MANAGEMENT DISCUSSION AND ANALYSIS REPORT FORMING PART OF THE DIRECTORS' REPORT INDUSTRY STRUCTURE AND DEVELOPMENT The Ceramic and Vitrified industry is largely dependent on Indian Real estate Development. Ceramic and Vitrified being the major input only in building and construction, we can conclude that once the building and development increase there is a huge demand for Ceramic and Vitrified tiles. The Current scenarios in India of real estate is booming because of the Central Government new plans of establishing smart cities in India and also the relaxed interest rates for real estate development. Simultaneously a situation of cut throat competition, margin squeezing to capture market caused serious setback to the business of tiles manufacturers in the organized section. Added to this many small and unorganized sector have taken up production of tiles and the number of such small units are increasing day by day. Murudeshwar Ceramics Limited started commercial production on 01.05.1988 with an installed capacity of 12,500 tons per annum (TPA) of Ceramic tiles at Hubli in Northern Karnataka. The Company undertook a major product diversification into manufacture of Vitrified tiles in the year 1993. The Vitrified tiles project was completed in a very short time and the production commenced on 01.03.1994. On considerations of quality, value addition, aesthetic looks and endurance, the said Vitrified tiles under the Brand Name of "NAVEEN DIAMONTILE" became very popular in domestic markets in a very short time. Encouraged by the response for Vitrified tiles in the Indian market, the company has established one more Vitrified tile manufacturing unit in Karaikal with an initial capacity of 6,000 Sq.mtrs. per day which commenced its commercial production on 1st day of October 2003. Simultaneously the capacity expansion also was carried on side by side. On cost considerations the Company stopped production of Ceramic tiles in August 2002. But later on, as a support product, manufacturing of Ceramic tiles was once again started with an initial capacity of 8,000 sq.mtrs per day at Hubli unit. The new Ceramic tile manufacturing unit became operational from January 2006 and the expansion project was undertaken simultaneously. New varieties of tiles in aesthetic colours, shades, body matrix and in different dimensions are being constantly added on in the product mix. On cost considerations, the Kilns in Hubli unit were modified to be fueled by Coal Gas. The Coal gasification was completed in the year 2009. As on 2012-13 the Hubli Plant is under conversion process from Coal Gas to Natural Gas. OPPORTUNITIES The Company is at brsent producing only Vitrified tiles. The multiple advantages of Vitrified tiles lies in its strength, endurance, elegance and variety in shades and designs. These qualities have made Vitrified tiles increase its popularity and customer base year after year. The Central Government has announced the implementation guidelines for the Smart Cities in India. We being in tiles industry can encash this opportunity by producing latest design tiles. Vitrified industry has lot of opportunities to grow because of the new housing policy introduced by financial Institution and Banks with lower interest rates in order to boom the housing loans. All this opportunities increase the tile market in India. Taking advantage of the situation, we endeavour our best to achieve optimum production in our Karaikal plant, mainly concentrating on high value items and tiles of bigger size. THREATS Cheaper imported Vitrified tiles is flooding the Indian markets. The demand for tiles has resulted in large number of smaller to medium size new industries mushrooming in various parts of the Country. Frequent increase in cost of power and fuel not only accounts for increase in direct cost but also result in increase of indirect costs like transportation and cost of other inputs. Ceramic tiles industry in India is suffering from low margin and profitability. Non availability of skilled labour and increased rate of interest on borrowing is also major threat to the industries. SEGMENT-WISE PERFORMANCE AND DISCUSSION ON FINANCIAL/OPERATIONAL PERFORMANCE : As may be seen from the above statement, production of Ceramic tiles has been reduced by 99.42% and Vitrified tiles production by 0.58% and Granite Division has not produced any slabs during the year. Overall sales revenue has reduced by 4.30% which is Rs.14,655.86 lakhs for the year under report. With the result the Company has incurred a profit of Rs.171.90 lakhs for the year under report compared to profit of Rs.116.80 lakhs for the brvious year. OUT-LOOK The Company has also outsources manufacturing of tiles in the Company's brand name. These new varieties are well accepted by the market. The R & D team is work hard to invent new product range, designs and sophisticated colors. The bigger size tiles such as 800mm X 800mm and Nano series Vitrified tiles of 600mm X 600mm has captured the market. The Company has also has good sales of Glazed Vitrified Tiles and Digital Vitrified Tiles of 600mm X 600mm. RISKS AND CONCERNS During the year under report the Company has stopped producing Ceramic Tiles and concentrating more on business in Vitrified tiles for time being. Every raise in cost of LPG or Diesel will have its both direct and indirect influence on the costing. Further the cost of borrowing is also increasing day by day, this in turn will increase the cost of borrowing. The major concern of the Company is delay by the Government in installation of Natural Gas at Hubli Unit. The foreign brands are found to have managed to cross the barriers and gained entry into the domestic market at cheaper rates. Even though Vitrified tiles produced by the Company is of higher quality, still such low cost foreign tiles will impair the balance of pricing on consideration of price factor atleast for the section of society for which cost is the criteria. INTERNAL CONTROL SYSTEMS AND ADEQUACY Day to day administration is looked after by the Managing Director under supervision, control and guidance of the Executive Committee of Directors headed by Dr. R N Shetty as Chairman. The Company has a separate internal audit department with experienced staff, placed under the supervision and control of the Vice President (Finance) and CFO. The system control of the Company is functioning efficiently with most of the branches electronically connected with the Head Office. The organizational set up and the system control have been efficient. The internal control procedures are adequate and efficient. MATERIAL DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATIONS As at the end of the year the Company had 424 employees on the rolls. The Company continued to engage services of senior level personnel even at branches level to ensure better control and coordination. Management also continues to give due importance for Manpower training and motivation. Customer care and Customer satisfaction are being ensured with meticulous care. The understanding between the Management and workers continues to be cordial. CAUTION Opportunities, threats, outlook, forecasts in any form and manner, made in this section or any other sections of this Annual Report are purely based on management perceptions made on situations as could be reasonably foreseen under the existing conditions. But various factors viz., capacities elsewhere, technology related matters, inflationary trends, unexpected recession and changes in policies of the Government etc., may impair such perceptions and adversely impact on calculations of the management. for and on behalf of the Board of Directors Dr. R.N. SHETTY Chairman (DIN 00038810) Place : Bengaluru Date : July 31, 2015 |