Exxaro Tiles - IPO Note

Exxaro Tiles - IPO Note
IPO
31/07/2021

Exxaro is into the manufacture and marketing of vitrified tiles, which are extensively used as an alternative to marble flooring in homes and also in offices. They are easier to maintain. Exxaro is into the manufacture of double-charged vitrified tiles and glazed vitrified tiles made from clay, quartz, and feldspar. The company currently offers over 1000 designs across 6 standard sizes. 

Domestically, Exxaro supplies its tiles to residential, commercial and educational institutions while globally, Exxaro tiles are exported to Poland, Bosnia, the US and other countries. Currently, Exxaro has 2 manufacturing facilities located at Padra and Talod in the state of Gujarat with a total installed capacity to manufacture 1.32 crore square metres annually. 

Key terms of the IPO issue of Exxaro Tiles
 

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

04-Aug-2021

Face value of share

Rs.10 per share

Issue Closes on

06-Aug-2021

IPO Price Band

Rs.118 - Rs.120

Basis of Allotment date

11-Aug-2021

Market Lot

125 shares

Refund Initiation date

12-Aug-2021

Retail Investment limit

13 Lots (1,625 shares)

Credit to Demat

13-Aug-2021

Retail limit - Value

Rs.195,000

IPO Listing date

17-Aug-2021

Fresh Issue Size

Rs.134.23 crore

Pre issue promoter stake

56.09%

Offer for Sale Size

Rs.26.86 crore

Post issue promoters

42.50%

Total IPO Size

Rs.161.09 crore

Indicative valuation

Rs.564 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

50%

Retail Quota

35%

Data Source: IPO Filings

The fresh funds raised will be used for the following purposes.
•    Repayment of borrowings. Currently, Exxaro has debt to the tune Rs.75 crore of long-term debt and equivalent amount of short-term debt. The reduction of debt will be useful in reducing the interest cost of servicing and the solvency risk of business.

•    To meet the working capital needs of the business, which are quite substantial in the business where payments tend to get back-ended especially in large contracts or where the realty industry is going through a slowdown, as was evident till recently.

A quick look at the Financials of Exxaro Tiles

Here is a quick look at the financials of Exxaro Tiles, and we have only captured key financial parameters of relevance to the Exxaro Tiles IPO for the last 3 fiscal years.
 

Financial Parameter

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Net Worth

Rs.136.04 cr

Rs.120.74 cr

Rs.109.46 cr

Revenues

Rs.255.15 cr

Rs.240.74 cr

Rs.242.25 cr

Net Profit

Rs.15.22 cr

Rs.11.26 cr

Rs.8.92 cr

EPS

4.54

3.36

2.66

Data Source: RHP

Investment Perspective for Exxaro Tiles IPO

Exxaro does offer a wide choice of vitrified tiles for customers and markets its products through more than 2,000 registered dealers. It is also one of the key manufacturers in the niche glazed tiles manufacturing segment.
a)    The tiles segment is highly competitive with established listed names in the market as well as a huge unorganized segment that is active in manufacturing tiles. Exxaro is likely to face competition from both sides.

b)    The impact of the pandemic has been limited on the stock and typically it operates in the non-cyclical business which has a strong OEM market and also a replacement market. Normally, these needs can be postponed but cannot be done away with.

c)    Valuation may be slightly on the higher side. In post-IPO terms, the issue is priced at around 37X earnings of FY21. This is almost at par with the listed names and does not leave too much room for listing gains or short-run gains on the stock.

Also Check: List of Upcoming IPOs in August 2021


While the valuations do look fully priced at the current earnings levels of FY21, the earnings have been growing at 25% compounded on an annual basis. Hence, if the steady growth is maintained, the stock may offer a good proposition in the medium to long term. Investors need to be patient with the IPO.
 

Aticles to read next

Recent Articles

Categories

People are also reading