IPO Note

August , 3, 2021 Exxaro Tiles Ltd

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Exxaro Tiles Limited was Incorporated in 2008, Exxaro Tiles Ltd. (ETL) is
headquartered in Gujarat and is engaged in manufacturing and marketing
of vitrified tiles used majorly for flooring solutions, commenced business
as a manufacturer of frit, a raw materials used in manufacturing of tiles
http://www.asiamoney.com/brokers
and have over the years, evolved into a manufacturer for vitrified tiles..
Rating: Subscribe ETL is promoted by Mukeshkumar Patel, Dineshbhai Patel, Rameshbhai
Patel and Kirankumar Patel, each having considerable industry expertise
in ceramics tiles industry.
Issue Offer
Fresh Issue of 11,185,833 equity shares ETL has two state-of-the-art manufacturing facilities which are located at
upto INR 134.23Cr and OFS of 2,238,333 Padra and Talod respectively in Gujarat with a combined installed
shares by Promoters group taking the total
issue size at INR 161.09cr
production capacity of 132,00,000 sq. mt. p.a. Notably, Talod Unit is one
of the single largest plant for manufacturing glazed vitrified tiles under
Issue Summary
one roof in India.
Price Band (Rs) 118-120
Key Highlights
Face Value (Rs) 10  ETL has a large retail network of 2,000+ dealers having long term
Implied Market Cap relationships. ETL also has 6 display centers in 6 cities and 2 marketing
510
(Rs Cr) offices at Delhi and Morbi to complement growth strategies.
Market Lot 125  ETL has focused on R&D efforts by developing products which are
innovative and in line with the trends. Some of their key product
Issue Opens on Aug,4, 2021 development highlights include: 1) 3D Effect in Double Charge Vitrified
Issue Close on Aug,6, 2021 Tiles 2) Replica of Natural Stones in Double Charge Vitrified Tiles and
No. of share pre-issue 33,555,070 3) High transparent glaze in weight method for glazed vitrified tiles..
 Exxaro’s integrated model enables developing insights across the
No. of share post issue 42,502,570 entire value chain right from product design, process development,
Listing NSE / BSE and manufacturing to marketing. This helps the Company build brand
faster and stronger, besides clocking high operating margins.
Issue Break-up (%)  Domestically, ETL has PAN India presence with sales in 27 states
QIB Portion 25  Exxaro has clocked a revenue of INR 2,598+ Mn with an EBITDA of
NIB Portion 35 20.0% for FY21, margins are even better than some of the industry
peers. We understand that the financial results are based on full-
Retail Portion 40
fledged operations of 3 quarters only, as the major part of the first
Book Running Lead Managers quarter was complete lockdown.
Pantomath Capital Advisors

Registrar Valuation and View:

At the upper band of INR 120, the issue is valued at P/E 35(x) its FY21
Link Intime India Pvt Ltd. diluted EPS of INR 3.4. The organized tiles industry has been gaining
Shareholding Pattern market share post GST implementation and midsized companies having
stronger balance sheet and stable product portfolio are likely to deliver
Pre-Issue Post-Issue
higher growth potential going ahead. We like the company backed by its
Promoters 56.09% 42.50% wide spread dealer network, in house manufacturing facility and wide
Public & Others 43.91% 57.50% product portfolio having 1000+ designs. Company is continuously
focusing on enhancing brand value and Continue to improve operating
Objects of the issue efficiencies through technology enhancements and setting up own gas
To make repayment or prepayment of station which will help in sustaining margin going ahead. Based on
secured borrowings availed by the above factors we recommend SUBSCRIBE to the issue of Exxaro Tiles
company.
Ltd.
To meet working capital requirements.
To Meet general corporate purposes.

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 IPO Note | Exaaro Tiles Limited

Industry Overview

Indian Ceramic Industry has been growing exponentially during last couple of years as the industry
changes gears including continuous shift from un-organised to organised, shift in product focus with
increasing share of Glazed Vitrified Tiles (GVT) and Polished Glazed Vitrified Tiles (PGVT), growing
global penetration of large slabs, implementation of best in class technology and innovation to
manufacture products suitable for global markets. Transformational changes such as GST, RERA, e-
way bill and the like have paved the way for moving the industry from un-organised to organise. This
assumes significant importance as the industry has been dominated by un-organised segment.

38%+ CAGR growth in Ceramics exports from India (figures in sq.mt. Mn.)

445.1
358.7
MN Sq. Mt.

274.0
227.6
185.7
102.4 134.0
10.5 15.7 16.5 3.0 33.2 5.6

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Ceramics Exports from India (Ceramic World Web

Indian ceramic tiles output (in Mn. sq.mt.) and share in global output (%)

1,500 15.0%

10.0%
7.9% 8.7%
1,000

6.8% 7.2% 10.0%

500 5.0%

850 955 1,080 1,145 1,266

0 0.0%

2015 2016 2017 2018 2019

Source: Contribution of Indian Ceramics Output

Notably, India has conquered the 2nd position in global exports of tiles surpassing Spain. India now
contributes more than 10% of the global ceramic output. Over the next few years, Indian Ceramic
Industry is bound to witness a handsome flow of domestic and foreign investments as the Indian
growth story continues its march towards leading the world at 1st position.

Over the next few years, Indian Ceramic Industry is bound to witness a handsome flow of domestic
and foreign investments as the Indian growth story continues its march towards leading the world at
1st position.

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IPO Note | Exaaro Tiles Limited

Key Strengths

State-of-the-art manufacturing facilities with strong focus on design and quality: Exxaro manufactures
almost all their products in-house at two Units which have a combined installed production capacity of
1,32,00,000 sq.mt. p.a. Unit I is spread over 37,460 sq.mt. whereas Unit II is spread over 1,23,504 sq.mt.
Manufacturing facilities are fully integrated from raw material handling to finished goods warehousing
process, and are equipped with latest machineries such as Kiln, Press, Digital Printing, Glazing line (Unit II)
enabling them to manufacture various sizes of products, minimise human labour involvement and
achieving cost efficiencies. Unit II is one of the single largest plant for manufacturing glazed vitrified tiles
under one roof in India. Majority of key machineries are imported and match international standards.
Exxaro has an in-house laboratory, enabling it to develop new varieties, besides facilitating conducting of
tests and analysis of various products. Exxaro’s facilities are multi-purpose that are designed to allow a
level of flexibility enabling to manufacture various sizes of products and provide the ability to modify and
customize product portfolio to address the changing requirements of customers with minimal future
capital investments.

Widespread sales & dealers network: Exxaro’s marketing model for domestic operations is majorly
divided into two parts: 1) through retail network, and 2) through infrastructure related projects and to
private customers. Exxaro has over 2,000 registered dealers and domestically, and PAN India presence
with presence in 27 states. Exxaro focuses on developing new and trending designs, meet stringent quality
and technical specifications and providing better pricing and delivery terms. Dealers network is aided by
capable in-house sales and marketing team which liaise with the dealers on a regular basis for customer
inputs, market demands as well as positioning of products vis-à-vis products of competitors. Exxaro has
sales and marketing team of 80+ dedicated employees

Wide product portfolio comprising 1000+ designs Exxaro has gradually diversified, expanded and evolved
their operations from manufacturer of frit to manufacturing vitrified tiles:. Their product portfolio consists
of 1,000+ designs which are categorised into various series. Exxaro is also engaged in continuous product
development and introduction of new designs to keep up with the trends. Some of the key product
development highlights include: 1) 3D Effect in Double Charge Vitrified Tiles 2) Replica of Natural Stones in
Double Charge Vitrified Tiles 3) High transparent glaze in weight method for glazed vitrified tile

Key Growth Drivers

Strengthening brand value: Exxaro intends to make consistent efforts to strengthen their brand “Exxaro”
and enhance brand visibility by undertaking various marketing initiatives. Since Exxaro is a relatively young
and most of the peers have had a longer operating history, going forward, to attain parity with listed
industry peers, Exxaro intends to make conscious efforts to promote their brand and increase brand recall
by gradually increasing advertising and publicity expenses in line with the operations growth.

Expand dealer network in existing markets and increase export presence: Exxaro Tiles aims to focus on
increasing penetration in existing markets by expanding dealers’ network in Tier-2 cities, Tier-3 cities and
rural areas as there are significant untapped opportunities in these cities. ETL aims to appoint more
dealers in states where it has strong presence to strengthen network further and increase business
operations in such States by deepening penetration at selective Tier-2 cities, Tier-3 cities and rural villages.
Further, ETL also aim to increase presence based on product portfolio.

Increase sales by enhancing manufacturing capacities and procuring materials on outsourced

basis:Exxaro believes that in order to meet robust demand, it may have to increase manufacturing
capacities and engage with companies who manufacture qualitative products as per their specifications on
an outsourced basis. Exxaro has purchased certain lands at Morbi. Further, the outsourcing of
manufacturing and marketing of products under own brand is a common practice in the Industry. This
shall enable Exxaro to offer a comprehensive product range to dealers, increase sales and cash flow from
operations.

Continue to improve operating efficiencies through technology enhancements and setting up own gas
station Exxaro continues to further develop their technology systems to increase asset productivity,
operating efficiencies and strengthen competitive position. Exxaro is in the process of setting up of own
gas station for internal gas consumption to optimise operating costs such as power & fuel costs which
forms a significant portion in terms of costs of operations. Setting up own LNG gas station on own land for
internal consumption will help Exxaro reduce external dependency.

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 IPO Note | Exaaro Tiles Limited

Key Risks
 Fuel is a major cost for the manufacturing of tiles and any major rise in international prices could have an adverse impact on
the company's profitability. The tiles sector is highly dependent on the new construction, and any
 slowdown in the new launches by the real-estate sector could result in a slowdown in the off take. However, the replacement
market plays a sizable bale role and hence it could compensate the same..

Other Highlights
• Exxaro has grown at 21%+ CAGR over FY15-19. While, at the same time, it has been generating higher margins consistently and
its margins currently are even better than the industry peers owing to its distinct integrated model of owned manufacturing
and retail sales.

• Exxaro focuses on distribution network and retail sales has been one of the differentiating factor leading to higher margins
which is also coupled with owned manufacturing model with no reliance on outsourced manufacturing

• Exxaro has also been a pioneer in glazed vitrified tiles having one of the single largest facility for GVT under one roof in India,
this has enabled Exxaro to launch differentiated products for various sizes, designs that are used for multiple solutions.

• ETL has consistently grown over last few years while maintaining high EBITDA Margins

Peer Comparison

Company (in INR Mn) CMP (INR) Revenue EBITDA EBITDA M (%) PAT D/E (x) EPS (INR) RoE (%) P/E (x)
Exxaro Tiles Limited^ 120 2598 520 20% 152 1.1 4.5 11.2 26.6
Kakaria Ceramics Limited 1002 27809 5087 18% 3087 0.0 19 16.5 53
Somany Ceramics Limited 714 16505 1908 11% 613 0.5 14 9.3 51
Orient Bell Limited 371 5025 322 6% 43 0.1 5,4 1,7 69
Financials are as on FY21; ^ at upper price band

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 IPO Note | Exaaro Tiles Limited

Management
Key Person Description
Mr Mukesh Patel Mr Mukesh Patel is the Chairman and Managing Director of the company, having 19 years of experience in
building materilas and ceromics industry. He is responsible for entire financial management and overall
business development
Mr Kirit Patel Mr Kirit Patel is the Whole Time Director of the company, having 15 years of experience in sales and
marketing of the manufacturing industry. He is responsible for sales and distribution process and monitors
the HR department.
Mr Dinesh Patel Mr Dinesh Patel is the Whole Time Director of the Company, having 18 years of experience in the
manufacturing industry. He is responsible for production and administrative operations.

Financial Performance
Particulars (in mn.) FY19 FY20 FY21
Revenue 2,440 2,440 2,599
EBITDA 396 462 521
EBITDAM(%) 16.2% 18.9% 20.0%
PAT 89 113 152
PATM (%) 3.7% 4.6% 5.9%
EPS (INR as reported) 2.7 3.6 4.5
Net Worth 1,095 1,207 1,360
Total Debt 1,435 1,621 1,610
Total Assets 3,693 3,871 3,853
ROE (%) 8.1% 9.3% 11.2%

Charts

600 521 22.0%

500 462 20.0% 20.0%
2599
396 18.9%
400 18.0%
300 16.2% 16.0%
2440 2440
200 14.0%
100 12.0%
- 10.0%
FY19 FY20 FY21 FY19 FY20 FY21

Revenue (mn) EBITDA (mn) EBITDAM(%)

200 7.0% 1,500 1,360 12.0%

152 5.9% 6.0% 1,207 11.2%
1,095 10.0%
150 5.0% 9.3%
113 4.6% 1,000 8.1% 8.0%
89 3.7% 4.0%
100 6.0%
3.0%
500 4.0%
50 2.0%
1.0% 2.0%
- 0.0% - 0.0%
FY19 FY20 FY21 FY19 FY20 FY21

PAT (mn) PATM (%) Net Worth (mn) ROE (%)

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IPO Note | Exaaro Tiles Limited

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HOLD 5% to 12%
NEUTRAL -5% to 5%
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