Tiles have been used as paving or cladding material since long. As India advances on the path of economic growth and development there is a lot of construction activity going on. As an input industry, tiles manufacturers are having good times. The plants are running at record utilisation levels and many in the industry have charted out plans of expansion.
Business
Asian Granito India Ltd (AGIL) is in the business of manufacturing vitrified tiles and offers a wide range of products at various price points. The company started operations in October 2003 with an installed capacity of 4,000 square metres per day of vitrified tiles. Post July 2006 the company has vitrified capacity of 14,000 square metres per day.
Financials
On standalone basis the top line has grown from Rs 13.3 crore in FY2003-04 to Rs 152.30 crore in FY2006-07, depicting a CAGR of 125%. In the same period, AGIL has registered a growth from Rs 2.01 crore to Rs 20.99 crore, showing a CAGR of 118%. On consolidated basis the top line stood at Rs 176 crore and a bottom line of Rs 42.80 crore.
Objectives
The company intends to set up a new wall tile plant with a manufacturing capacity of 9,300 square metres per day adjoining its existing facilities, by using Rs 48.68 crore. The facility is expected to go on stream by January 2008. The company further wishes to use Rs 12.67 crore for modernisation and expansion of the existing vitrified plant. This will enhance the vitrified tiles capacity to 16,000 square metres per day against the current capacity of 14,000 square metres per day. This is expected to go on stream by October 2007.
Valuation
The expansion in the offing is expected to diversify the product portfolio of the company and thereby reduce the risk involved. The stock on offer is available at a P/E multiple of 7.78 and 9.34 at the lower and upper end of the price band considering fully diluted equity capital based on FY2006-07 EPS on standalone basis.
The valuation looks attractive compared to its peers. The margins are improving continuously in line with the industry trends. Ability to complete the projects on time and continuous increase in the capacities may bring in desired results. An investor considering a stand for a couple of years may stand to gain out of this capital offering of AGIL.
