Financial Daily from THE HINDU group of publications
Tuesday, Feb 17, 2004

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Industry & Economy - Ceramics

Tile majors chart growth strategy

B. Krishnakumar

BUOYED by robust demand, ceramic tile producers in the country are pouring in an unprecedented Rs 500 crore of fresh investments to expand capacities. Companies that have planned expansion include H&R Johnson, Kajaria Ceramics Murudeshwar Ceramics, Spartek Ceramics and Regency Ceramics. These fresh capacities are set to go on stream between March 2004 and February 2005.

The proposed investments are the largest that the sector has witnessed after the rash of new capacities that were put up in the early 90's. The proposed expansion will increase the existing installed capacity of three lakh square meters per day by about 18 per cent.

The capacity expansion plans come at a time when input costs are on the rise and competition from imports is stiff. In addition, most of the tile producers had added to their capacities only recently. For instance, Kajaria Ceramics recently expanded its capacity at the Gailpur plant in Rajasthan by two million square metres to 14 million square metres per annum. Murudeshwar Ceramics too recently commissioned a new plant at Karaikal, near Pondicherry with a production capacity of 4,000 square metres per day.

Top company officials in companies such as Kajaria, Spartek and Murudehwar Ceramics are very positive about the growth prospects. On an average, a 15-per cent increase in demand is projected by industry sources.

Factors such as the booming housing sector, pick-up in real estate activity and the increasing number of commercial complexes in the country have bolstered demand for ceramic tiles. Besides, rationalisation of excise duty on tiles over the recent years has resulted in the narrowing of price difference between ceramic tiles and the traditional mosaic tile.

Along with these factors, the conversion of existing mosaic tiles to ceramic tiles has also fuelled demand for ceramic tiles.

The robust demand for tiles has also translated into improved financial performance of industry majors. Almost all tile companies have recorded a healthy growth in earnings in the recent quarters. This has been possible despite an increase in energy costs and rising competition, especially from imports.

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