Exxaro Tiles IPO: Exxaro Tiles IPO: Should you subscribe or give it a miss?

NEW DELHI: Gujarat-based Exxaro Tiles on Wednesday kicked off its Rs 161 crore IPO.

On the block is a contemporary situation of 1,11,86,000 shares and a proposal of sale (OFS) of two,238,000 shares by considered one of its shareholders. The value band of the problem is fastened at Rs 118-120.

On Tuesday, the corporate allotted 19,73,325 shares to 2 home funds on the higher finish of the worth band, totalling Rs 23.68 crore.

Final heard, the unlisted inventory was commanding a premium of Rs 20 within the gray market. Analyst views range broadly on the problem, with some discovering the P/E valuation of 35.3 instances (on restated FY21 EPS of Rs 3.4) demanding, whereas others say it’s cheap.

“The return on equity (RoE), the demanded valuation look to be extremely stretched. There are already many better-established friends within the listed area, which an investor can think about for funding. Thus we’re assigning an ‘keep away from’ score to the problem,” Alternative Broking stated.

The tiles sector within the nation is a fragmented one, with a handful of huge firms holding dominant positions. Exxaro Tiles is engaged within the manufacturing and advertising and marketing of vitrified tiles used majorly for flooring options. The corporate has two manufacturing amenities at Vadodara and Talod unfold over 1.5 lakh sq. meters. Its enterprise operations are broadly divided into two product classes – double-charge vitrified tiles and glazed vitrified.

The corporate’s merchandise are offered by way of a community of two,000 sellers. It claims to have extensive presence in Tier I cities.

Amarjeet Maurya, AVP for Midcaps at Angel Broking, stated the valuation seems to be low in contrast with Somany Ceramics’ 43.7 instances and Kajaria Ceramics’ 52.7 instances.

“Exxaro Tiles has a greater income progress monitor file in contrast with its friends (over FY18-21). We imagine the valuation is cheap. We advocate a ‘subscribe’ score on the problem,” it stated.

For FY21, the corporate reported a 6 per cent rise in gross sales at Rs 255 crore. Internet revenue jumped 36 per cent to Rs 15.2 crore in the course of the 12 months. The corporate stated it has the very best working margins earlier than depreciation and amortisation (Ebidta margin) of 19 per cent amongst friends. That stated, its return on fairness at 11.9 per cent is decrease than Kajaria’s 16.5 per cent. Exxaro’s whole borrowings on the finish of FY21 stood at Rs 161 crore.

Arihant Capital stated the organised tiles business has been gaining market share submit GST implementation. Midsized firms having stronger steadiness sheets and steady product portfolio look set to ship increased progress potential going forward.

“We like Exxaro, which is backed by its wide-spread seller community, in-house manufacturing facility, and extensive product portfolio having 1,000-plus designs. The corporate is constantly specializing in enhancing model worth and proceed to enhance working efficiencies by means of expertise enhancements and establishing personal gasoline station, which is able to assist it maintain margins going forward,” Arihant Capital stated.

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