

demand as the realization per Metric Ton for high value product is

very good which ultimately results in good profitability. In order to

educate the customers in India to go for quality products and also

for higher value sanitarywares, companies have adopted a very

aggressive advertisement campaign. Companies have also

strengthened their dealer network by offering showroom incentives

15

and some of the companies have also gone for their own retail

outlets in major towns. The demand for sanitarywares in India is

growing @ 15% -17% every year.

The sanitaryware industry in India is divided in two sectors. The

organized sector consisting of 5 companies (M/s. Hindustan

Sanitary Industries Limited, M/s. E.I.D. Parry, M/s. Swastik

Sanitarywares Limited, M/s. Madhusudan Ceramics, M/s. Neycer

India Limited), manufacturing sanitaryware for the last 15-20 years

and have established their Brand image. The organized sectors

produce fully vitrified sanitarywares, using latest technology and

best of Ceramic Raw Materials available in India. The unorganized

sectors have adopted local Indian technology to manufacture the

basic sanitaryware products. Since the availability of raw material

is in abundance and also very cheap in the state of Gujarat &

Rajasthan, various companies have established their factory in

these areas. They are producing the basic sanitaryware in various

brands. Unorganized sector's percentage of production capacity

and also their sales in the local domestic market are higher than

that of the organized sectors' sales. Unorganized sanitaryware

manufacturer comes under small sectors and hence enjoy the

benefit of Nil Excise Duty and Sales Tax and hence they sell their

products in the domestic market approximately 70% cheaper than

the organized sector products.

16

Government of India Policy on Housing Sector is very

encouraging. The Government has announced Income Tax rebate

on housing loan to boost the housing sector. All financial

institutions are lending money for construction of house at a very

low rate of interest. Government figure shows that Housing Sector

is growing by approximately 25% every year. The need of Housing

in India with 100 crores population looks to be very potential. As

per DGTD Survey Report there is a shortage of about 20 million

houses in the country by the end of 8th Five Year Plan. The

housing has become a basic necessity, as people in India are

looking forward for improved sanitary condition. The concept of

making toilet is fast growing even in village areas, where toilet till

last two years did not exist.

The cost of producing sanitaryware in India is substantially low as

compared to the advance countries, because the labour cost and the

basic raw materials for manufacturing quality sanitarywares is

available at very cheap rate and in abundance. Because of our low

cost of production, Indian sanitarywares are very competitive in

the neighboring countries and hence export from India is also

growing everyday.

17

Demand Estimates:

The total demand for sanitaryware in India for the organized

manufacturers is at present approximately 80,000 M.T. per annum.

The region wise demand pattern can be estimated as follows:

NORTH SOUTH EAST WEST TOTAL

18,000 32,000 15,000 15,000 80,000

Note: Every year the above demand is expected to grow by 15 to

17%.

Current Market Size:

The Indian Sanitaryware market is worth around 500 crores for the

year 2001-02 with an annual market size of around 8 million

pieces. This represents a yearly growth rate of about 3-4%.

Major players:

Until the mid 1940s the only sanitaryware available in India was

imported mainly from UK and was used only in upper class

residences in major cities. The first Sanitaryware manufactured in

India was by M/s. Parasuram Pottery Works. In the 1960s,

companies like EID Parry, in collaboration with Royal Doulton of

UK and Hindustan Sanitaryware in collaboration with Twyford of

18

UK, started production of Vitreous China Sanitaryware. Other

major players who joined the organized sector were Madhusudan

Ceramics and Neyveli Ceramics. In the 1980s, 7-8 other players

had entered the organized sector, but most of them have since been

taken over by the majors.

The large foreign players like American Standard, Toto, Villeroy

and Boch have also set up distribution channels in India.

In addition to the branded products made by the above companies,

there are a large number of small-scale units mainly in Thangad

and Morbi districts of Gujarat.

Concerns:

It has been observed that many sanitaryware manufacturers in the

small-scale sector do not manufacture ceramic sanitaryware to

standard quality norms. Moreover some of these manufacturers use

the word "Vitreous" along with their brand name whereas they do

not meet the water absorption standards and thereby are misleading

the consumers.

19

SANITARYWARE INDUSTRY STATISTICS :

1.World production:  187 Million

pieces

2.India's Share: 6.7 Million

Pieces.

3.World ranking (in production): Not in the Top

10 (India A/c for

3.30%)

4.Global Industry Growth Rate: 5-7%

5.Growth Rate (India Domestic Market): 10%

6.Organized sector:

    % Share of

Production:

43%

No. of units: 6

    Production Capacity: 103300 M.T. per

annum

    Actual Production: 95000 M.T. per

annum

7.Unorganized sector:

    % Share of

Production:

57%

20

    Production Capacity: 136700 M.T. per

annum

    Actual Production: 120000 M.T. per

annum

21

INTRODUCTION TO CERA SANITARYWARE LTD

Cera Sanitaryware Limited (CSL) is one of the pioneers in the

sanitaryware segment in India. CSL was founded in the year 1980

as a division of Madhusudan Industries Limited. Realizing the

future growth prospects of this division, in the year 2001,

management thought it worthwhile to have independent identity by

de-merging and transferring the entire business to a new company.

The new company was named Cera Sanitaryware Limited It is now

the third largest company in the organized sector with over 20%

market share. It is also the largest and only listed company in pure

sanitaryware space. CSL is the first sanitaryware company to use

natural gas and the first Indian sanitaryware company to have ISO

9002 and ISO 14001 certifications for its products.

Launched in 1980, Cera is a pioneer in the sanitaryware segment in

India. The first sanitaryware company to use natural gas, Cera has

been on the forefront of launching a versatile colour range and

introducing the bath suite concept. It also launched innovative

designs and water-saving products. The twin-flush model launched

in India by Cera for the first time, reduces the water needs of

households considerably. WCs designed to flush in just 4 liters of

water is another notable innovation by Cera.

22

Based in Kadi, Gujarat, Cera Sanitaryware Ltd. uses German

technology, which has ensured CERA’s superiority over others in

quality. Established with an initial capacity of 3,600 MTPA, the

plant has undergone several periodical up gradations and

modernizations to expand to 15,000 MTPA.

To achieve growth in the rapidly changing retail market in the

country, Cera, has launched its one of a kind Cera Bath Studios in

Ahmedabad, Bangalore, Chandigarh, Kolkata, Cochin and

Hyderabad. With the opening of the Cera Bath Studios, the

discerning consumers architects and interior designers can have

full view of the CERA’s premium ranges of WC’s, Wash Basins,

Shower Panels, Shower Cubicles, Bath Tubs, Shower Temples,

Whirlpools, CP fittings etc. Cera Bath Studios will complement its

existing network of 400 distributors and 4000 retailers. Several

Bathrooms are displayed live, so that the customers can get a feel

of CERA’s vast range of products.

Soon, Cera will also launch premium Spanish Tiles in Indian

market. The company is poised to become a total bathroom

solutions provider.

Having shown a growth rate of more than 20% since last 3 years,

Cera Sanitaryware Ltd. today is the fastest growing sanitaryware

company in India.

23

PRODUCT DETAILS AND CONCEPT

Product of the company as is defined in company’s introductory

chapter is an sanitaryware product having mainly extraordinary

features like twin flush water saving product, soft close seat cover,

shower temple product. This product talk about giving an spa foot

massage and inbuilt Jacuzzi unit which give experience artificial

water waves and facility like radio and telecalling with six body jet

spray.

Wider product range:

Capitalizing on a strong brand image and an evolving market for

Sanitaryware products likes orissa Pan, EWC (European Water

Close), Wash Basin Apart from this CSL has expanded its product

range to other related Bathroom products like shower panels,

shower cubicles, shower temples, bath tubes, whirlpools, bath

fittings, glass bowls, sensor for Tap and Urinal, glass basin,

PVC seat covers and PVC cisterns, which makes it a total

bathroom solutions provider.

24

SECTION C

MANUFACTURING PROCESS DEPARTMENT

Manufacturing Process Layout

Casting

Green House

Kerosine

Inspection

Raw Material

Slip House(Slip)

Mill House(Glaze)

25

Glaze

Placing

Kiln

Sorting

Ware House

Dispatched

Raw Material which is use in this ceramic product is basically

Clay: Ivory color which has good strength and excellent drying

26

capacity other than this Than Clay, Bikaner clay, Felspar,

Quartz which is approved after R & D Testing then shifts for next

process.

In slip Plastic Clay constitute 52%, silica 12 to 14 % and feldspar

30 to 40 % while for glaze it is mixture of feldspar, Quartz, calcite,

china clay, Tulk, Zinc oxide, Barium Carbonate , Zirconium

Silicate which is imported from African country

Then in casting Department slip is poured in mould of required

design. Here mainly three types of casting carried out: Beam

Casting is semi manual casting, Bench casting manual casting,

Battery casting is automatic casting. Depend up on production

requirement they use this casting alternatively

After casting piece is go to green house department where if any

crack it will be automatically filled up. Pin hall plaster through

water base Glaze. Then it is process through kerosene dept. where

unforeseen crack is repaired. Then piece go to the inspection

department which fully inspect the piece thoroughly. After Glaze

dept. do the Glaze of piece. Then it is moved towards placing dept

and then Kiln dept. is heating the piece up to 1200 c by automatic

27

Kiln. Then piece are sorted and if crack is seen then it is piture and

if small crack is there then it is Re-Kiln by repairing crack.

When piece get ready it store in to the Warehouse by Gasket

Packing. And as per order of Marketing Department it gets

dispatch to Client Premises.

Thus production process carried out from raw Material to Finished

Product. Stringent Quality control followed by CERA. It is first

one to use Natural Gas in Its Production Process.

28

HR PRACTICES

Here we have included some of the HR practices followed by cera

sanitaryware. Purpose is to study what kind of HR Procedures

being followed and what are the details of the same etc.

Recruitment:

The recruitment is done mostly through advertisement in

newspaper, internet portals or campus recruitment. This

recruitment is done on the basis of manpower requirement from

various department of the company. If the candidate has qualified

for the next round, then higher authority takes an interview of the

concerned department in which position has been vacant and then

if is being selected, then they get the offer from the company side

and the candidate has to reply within 2 days.

Selection:

Selections of the candidates are based on the interview

performance of the candidate and his/her educational qualification,

additional qualification, speaking & Convincing ability of the

candidate (for Sales Personnel) and relevant experience. While

29

comparing with the recruitment at higher post, they are selected on

the basis of interview performance and on the basis of their ability

to handle people and handle tricky situations and ability to lead

people are also analyzed.

Letter of intent is given to the selected candidate an official

offering and then offer letter will be given after approval of joint

director.

Training and Development:

Training to the selected personnel in the sales is given one week

training programme at manufacturing plant based at KADI and for

the development of the candidate additional training will be

provided.

Compensation:

Salary:

Compensation type in cera sanitaryware is the salary. It gives

compensation to their employees on fixed salary basis. The sales

Personnel are been provide a salary slip and their salary is been

credited to their salary accounts with HDFC Bank. Higher

authorities are also been compensated with salary.

30

Allowances:

The company is providing allowances to the employees like

conveyance allowance, traveling allowance, mobile allowance, etc.

For instance, the sales personnel get their petrol allowance on

producing the voucher of the amount expensed by them. Also the

higher-level people also get the allowances by the way of

preparing the voucher.

Incentives:

Incentives are also provided to the sales personnel as well as Team

Leaders and Branch Heads. Sales Personnel get the incentive on

achievement of the target given to them. The company pays

overtime incentives to their employees.

Promotions:

Promotions are based on the performance only and on the basis of

appraisal feedback. If any higher position is being vacant then

suitable candidate from the company is considered first. By this

he/she gets promoted.

Thus, Performance is the only criteria for the employees to be

promoted.

31

Separations:

Separations of the employee are also based on the performance. If

suppose a sales person has been a non-performer for some months,

then is being separated from the cera sanitaryware. Same applies to

higher authorities also. This can be done by employer with the

prior notice of 15 days to the employee. On the other hand, if

employee wants to be separated form the organization, he/she

should give 15 days prior notice to the employer.

Most probable reasons of the employer to separate the employees

form the organization includes following:

Any act of dishonesty done by employee.

Disobedience of any orders given by higher authorities.

Diluting brand image of the company.

Irregularity in Attendance by the employee.

Misconduct or neglect of duty in any cases.

Incompetence in the discharge of duty on employees’ part.

Being held guilty by a competent court of any offence

involving moral turpitude.

32

MARKETING ASPECTS

Here we have analyzed various marketing aspects of cera

sanitaryware undertaken for the marketing mix of the company.

Various marketing mix of cera sanitaryware are as follows:

Product:

Product of the company as is defined in company’s introductory

chapter is an sanitaryware product having mainly extraordinary

features like twin flush water saving product, soft close seat cover,

shower temple product. This product talk about giving an spa foot

massage and inbuilt Jacuzzi unit which give experience artificial

water waves and facility like radio and telecalling with six body jet

spray.

Price:

Prices of the product and services offered are competitive

compared to our competitors products and also provide value for

money to the customers. Because as we talked in the earlier

paragraph that features provided in the products are very unique

33

and are having low cost so finally company becomes best cost

provider in the market.

Place:

As cera sanitaryware is having excellent distribution channel

empowered by 500 dealer’s network and 5000 retailers all across

India. To supplement the distribution network, it has 10 major

depots across India. It has 7 zonal sales & service offices,

supported by another 28 sales offices, 7 bath studios strategically

located in major cities across India. To capitalize on the growth

market for premium products, Cera has entered into an exclusive

marketing agreement with Italy's luxury brand Pozzi-Ginori to

market its designer sanitaryware in India.

Promotion:

Cera sanitaryware ltd has always been proactive in promotional

activities for increasing the brand awareness among the consumer

so the company has promotional scheme directed towards

consumer as well as its partner (dealer).

Consumer oriented: few months ago, the company had

launch (special offer) the promotional scheme applicable

only in Delhi, Clair set in Rs. 3999/- for only one month.

34

Partner oriented: gold scheme, silver scheme and foreign

travel scheme.

People:

As company is in service industry it needs to have strong

additional 3 Ps of the marketing mix starting from people. In

ceramic industry as goods are produced and prompt service is

given to the people i.e. employees need to be highly trained and

qualified. So requires good qualified and expertise employees to

this competitive industry.

Cera sanitaryware has achieved a good sense of the same by

employing highly qualified employees like M.B.A. and other

Marketing specialized.

Physical Evidence:

Cera sanitaryware is providing catalogs to their customers as a

physical evidence of purchasing the product. If customer wants to

see the physical product then company has its own display center

“cera bath studio” in metro cities of India.

Process:

35

This last step of marketing mix of cera sanitaryware includes

following points to be done for making the product available to the

customers:

Data regarding details of prospect customers are first being

collected by sales personnel.

These personnel then make calling and getting appointments

from prospects to explain product and services.

Next step includes meeting and explaining product and

services.

Then all the documents required for dispatching the product

to client premises are collected by the sales personnel.

These all documents are then submitted to Head Office at

Ahmedabad.

Then order is processed and cheque is collected and thus

order of the goods gets dispatched.

36

FINANCIAL ANALYSIS

Profit and loss account

  Mar ' 07 

Mar ' 06 

Mar ' 05 

Mar ' 04 

Mar ' 03 

Income :          

Operating Income  106.51  80.03  60.94  50.62  41.50           

Expenses          

Material Consumed  45.69  33.05  25.63  20.11  16.31Manufacturing Expenses

 5.04  4.46  4.91  4.22  4.24

Personnel Expenses  15.16  11.82  10.08  9.07  8.23Selling Expenses  12.63  10.21  7.63  7.07  3.99Administrative Expenses

 9.04  8.04  5.99  4.42  4.08

Expenses Capitalized  0.00  0.00  0.00  0.00  0.00           Cost Of Sales  87.55  67.57  54.24  44.89  36.85           

Operating Profit  18.95  12.46  6.70  5.72  4.65

           Other Recurring Income

 0.26  0.42  0.37  0.36  0.20

           Adjusted PBDIT  19.21  12.88  7.07  6.09  4.85           Financial Expenses  2.28  1.39  1.04  1.22  1.52Depreciation  3.54  2.68  2.11  2.06  1.89Other Write offs  0.00  0.00  0.00  0.00  0.00           Adjusted PBT  13.40  8.81  3.92  2.81  1.43           Tax Charges  4.92  3.07  1.59  1.02  0.09           Adjusted PAT  8.48  5.74  2.33  1.79  1.34Non Recurring Items  0.29  -0.02  0.00  -0.20  -0.02

37

Other Non Cash adjustments

 0.30  0.18  0.06  0.02  0.10

           Reported Net Profit  9.07  5.90  2.39  1.61  1.42           Earnings Before Appropriation

 13.07  7.40  3.39  2.11  1.52

           Equity Dividend  0.67  0.48  0.43  0.40  0.32Preference Dividend  0.00  0.00  0.00  0.00  0.00Dividend Tax  0.11  0.07  0.06  0.05  0.04Retained Earnings  12.28  6.85  2.90  1.66  1.16

38

Balance sheet

  Mar ' 07 

Mar ' 06 

Mar ' 05 

Mar ' 04 

Mar ' 03 

SOURCES OF

FUNDS

         

Owner's Fund          

Equity Share Capital  3.04  2.69  2.69  2.69  2.69Share Application Money

 0.55  0.00  0.00  0.00  0.00

Preference Share Capital

 0.00  0.00  0.00  0.00  0.00

Reserves & Surplus  44.12  25.58  20.23  18.63  17.47

Loan Funds          

Secured Loans  24.42  16.70  8.36  6.90  7.87Unsecured Loans  5.12  3.38  5.10  6.69  6.70

Total  77.25  48.35  36.38  34.91  34.73

           

USES OF FUNDS          

Fixed Assets          

Gross Block  63.33  51.03  37.49  35.78  32.72Less : Revaluation Reserve

 0.00  0.00  0.00  0.00  0.00

Less : Accumulated Depreciation

 13.89  10.44  7.80  5.84  3.87

Net Block  49.45  40.59  29.69  29.94  28.85Capital Work-in-progress

 10.01  0.31  0.89  0.18  0.00

           Investments  0.00  0.00  0.01  0.00  0.00           

Net Current Assets          

Current Assets, Loans & Advances

 62.84  40.17  34.10  29.32  24.20

Less : Current Liabilities & Provisions

 45.18  32.79  28.44  24.70  18.54

Total Net Current Assets

 17.66  7.38  5.66  4.61  5.66

Miscellaneous expenses not written

 0.13  0.07  0.12  0.17  0.22

Total  77.25  48.35  36.37  34.90  34.73

39

Note :          Book Value of Unquoted Investments

 0.00  0.00  0.01  0.00  0.00

Market Value of Quoted Investments

 0.00  0.00  0.00  0.00  0.00

Contingent liabilities  3.32  2.16  6.51  3.90  35.01Number of Equity shares outstanding (in Lacs)

 60.75  53.75  53.75  53.75  53.75

40

Ratios

RATIOS Mar '

07 

Mar '

06 

Mar '

05 

Mar '

04 

Mar '

03 

PER SHARE RATIOS:          

Adjusted E P S (Rs.)  13.96  10.68  4.33  3.33  2.49

Adjusted Cash EPS (Rs.)  19.79  15.67  8.25  7.16  6.02

Reported EPS (Rs.)  14.92  10.98  4.45  3.00  2.64

Reported Cash EPS (Rs.)  20.75  15.97  8.37  6.82  6.16

Dividend Per Share  1.10  0.90  0.80  0.75  0.60

Operating Profit Per Share

(Rs.)

 31.19  23.18  12.46  10.65  8.65

Book Value (Excl Rev Res)

Per Share (Rs.)

 77.42  52.45  42.40  39.34  37.09

Book Value (Incl Rev Res)

Per Share (Rs.)

 77.42  52.45  42.40  39.34  37.09

Net Operating Income Per

Share (Rs.)

 175.32  148.90  113.37  94.17  77.21

Free Reserves Per Share

(Rs.)

 72.02  47.45  37.40  34.34  32.09

           

PROFITABILITY

RATIOS

         

Operating Margin (%)  17.79  15.56  10.98  11.31  11.20

Gross Profit Margin (%)  14.46  12.21  7.53  7.24  6.64

Net Profit Margin (%)  8.49  7.33  3.90  3.16  3.40

Adjusted Cash Margin (%)  11.25  10.47  7.23  7.54  7.75

Adjusted Return On Net

Worth (%)

 18.02  20.37  10.20  8.46  6.71

41

Reported Return On Net

Worth (%)

 19.27  20.92  10.49  7.61  7.11

Return On long Term Funds

(%)

 23.49  25.63  17.02  13.83  10.01

           

LEVERAGE RATIOS          

Long Term Debt / Equity  0.41  0.40  0.27  0.36  0.46

Total Debt/Equity  0.62  0.71  0.58  0.63  0.72

Owners fund as % of total

Source

 61.48  58.45  62.99  61.06  58.04

Fixed Assets Turnover Ratio  1.68  1.57  1.63  1.41  1.27

LIQUIDITY RATIOS

Current Ratio  1.39  1.23  1.20  1.19  1.31

Current Ratio (Inc. ST

Loans)

 0.99  0.80  0.79  0.80  0.83

Quick Ratio  0.93  0.69  0.72  0.69  0.66

Inventory Turnover Ratio  6.73  6.13  6.12  5.85  4.78

           

PAYOUT RATIOS          

Dividend payout Ratio (Net

Profit)

 8.62  9.35  20.50  28.22  25.63

Dividend payout Ratio

(Cash Profit)

 6.20  6.42  10.90  12.39  10.97

Earning Retention Ratio  90.78  90.40  78.93  74.60  72.83

Cash Earnings Retention

Ratio

 93.50  93.46  88.94  88.18  88.75

           

COVERAGE RATIOS          

42

Adjusted Cash Flow Time

Total Debt

 2.46  2.38  3.04  3.53  4.51

Financial Charges Coverage

Ratio

 8.44  9.30  6.79  4.99  3.18

Fin. Charges Cov.Ratio

(Post Tax)

 6.54  7.20  5.32  4.00  3.18

           

COMPONENT RATIOS          

Material Cost Component(%

earnings)

 45.68  45.65  44.07  39.55  34.75

Selling Cost Component  11.86  12.75  12.52  13.95  9.60

Exports as percent of Total

Sales

 2.40  3.03  4.08  5.59  6.58

Import Comp. in Raw Mat.

Consumed

 12.31  11.29  10.33  10.59  12.82

Long term assets / Total

Assets

 0.48  0.50  0.47  0.50  0.54

Bonus Component In Equity

Capital (%)

 0.00  0.00  0.00  0.00  0.00

43

Explanation-

Earnings per share:Earnings per share are generally considered to be the single most important variable in determining a share's price. The company’s EPS shows increasing trend. But the % of increase in EPS is less in the year 2007 compared to the year 2006, the reason being the increase in the number of shares issued by the company.

Dividend per share:This ratio indicates dividend declared per share to its market price per share. The company’s dividend per share shows continuously increasing trend year on year. This indicates how profitable the investment is due to higher yield ratio.

Free reserves per share:The company’s free reserves per share have shown tremendous increase on year on year basis. This shows that the company believes in growth by ploughing back of its profit which can be compared with rise of its free reserves year on year basis from its balance sheet.

Dividend payout ratio:The ratio indicates the relationship between dividends distributed and net earnings of the firm. This ratio shows the fact that company is paying low dividend compared to the previous years. This indicates that it is retaining its profit to take care of the growth factor. The less the dividend payouts, the more is the company retaining its profits which can be seen from the balance sheet.

44

Current ratio:This ratio is commonly used to measure the short term solvency of the firm. Here, every current liability of Re 1 is backed by the current assets of Re.1.39. This indicates the ability of the company to meet its obligations. It shows the working capital position is sound.

Quick ratio:The main difference between the current ratio and quick ratio is of the inventory, the comparison of two ratios leads to the important conclusions relating to the inventory hold-ups. Here the company’s quick ratio is not in a desirable position as it should be in ratio of 1:1 as per the convention. The reason is because of the huge inventory piling up in the working capital, though the current ratio is showing improving signs.

Fixed assets turnover ratio:The ratio indicates whether the capitalization is proper. The company’s ratio is constantly shows improving signs. This indicates that there has been efficient utilization of the fixed assets, thus fully contributing to the sales of the company.

Financial charges coverage ratio:The ratio indicates the extent to which earnings can decline without resultant financial hardships to the company because of its inability to meet annual interest cost. Here, the company’s ratio has shown tremendous improvement in the year 2006 and 2007 compared to previous years. This shows the company’s ability to suck the fixed financial charge liabilities through its profits.

45

Conclusion- CSL's revenues are expected to increase at 67.77% CAGR

over FY06-09.

OPMs of the company are expected to increase from 15.45%

in FY06 to 16.13% in by FY09 due to increasing revenues

from the trading activities where the margins are high.

CSL is expected to have a healthy interest coverage ratio due

to higher EBIDTA margins.

The company is expected to maintain a low debt-equity ratio

due to its ability to generate high cash earnings.

Return on Networth is expected to increase from 23.06% in

FY06 to 29.07% in FY09, whereas the Return on Capital

Employed is expected to increase from 17.19% in FY06 to

20.47% in FY09.

Currently, the stock trades at 6.33 x FY09E earnings and at

4.63 x FY09E EV / EBIDTA. The valuations of the company

look extremely attractive, looking at the growth opportunities

and the companies’ plans towards it.

46

SECTION D

PEST ANALYSIS

In addition to market forces within the industry, it is critical to

monitor the external forces that may impact the industry on the

ongoing crisis. A manager may have a very good understanding of

what is happening within an industry, and yet be blindsided by

external events that change the nature of competition and revenue

within the industry. A marketing framework commonly used to

examine these forces that impact business decision referred to as

PEST. PEST is acronym for the Political/Legal, Economical,

Social-Cultural & Technological factors that shape the

environmental of an industry or a business.

It is useful to consider to what extent environmental influences

have been particularly important in past and the extent to which

there any impact which may make any of these more or less

significant in the features for the organization and its

competencies. In order to answer some of the key question about

47

forces that work in macro environment, a PEST analysis indicating

the importance of political, economical, social, technological

influences on the organization carried out.

Macro Environment

Political Factors

Economical Factors

Socio-Cultural Factors

Technological Factors

Political Factors

The sanitation levels are very low in the country at about

34%. The government has decided to improve this and has

set up the National Urban Renewal Mission with an

estimated outlay of Rs1200bn to be spent over the next five

years. This is thus going to create a lot of demand for this

industry in the years to come.

It is estimated that in India there is a shortage of more than

22.5 mn dwelling units and the government is trying to

48

reduce this gap. This will thus result in a lot of demand for

the sanitaryware industry going ahead.

The government has given tax incentives to the housing

sector which has resulted in an increasing off take of loans

for housing. With the tax incentives in place, young

population and rising income levels the housing industry will

continue to see good growth which in turn will help the

building products industry to grow.

The opening of the construction sector to 100 percent Foreign

Direct Investment (FDI) foreign investment is expected to

result in a boom in this industry. This will thus benefit the

sanitaryware industry also.

49

FDI Inflows- Sector -wise

Electrical equipment including software moves to over all 2nd position in Nov 2006.

Services sector shows spurt in growth and the top sector attracting FDI – moving up from the third position.

Economical Factors

Interest Rate:

As housing sector is the main driving force for the sanitaryware

industry. So the increase or decrease in the home loan rates will

have the direct impact on the sanitaryware industry of India.

Demand for residential properties tends to be highly price-

sensitive. Though the underlying demand for housing is huge,

increasing property prices will result in postponement of

purchasing decisions. The growth in housing demand has been

stymied by high property prices. However, home loan rates, akin to

the general interest rates have been steadily climbing in the past

12-15 months. Increase in loan rates will further dampen the

demand for real estate construction. As the interest rate on home

loan rose from 7% in 2004 to 12% by March 2007, affordability of

weaker sector to buy houses has gone down sharply. Because of

the rise in interest rates, the equated monthly installment (EMI) on

a 20-year home loan went up by almost 50%. At the same time, as

the real estate prices also rose sharply during the same period,

50

Spurt in FDI in Real Estate causes the construction sector to the third position in Nov 2006.

houses become almost out of reach for the low-income group

people.

The country could face a shortage of 2.65 crore houses by 2012.

Government has been asking banks to lower lending rates to

encourage spending and prevent growth from slowing down. FM P

Chidambaram had suggested that banks should cut rates on home

loans up to Rs.20 lakhs.

But because of inflationary pressure, RBI continued to follow the

tight monetary policy, keeping the interest rate high. But, this has

affected both home buyers and the developers who facing are now

facing a slowdown in the sector.

Inflation:

The inflation rate has the direct impact on any industry. As the rate

of inflation goes up, it reduces the purchasing power of people.

Also in order to control the inflation the government goes for

tightening monetary policy which leads to increase in the interest

rate. This ultimately affects the sanitaryware industry as the

increase in the rate of inflation also leads to the increase in the

housing loan rates. Inflation based on the wholesale price index

(WPI) zoomed to over three-year high of 7.41% for the week

51

ended March 29, 2008. This does not give the very good news to

the sanitaryware industry.

GDP Growth Rate:

The country's economic growth slowed down to 8.4 per cent for

the quarter ended December 31, 2007 The GDP growth during the

year-ago quarter had stood at 9.1 per cent, while growth during the

full year 2006-07 had touched 9.6 per cent. A downturn in

manufacturing and construction sectors pulled down economic

growth rate in the third quarter of this fiscal to 8.4 per cent from

9.1 per cent a year ago. While the growth rate of the manufacturing

sector came down to 9.3 per cent during October-December 2007

from 11.3 per cent in the corresponding period previous year, the

construction sector growth rate dipped to 8.4 per cent from 10.8

per cent during the same period.

The signs of slowdown were also visible in the construction sector,

which recorded a growth rate of 10 per cent during the nine-month

period, down from 11.9 per cent in the corresponding period in the

previous financial year. The financing, insurance, real estate and

business services segment growth rate during the first three

quarters slipped to 11.1 per cent from 14.1 per cent. Trade, hotels,

transport and communication sectors, however, managed to retain

the growth rate at 11.6 per cent during April-December 2007. The

52

growth rate of this sector was 11.8 per cent in the corresponding

period in the previous fiscal year.

Per capita consumption:

In India per capita consumption of ceramic tiles is as low as 0.09

sq. mt. per annum compared to 5 sq. mt. per annum in Europe.

Most of the existing demand comes from the urban and semi urban

areas. However, the rural demand is also expected to grow in

future because of increasing rural income, increasing

health/hygiene consciousness and the growing tendency of Indian

people to adopt new construction materials in their changing life

style. The tiles today have practically started decorating all the

possible areas like dwelling places, working areas, public places,

schools and hospitals. So, one can expect a major market growth

and increase in per capita consumption of ceramic products in the

coming future.

53

Growth of Construction Sector:

One of the important drivers for growth for the sanitaryware

industry is the growth of construction sector. The construction

sector plays a pivotal role in the economy of a nation. It is an

integral part of and defines a country’s infrastructural and

industrial landscape. It includes hospitals, schools, townships,

offices, houses and other buildings; industrial construction; urban

infrastructure (Including water supply, sewerage, drainage);

highways, roads, ports, railways, airports; power systems;

irrigation and agriculture systems; telecommunications etc.

Covering so wide a spectrum, construction forms a basic input for

socioeconomic development.

Housing

The Indian housing industry is highly fragmented, with the

unorganized sector, comprising small builders and contractors, and

accounting for majority of housing units constructed. The

organized sector comprises large builders and government or

government-affiliated entities. The Tenth Five Year Plan envisages

a growth of 381% in the total investment made in the housing

54

segment. Such growth is envisaged owing to the housing shortage,

currently faced.

Commercial

Office Premises

Another major booster for the growth of real estate is growing

demand for office premises especially by booming IT industry

including BPO sector. It is expected that India would continue to

be one of the preferred destinations for setting up back office

operations. Consequently, the growth in the sector will translate

into substantially higher demand for commercial space, adding to

the overall investment in real estate activities.

55

Shopping Malls

Over the last decade, urbanization has increased. The boom in the

service sector in India in the recent years, has not only pushed up

the disposable income of the urban population, but has also made

them more brands savvy and status conscious. This increase in

disposable income along with more brand awareness results in

increase in sales of branded goods. The increasing income level

and changing life style and consumer approach towards branded

goods is expected to translate into higher demand for shopping

mall space. This will lead to strong growth in mall development

activities. It is further expected that while mall development

activity was initially restricted to a few major cities like Mumbai,

Chennai, Delhi, Noida, Banglore and Gurgaon it will now onwards

extend to other cities like Surat, Jaipur, Vadodara Kolkata, Pune

and Ahmedabad etc. thus causing a boom of real estate activities in

those cities.

Multiplexes

Another growth booster for real estate activities is growing

demand for multiplexes. The growth in multiplexes is being driven

56

by the following factors: Multiplexes typically have 250-400 seats

per screen as against 800-1000 seats in a single screen theatre,

which gives multiplex owners additional flexibility, enabling them

to optimize capacity utilization further, growth of multiplexes is

being driven by favorable government policies. The income tax

benefits have resulted in most major players announcing multiplex

projects in smaller towns. The aforesaid growth of multiplexes is

expected to push the growth of the real estate related activities.

Hotels/Resorts

With the increase of disposable income in the hands of Indian

middle class, the ability of spending a larger portion of their

income on tours and travels is going up. This factor, coupled with

the changing lifestyle of Indian population, has created demand for

quality hotels/resorts across this country. In addition, India is also

emerging as a major destination for global tourism which in turn

pushing up the demand for hotels/resorts across India. This

increasing demand for hotels/resorts across India, is offering

another opportunity for real estate development.

Builders

Real estate developers and builders are also changing their profiles.

They have started becoming more organized, with a clear focus on

57

building superior infrastructure, using the best quality materials.

They are emphasizing on international standards and

consciousness for better quality raw material. Technology has

evolved in the construction business, so using them, as part of the

process has been very vital in these competitive environments. The

banks have also played an important role in the process, by

increasing the availability of funds, which has helped evolve a new

breed of developers, thus providing opportunity for real estate

development.

IT Parks

The development of IT parks has also resulted in demand for

sanitaryware industry. It is estimated that for every 1 lakh square

feet of space occupied by IT-ITES parks there is an immediate

demand created for 7 lakh square feet of residential property thus

providing a market for sanitaryware industry.

58

Socio-Cultural Factors

Household Income:

The above chart shows that middle, upper middle & rich

households are going to increase considerably from 2004-05 to

2014-15 which does show very good demand for sanitaryware

industry in the future.

59

Life Style Pattern

The growing culture of malls in the country is providing a market

for the sanitaryware industry. It is estimated that about 600 malls

are going to come in the country in due course of time which thus

augurs well for the sanitaryware industry.

There is a growing trend of brand consciousness in India at

present. Customers are becoming more and more brands conscious

because of assured quality on the one hand and higher social

prestige associated from the use of branded product on the other.

This trend is expected to continue in future and this would place

the organized sector at an advantageous position over the

unorganized sector. This sector will contribute towards all the

domestic requirements.

60

Population Growth:

The above chart suggests that India will overtake China in terms of

population by 2030. This shows that India’s population is rising

very fast. This population will give boost to the housing sector.

And housing is one of the main driving forces to the sanitaryware

61

items. Thus rising population will also add to the sanitaryware

industry of India.

Technological Factors

The use of German know-how ensured CERA’s technological

superiority over others in uncompromising quality. Established

with an initial capacity of 3,500 MTPA, the plant underwent

several periodical up gradations and modernizations to reach

15,000 MTPA. The plant is under massive expansion and will be

largest single location manufacturer in India as far as sanitaryware

is concerned.

Cera revolutionized the way Indian consumers looked at their

bathrooms by changing the perception towards bathroom. It was

the time, when an average Indian gave last priority to their

bathrooms -- after drawing rooms, bedrooms, kitchens and then

bathrooms in that order. The turning point was CERA’s advertising

campaign “Your bathroom is a room too… “Which made the

customers sit up and think on their priorities in furnishing their

home? Cera is also credited with branding of sanitaryware in India.

The continuous advertising from its launch made Cera a brand and

consumers started asking for not just sanitaryware but by brand

62

name, also an elevation from a mere utility product to a lifestyle

product. also Cera is first to use natural gas for firing Ceramic

product in production .

CERA has now added other bathroom products like Shower

Cubicles, Bath Tubs, Bath Fittings etc., to its range of products,

thus progressing towards its vision to become a complete bathroom

solution provider.

WORLD TECHNOLOGY USE BY CERA

To keep ahead of competition, Cera has always kept its technology

ahead of rest of the players in India. It took help from ceramic

technology suppliers from several countries in Europe time and

again so that its process and products are of international norms. It

also helped Cera bag large export orders from the US, unmatched

by any other Indian sanitaryware company. Cera could easily make

products conforming to ANSI, apart from European, Australian,

Canadian and Indian norms. CERA has been constantly using

internationally renowned consultants in the ceramic field to

upgrade its production processes, yield and finished goods quality.

Product innovation has been CERA’s forte. One after the other,

Cera launched not only new designs, but even new innovations in

India. The first was bath suites—a unique design concept

63

consisting of WCs, wash basins, bidets and accessories, giving the

bathroom a distinct personality. A series of bath suites—Crowne,

Concard, Capri, Cornet, Comet, Clair, Cognac, Celebrity, Celeste,

etc.—were launched in quick succession. Cera is also credited with

launch India’s first monoblock EWC, Cologne and now has an

array of one piece EWC & wash basins to its kitty.

TWIN-FLUSH TECHNOLOGY

Water scarcity has always been a concern in most parts of India.

When there is shortage of water, can we not think of conserving it,

by sending less water per flush down the drain? This concern was

brainstormed by our technical and research personnel, designers

and quality assurance and marketing personnel and thus the

concept of twin action flushing was born. We found that in most

households, a WC is used more as a urinal and still it was using 8

to 12 liters of water for each flush. Our team then came up with the

idea of half flush along with full flush. A household can save

substantial quantity of water by installing twin flush. Even where

water is available in abundance, we advise twin flush because the

cost of electricity for pumping extra water to overhead tank can be

saved. In India, ever since we pioneered the twin action coupled

closets two years back; it has caught the fancy of all architects,

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plumbing consultants, trade, customers and even competitors. One

after the other, all manufacturers commenced twin action.

Technology which is used by CERA in production of the ceramic

products is as follows:

Bench casting: in bench casting moulding and casting process

done manually by skilled worker. so production capacity is Lower

due to manual production.

Beam casting: in beam casting iron beams are used for proper

casting in which less manpower is required in a way it is semi auto

technology.

Battery casting: in Battery casting iron beams are used for proper

casting in required in a way as it is automatic technology. This

casting doesn’t required manpower. So production capacity is

higher due to this technology.

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COMPETITIVE FIVE FORCE MODEL

Every business unit should develop a competitive advantage in

order to accomplish its mission. Three interrelated questions have

to be considered in developing the business unit’s competitive

advantage.

First, what is the structure of industry in which the business

unit operates?

Second, how should the business unit exploit the industry’s

structure?

Third, what will be the basis of the business unit’s

competitive advantage?

Five interactive competitive forces collectively determine an

industry’s long term attractiveness: present competitors, potential

competitors, the bargaining power of suppliers, the bargaining

power of buyers and the threat of substitute products. This mix of

forces explain why some industries are consistently more

profitable than others and provides further insights into which

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resources are required and which strategy should be adopted to be

successful. The strength of individual forces varies from industry

to industry and, overtime, within the same industry.

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Rivalry among existing players

Variable Degree of Rivalry

Low Moderate High

No. of Players

Growth of Industry

Degree of

differentiation

Price competition

[Table: Rivalry among Existing Players]

Number of players: There are approximately 20 to 25 organized

players in the ceramic industry particularly in sanitaryware

segment and lots of unorganized players whose market share in

the industry is relatively high. So, the rivalry among the big

players is very much high.

Growth of Industry: In order to accelerate the growth, the

companies are increasing their range of products. Major growth

drivers for the industry are:

Healthy growth in housing sector due to rising income and

aspiration levels and attractive mortgage rates.

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Growth of Retail & Entertainment sector through the

development of new shopping malls multiplexes etc.

Increasing demand from the IT & ITeS SEZ and growing

Corporate Township Project.

Total demand from replacement market is around 10% in

India compared to 80% in the developed countries. Growth

from this market is likely to accelerate rapidly due to

continuous up gradation of trend, availability of new and

better designs, easy availability of finance and higher

disposable income.

So the growth in the industry is relatively high.

Degree of Differentiation: The products or services are

moderately differentiated as products provided are identical. It

is obvious that rivalry was moved to very unfortunate price

competition.

Fierce Price Competition: the companies in this industry try to

provide huge amount of discounts to their customers to stand in

this fierce competition with the unorganized players having a

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huge share in the market. This is because the customers are not

aware of the branded products in this market and prefer to have

products of unorganized players which are very cheap in terms

of quality and price.

Thus the price competition is huge factor and very high.

The sanitaryware manufacturers in the unorganized sector

continue to enjoy duty exemptions, which is not conducive for

healthy competition. CSL faces a lot of competition from the

unorganized sector in Gujarat which is a cause for concern to

the company.

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Bargaining power of Buyers:

Variable Degree of Bargaining

Low Moderate High

Access to information

Switching Cost

Awareness

No. of sellers

[Table: Bargaining Power of Buyers]

Access to Information: The first and foremost thing that and

consumer looks for the information that is available with the

dealer and that can be widely accessible by the consumer. The

dealer needs to provide all the information whenever asked by

the consumer. The dealer should help the customers for making

the purchase decisions for sanitaryware products. The company

has also its own display center which gives all information to

consumer apart from dealer.

From this point of view the bargaining power of the customer is

very much high.

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Switching Cost: There are many players in this industry. So, the

buyer has the wider choice of selecting his Brand which can

best fit to his/her expectations and Budget with good Quality

product. Here the switching cost is low for the Consumer. So,

we have concluded that the bargaining power of the buyer in

this case is higher.

Awareness: Looking at the current market trends, the

Awareness for the CERA is increasing at moderate level but

now company has initiated the Branding exercise to increase the

awareness level among the consumer. However, the proportion

of these consumer is very much moderate, so the bargaining

power of the investors is moderate in terms of Awareness.

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Bargaining power of suppliers (Service Providers):

In manufacturing industry it is very difficult to clearly define the

key supplier. So, we have considered below Raw material

providers as the suppliers for the Manufacturing firm. They are

providers of the Raw materials which is use in this ceramic product

is basically Clay: Ivory color ,Than Clay, Bikaner clay, Felspar,

Quartz, , calcite, china clay, Tulk, Zinc oxide, Barium

Carbonate , Zirconium Silicate which is approved after R & D

Testing .

Variable Degree of Bargaining

Low Moderate High

Dependency

No. of suppliers

[Table 7.3: Bargaining Power of Suppliers]

Dependency: The CERA Company is moderately dependent on

their Raw material providers as we mentioned earlier. They

need to meet every requirements prescribed by the Company’s

Quality control Department and company held minimum 3-4

Raw material provider for its Product requirement

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No. of Suppliers: There is very limited no. of suppliers. To get a

platform for the business they have a very Moderate choice.

Company’s is having minimum 3-4 Raw material provider for

its Product requirement and some imported product are

imported from china.

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Threat of substitute products and services:

No. of Substitutes: there are no such substitutes for these

products as such it is necessary requirement of human being.

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Threats of New entrants:

The increasing imports of sanitaryware and the likely

commencement of new sanitaryware plants in the country by the

multinationals can cause a threat to the growth of the Company.

Few companies like ROCA, KOHLER, RAK, TOTO, and

AMERICAN STANDARD have already taken steps to enter the

market.

Variable Degree of Threat

Low Moderate High

Entry Barriers

Degree of Demand

Growth Potential

[Table: Threats of New Entrants]

Entry Barriers: In this industry the entry is costlier to start the

business at the entry level. The existing players are facing a high

threat from the unorganized players in the market. These big

players can bear a high amount of investment at the initial stage

itself and can expand themselves to a wide area in a very short

span of time. The entry barriers for organized sector are-huge

manpower requirements, since sanitaryware manufacturing is

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highly labour intensive, non-availability of standardized raw-

materials (every manufacturer has to source raw materials from

mines and have its own quality assurance systems), low market

size (the market currently is estimated to be just around Rs7bn)

and innumerable number of unorganized sector players who thrive

partly on government policy of levy-exemption and partly on

evasion of taxes.

Degree of Demand: The demand for the sanitaryware product is

to remain high due to healthy growth in housing sector as well

as the retail sector will boost the demand for sanitaryware

products. The growth in the. This will be supported by rising

income levels and increasing awareness about sanitation and

hygiene and aspiration levels and attractive mortgage rates.

Total demand from replacement market is around 10% in India

compared to 80% in the developed countries. Growth from this

market is likely to accelerate rapidly due to continuous up

gradation of trend, availability of new and better designs, easy

availability of finance and higher disposable income.

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Growth Potential: It is likely to see the high growth potential in

the industry as the Housing sector is booming and the more and

more people come to invest in the Realty sector .This shows the

high amount of Growth opportunity for the existing players.

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CONCLUSION OF PORTER:

By studying the above model, we drawn the following

conclusion:

The sanitaryware manufacturers in the unorganized sector

continue to enjoy duty exemptions, which is not conducive for

healthy competition. CSL faces a lot of competition from the

unorganized sector in Gujarat which is a cause for concern to

the company.

After studying the Model, we can conclude that Sanitaryware

business completely depends on the development and booming

of the Housing and Retail Sector. Currently, the industry is

growing by leaps and bound due to high growth of

infrastructure. In near future, the great phase of consolidation

will start. Firstly, by providing wider range of Products besides

service and covering more and more geographical area by

branches and franchises.

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SWOT ANALYSIS

STRENGTHS:

India’s first to use natural gas firing.

Direct connection of natural gas from GAIL has certainly

helped CERA in better margins. However, this is only one of

the several advantages. CERA has captive power plant using

natural gas. CERA also has wind turbines. Thus CERA is not

dependent on government electricity board for its power

requirements. Others will take a long time to catch up.

Further, CERA is getting natural gas on very cheap rate directly

from the ONGC oil fields, which will continue to be cheap,

wherein others are getting imported LNG which is three times

costlier than what cera is getting.

India’s first to launch twin flush technology & 4 liters flush WC.

We have twin flush models that on an average consume only 4

liters of water, against the others which can use up to 6 liters

every flush. That quantifies to 50% of water saving. With water

scarcity in urban areas, there are a lot of initiatives that have

already been taken by Metros like Mumbai. Others will have to

soon follow in order to save water.

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Wide product range.

Capitalizing on a strong brand image and an evolving market for

bathroom products, CSL expanded its product range to other

related products like shower panels, shower cubicles, shower

temples, bath tubes, whirlpools, bath fittings etc., which makes it a

total bathroom solutions provider.

Huge distribution network.

CSL enjoys a strong distribution network of 500 dealers and 5000

retailers. To supplement the distribution network, the company has

several depots and zonal offices across India. This will help the

company in increasing its market share.

WEAKNESSES.

The company has only one manufacturing plant at kadi, Gujarat.

While its nearest competitors HSIL and parry ware has more

than one manufacturing plant strategically located across

different parts of India to bridge the gap between demand and

supply.

Large unorganized existence

Low R&D for product innovation

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OPPORTUNITIES

Rising domestic demand for tile, sanitaryware and table

ware

Large export potential in sanitaryware in Middle East, Africa

and Central Asia.

Exploit local expertise in related sectors, clusters

technologies.

Facilitate supply chain collaboration.

THREATS

Low priced import from china

Changing consumer preferences

Large surplus capacities in the international market.

Increasing regulatory pressures.

ANALYSIS OF BCG MATRIX

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MARKET SHARE

Parry ware-35% Hindustan- 32% Cera- 20% Others- 13% Others include -AMERICAN STD, KOHLER, ROKA, RAK

SALES DATA OF THE CURRENT YEAR 2007-08

PARRY WARE – Rs. 500 CRORESHIND – Rs. 407 CRORESCERA- Rs.110 CRORES

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Parryware

Hindustan

Cera

Others

PRODUCT LIFE CYCLE

Industry Position

For the last 6-7 years, the sanitaryware industry in India has shown

dramatic growth with major players doubling their production

capacity. The demand for high value sanitaryware in India is

growing very fast. Indian Sanitaryware industry is witnessing a

boom growing at a 12-15% growth for the last couple of years.

There are generally mixed forecasts regarding the potential for the

housing market, an essential driver of replacement and new

bathrooms. The baths and Sanitaryware market will continue to

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grow over the period 2006 to 2010. The new trend is that

consumer’s tend to associate themselves with quality and well

designed products. This has also increased the demand in the

organized sanitaryware products.

The essential driver is the housing market. In the next decade,

India is expected to be one of the world's fastest growing countries

for Sanitaryware consumption. The Government’s impetus to

improve hygiene and sanitation is likely to increase the demand-

supply gap.

The total demand for sanitaryware in India for the organized

manufacturers is at present approximately 80,000 M.T. per annum.

The region wise demand pattern can be estimated as follows:

NORTH SOUTH EAST WEST TOTAL

18,000 32,000 15,000 15,000 80,000

Note: Every year the above demand is expected to grow by 15 to

17%.

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CORPORATE GROWTH STRATEGY

The projected combined future sales and profit of the corporation’s

business unit (CERA) and product-markets fall short of the firm’s

long run growth and profitability objectives. There is a gap

between what the firm expects to become if it is continuous on its

present course and what it would like to become. This not

surprising because some of its high growth markets are likely to

slip into maturity over time and some of its high profit mature

businesses may decline to insignificance as they get older. Thus,

determine where future growth is coming from, management must

decide on a strategy to guide corporate development.

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Current products new products

Market penetration

strategies

(CERA)

Increase market share

Increase product

usage

New applications

Product development strategies

Product improvements

Product-line extensions

New products for same

market

Market development

strategies

Expand markets for

existing products

Geographic expansion

Diversification strategies

Vertical integration

Diversification into related

business

Diversification into

unrelated business

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Recommended corporate strategy for the CERA:

Market penetration & Product development Strategies:

Perhaps, the growth strategy with the greatest potential for CERA

is the aggressive penetration in current markets for their existing

products. This may involve the creation of marketing programme

aimed at non user or Brand-switcher segments of existing markets.

Expansion into new Product development to cater varying need of

customer or product line extension in the current markets is also a

primary growth strategy for CERA.

Diversification into related business

Another Growth strategy would be Diversification strategies

Example like Diversification into related business of Vitrified Tiles

Industry to leverage its Brand image. That will give company

added advantage of “Complete Home solution Provider”. That will

open new Avenue or Frontier for CERA Company.

Expand markets for existing products

Diversification strategies

New Product Development

SEVEN-S MODEL

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The seven S models is the framework for analyzing organization

and their effectiveness. It looks at seven key elements that make

organization successful, or not: strategy, structure, system, style,

skill, shared values.

About 7 S models:

The 7 S models is a tool form managerial analysis and action that

provides a structure with which to consider a company as a whole,

so that organizations problems may be diagnosed and a strategy

may be developed and implemented.

The 7S diagram illustrates the multiplicity interconnectedness of

elements that define an organizations ability to change. This model

helps to change managers thinking about how companies could be

improved. It says that it is not just a matter of devising a new

strategy and following it through. Nor is it matter of setting up a

new systems and letting them generate improvements.

To be effective, organization must have a high degree of fit, or

internal alignment among all the seven Ss. Each S must be

consistent with and reinforce the others. It is impossible to make

progress on one without making progress on all. Thus, to improve

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your organization, you have to master system thinking and pay

attention to all of the seven elements at the same time. There is no

starting point or implied hierarchy-different factors may drive the

business in any one organization.

With these aspects, we have analyzed all the 7-S for Cera

Sanitaryware Ltd. to know the effectiveness of the company. These

7-S areas follow:

1. Structure:

It is very clear that a well-defined Organizational structure

gives the employee a perfect view of to whom they have to

report and from whom they are going to receive orders. Thus,

a structured organization is very effective. The same with

CERA. They have well defined all the level of the company’s

organizational Structure .Thus making no confusion for any

employee and speed up the working level.

2. Strategy:

Strategy as we all know has a tremendous importance in

success of any organization. This is because strategy of any

company talks about the game plan that they are going to

have for the development of the organization and also how to

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compete in the market against rivalry. But when we talk

about developing strategy, it is easier task compared to

executing these strategies. This is because when its time to

implement strategy, it need to have a lots of coordination

among all the employees and organizational resources. Thus,

CERA have well defined strategies and are implementing

with very good speed. Also they are focusing on

downloading vision and mission in the mindsets of each and

every employee and they have the products catering to all

segment of its Target Market so that they become clear that

what company wants in the future to aggressively Propel the

Growth and where it want to go, so they can go in the right

direction.

Thus company is using clear cut strategy of increasing their

market share by increasing their sales force and expanding in

to Innovative and different new types of Products.

3. System:

System as a whole should also be analyzed for checking any

organizations effectiveness. Because when we talk about

system, it includes all the functional and procedural aspects

of the organization. CERA has fairly implemented

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procedures and functions because when we talk about CERA

they have well defined strategy and structure and all Aspect

of Functional Area are being very well executed. So

company is having very well organized system.

4. Style:

Style refers to action taken by top Management to exist in the

market with Charismatic Leadership. Here, CERA’s top

management has done a good job in getting differentiation in

perceiving the CERA Brand which stand for “Value for

money product” among the Consumer and Quality is

synonymous with CERA is all hard effort of the Top

Management Particularly by their Chairman Vikram Somany.

This gives the company a different brand personality in the

mindset of the customer about CERA.

5. Staff:

As CERA is in the manufacturing industry, for its success it

needs to have an excellent power of Human Resources. This

is because in any organization behavior of people, Excellent

service -oriented people, their talking pitch and their ability

to tackling & Problem solving Approach to the customers

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makes difference in the organization. Thus, CERA has

achieved this by employing a well trained staff.

6. Skills:

When we talk about skills, we talk about those activities,

which organizations apply to be best and for which they

become known for. Here CERA is well known for providing

excellent product features at comparatively affordable prices

so kind of giving value for money to the customers. And for

this effectiveness it needs to have well trained employees.

7. Super ordinate goals:

Super ordinate goals refer to guiding concepts, values and

aspirations that unite an organization in some common

purpose. Here we may also talk about goal congruence. This

refers to an overall organizations movement toward

achieving same goal. CERA has also one goal to achieve that

is being a market leader in its field and to have top of the

mind image in customers’ mindset. So when they talk about

Sanitaryware Product, it comes CERA first in their mind.

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SECTION E

FINDINGS AND SUGGESTIONS

Findings:

In the next decade, India is expected to be one of the world's fastest

growing countries for sanitaryware consumption. The sanitation

penetration has more than trebled from 8% in 1982 to 18% in 1994

and to 29% in 1999.

The comparative penetration levels in neighboring countries are as

follows: Pakistan: 50%, Sri Lanka: 65%, Malaysia: 94% and

Thailand: 96%.

The government impetus to improve hygiene and sanitation is

likely to increase the demand for sanitaryware in India. Moreover

the increasing urbanization of India and the consequent

requirement for residential and commercial buildings will be a

major driver for growth of sanitaryware. Along with this the focus

of the central and state governments to provide housing facilities to

the poor, is also expected to generate demand.

The National Housing Policy formulation that envisages "Housing

for all" by the end of Ninth Plan period is a big step towards this.

Indira Awaas Yojana, Samgra Awaas Yojana are programs for

providing housing to the rural poor is a key step taken by the

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government in this area. The housing development organizations

like HUDCO, State Housing Development Boards and Rajiv

Gandhi Rural Housing Corporation Ltd. are also playing a large

role in this initiative.

It is estimated that there is currently a demand for 20 million

housing units in India. Further, a significant number of the 115

million housing units across the country will need reconstruction

for improvement. Therefore a replacement market will emerge,

though currently original equipment sanitaryware market accounts

for nearly 90% of the market.

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Suggestions:

To increase the market share company should spend moderate amount on advertising through local newspaper and television all across India.

Needs to increase the brand image and brand preference especially in north India where company’s market share is less compared to other competitors.

To locate the production plant in other parts of India.

To provide good after sale service.

Keep innovating product offerings.

To identify the market opportunities due to recent boom in realty sector.

To launch flank product against the local sanitary product whose price is very low for giving them tough competition.

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BIBLIOGRAPHY

Books:

1. Crafting and executing strategy. Arther A. Thompson Jr. A.J

Strickland, john E.Gamble. 14th edition

2. Marketing Strategy. Walker, Boyd, Mullins, Larreche .fourth

Edition

3. Marketing Research. David J. Luck, Ronald S. Rubin Seventh

Edition

4. Indian financial system; M Y Khan; 3rd edition; tata mcgraw hill.

5. personnel manangement; ashwathappa; 3rd edition.

Magazine:

1 Faqs for u, issue 2007

2. Business world issue 2007

3 4P’s Business and Marketing issue 2007

News paper:

1 The Economic Times

2 The Business Standard

3 The Financial Express

Reports:

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Cera annual report for the year 2006-07

Software:

CMIE (Prowess)

Web Site:

www.indiainfoline.com

www.cii.com

www.surfindia.com

www.cera-india.com

www.livemint.com

www.iccta.org

www.scribd.com

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