Varmora Granito Limited

Key Financial Performance Highlights

H1 FY27 Performance (Year-over-Year)

  • Revenue Growth: 3% YoY
  • Gross Margin Improvement: 8% improvement
  • EBITDA Margin Improvement: 17% improvement
  • PAT Growth: 498% improvement

Q2 FY27 Operational Metrics

  • Capacity Utilization: 89% in Q2 (vs 63% in Q1)
  • H1 Capacity Utilization: 76%
  • Total Capacity: 50.6 million square meters
  • Peak Utilization Potential: 92-93%

Product Mix Analysis

  • GVT Contribution: 86% of revenue (increased from previous years)
  • PVT Contribution: 8% of revenue (down from 11% last year)
  • Ceramics Contribution: 5% of revenue (down from 6% last year)
  • SKU Count: Over 3,500 SKUs

Realization Improvement

  • Average Realization Improvement: INR75 per unit YoY
  • Price Hike Contribution: INR50 (17% price hike)
  • Product Mix Contribution: INR25 (3.5-4% improvement)

Business Segments Performance

Domestic Business

  • Revenue Growth: 9% YoY
  • GVT Volume Growth: 14% YoY
  • Retail vs Project Split: 72% retail, 28% project business

Export Business

  • Revenue Decline: 17-18% YoY
  • Primary Reason: Container non-availability and freight issues
  • GVT Contribution in Exports: 98%
  • Current Freight Rates: Declining from $7,000-7,500 to $5,500

Strategic Developments

IPO Utilization

  • IPO Size: INR708 crores
  • Fresh Issue: INR320 crores allocated for debt repayment
  • Interest Cost Impact: Expected to become "almost zero" going forward

Northeast Plant Expansion

  • Current Status: Operational
  • Q2 Utilization: 50% utilization
  • Q3 Target: 75% utilization
  • Q4 Target: 85-87% utilization
  • Fuel Source: Coal gasifier (not gas)
  • Benefits: GST benefits, interest subvention, freight advantage (INR120 vs INR2-3 per meter)
  • Product Focus: 2x2 GVT and 4x2 GVT sizes specifically for Northeastern region, North Bengal, Eastern UP, and Eastern Bihar

Divestment Impact

  • Simola Divestment: Completed
  • Revenue Impact: INR60 crores in H1 FY26 vs INR9 crores in H1 FY27
  • Rationale: Focus on bottom-line improvement rather than volume

Operational Metrics

Distribution Network

  • EBOs (Exclusive Brand Outlets): 309
  • MBOs (Multi-Brand Outlets): ~2,000

Capacity & Utilization

  • Current Capacity: 50.6 million square meters
  • FY26 Utilization: 72%
  • FY27 H1 Utilization: 76%
  • FY28 Utilization Target: 80-85%

Outsourcing Strategy

  • Current Outsourced Mix: 14%
  • Products Outsourced: PVT and ceramics (low margin products)
  • In-house Production: GVT and large sizes

Technology & Innovation

Integrated Stone Technology (IST)

  • Status: First machine installed in Asia
  • Technology Difference: Full-body replica of natural marble vs normal GVT with print on top
  • Pricing: INR300 ex-factory, reaching INR500-600 for consumers vs natural Statuario marble at INR4,000-6,000 per square foot

Continuous Presses

  • IST Plant: Equipped with continuous press
  • Industry Adoption: 5-6 lines in Morbi currently

Financial Policy Changes

Depreciation Policy

  • Change: From WDV method to SLM method
  • Useful Life: Reduced from 15 years to 10 years
  • PAT Impact: INR14-17 crores difference
  • Rationale: Industry standard practice, technology changes requiring new capex for multiple sizes

Cost Structure

Marketing Spend

  • H1 FY27: 1.9% of revenue
  • Full Year Expectation: Similar level maintained

Gas Pricing

  • Q1 Average: INR84.73 per SCM
  • Q2 Average: INR80.53 per SCM
  • Current Price: INR92 per SCM
  • Northeast Plant: Uses coal gasifier, not gas

Input Cost vs Price Hike

  • Input Cost Increase: 14% YoY
  • Price Hike Taken: 17% YoY (14% in Q1 + 3-3.5% in Q2)
  • Price Flexibility: 3% leeway available before needing additional price hikes

Guidance & Outlook

Revenue Growth Expectations

  • Value Growth: ~15% YoY (if exports recover)
  • Volume Growth: ~10% YoY
  • Industry Outperformance: Target to outperform industry by 2-3%

Margin Outlook

  • Sustainability: Current margins sustainable with potential for improvement
  • Drivers: Better product mix within GVT (currently at 25% of potential), improved utilization
  • Q3/Q4 Expectation: Better margins than Q2 expected

Capex Plans

  • Immediate Capex: None planned
  • Maintenance Capex: INR9-10 crores annually
  • Growth Strategy: Focus on utilization improvement rather than capacity addition

Regional Contribution

  • Eastern Region Contribution: Currently 3% of revenue
  • Expected Growth: Increase from next year due to Northeast plant operations

Additional Business Segments

Bathware Business

  • Current Contribution: 10% of revenue
  • Growth Expectation: Higher than tiles but remaining at 10-12% range
  • Product Range: At par with tile players but behind core sanitaryware players
  • Manufacturing: Sanitaryware in-house, faucets outsourced

Adhesive Business

  • Quarterly Run Rate: INR5-5.5 crores
  • Growth Strategy: Regional opportunities exploration, natural growth with tile business

Industry Context

  • Morbi Industry Capacity: No net capacity addition in H1 (3-4 new lines vs 10-11 plant shutdowns)
  • Pricing Position: Second highest average realization among listed players
  • Export Industry Trend: 40% decline in industry exports vs company's 18% decline due to branded focus