Varmora Granito Limited (Avoid)

Highlights

Varmora Granito Limited (VGL) incorporated in 2003, is engaged in manufacturing and marketing ceramic and vitrified tiles, focusing on premium, technology-driven products including Glazed Vitrified Tiles (GVT), Polished Vitrified Tiles (PVT) and ceramic tiles.

Beyond its core tiles business, VGL offers bathware and adhesives as ancillary products. Its bathware portfolio includes faucets, showers, sanitary ware and other bathroom accessories, while its adhesive range includes tile adhesives, grout, sealants, waterproofing products and related application tools.

VGL operates through a wide multi-channel distribution network comprising B2C retails channels which includes 305 exclusive brand outlets (EBOs) and 2,758 multi-brand outlets (MBOs) across India and overseas, along with B2B sales to builders, contractors, developers and government entities.

Out of the total proceeds of Rs. 7,080 mn, Rs. 2,450 mn would go towards repayment/ pre-payment, in full or in part, of all or certain outstanding borrowings and accrued interest, and remaining Rs. 750 mn would go towards funding general corporate purposes.  Additionally, Rs 3,880 mn would go towards investor selling shareholder of the company.

Key Highlights                        

• India’s domestic tiles market was valued at Rs. 531.0 bn in FY25 and is expected to reach Rs. 765.2 bn by FY30, at 8.4 pct CAGR during FY26-30. GVT is the fastest-growing tile category, with its market value growing at a 10.7 pct CAGR during FY19-25, compared with 5.6 pct for ceramic tiles and 4.0 pct for PVT. Its share of the Indian tile industry stood at 36.5 pct in FY25 and is expected to increase to 45.5 pct by FY30.

• VGL operates eight in-house manufacturing facilities, which provides greater control over product quality & innovation, shorten timelines from development to launch and improves margins. Additionally, for high-volume, low-complexity products such as ceramic and PVT tiles, VGL collaborate with third-party contract manufacturers to leverage their specialized capabilities and economies of scale, enabling to meet large volumes without compromising quality or delivery timelines.
• VGL strengthened its product portfolio by launching marble-like tiles across four surfaces through its technology partnership with SACMI. VGL was the first in Asia to implement SACMI’s V-NATURE BLOCK IST technology, enabling it to produce tiles with a marble-like appearance while retaining the durability, stain resistance and low-maintenance benefits of vitrified tiles. This technology will support entry into marble replacement market catering to both cost-conscious and quality-focused consumers
• VGL has agreed to acquire a 51 pct stake in Allemby, a tile manufacturer in Assam, to establish a greenfield manufacturing facility in Tezpur with an expected capacity of 6.40 mn sq. m. of GVT tiles annually. The expansion is aimed to enhance access to the Eastern and North-eastern Indian markets and strengthen VGL’s competitive positive.
• VGL’s key growth strategies include (i) To expand reach in high growth emerging markets while consolidating leadership in its core markets, (ii) strategic acquisition and expansion into East and Northeast India, (iii expand distribution network with focus on EBOs, (iv) accelerate investment in brand-building, (v) focus on technology-driven product innovation and premiumization, (vi) expand in bathware, adhesives and other adjacencies, (vii) pursue inorganic growth opportunities, and (viii) focus on ESG and adoption of enhanced sustainable practices.
• The sales of the company have grown by 2.65 pct CAGR over FY24-26 and EBITDA/profit has grown 21.42 pct CAGR/10.78 pct CAGR over same year. In FY26 the company reported sales of Rs. 15,125 mn rose by 4.60 pct YoY. EBITDA of the company rose by 11.75 pct YoY to Rs. 2,216 mn. In FY26 the company posted profit of Rs. 551 mn, which increased by 78.90 pct YoY.

Key Risk

• VGL’s all manufacturing facilities are located in morbi region, any disruption in the region could adversely affect the business and results of operations.
• VGL is significantly dependent on the performance of the real estate and infrastructure industries, any negative trend in these industries could adversely affect demand or its product.
• VGL is engaged with third party contract manufacturers and are engaged on a non-exclusive basis, any disruption or non-performance by these third parties may affect its business and results of operations.

Financial Performance

Source: – RHP.

Peer Comparison based on FY26 Financials.

Source: – RHP.

Valuation

Varmora Granito Limited (VGL) is well-positioned to capture these tailwinds of growth in the tiles market, premiumization of customer demand and shift towards branded players. Their diverse product offerings with key focus on premium products (such as GVT), continued innovation, pan India distribution channels, effective sales and marketing initiatives, advanced manufacturing capabilities and robust governance mechanisms enable them to leverage these industry trends to maintain and enhance competitive market position and growth. At the upper end of the price band of Rs. 148, the issue is priced at an PE of 60.7x its FY26 post issue capital. The issue appears to be fully priced. One can Avoid this issue.

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