Cera Sanitaryware Ltd Management Discussions.

Your Company continued to be one of the fastest growing home solutions brands this year too but due to economic slowdown, topline has declined close to 10%.

Your Company has taken several steps to continue its growth in the coming years as well.

Your Company continues to grow due to:

1. Right product mix:

Your Company has been constantly launching new designs in Sanitaryware, Faucets and Tiles. The new designs are indigenously developed by in-house teams, after feedback from the market. This helps your Company to be seen as leader in product offerings.

2. Use of high tech in manufacturing:

Your Company has been an innovator in the use of technology and automation in design and process. Indigenously developed 3D printing, robotic glazing, etc. are just a couple of such innovations. Recently your Company also inducted high pressure casting system to manufacture wall hung WCs.

3. Cutting edge in designs:

Your Company takes constant feedback from the market and based on such feedbacks improvements in existing designs and introduction of new designs are planned.

4. Constant brand promotion:

Your Company has always emphasized on continuous promotional activities to stay on top of mind of its customers. The newly produced television commercials were aired on news channels all over India and also on the hugely popular stand up comedy show, on Sony TV. Apart from mass advertising through digital, television and print media, your Company also concentrates on in-shop branding and product display in dealers and retailers showrooms.

5. Constant liaison:

Your Company constantly liaised with influencers like architects and interior designers. In addition to this, regular liaison was done with institutional customers like developers.

6. Available for all segments:

Your Company offers products for all segments - starting with Isea for exclusive luxury seekers, Senator for discerning premium buyers, CERA for mid & upper segment and Jeet forthose seeking affordable products.

7. Wide distribution:

Your Companys distribution network of over 14,000, including direct dealers and retailers, is one of key strengths. Your Company reaches almost every town, small or big, in thecountry.

8. CERA Care:

Your Companys after - sales team of technicians, a 24 hour toll free call centre, and timely on site service from the technicians to individual customers, has been one of its key strengths in generating customer loyalty and helping it garner word of mouth publicity.

9. Company Display Centres:

For providing touch and feel experience to customers, the Company - managed large format CERA Style Studios in select cities, while dealers own and operate CERA Style Gallerys and CERA Tile Galleries. In case of retailers owned customer touch points, CERA Style Centres and CERA Tile Centres provide customers not only an insight of your Companys products, but also a delightful shopping experience.

10. Manpower Training:

Your Company constantly imparts training to not only itsown sales and service teams, but also to its dealers and sub-dealers salesmen.

a) Industry Structure and Developments

The industry structure remains unchanged. Your Companys brand pyramid is effectively present in all segments - from affordable to luxury.

b) Opportunities and Threats

The governments emphasis on affordable housing has provided a demand boost in the segment and the benefits have been accruing to the Company. Implementation of GST also helps your Company as it provides a level playing field in price sensitive products.

Your Companys four - decades of brand promotion, distribution strength and product quality and consumer loyalty have ensured its market position.

c) Outlook

Your Company has been a preferred partner of CREDAI (Confederation of Real Estate Developers Associations of India), the apex body of developers, for the last seven years. Your Company also works closely with influencers and their associations like IIA (Indian Institute of Architects), IIID (Institute of Indian Interior Designers) and IPA (Indian Plumbing Association).

d) Risks and Concerns

Any drastic change in Government policy may affect your Company.

e) Internal Control Systems and their adequacy

The Company has an adequate system of internal financial controls with reference to the financial statements and also relating to the purchase of stores, raw materials, plant & machineries, equipment and various components and for the sale of goods commensurate with the size of the Company and the nature of business.

The system of internal control of the Company is adequate keeping in mind the size and complexity of your Companys business. Systems are regularly reviewed to ensure effectiveness.

The internal auditors monitor and evaluate the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies. Based on the report on the internal audit function, necessary corrective actions in the respective areas are taken and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the audit committee of the board.

f) Key Financial Ratios: (in times / %)

Sr. No. Ratio 2019-20 2018-19
1. Debtors Turnover 5.49 5.60
2. Inventory Turnover 3.05 3.80
3. Interest Coverage Ratio 32.94 56.64
Reduced due to implementation of Ind AS 116 -Leases, applicable from 01.04.2019 (Refer note no.3.12 and 43 )
4. Current Ratio 2.52 2.21
5. Debt Equity Ratio 0.46 0.56
6. Operating Profit Margin % 11.99% 13.65%
7. Net Profit Margin % 9.59% 8.56%
8. Return on Net Worth % 15.00% 16.43%

g) Financial performance with respect to operational performance is discussed in the main part of the Report.

h) Material Developments in Human Resources, Industrial Relations, Environment, Health & Safety

Faced with the shortage of quality manpower, the thrust of your Company has been on talent improvement through training programmes.

Your Company continues to invest in training and development of its employees and has been organizing various training programmes from time to time. CERAs manpower strength as on March 31, 2020 stands at 2544.

The Company is ISO 9001, 14001 and BS 18001 certified. Your Company is also a member of Indian Green Building Council (IGBC), promoted by Confederation of Indian Industry (CII).

Ahmedabad. Vikram Somany
30th June, 2020 Chairman and Managing Director
(DIN : 00048827)