Mr.

Vidush Somany, Executive Director, Cera Sanitaryware Limited (CSL)

Cera Sanitaryware Limited (CSL) is one of the pioneers in the Sanitaryware segment in India. CSL was founded in the year 1980 as a division of Madhusudan Industries Limited. Realizing the future growth prospects of this division, in the year 2001, management thought it worthwhile to have independent identity by de-merging and transferring the entire business to a new company. The new company was named Cera Sanitaryware Limited It is now the third largest company in the organised sector with over 20% market share. It is also the largest and only listed company in pure sanitaryware space. CSL is the first sanitaryware company to use natural gas and the first Indian sanitaryware company to have ISO 9002 and ISO 14001 certifications for its products. Vidush Somany, Executive Director, Cera Sanitaryware, graduated in Bachelor of Business Administration from Franklin & Marshal College - U S A. UK. He, along with SC Kothari, is actively involved in expanding the organization in a multi-throng manner thereby giving the organization a perfect diversification as it grows. Vidush Somany compliments the vision set by Vikram Somany to make Cera Sanitaryware Limited the most successful home solutions company in the coming years. Replying to Anil Mascarenhas of India Infoline, Vidush Somany says, "Cera is confident of maintaining 20% OPM in spite of the competition." Quality and design appear to be changing the dynamics of the business. What trends are you witnessing in the sanitaryware market? Indian Sanitaryware industry is witnessing a boom growing at a 12-15% growth for the last couple of years. There are generally mixed forecasts regarding the potential for the housing market, an essential driver of replacement and new bathrooms. The baths and sanitaryware market will continue to grow over the period 2006 to 2010. The new trend is that consumer?s tend to associate themselves with quality and well designed products. This has also increased the demand in the organized sanitary ware products. Besides the housing market, what other triggers do you foresee? Do you anticipate any slowdown? The essential driver is the housing market. In the next decade, India is expected to be one of the world's fastest growing countries for sanitaryware consumption. The Government?s impetus to improve hygiene and sanitation is likely to increase the demand-supply gap. Seeing this as a challenge, we think the subject of toilet is more important than other social challenges like literacy, poverty, education and employment. Think of government?s initiative where it built 650,000 public toilets with NGOs help in 25 years India, for people who could not afford building toilets. There is tremendous potential for the sanitaryware industry in India. A question of slowdown does not appear in the near future. What is your current market share in each segment? What efforts are you making to improve the same? Cera enjoys a healthy 18-20% market share in the organized sector. Cera believes in delivering the best to the consumer. With the ongoing R & D we plan to bring the latest user-friendly designs to the market. This, we believe, will make our brand strong with the consumer. Our Emphasis on communication is made to make the consumer realize that Cera is a household product. Brief us on your product mix and new marketing strategies? Cera has a mix of products that would cater to all needs of consumer. Cera has top end products like the Senator Collection, the Shower Temples with Jacuzzi features in them. Cera also has the Premium Collection focused at middle end users and the Regular collection which includes the Indian EWCs as well as European EWCs for the lower end customers. In Bath Fittings, the Single Lever Bath fittings are for the elite, followed by the Quarter turn and the half turn fittings meant for people looking for more economical range. What are some of the important tie-ups you have at present? The recent Strategic Marketing tie-up with the Sanitec group, manufacturer of "Pozzi-Ginori" a designer range sanitaryware is an opportunity for Cera to cater the niche target audience, the top range of Pozzi-Ginnori products. How much does this business contribute to your revenues and profitability? It will still be too early to discuss the revenues and profitability of Pozzi. How many Cera Bath Studios do you have? Any major expansion here? Starting in the 2005, CERA Bath studios are located at 8 centres namely, Bangalore, Chandigarh,

Kolkata, Cochin and Hyderabad, Calcutta, Lucknow & Mumbai. Cera also has plans of opening Cera Bath Studio, in all the other Metros and Big Cities, in the near future. Also are plans where Cera will join hands with their esteemed dealers in setting up our Bath Studios in all the cities and towns. You have the twin-flush model. To what extent does it reduce the water consumption? Do you see new regulations coming up which could boost the demand for such products? We have twin flush models that on an average consume only 4 litres of water, against the others which can use up to 6 litres every flush. That quantifies to 50% of water saving. With water scarcity in urban areas, there are a lot of initiatives that have already been taken by Metros like Mumbai. Others will have to soon follow in order to save water. Comment on your premium vitrified floor tiles. Which other segments do you plan to enter? With the launch of tiles poised to take off any time, eventually, Cera would be a complete home solution provider Company. Cera aims to become a complete bathroom solution provider in the next two years. Setting a course on this direction, Cera entered in the Bath Fittings segment last year. We are still in the process of pursuing various options, so it would be too early to comment on what are the other areas or segments we are focusing. Promoters? holding is around 54.12%. Any plans to dilute the same? What are your capex plans and how would they be funded? There are no definite plans on the promoter?s holdings. The Capital expenditure for the year was approximatelyRs.300mn. This was partly funded by the way of internal accruals and partly financed by Banks. Brief us about your plants and capacity. What is the current utilization? To what extent can you scale capacity in your existing units? Cera is the fastest growing sanitaryware company in India. Starting with an initial capacity of 3.05 lakhs pieces per year, Cera?s ongoing expansion process that would be complete in July 2007, would increase the production to 2mn pieces and 2.80mn pieces by the end of next year, making Cera the only organization to have the distinction of "Single largest Production Capacity" at one place. Your current OPM is close to 20%. In the wake of competition catching up are you confident of increasing or maintaining the same? What is the trading goods component in your sales. How are the margins here? With the increase in production after the expansion plans and the positive industry growth Cera is confident of maintaining 20% OPM in spite of the competition. Trading goods accounted to approximately 40% of the total sales in the year ended 2006-2007 What are the entry barriers? What about the unorganized market? The entry barriers for organized sector are-huge manpower requirements, since sanitaryware manufacturing is highly labour intensive, non-availability of standardized raw-materials (every manufacturer has to source raw materials from mines and have its own quality assurance systems), low market size (the market currently is estimated to be just around Rs7bn) and innumerable number of unorganized sector players who thrive partly on government policy of levy-exemption and partly on evasion of taxes. Organised sector currently contributed nearly 50% of volume sales in India. However, as quality consciousness and brand-awareness are increasing among consumers, over a period of time, the unorganized sector is likely to go up considerably. What edge do you have as far as technology is concerned? How difficult is it for others to get hold of such technology? CERA uses technology from Germany, Italy, UK and Australia, adapted to suit Indian conditions. Though it is not difficult for others to get such technology, it is the adaptation of such technology making it conducive for Indian workforce and raw materials that has given an edge to CERA over others. With other companies also using natural gas for kilns, what advantage do you enjoy? Direct connection of natural gas from GAIL has certainly helped CERA in better margins. However, this is only one of the several advantages. CERA has captive power plant using natural gas. CERA also has wind turbines. Thus CERA is not dependent on government electricity board for its power requirements. Others will take a long time to catch up. Further, CERA is getting natural gas on very cheap rate directly from the ONGC oil fields, which will continue to be cheap, wherein others are getting imported LNG which is three times costlier than what we are getting. What is the demand in the replacement market? Currently, the replacement market is estimated to be just 10% of the total market. However, as the

market matures, it is likely to go up exponentially. Brief us on your international presence and exports? Any plans to set up shop abroad? CERA has exported, in the past, to developed countries like the US, huge quantities. However, as the domestic market was giving better realization, CERA has to curtail its exports. Currently, CERA has presence in several markets like Gulf, New Zealand, Greece, South Africa, etc. With the production going up in the coming months, CERA is now looking at export market more seriously and talks are on with certain parties for OE supplies. Also we do have definite plans, but it is too early now to divulge the details. Your dividend policy? The company has been giving dividends all through these years. It has increased from 15% in 20032004 to 22% in 2006-2007. We hope to keep the trend going. Your message to shareholders? The company is sure of surging ahead in the coming years as, and will, as always protect the shareholders interest.