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business | IST

Somany Ceramics plans another hike if gas prices rise further

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Somany Ceramics has been buzzing lately, the stock is up 10 percent in the month of October itself, and in the last six months, it’s up over 100 percent. Gujarat Gas had earlier hiked its gas prices, to discuss this and more, CNBC-TV18 spoke to Abhishek Somany, MD of the company. Somany said that between 25-28 percent is the cost of gas rice for the company. In percentage terms, it would be different for different players as far as price hike is concerned. He also said that the company has been successful in passing through a substantial portion of the gas price increase so far. The company could further hike its prices if gas prices elevate further.

Somany Ceramics has been buzzing lately, the stock is up 10 percent in the month of October itself, and in the last six months, it’s up over 100 percent. The stock is currently trading at around Rs 840 on the NSE. Gujarat Gas had earlier hiked its gas prices, will that impact Somany's bottomline, to discuss this and more, CNBC-TV18 spoke to Abhishek Somany, MD of the company.
On gas price increase, Somany said, “The gas prices have gone up across the board. The entire Morbi sector which is about 1000 plants have also decided to increase prices so from that point of view, there has already been a price increase this week. I believe there is another news of a further price increase in the next 15-20 days. As and when that happens, we would increase prices again. Currently, it doesn’t seem to be an issue because it being passed on.”
He added, “Mind you, tiles is the only sector in the last 10 years in building materials, where the prices have gone down very, very substantially. So, I think it is a great time for us to correct our prices and move up the prices and the market has absorbed it.”
On cost of gas, Somany said, “Between 25 and 28 percent of our cost is the gas price. So the industry has increased prices by approximately Rs 2-3 a square foot. So in percentage terms for different players, it would be different. The gas prices, whatever the increase has been, almost a reasonable portion has been passed on and that is an industry phenomenon.”
On capacity utilization, Somany said, “We are at 100 percent utilization and that continues to be at 100 percent even though the prices have gone up. So clearly the demand is back, at least for the brand-new players. Even for the industry, it is good news because the real estate sector has really picked up. I think there is going to be a lot of launches so a lot of the capacity would get absorbed, servicing the real estate sector which is extremely robust after a good 10 year lag.”
He added, “As far as the renovation market is concerned, unlike paint, tile is not a very large renovation market. Approximately 18 to 20 percent of it is renovation otherwise it is new application.”
On SREI exposure, he said, “It was a Rs 18 crore exposure and that was something which we had not written off, we have provided for it and if there is a resolution then great, we would reverse it.”
For full management commentary, watch the video.