Exxaro Tiles Limited: IPO Review

Exxaro Tiles Limited incorporated in 2008 is a Gujarat-based company engaged in manufacturing and marketing of vitrified tiles used majorly for flooring solutions. They have two product types i) Double Charge Vitrified Tiles and ii) Glazed Vitrified Tiles. The company supplies products mainly in 6 sizes, and has more than 1,000 of designs in product basket.

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Domestically, it has PAN India presence in 27 states/ union territories and internationally it supplies products in over 13 countries including Poland, UAE, Italy, Bosnia etc. It has 2 state-of-the-art manufacturing facilities in Padra and Talod. It also has 6 display centers in 6 cities and 2 marketing offices in Delhi and Morbi.

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Promoters & Shareholding:

Mr. Mukeshkumar Patel, Mr. Kirankumar Patel, Mr. Dineshbhai Patel, and Mr. Rameshbhai Patel are the company promoter with pre issue holding of 56.09%.

Public Issue Details:

Offer for sale: Fresh issue of approx. 11,186,000 equity shares of Rs. 10 aggregating up to Rs. 134.23 Cr and OFS of approx. 2,238,000 equity shares aggregating up to Rs. 26.86 Cr.

Total IPO Size: Rs. 161.09 Cr.

Price band: Rs. 118 – Rs. 120.

Objective: For repayment and/or prepayment of company’s borrowings fully or partially, working capital requirements and for general corporate purposes.

Bid qty: minimum of 125 shares (1 lot) for Rs. 1500 and maximum of 13 lots.

Offer period: 4th Aug 2021 – 6th Aug 2021.

Date of listing: 17th Aug 2021.

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Pros:

  • Strong PAN India presence in 27 states of India.
  • They have more than 2000 registered dealers.
  • Strong International presence exporting to more than 13 countries
  • Largest plant of glazed vitrified tiles in India.
  • Widespread sales and dealership networks.

Cons:

  • Covid-19 lockdowns has had/will have significant impact on the company’s business.
  • The company has some unsecured loans which can be recalled by the lender anytime.
  • It does not have long term agreements with its customers.

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Subscribe or avoid?

The Indian Ceramic Tiles industry is highly fragmented in nature, with many small-size family- owned entities. The size of the Indian tiles industry is estimated to be around Rs 35,000 to Rs 40,000 crores in 2019 with exports comprising of close to 35% of the sector revenue. Indian Ceramic tiles industry expected to grow at a healthy rate of around 12% to 14% in the next two years even though the global tile industry has declined last year, which is expected to have positive impact on the company and its business.

On the financial side, the company has reported revenue of Rs. 259.85 Cr, Rs. 243.96 Cr and Rs. 244 Cr in the FY21, FY20 and FY19 respectively and net profit of Rs. 15.22 Cr, Rs. 11.26 Cr and Rs. 8.92 Cr in the FY21, FY20 and FY19 respectively. The average annual revenue growth from the last 3 years has been around 3%.

Looking at the valuation perspective, for the last 3 years average EPS is around 3.83, the P/E ratio is 31x. On the upper price band of Rs 120 and EPS of Rs 4.54 for FY21, the P/E ratio works out to be 26x. Hence, the PE range is 26x to 31x at the upper price band. There are listed peers like Orient Bell trading at P/E 61x (Highest) and Asian Granito trading at P/E 9.9x (Lowest) and industry average P/E of 42.7x. Based on super earnings of FY21, the issue is fully priced. Considering all the above factors and much better IPOs floating, we recommend “AVOID” this IPO.

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Disclaimer:

This article should not be construed as an investment advise, please consult your Investment Adviser before making any investment decision.

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