somany final prjct

8/7/2019 Somany Final Prjct

1/91

Summer Internship Project

Return on investment of dealers of

Somany Ceramics Ltd.

Submitted in partial fulfillment of PGDM program2008-10

Submitted by:

Nitin Kumar Tripathi16/097

Company Guide Faculty Guide

Mr.Sanjay Sharma Miss. Priya GuptaAssistant General Manager Assistant lecturer

Somany Ceramics limited.

Apeejay School of ManagementDwarka, New Delhi

July 2009


2/91

CERTIFICATE

This is to certify that the project work done on --------Title---- Submitted toApeejay School of Management, Dwarka by --------Name of the student----- in partialfulfillment of the requirement for the award of PG Diploma in Business Management,is a bonafide work carried out by him/her under my supervision and guidance. Thiswork has not been submitted anywhere else for any other degree/diploma. Theoriginal work was carried during --------to ----- in (Name of the organization)

Date: Seal/Stamp of the Organization Name of the guideAddress:

CERTIFICATE

This is to certify that the project work done on --------Title---- Submitted toApeejay School of Management, Dwarka by --------Name of the student----- in partialfulfillment of the requirement for the award of PG Diploma in Business Management,is a bonafide work carried out by him/her under my supervision and guidance. Thiswork has not been submitted anywhere else for any other degree/diploma. Theoriginal work was carried during --------to ----- in (Name of the organization)

Date: Seal/Stamp of the Organization Name of the guideAddress:


3/91

ACKNOWLEDGEMENT

In Indian culture a task is said to be incomplete without the blessings of almighty and

elders. Also acknowledging the work and help of all those who have guided me for the

completition of my project on time, is indeed duty of mine. Knowing the fact that no

words can measure their guidance to any text.

I take this opportunity to express my profound sense of gratitude to all those who

encouraged me, assisted me and cooperated with me for successful completition of this

summer project and without them this summer project would not have been possible.

I am highly indebted to Mr. Sanjay Sharma assistant general manager (AGM) who gave

me an opportunity to work in all the Departments of this esteemed organization and for

his whole-hearted support and suggestions. I am highly thankful to him that in spite of his

demanding professional preoccupation he always made himself available for guidance

and assistance to me in my project works. Working under his able guidance was a

learning experience for me.

It provides me immense pleasure to extend my grateful thanks to Mr. Naveen Singh

(area manager marketing of west region NCR, SPL Miss saalu, Mr. kuber

I would like to acknowledge my sincere thanks to Miss Priya Gupta , Faculty Mentor,

Apeejay School of Management for her excellent guidance and supervision for the

completion of this project successfully.

I express my deep sense of gratitude and reverence for my parents and friends for their

endless love guidance moral support encouragement and cooperation throughout my

study and work without which this work would ever have been completed.

The acknowledgement will not be complete without a vote of thanks to all other

employees of Somany ceramics limited, who helped me in one way or the other in

completion of this project.

NITIN TRIPATHI

PGDBM

APEEJAY SCHOOL OF MANAGEMENT

DWARKA, NEW DELHI


4/91

EXECUTIVE SUMMARY

My maiden voyage with Somany Ceramics Limitedbegan on 6th may 2009. A life time

opportunity to not only work with Somany but also explore my inner self and identify my true

potential.

Somany Ceramics Limited is a leading Indian t ile and sanitary ware company .From over 40

years Somany has been a pioneering manufacturer, supplier and exporter of Floor Tiles, Wall

Tiles, Sanitary Ware including urinals, basins, etc. With the highest standards and its excellence

in quality and design it is the one of the market leader in the industry.

During my training I have been getting continuous insight into the tile industry. My training was

a delight as my mentor designed it in that very manner. I had the opportunity to meet the dealers

and sub dealers of Somany Ceramics My tenure in Somany tiles gave me a practical knowledge

regarding various things, which I learnt in theory and I hope that this will help me in my

professional life in future.

Now as we know there has been welcome improvement in the awareness of satisfaction

level in todays era in each and every field and especially into the manufacturing industry so

it is very important to have satisfied dealers.

This study aims to investigate t he return on investment level of existing

dealers of Somany tiles using different products (ceramics, sanitary ware,

C.P.fitting). The project undertaken in Somany ceramics was a great experience for me

and gave me immense knowledge about the various activities of dealers. This project brings

out various problems related with the Somany due to which its work is affected severely.


5/91


6/91

Definitions:

In a broad sense Return on Investment simply means how much money you get out

compared to how much money you put in, in regards to an investment.

A performance measure used to evaluate the efficiency of an investment or to compare the

efficiency of a number of different investments.

To calculate ROI, the benefit (return) of an investment is divided by the cost of the

investment; the result is expressed as a percentage or a ratio. For example, if a project has an

ROI of 300%, the net benefits derived from that project are three times those of the expected

total costs to implement the project.

Expressed in absolute terms as a %, ROI= (total benefits total costs) (total costs) x 100.

Total benefits include financial savings and money made as a result of the investment; Total

costs include the investment (e.g. training) costs, cost of participants time, any physical

materials used, etc., possibly including department overheads.


7/91

Setting a Minimum ROI Threshold avoids the need to precisely quantify benefits in

financial terms. The investment is judged to have given a positive return if a particular

benefit target is achieved or if the cost of benefits has exceeded the costs of the investment.

This may be most suitable when time is limited for calculating absolute ROI or where a

yes/no? assessment of value is whats required.

Return on Investment (ROI) analysis is one of several approaches to building a financial

business case. The term means that decision makers evaluate the investment by comparing

the magnitude and timing of expected gains to the investment costs. Decision makers will

also look for ways to improve ROI by reducing costs, increasing gains, or accelerating gains.

Return on investment is a very popular metric because of its versatility and simplicity. That

is, if an investment does not have a positive ROI, or if there are other opportunities with a

higher ROI, then the investment should be not be undertaken.

ROI measures how effectively the firm uses its capital to generate profit; the higher the ROI,

the better.

Formula of return on investment

(Gain from investment - cost of investment)

ROI = ______________________________________

Cost of investment

Single-period

Arithmetic return

The arithmetic return is:


8/91

Logarithmic or continuously compounded return

The logarithmic return or continuously compounded return, also known as force of interest,

is defined as:

It is the reciprocal of the e-folding time.

Benefits:

Major categories of benefits may include:

y labour savings (e.g. reduced duplication of effort through better team working),

y productivity increases (e.g. resulting from a new process, behaviour, mindset, skill,

knowledge or method),

y better customer management (e.g. less customers lost, better management of debt),

income generation (e.g. sales performance, better success in winning competitive

pitches, sales referrals by non-sales staff)

y New or improved product/process ideas and innovation.

How Can ROI Be Useful?

Perhaps the biggest reason for the popularity of ROI is its simplicity. A companys ROI is

directly comparable to returns on other, perhaps more familiar, investments (such as an

account at the bank) and to the companys cost of capital. If we pay 10 percent interest on

capital but earn only 8 percent, thats bad. If we pay 10 percent but earn 15 percent, thats

goodwhat could be simpler?

It is a comprehensive tool that measures activities of different sizes and Profits happen when

a company operates effectively. We can tell that the management team is doing its job well if

the company prospers, obtains funding, and rewards the suppliers of its funds.


9/91


10/91

Perspectives

Different stakeholders are likely to have different perspectives of ROI, for example:

y L&D may look at achievement of learning goals or what skill levels are required by

the organisation and what theyve enabled

y Executives may focus on strategic fit, external reputation or competitiveness

y Corporate functions such as HR may be more concerned with matters like staff

turnover and the ability to attract high calibre staff from other organisations, or

comparing the investment against possible alternatives

y Business managers may put emphasis on performance, profit, productivity and levels

of customer satisfaction

y Project managers set their sights on achieving project / business goals

y Line managers may worry about the extent to which they can confidently delegate or

the amount of time they spend fire-fighting people problems

y Employees may be most concerned with work satisfaction, personal progression,

wellbeing or having a sense of being valued by the organisation.

Limitations of ROI:

ROI is a popular metric for sure. It boils down a complex soup of numbers into a single

percentage that everyone can digest. But there are some limitations of ROI-

y The ROI metric is more accurate for cost-saving projects than for revenue-generating

projects.

y ROI analysis works best for IT implementations that produce tangible easy to

measure cost benefits like improved productivity.

y When calculating ROI from a revenue generation point of view, estimates are often

used - lessening the accuracy of the analysis.


11/91


12/91

Ceramic Industry: Tilling Fast!

The word Ceramic comes from the Greek word Keramos meaning pottery, it is related to

an old Sanskrit root meaning to burn but was primarily used to mean burnt stuff. In the

early days the tiles were hand made, hand formed and hand-painted. But today the ceramic

tile is not hand made or hand painted. In the modern house ceramic tiles is used throughout

for their bathrooms and kitchens and in every vital area of the premise.

Apart from decorative look ceramic tiles are primarily hygiene products and that is evident

from its usage ranging from bathrooms and kitchens in average Indian households to medical

centers, labs, milk booths, schools, public conveniences etc. A ceramic tile is basically a

utility product and popular housing projects are increasingly switching over to Ceramic

Tiles from the traditional mosaic and even granite or marble, owing to several factors viz.

ease in laying ability, versatility, low price and most importantly hygiene.

The main product segments are the Wall tiles, Floor tiles, Vitrified tiles and Porcelain tile

segments. The market shares are 35 percent, 53 percent and 12 percent respectively for wall,

floor & Vitrified/Porcelain tiles.

Industry Profile

Ceramic tiles as a product segment have grown to 3.8 million tons production per annum.

The potential seems to be great particularly in view of the boom in the housing sector, retail

sector and IT and BPO sectors. The ceramic tile sector has been clocking a robust growth of

12-15 percent consistently over the last few years. The investment in the ceramic tile

industry, in the last five years is approximately Rs2000 crores. This industry provides

employment of 550000 people, 50000 of whom are directly employed. The potential is huge

considering the per capita consumption of ceramic tiles in India. Currently it is at 0.5 sq.m

per person in comparison to over 2 for like countries like China, Brazil and Malaysia.


13/91

Some of the key statistics pertaining to the industry are summarized below:

i. World production: 6400 Million Sq.mtrs

ii. India's Share: 200 Million Sq.mtrs.

iii. World Ranking (in production) : 7

iv. Per capita consumption: 0.15 Sq.mtrs.

v. Global Industry Growth Rate : 6%

vi. Growth rate (India Domestic Market) : 12%

vii. Organized industry turnover (India) : INR 22.50 Billion

y Glazed Wall tile share 40%

y Glazed Floor tile share 46%

y Unglazed Vitrified tile share 8%

y Glazed Porcelain tile share 6%

viii. Unorganized industry turnover

y Glazed Wall tile share 57%

y Glazed Floor tile share 35%

y Unglazed Vitrified tile share 6%

y Glazed Porcelain tile share 2%

ix. Investment in the last 5 years: INR 20 Billion

x. Organized sector :

y Share of Production : 56%

y No. of units : 15

y Revenue (excise duty) : INR ~ 2.3 Billion per annum

xi. Unorganized sector

y Share of Production : 44%


14/91

y No. of units :~200 (70 percent based in Gujarat region)

y Revenue (excise duty): INR 0.7 Billion per annum or less

xii. Job Potential: 50000 direct

International Scenario

30 major tile manufacturing companies cover 95.8 percent of the total world production of

ceramic tiles in 2008respectively. China is the largest producer and contributes almost 33

percent of the world production in 2008. This is followed by Thailand, Poland, South Africa

and Russia which are growing at almost 20

percent. Italy, Spain and China are the

leading exporters and USA, Germany and

France are the leading importers.

Countries like Malaysia, Thailand,

Indonesia, Sri Lanka and Vietnam are

setting up their own plants. China has

emerged as a major competitor.

Producers from Spain and Italy have the

advantage of lower transportation costswhile exporting to USA and Germany.In

India, the per capita consumption is as

low as 0.30 square meters per person

compared to China (2 square meters per

person), Europe (5 to 6 square meters

per person) or Brazil (2.5 square meters

per person).

Asia

53%

Central&

south

America

10%

Europe

(Non

E.U.)

6%

Europea

n Union

23%

North

America

4%

Africa

4%

Production Region

Wise(in Percentage)


15/91

Indian Scenario

In India, Ceramic tile industry emerged in the late 1950s. Ceramic Tile Industry can be

classified into three categories namely wall tile segment, floor tile segment and vitrified

and porcelain tile segment. In India the floor tiles segment is growing at a faster rate. The

market for the wall tiles is rising at a relatively slower pace and this has resulted in high

excess capacity in the wall tile segment. The entry of two relatively new product categories

Vitrified tiles andPorcelain tiles has increased the size of the market considerably. It is

expected that these products will gradually take away the market from the conventional

ceramic tiles (wall and floor). As far as manufacturing of ceramic tiles is concerned, both the

organized and unorganized sector plays a very important role in India. Growth of the

unorganized sector accounted for 44 percent of the total production and the revenue earnings

from the organized sector accounted to over Rs150 crore.

Ceramic tiles as a product segment have grown to a sizeable chunk today at 340 Millions

Square meters production per annum.The ceramic tiles sector has been clocking a robust

growth of 12-15% consistently over the last few years.

Asia

50%

Central

& south

America

10%

Europe

(Non

E.U.)

7%

Europea

n Union

20%

NorthAmerica

8%

Africa4%

Oceania

1%

Consumption Region

wise

(in Percentage)


16/91

Despite an overall slowdown of the economy this sector continues to grow at a healthy 12

percent per annum. India ranks 7th in terms of production in the world and the market share

of India have risen from 1.7 percent to 2.7 percent in terms of ceramic tile production.

The introduction of vitrified and porcelain tiles. These new entrant product types are said

to be the tiles of the future. Internationally these tiles are already the major sellers. These

categories of products account for 13% of all organized sales in this industry.

These new products and the conventional wall & floor tiles have together made the organized

industry grow to a formidable Rs. 3000 crores industry.

The industry has a total production capacity of approximately one mn tpa in the

organized sector and 200,000 tpa in the small and informal sector. Some 10% of the

capacity in the organized sector is non-operational. The informal sector has a relatively

variable capacity profile. Apart from the 6 major players at the top, there are about 29

smaller players in the organized sector. With a total production of 1300,000 tones in

2007-08, the capacity utilization in the organized sector was 65%.

y The wall tiles segment is dominated by H&R Johnson, SPL and Kajaria.

y

In the floor tiles, Murudeshwar, Bell and Spartek, account for 60% of the turnoverof the organized sector.

y The institutional to retail sales ratio is about 40:60.

y Floor tiles segment is anticipated to grow faster than the wall tiles as the

consumption ratio shifts from 2:1 to almost 1:1 as is in the developed countries.

y Kajaria and SPL dominate the north while H&R Johnson, Bell and SPL rule the

west; Murudeshwar and Spartek share the southern markets.

y H&R Johnson (India) has the largest market share in the wall tiles.

y Johnson International of the UK holds 40% of its equity. It is setting up a 93,000

tpa plant (30,000 tpa of wall and 63,000 tpa of floor tiles) in Rai gad district of

Maharashtra, which could be the largest in South-East Asia.


17/91

y Kajaria Ceramics is the second largest player in the industry. It has maintained a

fast growth amongst the industry majors with a 30% growth in turnover and 50%

in net profit. SPL, the erstwhile Somany Pilkington Ltd, with a long presence in

the country along with H&R Johnson, commands the second largest market share

(19%) in the wall tiles segment. It is further expanding the capacity from 110,000

TPA to 130,000 TPA.

Among the other established players are Deora Ceramics, Diamond Ceramics. These

apart, there are new entrants like EID Parry, Aurangabad Asbestos and Nitco.

The industry is capital intensive although there is a sizeable presence of the informal

sector, which operates on, smaller capital inputs. With new technology and large

economic size, the capital costs are high. So is the capital working requirements because

of the need to store a wide variety of the product and long credits.

Trends in Indian ceramic tile industry

y In India, the major part of ceramic tiles manufacturing is undertaken by the SMEs.

y The ceramic tiles industry is worth about Rs 6000 crore, and dominated by medium

scale players.y Besides the established 12-14 players there are more than 50 small scale players

today.

y Some of the bigger players have started sourcing from the unorganized sector.

The products are then marketed under the brand names of the bigger companies.

This trend is bound to grow in both short and medium term.

Like developed markets the financial institutions (both foreign and domestic) are beginning

to show interest in the sector. Various foreign Real Estate and Finance companies like GE

Commercial Finance, Tishman Speyer, Ascendas and Farallon Capital have entered the

Indian market.

Growth Trends


18/91

Production

y Indian ceramics industry provides employment to 550,000 people, of whom 50,000

are directly employed.

y As per 2007-08 estimates, there are at present 16 units in the organized sector, with

an installed capacity of 21 lakh million tones (MT). This accounts for 2.5 per cent of

the world ceramic tile production. The ceramic tile industry has been growing at

about 12 per cent per annum.

y In 2009-10, production of ceramic tiles was estimated to be at a 360.00 million square

metres as against 340 million sq. meters of ceramic tiles, out of the global production

of 6,400 million sq. meters during 2008-09, when India was ranked 7th in the world

in terms of production of ceramic tiles produced.

y Gujarat accounts for around 70 per cent of total ceramic production, and the

unorganised sector, comprising entirely of SMEs, manufactures a staggering 37 per

cent of the countrys total ceramic output.

y The size of the unorganized ceramic tiles industry - comprising wall tiles, floor tiles

and fully vitrified tiles - is around US$ 3.5 billion. These are exported to East and

West Asian countries.

y In sanitary ware industry, at present, the production capacity in organized sector is

1.43 lakh MT per annum, and 3,65,695 MT production has been estimated in 2007-

08. In the small scale sector, there are over 200 units with capacity of 53,000 MT per

annum. The industry turnover is above Rs 500-600 crores (US$ 102.77 million - US$

123.32 million) per annum. Sanitary ware industry has been growing by about 5 per

cent per annum during the last two years.

y Pottery ware, signifying crockery and tableware, are produced both in the large scale

and the small scale sectors. There are 16 units in the organized sector, with a total

installed capacity of 43,000 MT per annum and the production was estimated at

58,781 MT for 2007-08. Small-scale sector has over 1,200 plants, with a capacity of 3


19/91

lakh MT per annum. Bone china and stoneware contribute to the major portion of the

production of ceramics tableware.

Exports

y India exports ceramics worth approximately US$ 1 billion per annum. The main

export products are chemical porcelain and insulators, handicrafts, art ware and

stoneware crockery.

y The ceramic tile industry has shown a growth rate at about 12 per cent per annum.

These are exported to East and West Asian countries. The exports during 2006-07

amounted to Rs 251.20 crores (US$ 51.63 million).

y The exports in sanitary ware industry was to the tune of Rs 93.49 crores (US$ 19.21

million) during 2006-07.

y The export of pottery ware during 2006-07 was of the order of Rs 45.50 crore (US$

9.35 million) and major markets include the US and Europe.

Tile Consumption Pattern

From a market point of view, India has always been classified into five different zones,

North, South, West, East and middle. Most of the companies take each of the area into a

single market. From tile industries perspective West is the most lucrative market,

followed by north, south, middle and east zones in that order.

y There has been a spate of constructions throughout the India, but the first three

zones have the maximum concentration of these activities, lead by Mumbai-Pune

belt and a few cities in Gujarat, followed by National capital region and Banglore.


20/91

y Middle and Eastern part of India has not grown in proportion of the rest three

markets and tile consumption is significantly lower as compared with other three

regions. While Middle India is equidistant from all three regions where ceramic

manufacturers are concentrated, for the Eastern part of the country, tile

manufacturers end up spending maximum amount on logistics.

THE INDIAN COUNCIL OF CERAMIC TILES (ICCTAS):

The Indian Council of Ceramic Tiles and Sanitaryware (ICCTAS) is a registered body,

founded in 1990 and based in Delhi, India.The ICCTAS is a voluntary non-profit Association

dedicated to the growth of Ceramic Tiles and sanitary ware.

Objectives:

y Promote sales of products of Ceramic Tiles & Sanitary ware Industry in

domestic and Overseas Markets.

y Promote interest & co-operation of members on above activities.

ACTIVITIES OF ICCTAS:

y Promote/Trade Exhibitions, Campaigns, Events, and

Seminars in India & Abroad.

y Provide Trade related information on regular basis

comprising articles, circulars, periodicals, statistics, etc.

y Joint representation of issues/matters affecting

directly/indirectly the industry to Government, Local

bodies & Institutions.


21/91

y Promote ICCTAS membership in the industry among all

manufacturers in Ceramic & Sanitary ware.

Impact of slowdown on Indian ceramic tile industry

The economic downturn has hit ceramic tile manufacturers, large and small alike.

However, due to the nature of the industry, the effect has been gradual. The construction

industry has a longer cycle than that of most other industries. Almost-completed project

would be completed regardless of the economic scenario.

The ongoing financial crisis has hit the real estate market in India badly, and as a result

the booming business in the ceramic industry has been slightly affected. However, the

ceramic sector depends on the raw material available in the local market, and also caters

to buyers in the domestic market; the financial crisis factor doesnt play a critical role.

However, in the past three or four months, orders have thinned and a number of smaller

set-ups are feeling the pinch of the falling demand. Some companies in Gujarat had even

taken a holiday for some time.

Amid slowdown in construction industry, the ceramic and vitrified tile some manufacturers

have been forced to cut down their production capacity to 50 per cent.

The international gas price has fallen from $ 9 per million Btu to $ 5 per million Btu. Whichis why, manufacturers have asked the government to now bring down gas price from Rs 15

per scmd to Rs 11 per scmd that might offer some respite to the units amidst slowdown.

Apart from gas prices, the units are also demanding other benefits as well. "We are also

asking the government to increase the subsidy on exports from 6 per cent to 15 per cent.

Also, to stand against the Chinese products, they are asking the government to put more duty

on import materials. Also, the units are demanding a reduction in value added tax (VAT)

from 12.5 per cent to 4 per cent.


22/91

COMPETITION WITH FOREIGN HAND:

Many leading foreign ceramic companies have been venturing into the lucrative Indian

ceramic industry. Indian companies catering to the high end luxury segment are facing

steep competition from Italy and Spain, whereas China is trying to capture the market in

the lower end. Interestingly, even this situation has been ineffective in mounting pressure

on the SMEs in the ceramic industry. Although the Chinese ceramic products are cheap

and target mainly the mass market in the country, they lag behind in quality and hence

have very few takers. On the other hand, the Italian companies mainly import equipment

at a lower cost and then get them manufactured by any small enterprise in the business.

SMEs operating in the ceramic industry are going to benefit immensely from this new

trend. This scenario will encourage many new entrepreneurs to venture into the field of

ceramics and set up new units.

Constraints

The industry faces some constraints: it is highly fragmented with very few large players

and a large number of SMEs who face problems of poor economies of scale. Specialists

from different European countries including Spain, Germany, the UK and the

Netherlands feel that doing business in India without a local associate is more difficult

compared to China, and finding the right partner is a major hurdle.

Other constraints are:

y The industry also suffers due to non-availability of raw material with uniform

properties and lack of manpower with suitable technical skills. Problems range from

rising costs and falling prices higher taxes, fuel costs, transportation costs, lack of raw

material, dumping of cheaper vitrified Chinese tiles into India, and to top it all, a

slump in demand from construction.


23/91

y Another common constraint is lack of easy access of raw materials. For example,

lignite material essential for making tiles, were easily accessible earlier to local units

available in Kutch districts. Now, the tile makers are being forced to bring the

material from Bharuch, which adds immensely to the transportation costs.

y Energy costs account for 45 per cent of tile making, which requires natural gas or coal

to file the knives, apart from electricity.

y Taxes add another 25 per cent to costs and hurt the tile manufacturers, especially as

there is no import duty or anti-dumping duty on the Chinese tiles.

y A recent phenomenon has been delaying of payments by big manufacturers, which is

also forcing the local tile makers to close their units.

Where we stand and what we must do?

As a foreign exchange earner or a global player, Indian Tile industry has captured the

attention of the world in the ceramic tiles segment. India is projected to figure in the top 3

countries manufacturing ceramic tiles by 2010. This however is subject to policiesfavorable for the tile industry to complete with international players on an even ground.

To compete internationally, our plants must be geared up to large units , These will also

help us in lowering our cost of production significantly. Better infrastructure will bring in

better growth in terms of consistency and sustenance. Freight,supply of power and gas

remains the key cost-related issues impacting the industry. Availability, consistent supply

and reasonable rates are extremely important for the growth of the ceramic tile industry.

Also, the prevailing anomalies pertaining to Basic Customs Duty on import of ceramic

tiles from China and raw materials imported from abroad need to be corrected to prevent

dumping of tiles from China. Rural thrust should be enhanced by favorable excise duty

and MRP structure.


24/91

Focus on Rural Market

Since the last few years there has been an upsurge in demand for tiles in the rural

markets. Given the scenario where more than 70% of India's population resides in

rural areas and the stagnation that is setting-in in urban cities, the rural market is a

vast untapped market for ceramic tiles. However, for a product to reach six lakh

locations, one needs to be realistic about the fact that 700 million villages are spread

over 3.2 million sq. metre of area & the road conditions are usually poor. It is,

therefore, important that tile manufacturers expecting to tap these markets should

have a good distribution system coupled with efficient logistics.


25/91


26/91

Creating a world of tiles. About organization

It is said that to accomplish great things you must dream. Somany Tiles was initiated

with the same vision to lead the market. Today after three decades, it is one of India's

leading manufactures of quality wall and floor tiles. A face of constant innovation,

progression and quality products in a market plagued by fickle competitors.

Over the years Somany has made some of the most revolutionary and technically superior

benchmarked products for its customers, like India's most durable VC Shield floor tiles,

the Durastone range of world's toughest tiles, the 14x10 range of world's most preferred

sized tiles and 12x18 (bigger size rectified tiles).

Somany is also the first tile manufacturing company in India to be honoured with both

the prestigious ISO 9002 & ISO 14001 certifications for its two highly advanced state-of-

art manufacturing facilities at Kassar, Haryana and Kadi, Gujarat. Somany's

marketing strength has also leaped to greater heights. Today it has one of the most

extensive and robust dealer network spread all over the country.

Somany is the front-runner in the industry to use the latest technology possible and to come

up with innovative tile designs and sizes. Somanys design and sizes are the most copied

varieties in India. Somany Tiles believes that the days are pass when tiles were sold as

pieces used to cover floors and walls. Now is the age when tiles are sold as concepts, which

could be visualized by the consumers before purchasing them in exclusive display outlets.T

Somany becomes Indias first ceramic tile company to receive patent for its

manufacturing technology

Somany has collaborations with the biggest and the best international tiling brands too,

like Kaleseramik, Turkey and Leonardo Cermica, Italy. Somany plans to get in to

future tie-ups with other prominent international players and market their global product

portfolio in India.


27/91

Just like all the other aspects of the brand, Somany's communication has also been

consistent yet refreshing. The current logo sports a dash of red that gives it a vibrant

touch and indicates the rejuvenated spirit of the brand. It is in anticipation to the evolving

customer trends and fast changing market environment. Thus connecting with the

changing tastes of the discerning customers and keeping Somany fresh, young and

relevant in their minds.

It is this dedication towards quality and hardwork combined with accurate marketing

strategies that will take Somany ahead in the market and place it high in this race to

perfection.

Business profile

SPL ltd. formerly Somany Pilkingtons ltd.(SPL),was promoted by the KL Somany Group

and PilkingtonTiles ltd.,UK in1968.in FY95,the Somanys acquired the entire 20.3% stake of

its UK collaborater at a cost of rs.290mn (at Rs616 per share).SPL is engaged in the

manufacturers of ceramic floor and wall tiles,with a market share of about 19%.the company

has wall tile units using state- of- the- art technology,of 5000sq.m/day capacity each,at

Kassar (Haryana) and Kadi (Gujarat).

The company had tied-up with Schblona India to manufacture ceramics decals and fire the

same on glazed tile.it has one of the first Indian companies to use this techonology.it also

commissioned a new unit at Kassar with a fire printing technology that van print any kind of

prints on tiles.inFY9,the company had entered into a technical collaboration with Leonardo

Ceremica, Italy:the fourth largest producer of ceramic tiles in Italy and a leading

manufacturer in the vitrified porcelain tiles segment. InFY 00, it entered the vitrified tiles

segment by launching Greviti. In FY01, the company launched a new concept in floor and

wall tiles, called the Versa tile brand.


28/91

Promoters

Mr. H.L.Somany

A visionary and the founder director of SPL limited, (formerly known as Somany Pilkington)

he is also credited with setting up mega brands like Hindustan Sanitary ware &industries ltd.

and M/s Hindustan National Glass limited.

With more than 60 years experience in business, Mr. Somany is a member of Institute of

ceramics. During his illustrious carrier,he has held various position with Government and

non government agencies and was the chairman of Capexil in 1969, Commissioner of

Calcutta Port Trust during 1972-74, President of ASSOCHAM in 1997 and a member of the

eastern regional committee of IDBI.

His social commitment saw him being instrumental in setting up and running several schools

and colleges in rajasthan and Haryana .his multi faceted personality makes him keen patrons

of arts and the chairman of the Sangeet Kala Mandir Trust&Samagam.

Mr.Shreekant Somany

Founder director of SPL ltd. was trained at foundary practices and machine shop, Geneva. He

set up soma plumbing &fixtures in 1975. Later,he moved on to head and glass division of

Hindustan sanitary ware,a turn around venture .two years after joining SPL limited in

1992,he took over as managing director.since then he has spearhead the companys growth

and foray in to futures. He is the chairman of the Indian Council of Ceramics Tiles and

Sanitaryware (ICTTAS) and holds key positions with managing and expert committees of

ASSOCHAM and PHD chamber of commerce and industry and also a member of National

Council of Confederation of Indian Industry (CII).


29/91

Mr. Abhishek somany

An mba from Richmond University with specialization in Accounts &Finance, he is the

Executive Director of SPL.

Before chartering a new success course for the company; which has taken SPL to new

heights, he has undergone intensive training at M/s Pilkingtons tiles U.K., Manchester plant

.in manufacturing of Glazed ceramic wall &floor tiles and has attended advance management

course at sun ridge park.UK.

In course of his association with the company in various capacities, Mr. Somany has gained

wide knowledge and experience in all aspects of Ceramic &Tile Industry and also acquired

valued experience and knowledge in varied aspects of corporate affairs.

Mission

To manufacture market and service products of international standard. Ensure that all

company processes are geared to deliver the highest levels of customer satisfaction .keep on

employee-centric focus in all the operations. Foster innovation and creativity at all levels.

Deliver value to all stakeholders of the company

Vision

To emerge as Indias finest manufacturer of ceramic tiles using the latest technologies,

delighting customers and enhancing shareholder value on a consistent and sustainable basis.

MILESTONES TO SUCCES-

Somany Ceramic India made its beginning with as a small organization, but hascontinued to learn and grow to a commanding status in the tile industry. The company

has gone a long way in popularizing and making easily available a whole range of tiles

and sanitary ware. And it has set very high standards in developing products and

processes which meet stringent quality norms. As it grows further, Somany will continue

to markup on major milestones along the way, setting the road for others to follow


30/91

YEAR EVENTS

The company was incorporated on 20th January at Calcutta

The company entered into a collaboration agreement with

Pilkington's Tiles Limited, U.K.

1968 Issued 93,200 No. of equity shares to directors, etc.

20,000 No. of equity shares to ICICI, 78,000 No. of equity share to

Pilkingtons Ltd., U.K. (30,000 shares for cash and 48,000 shares

against plant and equipment).

1970 1, 08,800 No. of equity and 10,000 Pref. shares offered to public

in January 1970.

1974 - 100 forfeited shares reissued.

1976 - 2, 99,950 Bonus Equity shares issued in prop. 1:1.

1983 - The company undertook to set up a new unit at Kadi in Gujarat

with a licensed capacity of 6,000 tonnes per annum.

Production was started in June.

Kadi unit had teething troubles and did not reach its installed

capacity.

1984 Pref. shares redeemed on 28.2.1985. 2, 99,950 bonus equity

Shares issued in prop. 1:2.

1985 - Production increased further to 5,665 tonnes despite power Supply

constraints.


31/91

The company continued to face problems at Kassar due to

changeover of a large part of firing system from furnace oil to

residual fuel oil.

A modernisation programme was undertaken at Kassar which

would enable the company to introduce newer designs.

1986 Production declined to 19,742 tonnes due to strike at the Kassar

factory from 22nd June 23rd September, 1987 and poor power

availability.

The company proposed to install a 22 MW diesel generating set

and steps were taken to install storage tanks for liquified petroleum

gas, for which Government approval has been received.

Modernisation in the body preparation section was in progress.On

completion of the proposed programme of modernisation and

expansion, the production capacity at Kassar would stand

increased to 31,000 tonnes per annum.

1987 50 forfeited shares reissued.

1988 Commissioning of hydraulic presses at Kassar was completed and

trial production was started. Active steps were being taken for

further modernisation under the TDF Scheme at Kadi was

approved by Government.

1989 The company took up a floor tile project with a capacity of 12,000

tonnes per annum

8, 99,900 Bonus shares issued in prop. 1:1.


32/91

1990 Imported machines under TDF Scheme were installed at Kadi.

1991 Two more automatic hydraulic presses were installed at Kassar.

1992 The Company entered into a collaboration agreement with M/s

Pilkington's Tiles Ltd. for upgradation in the existing technology.

1993 During October/November the company made a right and public

Issue

1994 The capacity of floor tiles was expanded from 15,000 tonnes to

30,000 tonnes.

1995 5,000 sq. mtr./day wall tile unit by double fast firing was

commissioned and is fully operational.

45, 99,600 bonus equity shares issued in prop. 2:1.

1996 The Company introduced India's largest ceramic tile

(45cmX45cm), production of such large size ceramic tile requires

very high technology and skills.

1997 SPL has tied-up with Schblona India to manufacture ceramic

Decals and fire the same on glazed tiles. SPL would be one of

theFirst Indian companies to use this technology.

SPL introduced 45x45 cm tiles - a world class product for the

first time in the domestic market.


33/91

A new unit has also been commissioned at Kassar with a fire

printing technology that can print any kind of prints on tiles.

1999 The company has entered into a technical collaboration with

Leonardo Ceramica, Italy which is a part of the Cooperative

Ceramica di Imola group: the fourth largest producer of

ceramicTiles in Italy and a leading manufacturer in the vitrified

Porcelain tiles segment.

The Company has entered into an Agreement with National

Securities Depository Limited (NSDL) in order to provide the

requisite facilities for dematerialisation of its shares.

2000 SPL Ltd., the makers of Somany tiles, has entered the vitrified

Tiles segment by launching `Greviti'.

2001 SPL Ltd., makers of Somany tiles, has launched a new concept in

floor and wall tiles, called the versaTile brand.

2004 Delists shares from Delhi Stock Exchange Association Ltd.

2006- SPL Ltd has entered into Joint Venture (JV) Agreement with

Keraben S A with the aim of manufacturing, promoting,

distributing and selling the products within India and other

countries.

ORGANIZATIONAL STRUCTURE:


34/91

NAME DESIGNATION

Mr. Shreekant Somany Chairman and Managing Director

Mr. Abhishek Somany Joint Managing Director

Mr. G L Sultania Director

Mr. R K Daga Director

Mr. R L Gaggar DirectorMr. Ravinder Nath Director

Mr. Salil Singhal Director

Mr. G. G Trivedi Executive Director

Mr. Sunil Trikha Nominee Director

Mr. A K Beejawat President

Mr. R K Lakhotia Vice President(Finance)

Mr. Ketan Dave Vice President(Technical)

Mr. T K Jena Vice President(Sales and Marketing)

Mr. R P Mittal Vice President(Commercial)

Mr.Samir Raheja Company Secretary

PRODUCTS &THEIR FEATURES

RANGE OF WALL TILES

PRODUCT (SIZE INMM)

INDUSTRYFOCUS

TYPES

Wall Tiles of Size 200x200 Tiles New Arrivals, Deluxe, Super

Premium, Premium, Classic and

Regular

Wall Tiles of Size 200x300 Tiles Deluxe, Super Premium, Premium,

Classic and Regular

Wall Tiles of Size 250x350 Tiles Woodart, New Arrivals, Colorz, LTD,

Barcode, Super Premium, Premium,

Classic and Regular.

Wall Tiles of Size 300x450 Tiles Forest, Tifny, Acero, Special Prints,

Super Premium, Plain Colour

Wall Tiles of Size 450x600 Tiles New Arrivals




35/91

Wall Tiles of Size 200x425 Tiles Marfil, Emporio,Sandra,Lorel

Floor tiles of size300x300 Tiles Plain Colours ,Super Premium,

Premium, Printed Series

Floor tiles of size

396x396(Edgecut)

Tiles Ocean Magenta Gr.3.,Silvia Beige

Gr.3, Starflame Almond Gr.3

Floor tiles of size406x406(Edgecut)

Tiles Premium, Olympic(glossy), Popular,Classic

Floor tiles of size 605x605 Tiles New Arrival

Floor tiles of size

496x496(VC Shield)

Tiles Noble Mushroom, Lazio Marfil,

Laguna Beige

Floor tiles of size 600x450 Tiles Comfort Brown, Element Nero, Zenith

Blue. Zenith Light, Loft Brown



Floor tiles of size 333x333 Tiles Rustic Series

Floor tiles of

size:605x605(Virtified)

Tiles New Arrival

SANITARY WARE

PRODUCT INDUSTRY

FOCUS

SIZE DESIGN COLOR

Rounded

shape

Wall hung

bidet

Wash basin 555x360x335(mm) Rounded

shape

White and

cream

Wall hung &

Pedestal

Basins

Wash basin 555mm x 420mm Semi -recessed White

Art Basin Wash basin 530x420mm Over the

Counter

White

Round shape

Wall Hung

Wash basin 550x365x370

[mm].

rounded shape White&

Cream

Wall Hung &Pedestal

Basins

Wash basin 520x410 mm square white

Wall Hung &

Pedestal

Basins

Wash basin 565x450 mm Straight-line Best White

and Cream

Wall Hung & Wash basin 640x500x835 mm Bowl shape Best White

and Cream


36/91

Pedestal Basin

Over the

Counter Art

Basin

Wash basin Diameter of 455

[mm].

full-bodied

design

Best White

and Cream

Over the

Counter Art

Basin

Wash basin 650x420 mm Wide-bowl

design.

Best White

and Cream

Over the

Counter Art

Basin

Wash basin 600x400 mm boat shaped Best White

Wall Hung-

WCs Ren

Bathroom &

Kitchen

Fixtures

550x365x370

[mm]

Italian `passo`

design

Best White

Coupled Sets

WCs

Bathroom &

Kitchen

Fixtures

685x365x760

[mm]

Compact-

Space saving

design

best White&

Cream

Single Pc.

Toilet

Bathroom &

Kitchen

Fixtures

740x440x740

[mm]

Neo-classical

oval design

best White&

Cream

Wall Hung

Urinals

Bathroom &

Kitchen

Fixtures

700x470x265[mm] Square

Designed

best White&

Cream

Wall Hung-

Urinal

Bathroom &

Kitchen

Fixtures

620x420x240 mm `Nest-like`

design

best White&

Cream

Large and

Small Urinals

Bathroom &

Kitchen

600x370x405 mm

430x350x300 mm.

Over the

Counter

best White&

Cream


37/91

Fixtures

Wall Hung-

Urinals

Bathroom &

Kitchen

Fixtures

735x470x300 mm square

designed with

sharp

protrudes

Best White

Press Panel-

Front Push

Oval Shaped

Cistern

Bathroom &

Kitchen

Fixtures

240x160 mm. oval shaped white, Cream

chrome-shiny,

and chrome-

matt, brushed-

metallic

Press Panel-

Front Push

Overlap

Cistern

Bathroom &

Kitchen

Fixtures

240x160 mm. overlap dual-

flush design

white, Cream

chrome-shiny,

and chrome-

matt, brushed-

metallic

Concealed

Cistern

Bathroom &

Kitchen

Fixtures

510x450x90 mm. 3 press-panel

design

Best White

Squatting

Pans Toilet

Bathroom &

Kitchen

Fixtures

520x430 &580x440 mm

Wide-bowldesign.

Best White

Wall Hung &

Pedestal Basin

Bathroom &

Kitchen

Fixtures

650x530x820 mm. Square

Designed

Best White&

Cream


38/91

Marketing strategies:

Somany tiles is facing competition not just from the unorganised sector but also from

Chinese imports To mitigate this problem, SCL is trying to focus more on value added and

innovative products which are outside the domain of unorganised players. Further to cater to

the top end of the market, it has also started importing tiles from countries like Spain, Italy,

Turkey and China.

To interact directly with the customer, the company has opened display centres called

`Simply Tiles' in all the major metros to help the customer get the touch, feel and colour of

tiles.this will help company to spread its presence in metro cities.In 'Simply Tiles.'company

will showcase entire range of solution floor and wall tiles, tile accessories, readymade

spots and skirtings and Eton glass basins.Company also wants to know about specific

requirement of different customer for this Customised advice and requirement is available in

these display centre.

.

Somany Floor and Wall Tiles is distributed through a large and committed network of

Dealers & Sub-dealers in the country with 25 branch offices and more than 600 dealers

Apart from doubling its advertising budget to Rs 4.5 crore, the company has also shifted

focus for the first time to the electronic media to increase its advertising reach and

penetration. The company has shifted its creative account from Leo Burnett to AB&M.

Madison continues to handle media buying for the group.

Somany Tiles new TVC builds an emotional connection to create unique brand positioning.

As part of its new marketing strategy, the SPL Ltd (Somany Tiles) plans to set up a chain

of stores called `Fine Line', to showcase the company's premium tile offerings. Starting

with a store each in Delhi, Mumbai and Chennai, the outlets would also sell sanitary

ware, for which the company has tied up with Hindustan Sanitaryware and Industries Ltd.

For a thrust in retail segment the company has devised a "shop in shop" concept where the

product shall be displayed at selected dealer counters in major towns & cities of India.


39/91

To strengthen the ties with the traders and architect fraternity Somany organizes interactive

session in which industrialists, traders, architects, engineers and businessmen take

participation.It helps to create a platform where they could interact with the company

representatives and trade partners.

To make the dealers happy, Somany Tiles has launched its Dhan Varsha Scheme which is

a token of gratitude for the support of Somany dealers entrusted on Somany

SCL has formed a JV with Keraben Ltd. of Spain viz. Somany Keraben Pvt Ltd. to market

`Synergy' brand of tiles in India to target and capture a larger market share.

SCL is foccussing on establishingits presence across all verticles of the demand prism,

beginning from the niche segment to the low-cost tiles segment to meet the demand of SCL

has been increasing its capacities over the years, visualizing the demand growth in future.

Competitors:

H. & R. Johnson

H. & R. Johnson (India) Limited is India's No. 1 tile company offering a wide range of

wall and floor tile products across various segments. With a vast portfolio comprising of

5 well-known brands in India (Johnson, Marbonite, Porselano, and Endura & Milano)

their plants are located in dewas (MP.i.e.central India), Pen (Maharastra, Western India),

Kunigal (Karnataka, Southern India), Karaikal (Tamilnadu, Southern India), Vijaywada

(Andhra Pradesh) and Rajkot (Gujarat, Western India).

It has implemented a comprehensive ERP to integrate over 2000 SKUs across different

qualities, manufacturing locations, 23 branch offices / warehouses. This helps it to

improve efficiency in production planning and better inventory management.

Kajaria Ceramics


40/91

Kajaria Ceramics is one of the largest manufacturers of ceramics tiles in India. It has an

annual capacity of 26.4 mn. Sq. mtr. Distributed across two plants - Sikandrabad at Uttar

Pradesh (capacity 9.70 mn. Sq. mtrs) and Gailpur at Rajasthan (capacity 16.7 mn. Sq.

mtrs.). Kajaria Ceramics has a strong distribution network of about 600 dealers and over

6000 sub-dealers spread all over India. It operates 14 exclusive showrooms in the

country.

Nitco:

The company has four manufacturing facilities in the country in Maharashtra - three near

Mumbai and one in Silvasa, Gujarat. It also imports tiles from China under contract

manufacturing from Foshan Lungo Ceramics and Foshan Chancheng Oulian

Construction Ceramic Co Ltd in the Guangdong province in China.

Nitco believes in setting up manufacturing unit closer to market as further process losses

are not significant to justify locating the unit close to raw material source.

Orient Tiles

Headquartered at New Delhi, Orient was incorporated as a Public Limited Company on

18th May 1977 for the manufacture of ceramic tiles with an installed capacity of 0.4

Million sq. mtrs. Per annum this has now grown to 14 million sq. mtrs. Per annum.

Orients state of the art manufacturing unit at Sikandrabad (Bulandshar, U.P.) is spread

across 40 acres of land. The company today possesses a strong network of over 800

dealers and 2500 sub-dealers spread all over the country.

Murudeshwar Ceramics

Murudeshwar Ceramics Ltd (MCL) was incorporated in June 1983. The company is into

manufacturing of ceramic wall, floor tiles, and vitrified tiles; it was amongst the first few

companies to set-up a manufacturing unit for vitrified tiles and has been a dominant

player in the segment. Around 60% of its sales come from southern India. Though it has

opened exclusive show rooms and stock depots in various centers in Western and


41/91

Northern India, but the focus is clearly on Southern and western market to save on the

transportation costs.

Government policy

Ceramic tiles find its maximum usage in residential and commercial buildings and are also

finding acceptance in other construction projects as well like airports, bus terminals etc. as In

India the Construction sector is expected to do well in future mainly due to fiscal incentives

given to infrastructure development. India is expected to be among the top 5 retail markets in

the world in10 years. The Ceramic tiles particularly the vitrified tiles are finding increasing

usage in both these sectors and the sector would benefit from an upsurge in these areas as

well.

The ceramic industry will also get benefit from the growing incomes and urbanization and

huge demnd for housing from rural areas.. The Indian economic growth is interlinked to the

growth of infrastructure development and for sustained development the government has to

continually recognize this segment. The government is set to pump in rs.172000 crore in the

national highway sectors by2012, rs.40000 crore for airports by2010.and rs.50000 crore for

ports by 2010 and thereby the economy to grow over 8% per annum (source: economic

survey)

The government impetus to improve hygiene and sanitation is likely to increase the

demand for sanitary ware in India. The focus of the central and state governments to

provide housing facilities to the poor is also expected to generate demand. Along with

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

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.


42/91

Reduction in threshold limit under Zero Duty Export Promotion Capital Goods (EPCG)

Scheme would also help accelerate the modernization process in ceramics industry.

SOMANY HR POLICY:

SOMANY is committed to fostering an atmosphere of caring, open communication and

candor among its employees, where it treats each other with respect.Company places a great

deal of emphasis on personal integrity and believe long-term results, from real

accomplishments, are the only fair way to judge performance. Respecting individual

differences in culture, ethnicity and color, equal opportunity for all employees and

applicants, to providing a workplace free from all forms of discrimination, respect the right

of individuals to achieve professional and personal balance in their lives is among many ofthe key features of the company.

SPL thinks that hiring new people to replace the old workers and training those costs the

company more than retaining people in the first place.

SPL Ltd has adopted a multi-pronged strategy, which includes identifying individual

employee potential, chalking out career growth plans for an employee based on the

potential so determined, giving out performance-based rewards and incentives, and

finally, conducting skill and attitude development training programmes.

The central point of SPL's HR policy is identification of individual potential, and this is

done by taking each employee through various job functions in different departments.

When an employee is found more productive and to exhibit his natural talent in a

particular department, he is assigned to that department and his career growth planned

along the lines of that particular job function.

SPL also sends its employees on regular training sessions. In this session emphasis is on

both soft-skill development and hard-skill development.

The soft skills include interpersonal communication and attitudinal changes, among

others; the hard skills include technical skills.

SPL organizes soft skill development training for its employees twice a year, while hard

skill development training goes on throughout the year on a job-to-job basis. To identify


43/91

the kind of training the employees need on an individual basis, SPL conducts skill need

identification programmes.

The company is conducting a technical persons exchange programme with its

Italian collaborator, Leonardo Ceramica to provide the necessary technical training

to its employees.

SPL employees are also motivated to bring out the best in them through the process of

reward recognition. Under this programme fall cash incentives, gifts or citations for

achieving pre-set targets. SPL has introduced reward recognition schemes in its

marketing division and in all its factory units as well.

In the marketing division, the scheme works as a sales incentive; at the production level,

it takes the form of a production incentive. The cash reward, in both cases, amounts to

20-25 per cent of the employee's annual salary.

Somany is committed by its current diversity initiatives. They have been formulated to

ensure that it attains its core value of diversity as a competitive advantage.

y Dedicated executives for managing diversity within our operating divisions.

y Multi-year strategic plans for diversity are developed with the same vigor and

goal setting process as other business issues. Goals include diverse recruitment,

improved retention and fostering a more inclusive culture.

y External Diversity Advisory Boards consisting of educators, politicians, practitioners

and customers to advise somanys senior management on a variety of issues relating to

diverse audiences.

y Annual employee performance reviews incorporating inclusion-related goals for all

managers.

y Mandatory annual Affirmative Action Planning process.

y Corporate-sponsored multi-level program for training employees to work and manage in

an inclusive environment.

y Employee networks to mentor and support diverse employees.


44/91

Problems

Increasing cost of power & fuel: increasein the prices of all petroleum products has

resulted in a huge hike in the cost of production of all ceramic tile companies and that

would ultimately result in reduced margins of the company.

.

The recent Court order disallowing overloading in a transport vehicle has

disproportionately increased freight rates by almost 30% and ceramic tiles are extremely

freight-sensitive. This element of freight and transport has led the industry to contemplate

and revise the costs of its products.

Competition from the unorganized sector:

In India organize sector is facing stiff competition from the unorganized sector, which is

huge as their costs are lower due to relief from duties and taxes.

Price checks due to increased capacity: As most of the players in the industry are

increasing their capacities, price checks could be experienced in future, thereby restricting

the growth in topline to some extent.

SWOT ANALYSIS OF CERAMIC INDUSTRY

Strengths

y The cost of production of tiles in India is 25-30 percent lower compared with the US

and Europe, mainly owing to labor costs.

y Consistent growth of 12-15 percent inspite of Slowdown in economy.

y The Indian ceramic export market is rising at the rate of 15 percent per annum.


45/91

Weakness

y Not much importance given on brand building and network thus creating hindrance

for export growth.

y Low per capita consumption (0.15 sq.mt. p.a.) as compared to developed nations.

y Non-availability of standard raw material with uniform properties, manpower with

low technical skills and limited facilities for technical skills and for technical

education in ceramics production

Opportunities

y The construction and Housing Boom to provide bolstering demand for ceramic tiles.

y Tourism in India has been growing at a fast pace. There is an increasing demandsupply gap of hotel rooms both for regular and seasonal tourists and for event specific

visitors such as to the commonwealth games 2010.

y The untapped rural market supported by a strong growth witnessed by Indian

Agriculture provides tremendous potential for the domestic ceramic manufacturers.

y European companies are investing in the market, the time of market entry is

interesting as import duties have decreased and the trend is expected to continue.

Threats


46/91

y Freight, supply of power and gas remains the key cost-related issues impacting the

industry.

y Basic Customs Duty on import of ceramic tiles from China and raw materials

imported from abroad should be corrected to prevent dumping of tiles from China.

y Indian ceramics industry is highly fragmented and face problems of poor

economies of scale.

y Unorganized tile sector in India accounts for 55% of the total production in India,

which in some way possess major threat to major players.

SWOT ANALYSIS: SOMANY

Strength

y Qualified and motivated Human Resource

y Well planned infrastructure

y Good market reputation

y Steady increase in Demand due to raise in standard of living

y The company has a network of 600 dealers across the country.

Weakness

y Low market share in southern region of India.

y Way behind market leader.


47/91

y Inferior trade promotion schemes.

y dealers complain about delay in supply

y Complains not attended on time

y Replacement not on time

Opportunity

y Convert image into market share.

y Increasing presence in Sothern India.

y Increasing presence in International markets

Threat

y Heightened competition with Chinese and national players.

y Razor thin margins.

y Dissatisfied dealer base.

y Better advertisements of competitors.

y Better incentives given by the competitors to the dealers.


48/91

Achievements

Mr. Shrikant Somany,

Chairman cum M.D

receiving award

List of Awards & Recognitions received by Somany

Ceramics Limited

1996 - R & D initiatives and activates recognized

by the Govt. Of India.

1998 - ISO 9002 awarded.

1999 - ISO 14001 awarded.

ISO 9001: 2000 awarded.

Export House award.

Capixel award for 03 consecutive years.

Mr. Vineet Maitin, GM -

Exports and Mktg. (East)

receiving Capixel award

Somany Ceramics Ltd. has become the first Indian tile company to receive patent under the

Indian Patent Act for its revolutionary high abrasion resistant glaze composition, known as

VC (VeilCraft) Shield.


49/91

Capital Structure AS ON 31.03.2008

Somany Ceramics Ltd key data

Ticker Somany Cera Country India

Exchance Bom Major industry Apparel &Textile

Sub industry Home furnishing

2008 sales 3,266,649,350(yr ending Jan2009)

Employee 1,253

Currency Indian rupee Marker Cap. 443,631,420

Fiscal yr ending March Share outstanding 6,899400

Share type Ordinery Closly held share 4,103,919

Stock price:


50/91

Current share price (as on 2nd July 2009): 67.50(Figures in Indian Rupees)

Authorized Capital:

No. of Shares Type Value Amount

15000000 Equity Shares Rs. 10/- Each Rs. 150.000 millions

1000000 Preference Shares Rs. 100/- Each Rs. 100.000 millions

Total Rs. 250.000 millions

Issued, Subscribed & Paid-up Capital:

No. of Shares Type Value Amount6899400 Equity Shares Rs. 10/- Each Rs. 68.994 millions

NOTES:-Including 6099400 Equity Shares allotted as fully paid up Bonus Shares by

capitalization of General Reserve, Share Premium and Capital Redemption Reserve.

CAPITAL STRUCTURE OF SOMANY

Promoters,

,

59.48%

Institutions

,

2.78%

Foreign

Holdings

5.02%

Non-

PromoterC

orporate,,

5.59%

IndianPubli

c &Others,,

29.17%


51/91

CSR ACTIVITIES:

At both Somany units in Haryana and Gujarat, a deep-felt sense of corporate social

responsibility is a trademark of the company. Fulfilling its social and environmental

responsibilities has been an important part of the company's overall philosophy and vision.

The Somany Education Trust gives scholarships to the deserving children in the Cherawa

College and the Cherawa Higher Secondary School. Another Trust works in the area of

providing aid to the poor, disabled and needy people.

Creating a great work environment, fostering an ethical work culture and instilling the right

values in every member of the Somany family, is a vital part of Somany's success. The right

outlook and a strict adherence to certain basic ethical and moral codes of conduct are an

important part of Somany's company ethos. Within the factories and plants a very strict no-

plastic usage dictum is adhered to, and there is a genuine commitment to the recycling of

wastage and mason training, as well as a concerted thrust towards extensive tree plantation.

National and international image

Somany Ceramics Limited has kept on going from strength to strength in exports. The

companys exports climbed to Rs. 40 crores during the year '08-'09.Somany ceramics exports

to more than 20 countries round the globe. The exports are mainly to countries like Middle

East, Sri Lanka, Mauritius and Australia. The company enjoys very good brand image in

these international market and do have a similar brand recall as that of domestic.

Company has made a marketing joint venture with big international player like Keraben

Ltd. of Spain,Kaleseramik of Turkey.

SPL has recently entered into a technical tie-up with the Italy based Leonardo Ceramica for

manufacturing vitrified tiles.


52/91

What makes Somany as one of the brand leader is precision in meeting customer demand

and also helping them imagine the possibilities.Somany's new positioning statement

Creating a world of tiles, Clearly enunciates its fresh brand philosophy.Somany is regarded

as one of the most trusted and innovative brand in the industry. This is substantiated by

various surveys carried out both in-house and by external research.

The brand Somany tile has today become synonym of quality, service and innovation

not only in the domestic market but even in the international market.With increased

capacity, increase in turnover and a growing domestic and exports market, somany

ceramics is set to emerge as a leader in the international ceramic tiles market.

FUTURE PROSPECTS OF SOMANY TILES:

witnessing an unprecedented boom in the construction and real estate sector as a national

player and an important part of the supply chain to the construction sector, Somany tiles has

a wonderful opportunity to continue to aggressively expand its market share over the next

few years..

As most leading architects and builders have pre-approved Somany for use at their new

projects, the company expects to gain a significant share of this construction boom in the

hospitality sector.

Individual buyers across India are gaining rapid international exposure to new building

materials, design styles and product applications. Keeping this in mind, Somany tiles are

investing heavily in expanding its dealer network across India to make its high quality

products at the best retail outlets.


53/91

Indias diverse demographics contribute to a huge market for attractive priced, budget

tiles.somany is quickly capitalizing on this relatively untapped market by expanding its

product portfolio with the addition of another production plant at kadi, Gujarat.

To stay ahead in the creative field of special design and effects, SOMANY with its advance

microprocessor controlled profile cutting technology to kept their designers create master

pieces that are worthy of anybodys imaginations.

SOMANY CERAMICS LIMITED IN NUT SHELL:

Registered Office : Address 82/19, Bhakerwara Road, Mundka, New

Delhi 110 041

Incorporated : 1968/01/20

Registration No.: 55-5169

Line of Business: Manufacturer of Ceramic Tiles

Chairman andManaging Director Mr. Shreekant Somany

Status : Company is a very well established renowned concern

having good track Record. Trade relations are good.

Payments: Slow but Correct

Litigation: Clear

Banking Reputation: Satisfactory

Offices: 93589, Works and Corporate Office:

P.O.: Kassar

City - Bahadurgarh

State - Haryana

PIN - 124507

Email ID - [email protected]


54/91

Factory/plant: 93588, 14, GIDC Industrial Estate,

District: Mehasana

City - Kadi

State - Gujarat

PIN - 382715

Email ID - [email protected]

LEGAL FORM:

Public Limited Company. The Company's shares are listed on the Stock

STOCKS IN WHICH COMPANY IS LISTED

y Bombay stock exchange

y Calcutta stock exchange

y Delhi stock exchange

y National stock exchange

PRODUCTS DETAILS:

Products Code No.: 69089090

Principal Products:Ceramic Glazed Wall, Floor Tiles

Floor Tiles, Wall Tile, Imported Tiles, Sanitary ware, Toilets, Basins, and Urinals

EXPORT DETAILS

Exports to Countries: Mauritius, Middle East, Australia, Sri Lanka

PRODUCTION STATUS (As on 31.03.2008)

Particulars Unit Registered /Installed ActualCapacity Production

Glazed / Vitrified

Porcelain Tiles MT 272500 228795


55/91

BANKERS:

y Punjab National Bank Limited

y Industrial Development Bank of India Limited

y Export Import Bank of India

y State Bank of Bikaner and Jaipur Limited

y Standard Chartered Bank

y Central Bank of India

AUDITORS Name: Lodha and Company, Chartered Accountants

Conclusion:Somany story is all grit, determination and accomplishments. It goes on to prove that singleminded focus and dedication pays. . These products; by virtue of product innovation andquality, have set an exemplary standard in the industry and have found ever ready domesticand export markets.


56/91

About the project:

Working with somany as a summer trainee was a great experience for me both individually

and professionally. My summer training project was to calculate the return on investment of

Somany dealers in Delhi &NCR.


57/91

The objective of the project was to motivate dealers to increase their investment on somany

products so that their return can be maximized; another objective was to tell dealers how they

can maximize their return on investtmnet.

Since all commercial organizations exist to make a return on their investment (ROI). Money

is a scarce resource and it is therefore reasonable to question how well it is spent whenever itis in any quantity. Indeed, most substantial sums of money require justification and the mostfrequently sought justification is the return on the investment the ratio of money gained orlost on an investment relative to the amount of money invested.

All substantial investments are scrutinized for their return and the motive is same here too,we want to scrutinize the investmnrt of the dealers. Different criteria are used in thisjustification and typically the percentage annual return and the payback period are consideredvitally important. Return on a fixed investment can vary over time, because the levels of riskvary depending on the type of investment, and because there could be different opportunitycosts for the investment, i.e. the money could be spent elsewhere.

In the main, ROIof the dealers was measured on fixed investments, such as new buildings capital items, stock level of the product.. The day-to-day running costs of businesses,however, have traditionally never had ROI measured.The motive behind the project ws to build a strong relationship with dealers by assuring

them that the company is willing to increase their profit and to make align their objective

with company objective.

For my project I prepare a questionnaire to gather information from dealers.in the

questaionnaire questions were asked about the investment and expenses such as rent rate of

the shop, salary &other administrative expenses, total stock level for somany product and for

other companys product.We gather information about the total area of the shop and the area

dedicated for display to somany tiles & to competitors.

We asked about the turnover of the dealer from somany product and from other companys

product. Payment term with the company and its competitors, margin which a dealer gets

from different product; sanitary ware, ceramic tiles, C.P.fitting and other (tanks) etc.

As we are groups of summer trainee working for the same project in the organization. Total

Delhi&NCR is divided in to some parts to make our study more convenient.i got the area of

central and east Delhi.


58/91

My job was to do the market research for calculating ROI, for this my mentor gave me the

list of dealers and sub dealers from whom I was supposed to gather information

Measuring return on investment, or ROI, from the marketing budget can help the company

gain better answers to its competitors policy.

ROI measurement of the dealers was an opportunity to review the marketing practices andmake smart, informed decisions about the future which tactics to emphasize, whatsworking and whats not, and whether the companys message is connecting with prospects orneed to be fine-tuned. Measuring the ROI of dealers indirectly generate new business andstrengthen existing dealer relationships

With ROI data of dealers in hand the top level manager of the Somany can make informedcomparisons between its Dealer-development activities. It could result in competitive

analysis of dealers and thus can be very tactful in motivating them.

My research will help the company to a greater extent to know about reasons,why

different dealers are unsatisfied with the different strategies of the company & find out

the ways to sought out there queries to make them more satisfy and increase there income

.

As the industry is booming o double digit growth periphery but real promise or

competition lie is to satisfy the dealers and there needs to a greater extent.my research

will figure out those research areas and parameters that can help the company to increase

its market share.

So my research is of utmost importance as it highlights all the practical discrepancy and

suggest the company some practical rectification to change their market position.

.


59/91


60/91

Literature Review

Davidson

Return on InvestmentSeveral different methods for calculating return on investment were uncovered during theliterature search. Five areas were recommended by Davidson (1998) in her recent articleentitled, "Measure what you bring to the Bottom Line." She suggests measuring:

y productivityoutput per unit of input,

y processessystems, workflow,

y human resource costs and benefits for a specific initiative,

y employee retention, morale, commitment, and skills,

y Capabilities of the organizationcycle time, learning, shared mind set,

accountability.

Phillips (1996a)

Phillips (1996a) believes that ROI measurement isn't complete until results are converted tomonetary worth. Phillips also recommends looking at a variety of other data, each of which isbriefly described below.

y

Converting output to contribution: This reflects the "profit contribution" of anadditional unit of product or service, or the contribution or the savings from

producing an additional unit of output from the same input. Marginal-cost statements

and sensitivity analyses can be used to pinpoint the values associated with changes if

the output data are not available.

y Calculating the cost of quality: Poor quality is waste generated by human error and

bears a cost: defective products, spoiled raw materials, and discarded paperwork. The

most costly waste occurs when a product is delivered to a customer and returned for

repair. Staff performs the rework and cost is added to the overhead. The highest cost

of poor quality is customer dissatisfaction.

y Converting employees' time: Converting the value of time saved is relatively easy

and is an important measure of a program's success. The most obvious measure is the


61/91

reduced cost of performing work. Monetary savings equal the hours saved multiplied

by the per-hour labor cost. Time saving is realized when the amount of time saved

translates to a cost reduction or profit contribution and the additional time saved is

used productively. Most ROI calculations simply use the average wage (with a

percent added for employee benefits). Some experts recommend adding in "employee

maintenance" costs including such items as office space, furniture, telephone,

utilities, computers, calculators, and administrative support.

y Using historic cost: Company records can often show the cost and value of one unit

of improvement.

y Using internal and external experts: Experts can provide the cost (or value) of one

unit of improvement.

y Using data from external studies: For some soft data, it may be appropriate to use

information from studies or research projects that focus on the cost of those data

items to estimate value or determine benchmarks and industry standards.

y Using participants', supervisors', and/or senior mangers' estimates.Sometimes the

people closest to an improvement can provide the most reliable estimates on its value.

y Using Human Resources estimates: These may be perceived as biased. After all, the

HR department will determine the basis for its claim for improvements due to

training.

Maglitta (1997)


62/91

Three more alternatives for calculating ROI were presented in a recent article by Maglitta(1997) in Computerworld magazine. [In fact, many of the models described immediatelyabove incorporate these methods to varying degrees.] These alternatives are:Business value added measures information technology (IT) contribution not in dollars butby support of key goals and metrics of functional groups. (It works best when high level

support, business growing, routine operations are under control, but is not useful for shortterm payback or heavily quantitative culture.)Intangible value is a less formal metric than evaluation of soft benefits such as attracting newstaff, improving product quality, enhancing reputation, staying in the marketgeneral costand benefit statements suffice. (It looks for benefits measured in clear dollars, which worksbest when credibility is established and executives support. However, it is not useful forheavily quantitative analysis.)Net present value gauges tomorrow's returns in today's dollars. It recognizes businessconditions, interest rates, risk and inflation and produces ballpark figures.

InformationWeek surveyAccording to the 1998 InformationWeek survey mentioned previously, the most popular

method of calculating ROI is traditional cost/benefit analysis (about 97% of all respondentsselected this option.) Cost benefit analysis is easy to understand and easy to calculate. Othermeasures also used are Net Present Value reported by 44% of the respondents, weightedscoring (22%), and applied information economics (12%). Also gaining popularity is theEconomic Value Added (EVA) method developed by Stern Stewart and C. (Violino, 1998).EVA measures the difference between after-tax operating profit and the cost of capitalemployed to generate the profit (in other words, the equity involved in producing profit .

Stolovitch et al. (1998)Stolovitch et al. (1998) present a detailed plan for calculating ROI for training interventionsthat might be adaptable for the present evaluation. It consists of seven distinct steps, each ofwhich is addressed here:Step 1: Calculate Potential for Improved Performance

y determine purpose of training (mandated, new system, performance gap)

y identify desired and actual performance

y identify feelings related to desired performance

y identify causes for not achieving desired performance

y

identify solutions

Step 2: Calculate Estimated Training CostsIncludes:


63/91

y Training Development Costs: human resources, travel, media production, fees,

licenses.

somany final prjct

Documents