Scuttlebutt on Indian tile industry

Scuttlebutt is an investment technique which was popularized by Philip Fisher in his book of “Common Stocks and Uncommon Profits” and includes all qualitative information of enquiring and asking questions to various people especially to those involved in a particular industry to get the insights of the industry. Suppliers, dealers and customers are the main source of such information. The purpose of scuttlebutt is to have an advantage in picking stocks from this industry by knowing the market condition.

[notification type=”info”]This article details about the scuttlebutt on tile industry prepared and examined by Samsan Simon and Neha Jain (students of MBA-FA) under the guidance of Prof Jatin Khemani.[/notification]

Jagatpuri market, is the largest market for tiles in Delhi/NCR. There are many shops which sell tiles, marbles and Granites. Marble is named by their place of origination and known by different names like pink bedasur, chima pink, morbid, R black, south black and sangh mar mar is known as the best marble and customers buy mainly mandir marbles and purchase is mainly depend on budget, age, preferences and durability. Sales of marbles and granites is less in winter compared to summer The standard selling size is 4*3, 4*4, 24”24 and there are no particular brands for marbles. Marble comes mainly from Rajasthan and Andhra Pradesh. There are marble and granite tiles available but because of very few designs and maintenance cost, marbletiles are not preferred by customers.

The next focus was on the local tiles. In local tiles there is no categorization. The dealers say that these tiles have a decent sales and profit margin, easily available and no advertising is required. The dealer says if people like the product they will buy it and there is also high bargaining power for customers but because there are many shops it is very difficult to retain customers.

Then there are imported tiles available in the market. The dealer says the company focuses on designs and all types of customer come to their shop. Wall tiles are mainly sold and it is rapidly growing market. High prices deter customers and the tiles are the best and made with the help of best designers in the industry. Their tiles have complete unique designs and so local tiles cannot copy their designs and their tiles designs keep on updating on a regular basis. The 4*6 feet tiles is the best seller.

Our next focus was the branded tiles like kajaria, somany, and orient. The dealers say company spends a lot on advertising. Kajaria has the largest market share in branded tile market because they are the oldest in the branded market and spent a lot on advertising and very unique designs and their shops are visited mainly by rich people.

The next we went to other branded tiles dealer of orient (listed in NSE and BSE) to know how their company is pushing sales through dealers and how they are competing with the brands like Kajaria and  we came across some interesting facts like there are so many policies available for dealer. There are margin at various level of sales and dealer moves up with every increase in sales. 2*2, 12*18, 12*24 are best-selling sizes. The customer look for designs and budget and mainly wall tiles are sold. There is vending problem in tiles. Sales are mainly depend on real estate sector and availability of labour and advertising is the next main factor.Porcelain tiles have more sales and the dealer says the company needs to customize the design and price.

Conclusions on the basis on scuttlebutt were that tiles are of various types like porcelain, vitrified, ceramic and digital tiles.Tiles are easy to fix, requires low maintenance, has a large variety of sizes and designs, used for residential and commercial purposes and profit margin are higher in non-branded tiles. Small tiles are cheap and easy to fix compared to large tiles which are costly. The important factors to look for in the tile industry are designs, customer tastes and preferences, labour availability, price, growth of real estate sector and construction activities and advertising. Labour forms a very important part in determining tile demand because in short winter days, labour charge more in comparison to other seasons due to which many customers defer their tile consumption.Tiles dealers also provide their customers with some of their labour contractors at cheap rates which would otherwise available at higher prices. The growth of real estate sector holds the key for growth in tile industry.

[notification type=”info”]Written by Samsan Simon and Neha Jain (Students of MBA FA 2014-16)
(International college of Financial Planning)[/notification]

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