Aro Granite Industries Ltd Management Discussions

Global Economy

The global economy proved resilient, achieving growth of 3.2% as inflation in advanced economies fell to around 2%, in line with central bank targets. This price stability enabled the Federal Reserve and European Central Bank to adopt more accommodative monetary stances, underpinning positive market sentiment. Consumer spending reached $77.6 trillion, and global energy demand rose by 2.2%, largely due to robust activity among BRICS nations.

Despite broad-based growth, major hurdles emerged. Global debt soared to a record $318 trillion, pushing the debt-to-GDP ratio higher for the first time since 2020, driven by rising borrowing and softer growth. The U.S. labour market showed mixed trends, while Chinas trade surplus approached $1 trillion, further consolidating its industrial strength. Global trade patterns shifted, with digital services rising sharply amid challenges for traditional goods, shaped by ongoing geopolitical tensions and increasing protectionism. Meanwhile, the U.S. dollar depreciated by 4.2%, helping exports but making imports costlier, as de-dollarisation continued to reshape global strategy.

Looking forward, the outlook remains moderately optimistic. The IMF anticipates global growth of 3.3% in both 2025 and 2026, below the historical average. Inflation is projected to decline to 4.1% in 2025 and 3.5% in 2026, affording central banks greater policy flexibility. Nevertheless, ongoing geopolitical pressures, trade frictions, and uncertainty in manufacturing persist as key risks, underscoring the critical importance of informed, agile policymaking to secure lasting economic stability and growth.

Indian Economy

Indias economy grew by 6.5% in FY25, moderating from 9.2% in the prior year as the nation recalibrated amidst global trade headwinds and subdued private investment. Despite these pressures, the economy demonstrated resilience, anchored by robust domestic consumption, improved agricultural output benefitting from favourable monsoons, and sustained vigour in the services sector. Headline inflation eased to its lowest level in five years, with the Consumer Price Index at 3.34% in March 2025 and food inflation subsiding to 2.69%. This stable inflationary landscape allowed the Reserve Bank of India to implement two consecutive repo rate reductions, lowering the benchmark rate to 6.0% to bolster growth while preserving macroeconomic stability.

While margin pressures and global trade challenges persisted, strong domestic demand, logistics upgrades, value-addition incentives, and government-led infrastructure initiatives underpinned notable gains, particularly within consumer-driven and light manufacturing sectors. The steady expansion in services and infrastructure was underlined by consistent demand and favourable pricing trends. Infrastructure investment and fiscal measures elevated business confidence, while the enduring strength of both rural and urban demand has provided momentum across sectors. Notably, Goods and

Services Tax collections rose by 9.4% year-on-year to reach ?22.08 lakh crore, signalling healthy consumption patterns and improved compliance, particularly in non-discretionary segments.

Looking ahead, the Reserve Bank of India has maintained its GDP growth projection at 6.5% for FY26, with early forecasts for FY27 suggesting an acceleration to 6.7%, buoyed by a potential global economic recovery, revitalised private investment, and continued progress in supply chain diversification. While external uncertainties remain, Indias intrinsic strengths, including favourable demographics, increased formalisation, and ongoing policy reform are set to anchor a stable and balanced growth trajectory over the medium term.

Global Granite Industry and Key Trends

The global granite sector has witnessed notable expansion and evolution in recent years, propelled by robust demand for natural stone across diverse construction and decorative end-uses. As reported by Verified Market Reports, the worldwide granite market was valued at USD 100 billion in 2023 and is forecast to rise to USD 140 billion by 2030, representing a compound annual growth rate (CAGR) of 5% for the period 2024–2030.

Granite, a coarse-textured igneous rock composed chiefly of quartz, feldspar, and mica, is highly prized for its strength, visual appeal, and versatility. It remains a preferred material for applications such as countertops, flooring, memorials, and landscaping. The sectors positive trajectory is underpinned by growing preference for premium building materials within both residential and commercial segments, in addition to increasing appreciation of granites distinctive aesthetic characteristics. This sustained growth reflects not only rising construction activity globally but also heightened awareness of granites enduring quality and design possibilities, positioning the industry for strong performance over the medium term.

Key Market Trends

Urbanisation and Infrastructure Growth

Rapid urbanisation and significant infrastructure development are driving demand within the global granite sector. Countries such as China and India are investing heavily in wide-ranging construction and urban projects. These developments are anticipated to substantially increase granite consumption. The World Banks Global Economic Prospects report reiterates that such infrastructure investments are vital for economic progress and stimulate greater use of essential materials like granite.

Sustainability Initiatives

Environmental responsibility is increasingly influencing the granite sector. Both consumers and industry participants are placing greater emphasis on ethically sourced materials with a reduced environmental impact. The industry is responding by adopting sustainable quarrying practices and advancing recycling efforts. The prevalence of resin-based binders and less harmful adhesives is rising, clearly aligning the industry with broader global sustainability objectives and demonstrating a strong commitment to responsible production.

Digital Transformation

Digitalisation is reshaping the granite industrys operating environment. Technologies such as virtual reality and three-dimensional modelling are being deployed to preview and incorporate granite installations into building designs. Online platforms now facilitate direct engagement between buyers and suppliers, improving transparency and reducing dependency on intermediaries. Increased automation in both quarrying and processing is further enhancing efficiency and minimising material wastage across the supply chain.

Technological Advancements

Ongoing innovation continues to improve productivity and quality. The implementation of modern techniques, such as Multi-Wire technology and precision waterjet cutting, enables the industry to extract and process granite with heightened efficiency. These advancements are supporting the creation of more intricate, tailor-made products that respond directly to evolving architectural and consumer demands.

Customisation and Design Trends

A growing preference for bespoke granite solutions is evident among homeowners and designers alike. There is heightened interest in rare varieties such as Azul Bahia and Cambrian Blue, celebrated for their distinctive veining and vivid colours. Methods including bookmatching and advanced waterjet cutting are making it possible to produce unique statement pieces. This trend highlights a broader shift towards personalised, visually distinctive interiors and greater emphasis on design individuality.

Challenges And Opportunities

Despite maintaining an upward growth path, the granite industry contends with notable challenges, including persistent supply chain disruptions and heightened geopolitical tensions. The escalation of geopolitical conflicts has contributed to elevated shipping costs and longer delivery periods, thereby affecting international trade flows and logistics efficiency. These issues have exerted upward pressure on granite prices and disrupted product availability, compressing profit margins for enterprises in impacted markets.

Nevertheless, the industrys continued emphasis on sustainability and technological advancement offers substantial growth prospects. With consumer demand shifting towards environmentally responsible and bespoke offerings, the granite sector is increasingly poised to leverage these emerging opportunities. Ongoing investments in innovation and sustainable practices are set to reinforce industry resilience and strengthen global competitiveness.

Indian Granite Industry

The Indian granite industry enjoys a distinguished standing in the global marketplace, recognised for its extensive range of colours, superior textures, and consistently high-quality stones. As one of the worlds leading producers and exporters, India makes a substantial contribution to global granite supply chains.

Key Trends

Diverse Granite Varieties

India is celebrated for its impressive spectrum of granite types, such as Black Galaxy, Kashmir White, and Absolute Black, which command strong demand in overseas markets. The countrys considerable geological diversity enables the extraction of rare and distinctive granites, catering to varied aesthetic preferences and diverse functional applications on an international scale.

Technological Advancements

Ongoing advancements in quarrying and processing technology have significantly benefited the Indian granite sector by improving operational efficiency and product excellence. The implementation of methods such as diamond wire sawing and waterjet cutting has resulted in reduced material wastage and enhanced cutting precision. These technological strides have empowered the industry to address rising requirements for bespoke and elaborate granite designs from both domestic and global consumers.

Challenges

Despite its established strengths, the Indian granite industry continues to confront several challenges that could influence its future development. Foremost among these is the issue of raw material availability, exacerbated by periodic mining restrictions in key producing states.

Mining Bans

States across southern India, particularly Tamil Nadu and Karnataka, have experienced recurring mining bans driven by environmental and regulatory considerations. These restrictions have resulted in limited access to premium raw granite, disrupting supply chains and contributing to escalating production costs. Industry stakeholders continue to advocate for a balanced regulatory framework that upholds environmental protection while permitting the adoption of sustainable mining methodologies.

Regulatory Hurdles

The sector also faces complex regulatory requirements, including strict environmental standards and intricate approval processes. Such challenges frequently result in project delays and higher compliance expenditures. There are increasing calls from within the industry for regulatory streamlining, enabling efficient project execution while maintaining robust environmental safeguards.

Labour Issues

The industrys dependence on skilled labour for quarrying and processing presents an additional challenge, as worker migration to urban centres has led to a notable shortage of expertise. This shortfall poses risks to timely production and quality assurance, highlighting the necessity for continued investment in training and comprehensive skill development initiatives.

Opportunities

Despite ongoing challenges, the Indian granite industry is well-positioned to capitalise on various opportunities for growth and advancement.

Domestic Demand

The ongoing wave of urbanisation and significant infrastructure development projects within India are steadily elevating domestic consumption. Government initiatives focused on smart cities and modernising urban infrastructure are anticipated to further invigorate the construction sector, thereby increasing granite uptake in both residential and commercial projects across the country.

Sustainability Initiatives

There is an increasing focus on sustainable mining and heightened environmental stewardship within the sector. Many companies are prioritising green technologies and implementing practices aimed at reducing ecological impact. These measures are bolstering the industrys credibility while aligning Indian granite with prevailing global sustainability expectations, thereby appealing to environmentally conscious markets.

Value-Added Products

The sector is placing greater emphasis on the production of value-added offerings, including bespoke countertops, tiles, and decorative articles. This transition towards premium, higher-margin products enables the industry to meet evolving consumer preferences and substantially improve profitability, both domestically and in international markets.

Global Quartz Industry

The global quartz industry has achieved robust growth in recent years, driven largely by its increased presence in both residential and commercial construction projects. According to Spherical Insights, the global quartz market was valued at USD 7.2 billion in 2023 and is projected to reach USD 12.2 billion by 2033. This projection reflects a compound annual growth rate of 5.42% from 2023 to 2033. The expansion of the sector is attributable to a rising preference for high-quality, durable construction materials, with demand from the United States remaining particularly influential due to widespread adoption in kitchen countertop applications.

Key Market Trends

Rising Demand in Construction and Infrastructure

Construction continues to serve as a primary engine for the global quartz market. Quartz is especially valued for its durability, visual appeal, and resistance to weathering, establishing its use in applications such as countertops, flooring, and decorative elements. The World Banks Global Economic Prospects report highlights that continued urbanisation and infrastructure development, especially in the Asia-Pacific region, are prominent factors behind the growing need for advanced materials like quartz.

Technological Advancements

Recent technological progress in quartz extraction and processing has markedly improved both efficiency and the quality of finished products. The use of advanced techniques, including waterjet cutting and precision grinding, has enabled the industry to deliver more intricate and tailored designs that respond to shifting consumer preferences. These innovations have also led to a reduction in waste and have supported the move towards more sustainable production practices.

US Market for Kitchen Countertops

In the United States, quartz has become the leading material for kitchen countertops, surpassing both granite and other traditional stones. This preference is based on key material strengths such as non-porosity, high resistance to stains and scratches, and minimal maintenance requirements. Homeowners and designers increasingly favour quartz because it offers a wide diversity of colours and patterns that can replicate natural stone while delivering superior performance standards.

Challenges And Opportunities

Despite a positive growth outlook, the quartz industry faces challenges that include supply chain disruptions, geopolitical complexities, and environmental regulatory pressures, all of which may influence both supply and pricing. Nonetheless, surging global acceptance of quartz as a countertop material, together with substantial untapped market potential, offers considerable prospects for the sectors continued expansion and success.

Company Overview

Established in 1989, Aro Granite Industries Limited is Indias foremost processor and exporter of premium granite products. With advanced manufacturing facilities in Hosur and Jaipur, the company transforms raw granite into high-quality finished products, consistently setting industry benchmarks. The addition of quartz stone manufacturing at the Hosur facility in 2020 has further broadened its product portfolio. Operating as a 100% Export Oriented Unit and a Special Economic Zone unit, Aro Granite maintains an annual production capacity of one million square metres.

Financial Performance Review

FY25 presented a fiercely challenging operating environment for Aro Granite Industries Limited, shaped by a convergence of global and domestic pressures. Demand for construction materials contracted sharply in core export markets such as Europe and the United States as recessionary headwinds, high interest rates, and persistent geopolitical uncertainties weighed heavily on construction activity. Compounding these challenges, a surge of competitively priced Chinese construction materials, amid their prolonged real estate crisis, intensified market competition and compressed industry margins. Simultaneously, logistical disruptions, notably the Red Sea crisis and volatile shipping rates, eroded cost competitiveness and added further complexity to global supply chains.

Despite these headwinds, the companys operational resilience was evident. Aro Granite reported total operating revenue of ?123.09 Crores and contained net losses to ?6.24 Crores. The ability to adapt pricing strategies amid volatile currency movements and shifting global liquidity demonstrated strong management acumen, even as new U.S. tariffs and container shortages pressured export margins.

Outlook

Looking to FY26 and beyond, the operating landscape shows tangible signs of improvement. Interest rate reductions in major economies are revitalising construction activity and supporting renewed demand for stone products, while stabilising shipping rates are restoring cost competitiveness, particularly for lower-priced product lines. The evolving trade regime in the United States has also provided India with a comparative advantage in quartz exports, unlocking new avenues for growth. With earlier investments in capacity, plant modernisation, and a transition towards value-added offerings, Aro Granite is well positioned to leverage the market recovery.

The company remains committed to agile, strategic decision-making and prudent risk management as key pillars of its outlook. With markets stabilising and growth drivers re-emerging, Aro Granite Industries Limited is poised to return to a trajectory of sustainable progress

Particulars	Hosur Tiles	Hosur Slabs	Jaipur Slabs	Hosur Quartz
Sales (In Sq. Mt.)	95078.81	124659.11	81968.41	119372.77
Production (In Sq. Mt.)	95923.69	117072.49	86938.75	114744.33
Capacity Utilisation	26.65%	18.29%	57.96%	63.75%

Key Financial Ratios

Particulars	FY25	FY24
Current Ratio	1.46	1.54
Debt Equity Ratio	0.86	0.98
Debt Service Coverage Ratio	0.10	1.21
Return on Equity Shares	(0.03)	0.01
Inventory Turnover Ratio	0.78	1.00
Trade Recievables Turnover Ratio	2.92	2.79
Trade Payables Turnover Ratio	1.49	2.29
Net Capital Turnover Ratio	1.30	1.53
Net Profit Ratio	(0.05)	0.01
Return on Capital Employed	0.02	0.05

Cautionary Statement

Statements presented in the Management Discussion and Analysis section detailing the Companys aims, forecasts, expectations, and anticipated results, whether pertaining to the Company or any of its subsidiaries or associates, may represent ‘forward-looking statements within the meaning of relevant legislation and regulations. Actual outcomes may materially diverge from these assertions. Contributing factors influencing performance may include economic forces impacting demand and supply, pricing dynamics in domestic and overseas markets, changes to governmental regulations or tax frameworks, as well as various incidental factors.

Human Resources

At Aro Granite Industries Limited, our workforce remains at the very core of our operations. Operating within a sector that values both efficiency and continual innovation, AGIL recognises the importance of sustaining a highly skilled and dedicated team, integral to driving the Companys progress. Our people not only contribute to process and management excellence but also encourage intellectual enrichment across the organisation.

As we embark upon a new fiscal year, our commitment to developing human capital and attracting top-tier talent endures. We are steadfast in our effort to provide a healthy, positive work environment that fosters individual growth and skill advancement. In this vein, we routinely organise targeted training programmes to strengthen workforce capabilities.

Empowered by a committed and engaged team, we are confident in our readiness to create value for all stakeholders and embrace the forthcoming opportunities. As at 31st March 2025, the Company proudly employs over 229 individuals.

Internal Control Systems and Their Adequacies

Our prudent and vigilant leadership ensures that the Companys Internal Control System is sufficiently robust to satisfy operational imperatives. The management retains prime responsibility for the safeguarding of assets and the integrity and accuracy of financial records. The Internal Control System assures that all transactions are duly authorised, documented, and reported, with ongoing efforts towards system enhancement. Regular measures are undertaken to secure company assets and prevent unauthorised usage. In addition, the Audit Committee meticulously reviews all financial statements, ensuring internal controls remain adequate. A comprehensive CCTV surveillance system is in place, overseeing the factory premises to protect materials and ensure safety. All controls are continuously assessed by management, with improvements instituted as necessary to uphold effectiveness.