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About the Company

Incorporated in 2008, Exxaro Tiles Ltd is engaged in manufacturing and marketing vitrified tiles used majorly for flooring solutions. Their business operations are broadly divided into two product categories i) Double charged vitrified tiles (DCVT) and Glazed Vitrified Tiles (GVT). It supplies products mainly in 6 sizes and has 1000+ designs in their product basket, which are marketed under the brand “Exxaro”. Its brand series namely Topaz Series, Galaxy Series, High Gloss Series, etc. are well-known in the market.

The company has two manufacturing plants, one at Talod (two lines) and Padra (one line) with a combined installed production capacity of 1,32,00,000 sq. mt. per annum. Further, it has more than 2,000 registered dealers and supplies products to large infrastructure-related projects including residential, commercial, educational institutions, hotels, hospitals, government, religious institutions, builders/developers, etc. They are present pan India and also have international reach as it supplies products in over 12 countries including Poland, UAE, Italy, Bosnia, etc.

Objects of the Issue

* To make repayment or prepayment of secured borrowings availed by the company;

* To meet working capital requirements;

* General corporate purposes

Valuation

The Indian ceramic tiles industry is highly competitive because of the limited product differentiation and largely has an unorganized nature of the business with many small-size family-owned entities. However, it enjoys some inherent advantages such as abundant raw material from indigenous sources, advanced infrastructure and low labour costs. The industry growth in FY20 remained subdued due to Covid-19-induced lockdown. However, the sector is expected to grow at a CAGR of 12-14% largely driven by a pickup in construction activity, government schemes for housing & infrastructure, shift from traditional to versatile products and increasing global demand for exports. This will benefit organized players to gain revenue as well as market share

Over the years, Exxaro Tiles have gradually diversified and expanded from a manufacturer of frit (one of the raw materials) to manufacturing vitrified tiles which have helped the company to grow its business and cater to different customer needs. Along with having a strong product portfolio and large dealer network, the company’s focus on innovation and quality products aided to gain a higher market share. Going forward, the company’s strategy is to enhance brand visibility, strengthen product portfolio, expand dealer network in India as well as globally. Besides, they plan to set up their gas station for internal gas consumption and optimize its power & fuel costs (which forms a significant portion i.e. 29-30% of revenue). This will help the company to reduce external dependency as well as improve operating margins. On the financial front, the company’s performance has been stable. We have a positive view on the company from the long term perspective.

Key risks:

* i) Highly depend on the real estate and infrastructure sector.

* ii) Labour intensive

* iii) Requires a significant amount of working capital.

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