Project Report

On
Kajaria Ceramics
for the subject,
Equity research - course code (313)
Submitted by,
Nikhil Mundada, Roll No 14011071
MBA 2nd year (III), Specialization- Finance

Index

Sr No.

Particulars

Page No.

Executive summary

Project Objectives

Industry profile

Company profile

Corporate governance

11

Financial analysis

12

Technical analysis

18

Conclusion

20

Executive summary

Kajaria Ceramics, incorporated in 1985, is the largest ceramic floor and wall tile
manufacturer in India. The company's two manufacturing facilities are located at
Sikandrabad in Uttar Pradesh and Gailpur in Rajasthan.
Kajaria Ceramics has increased its capacity from 1 mn. sq. mtrs to 46.60 mn. sq. mtrs. in
last 25 years and offers more than 1200 options in ceramic wall & floor tiles, vitrified
tiles, designer tiles and much more. These tiles come in a wide range of colours and
textures to complement bathrooms, living rooms, corridors, study rooms & kitchen, born
our of an inspired creativity of those who feel that rooms should be an extension of the
beauty reflected. With an unparalleled commitment towards quality we have strived to
adopt technologies and standards with the changing times
The company has an in-house research and development facility that focuses on
developing new designs and creating cost effective products.
Kajaria Ceramics has received various certifications such as ISO 9001 (for quality
management), ISO 14001 (environment management), OHSAS 18001 (for safety and
health management) and SA-8000 (for commitment to society). Kajaria Ceramics has
pan-India presence with a strong distribution network of about 600 dealers and over 6000
sub-dealers. Equipped with eight stock points, the company has Kajaria World
showrooms and owns 19 offices-cum-display centres.
Being largest exporter of ceramic tiles in India, Kajaria Ceramics exports its products to
over 20 countries and has an exclusive office/showroom in UAE.
The company has wide clientele namely Unitech, DLF, Parsvnath, Magarpatta, Sobha
Developers, DSK, Mantri Group,Prestige Group, Ansals, Hiranandani, Raheja
Developers, Omaxe and EMAAR-MGF are among others.
In 2010 Kajaria Ceramics entered into an agreement with Gas Authority of India Ltd.

Project objectives

To do fundamental analysis using top down approach

To do fundamental study on Kajaria Ceramics.
To do technical analysis on Kajaria Ceramics
To predict whether to buy sell or hold for company Kajaria Ceramics.

Introduction:
Industry Profile:
Ceramic Tiles today have become an integral part of home improvement. It can make a
huge difference to the way your interiors and outdoors look and express. The Indian tile
industry, despite an overall slowdown of the economy continues to grow at a healthy 15%
per annum. Investments in the last 5 years have aggregated over Rs. 5000 crores. The
overall size of the Indian ceramic tile industry is approximately Rs 18,000 crore (FY12).
The production during 2011-12 stood at approx. 600 million square meters.
The Indian tile industry is divided into organized and unorganized sector. The organized
sector comprises of approximately 14 players. The current size of the organized sector is
about Rs 7,200 Crores. The unorganized sector accounts for nearly 60% of the total
industry bearing testimony of the growth potential of this sector.
India ranks in the top 3 list of countries in terms of tile production in the world. With
proper planning and better quality control our exports (presently insignificant)
contribution can significantly increase.

Porter's five forces model :

5

1) Competitive rivalry
2)Power of suppliers
3) Power of buyers
4) Threats of substitutes
5) Threat of new entrants.
As the above factors influence industry performance, it is useful to find out about these
factors before you enter an industry or if you are wondering why your business industry
is not doing well.
Competitive Rivalry
Competitive rivalry is a good starting point to when analysing a particular industry. If
entry to an industry is easy then competitive rivalry is likely to be high. If it is easy for
customers to move to substitute products for example from coke to water then again
rivalry will be high. Generally competitive rivalry will be high if:
There is little differentiation between the products sold by competitors.
Competitors are approximately the same size of each other.
If competitors have similar strategies.
It is costly to leave the industry (exit barriers)
Power of Suppliers
6

Suppliers are also essential for the success of an organisation as they provide businesses
with the resources they need to produce their products and services. Supplier power can
come from:
If there is one or just a few suppliers that can provide the resources a business needs.
If it is expensive to move from one supplier to another (known also as switching cost)
If there is no other substitute for the product provided by the supplier.
Power of Buyers
Buyers or customers can exert influence and control over an industry in certain
circumstances. This happens when:
There is little differentiation over the product and substitutes can be found easily by
customers/buyers.
Buyers/customers are sensitive to price fluctuations.
Switching to another product is not costly for customers/buyers.
Threat of Substitutes
Are there alternative products that customers can purchase instead of yours? alternative
products that offer the same benefit as your products? The threat from substitute
(competitor) products is high when:
The price of the substitute (competitor) product falls.
It is easy for consumers to switch from one substitute product to another.
Buyers are willing to substitute products from different competitors.
Threat of New Entrant
The threat of new organisations entering the industry is high when it is easy for an
organisation to enter the industry i.e. entry barriers are low.When a new business is
deciding whether to enter an industry it will look at:

How loyal customers are to existing products,

How quickly it can achieve economy of scales

Would it have access to suppliers and

Would government legislation prevent them or encourage them to enter the

industry.

Company Profile:
Kajaria Ceramics is the largest manufacturer of ceramic/vitrified tiles in India. It has an
annual aggregate capacity of 62.10 mn. sq. meters, distributed across eight plantsSikandrabad in Uttar Pradesh, Gailpur in Rajasthan, five plants in Gujarat and one at
Vijayawada in Andhra Pradesh.

The motivating factor remains the zeal, the zeal to be the best, to be at the top and to
achieve the highest echelons of excellence. The manufacturing units are equipped with
cutting edge technology. Intense automation, robotic car application and a zero chance for
human error are just few reasons why Kajaria remains at the top in the industry.

Founded 27 years ago with a single-minded vision, to be the best in providing tile
solutions, Kajaria has since then grown stronger with its hard work, innovations and
patronage from our discerning customers.

The Indian consumers' rapidly growing appetite for style and aesthetics is the inspiration
behind every design of Kajaria Ceramics. Kajaria has today become a synonym for
quality, service and innovation - not only in the domestic market but in the international
market too.

Kajaria Ceramics has increased its capacity from 1 mn. sq. mtrs to 62.10 mn. sq. mtrs. in
last 27 years and offers more than 1500 options in ceramic wall & floor tiles, vitrified
tiles, designer tiles and much more. These tiles come in a wide range of colours and
textures to complement bathrooms, living rooms, corridors, study rooms & kitchen, born
out of an inspired creativity of those who feel that rooms should be an extension of the
beauty reflected. With an unparalleled commitment towards quality we have strived to
adopt technologies and standards with the changing times.

Be it technology, research, design or quality, Kajaria has set its sight on all these factors
adopting new production techniques in order to enhance the quality of its products. Due
to creativity and design ability of our team, our design comprises both innovation and
exclusivity.

Leveraging the two invaluable assets - the Kajaria brand and unparalleled, multi-layer
distribution network - to expand the product bouquet to cater to the growing aspirations
of the discerning Indian customers.
8

Board of Directors :
S.No

Name

Designation

Ashok Kajaria

Chairman

Ashok Kajaria

Managing Director

Dev Datt Rishi

Executive Director - Technical

12

Basant Kumar Sinha

Executive Director - Technical

Chetan Kajaria

Joint Managing Director

Rishi Kajaria

Joint Managing Director

Raj Kumar Bhargava

Non Executive Independent Director

Ram Ratan Bagri

Non Executive Independent Director

Debi Prasad Bagchi

Non Executive Independent Director

H Rathnakar Hegde

Non Executive Independent Director

10

Sandeep Singhal

Non Executive Independent Director

11

Sushmita Shekhar

Non Executive Independent Director

SWOT ANALYSIS
Strength of the company
Good Training System.
Good Organisational Climate.
High Market Share
Skilled Employees5.Strong Functional Structure6.Standard Quality Product
Weakness of the company
Low margin
High price
Sales representatives are less
There is no proper mechanism to handle the grievance of thecustomers
Opportunities for the company
Due to liberalization, demand for ceramic tiles have steppedup all over the globe.
National market through good advertisement.
Company provides better credit facility to dealers.
Company introduces promotional programs
Threats faced by the company
High competition
Liberal credit policy of other brand
Promotional programs of other brand
Complicated national market
Good replacement facility if other brands

10

Corporate Governance

The Board of Directors and the Management of Kajaria Ceramics are committed

to the enhancement of shareholder value,

Through sound business decisions, prudent financial management and high

standards of ethics throughout the organization

By ensuring transparency and professionalism in all decisions and transactions
Achieving excellence in Corporate Governance by conforming to, and exceeding
wherever possible, the prevalent mandatory guidelines on Corporate Governance
and by regularly reviewing the Board processes and the Management systems for

further improvement
The company has adopted a Code of Conduct for the members of the Board and
senior management, who have all affirmed in writing their adherence to this Code.

Financials Analysis:
11

Kajaria Ceramics
Standalone Balance Sheet

------------------- in Rs. Cr. ------------------Mar

'15

Mar '14

Mar '13

Mar '12

Mar '11

12
mths

12 mths

12 mths

12 mths

12 mths

Total Share Capital

15.89

15.12

14.72

14.72

14.72

Equity Share Capital

15.89

15.12

14.72

14.72

14.72

Share Application Money

0.00

25.00

0.00

0.00

0.00

Preference Share Capital

0.00

0.00

0.00

0.00

0.00

Reserves

706.24 477.46

342.07

267.18

207.84

Networth

722.13 517.58

356.79

281.90

222.56

Secured Loans

54.35

60.97

150.45

174.80

200.03

Unsecured Loans

25.51

0.00

20.00

0.00

0.00

Total Debt

79.86

60.97

170.45

174.80

200.03

Total Liabilities

801.99 578.55

527.24

456.70

422.59

Mar
'15

Mar '14

Mar '13

Mar '12

Mar '11

12
mths

12 mths

12 mths

12 mths

12 mths

Sources Of Funds

12

Application Of Funds
Gross Block

856.07 810.72

749.85

722.95

699.80

Less: Revaluation Reserves

0.00

0.00

0.00

0.00

Less: Accum. Depreciation

341.84 306.64

285.14

253.89

220.76

Net Block

514.23 504.08

464.71

469.06

479.04

Capital Work in Progress

3.71

11.94

6.85

1.76

0.06

Investments

79.19

44.95

37.16

12.35

9.01

Inventories

201.96 151.80

176.53

175.78

151.51

Sundry Debtors

191.78 158.32

136.58

141.01

90.90

Cash and Bank Balance

6.05

2.79

5.90

2.99

Total Current Assets

399.79 314.07

315.90

322.69

245.40

Loans and Advances

198.38 74.36

61.34

53.70

62.32

Fixed Deposits

0.00

0.00

0.00

0.00

Total CA, Loans & Advances

598.17 388.43

377.24

376.39

307.72

Deferred Credit

0.00

0.00

0.00

0.00

Current Liabilities

335.46 324.65

316.35

367.83

344.62

Provisions

57.85

42.37

35.04

28.64

Total CL & Provisions

393.31 370.84

358.72

402.87

373.26

Net Current Assets

204.86 17.59

18.52

-26.48

-65.54

Miscellaneous Expenses

0.00

0.00

0.00

0.00

Total Assets

801.99 578.56

527.24

456.69

422.57

Contingent Liabilities

308.78 225.24

116.80

150.61

178.53

Book Value (Rs)

90.87

48.49

38.31

30.25

0.00

3.95

0.00

0.00

46.19

0.00

65.17

13

Profit and loss account

Kajaria Ceramics
Standalone Profit & Loss
account

------------------- in Rs. Cr. ------------------Mar '15 Mar '14

Mar '13

Mar '12

Mar '11

12 mths 12 mths

12 mths

12 mths

12 mths

Sales Turnover

2,378.20 2,003.44

1,707.26

1,401.76

1,005.50

Excise Duty

145.06

119.06

88.97

52.23

Net Sales

2,233.14 1,877.88

1,588.20

1,312.79

953.27

Other Income

2.74

6.49

0.39

1.13

0.32

Stock Adjustments

45.56

-25.40

4.91

15.47

-3.92

Total Income

2,281.44 1,858.97

1,593.50

1,329.39

949.67

Raw Materials

1,345.39 1,104.75

898.97

724.93

550.69

Power & Fuel Cost

288.13

243.80

232.72

193.78

92.66

Employee Cost

169.20

149.83

122.13

103.66

75.81

Other Manufacturing Expenses

0.00

0.00

0.00

0.00

0.00

Selling and Admin Expenses

0.00

0.00

0.00

0.00

0.00

Miscellaneous Expenses

189.93

121.04

117.80

105.45

81.90

Income

125.56

Expenditure

14

Preoperative Exp Capitalised

0.00

Total Expenses

0.00

0.00

0.00

0.00

1,992.65 1,619.42

1,371.62

1,127.82

801.06

Mar '15 Mar '14

Mar '13

Mar '12

Mar '11

12 mths 12 mths

12 mths

12 mths

12 mths

Operating Profit

286.05

233.06

221.49

200.44

148.29

PBDIT

288.79

239.55

221.88

201.57

148.61

Interest

5.97

26.27

35.48

46.98

29.94

PBDT

282.82

213.28

186.40

154.59

118.67

Depreciation

39.38

36.49

38.36

37.08

29.50

Other Written Off

0.00

0.00

0.00

0.00

0.00

Profit Before Tax

243.44

176.79

148.04

117.51

89.17

Extra-ordinary items

0.00

0.00

0.00

0.00

0.00

PBT (Post Extra-ord Items)

243.44

176.79

148.04

117.51

89.17

Tax

75.08

60.06

47.49

36.80

28.51

Reported Net Profit

168.36

116.74

100.55

80.72

60.66

Total Value Addition

647.26

514.66

472.65

402.89

250.36

Preference Dividend

0.00

0.00

0.00

0.00

0.00

Equity Dividend

31.79

26.45

22.08

18.40

14.72

Corporate Dividend Tax

6.36

4.50

3.58

2.98

2.39

Shares in issue (lakhs)

794.69

755.84

735.84

735.84

735.84

Earning Per Share (Rs)

21.19

15.45

13.66

10.97

8.24

Equity Dividend (%)

200.00

175.00

150.00

125.00

100.00

Book Value (Rs)

90.87

65.17

48.49

38.31

30.25

Per share data (annualised)

15

Valuation:
PRICE EARNING RATIO =MARKET PRICE OF SHARE
EARNING PER SHARE
YEAR 2015 = 930 /25.04 = 37.17

37.17 is the PE of Kajaria Ceramics on date 23November 2015

16

So estimated price:
for FY 2016 =
EPS of 2016xP/E of Kajaria Ceramics
29.71 * 37.17 =Rs 1104.32

TECHNICAL ANALYSIS:
Technical Analysis is the forecasting of future financial price movements based on an
examination of past price movements. Like weather forecasting, technical analysis does
not result in absolute predictions about the future. Instead, technical analysis can
help INVESTORSanticipate what is likely to happen to prices over time. Technical
analysis uses a wide variety of charts that show price over time.
PRINCIPLES:

17

At the turn of the century, the Dow Theory laid the foundations for what was later to
become modern technical analysis. Dow Theory was not presented as one complete
amalgamation, but rather pieced together from the writings of Charles Dow over several
years. Of the many theorems put forth by Dow, three stand out:
a.

Price Discounts Everything

b.

Price Movements Are Not Totally Random

c.

What Is More Important than Why

Simple moving average (SMA)

A simple moving average is formed by computing the average (mean) price ofa security
over a specified number of periods. It places equal value on everyprice for the time span
selected. While it is possible to create moving averagesfrom the Open, the High, and the
Low data points, most moving averages arecreated using the closing price.

18

The above is a three-month chart of Kajaria Ceramics with two simple

moving averages. The red line is the shorter, 20-day moving average, while
the blue line represents the longer, 50-day moving average. Most traders will
use the cross of the short-term moving average above the longer-term
moving average to initiate a long positionand identify the start of a bullish
trend.

Conclusion:
After doing the fundamental as well as the technical analysis we can come to the
conclusion that the company is strong fundamentally, even the projection of balance sheet
and profit and loss shows that the company is going to grow as its exports are increasing
19

by 31.7% and also it model DOST is performing very well in the market. The company is
also going to launch some new products in the market. The market share of the company
grew to 28% which is good and indicates increase in sales.
The shareholders holding the shares of Kajaria Ceramics should continue to hold the
shares as the shares price is going to increase in the future. They can hold/buy it for short
term as well as for a long term because both the technical as well as are strong of the
company.

20