CMD
In 2010, when we acquired Bell Ceramics we had a capacity of 1.45 cr sq mtr p.a. with
one plant in North India and were predominantly a North-based company. In FY 2011-12, we
became a Company with a capacity of 2.9 cr sq mtr p.a., three pan-India plants and truly a
company with a nationwide footprint.
What gives me a sense of achievement is that even as the Indian tiles industry grew at
around 15% in 2011-12, your Company grew 86.77% on the strength of the Bell acquisition.
Even if we exclude the Bell brand sales in 2010-11, our growth was an impressive 36%.
This noteworthy accomplishment is the result of the Company selecting to grow its
business through organic and inorganic means. Your Company finished the year under review
with three plants across North, South and West India, an installed capacity that is the
largest consolidated by any single tile Indian manufacturing company. We also finished the
year under review with a growth in our market share from about 8% to 12%.
Acquisition
We acquired Bell Ceramics in December 2010 which had an enterprise value of around Rs.
115 cr. What makes us unique is that we went ahead and acquired an entire listed Company
and merged it successfully to form Orient Bell Ltd. This is the only such acquisition in
the history of Indian tile industry.
Bell represented a perfect fit for a number of reasons:
• Bell possessed two strategically located manufacturing facilities at Dora
(Gujarat) and Hoskote (rural Bengaluru), which complemented our existing facility in
Sikandrabad (Uttar Pradesh). We acquired the company as an extensive national footprint
that would enhance our operational flexibility and enable us to service demand in a quick
and cost-effective way.
• The Bell brand enjoyed a strong recall; particularly in South and West markets,
which complimented our existing presence in North and East India.
• By adding Bell’s production capacity, we became India’s largest in
house manufacturering capacity owners.
• There was hardly any overlap between the distribution networks of Bell with
Orient, thereby signifiacantly enlarging our dealer network.
Competence
We acquired Bell Ceramics with the objective to create a company that would be larger
and stronger than the simple aggregation of the two constituents. Our results for 2011-12
indicate that our decision has been vindicated.
Revenues
• Sales grew 80.87% to 26.16 mn sq. mtr.
• Gross income increased 86.77% to Rs. 585 cr.
Profitability
• Average realisations increased 9% to Rs. 233 per sq. mtr.
• EBIDTA margin strengthened 28 basis points to 8.71%.
• Net profit grew 37.87% to Rs. 13.47 cr.
Convergence
The tile is now an established product on account of its superior value-for-money
proposition considering cost, aesthetics, durability and hygiene.
There is a growing scope for this product for good reasons: there is a progressive
consumer extension beyond the conventional mosaic, there is a growing aspiration to invest
in better homes and offices. A relatively small increase in the outlay of tile investment
can generate a significant improvement in flooring and wall tiling quality, as the use of
technology has widened product offering to designs, finishes and shades that could not
even be conceived as recent as a couple of years ago.
There is no doubt that the growth of the tile sector is linked to the growth of
infrastructure. The strong drivers for infrastructure and tile sector growth are rising
middle-class population and increasing levels of lifestyles, which in turn, drive
residential housing, shopping complexes, food business, educational institutions,
hospitals and hotels, among others.
The advent of digital printing on tiles will further expand the market size by carving
away share from other surface covering products like marble, wood, stone etc. and, at the
same time, widen design offerings to customers while reducing investment in inventory.
Capitalising
At Orient Bell, we are favourably positioned to capitalise on prospective growth due to
the following reasons:
• Although family-owned, we are a professional, merit-led enterprise, having
attracted some of the best competencies, enhanced corporate transparency and created an
institution around our core values of integrity, quality, customers, agility, partnership
and performance.
• We possess a nationwide footprint through our presence in Uttar Pradesh
(servicing North and East India), Karnataka (servicing South India) and Gujarat (servicing
West India), three of the fastest growing regions in India today.
• We possess a complement of brands and brand extensions that enhance customer
recall.
• We are unique in our industry to have a design studio in Castellon, Spain, which
is considered the mecca of international tile design and development.
• We enjoy a vibrant distribution network comprising five Orient Tile Boutiques,
over 2000 direct dealers and over 8000 sub-dealers, making it possible for us to reach
most parts of India in a cost-effective way. While the North contributes the largest chunk
to our revenue at 41%, East, West and South constitute 17%, 9% and 33% of our revenues,
respectively.
• We turned a loss-making Bell around; full year benefits of all the improvements
that were done during the year will be visible from 2012-13.
• We possess an innovative product pipeline. We filed patents for ‘Forever
Tiles’ and ‘Germ Free Tiles’, which will help open new markets. We have
demonstrated that at our company, tile functionality and aesthetics go hand-in-hand. We
are the only company in India to file a patent for ‘Germ Free Tiles’ and perhaps
the only ceramic tile Company in the world to possess two patent-pending products.
Continuation
Going ahead, we expect to reinforce our business through an aggressive business plan,
diversified offerings, balance between risk and reward, growth in India and abroad,
integrated services that differentiate us from competitors as well as investments in
capabilities that reinforce a high-performance culture.
This blueprint is expected to translate into the manufacture of digital tiles across
60-70% of our total production by end-2012-13 and entire production in two years, launch
of five more owned Orient Tile Boutiques, more than 50 smaller Orient Tile Boutiques
(OTBs) and Bell Tile Boutiques (BTBs) as well as the launch of more innovative products.
In doing so, we are poised to enhance our high-value tile sales and generate a topline
of over Rs. 700 cr., strengthen our margins and enhance value for our stakeholders.
I thank my fellow Board members for their wholehearted support and my entire workforce
for their total commitment during this challenging and exciting period. It is our
assurance that we will remain dedicated to the creation of stakeholder value.
With good wishes!
Sincerely,
Mahendra K. Daga
Chairman and Managing Director