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Salient features of the IPO:

* Exxaro Tiles Ltd. (ETL), is coming up with an IPO to raise up to Rs. 161cr, which opens on 4th Aug. and closes on 6th Aug. 2021. The price band is Rs. 118 - 120 per share.

* The issue is a combination of fresh and OFS. The company will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, Rs. 50cr will be utilized to prepay/repay certain borrowings and another Rs. 45cr will be used to fund the working capital requirement of the company.

Key competitive strengths:

* State-of-the-art manufacturing facilities with strong focus on design and quality

* Widespread sales and dealers network 

* Wide product portfolio comprising of 1,000+ designs

* Experienced management and dedicated employee base

Risk and concerns:

* Subdued economic activities especially, real estate sector

* Unfavorable movements in the raw material prices

* Working capital intensive business

* Rise in interest rates

* Competition

Below are a few key observations of the issue:

* The size of domestic tile sector is estimated at Rs. 35,000-40,000cr in 2019, with exports comprising of close to 35%. Moreover, the sector is largely unorganized with over 55% contribution from the unorganized players. In 2020, the sector witnessed a contraction of around 10-12%, mainly due to the Covid-19 induced lockdown and restrictions.

* Aided by various government initiatives and revival in economic activities across the globe, the sector is expected to report a production growth of 14% and 10% in 2021 and 2022, respectively. With higher demand from the housing segment, consumption is likely to increase by 20% and 4% in the next two years.

* ETL is engaged in the manufacturing and marketing of vitrified tiles, which is mainly used for flooring applications. The company mainly deals into two categories, i.e. double charges vitrified tiles and glazed vitrified tiles. Currently, it has 1,000+ designs in the product basket, which are offered mainly in six different sizes and marketed under the brand name “Exxaro”. According to the company, its well-known brand series includes Topaz, Galaxy, High Gloss series etc.

* As of 28th Jul. 2021, ETL had more than 2,000 registered dealers, spread across 24 states/union territories in India. Its major focus sates are Gujarat, Karnataka, Maharashtra and Tamil Nadu, from where it generates major portion of business. Going forward, the company is looking to expands in states like Arunachal Pradesh, Uttarakhand and Puducherry. Internationally, ETL supplies products to over 12 countries including Poland, UAE, Italy, Bosnia etc. In FY21, the company generated 86.1% and 13.9% of the business from the domestic and overseas operations, respectively.

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