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Aro Granite Industries Ltd Management Discussions

Jul 19, 2024|09:44:56 AM

Aro Granite Industries Ltd Share Price Management Discussions

Economic Overview

Global economy

The global economic landscape of the fiscal year 2023 unfolds with a tapestry of complexities and transitions. Projections indicate a moderated growth trajectory, with the anticipated global growth rate easing from the estimated 3.4% in 2022 to 2.9% in 2023. However, there are glimpses of optimism on the horizon, as the recent reopening of economies has paved the way for a faster-than- expected recovery. The containment of COVID-19 in China has played a pivotal role in bolstering economic activity, instilling a sense of resilience in the face of unprecedented challenges.

Yet, it is essential to remain mindful of the prevailing uncertainties that persistently shape the global economy.

Inflation, an ever-watchful metric, is expected to undergo a gradual descent, declining from 8.8% in 2022 to 6.6% in 2023 and further to 4.3% in 2024. While these figures remain elevated compared to pre-pandemic levels, they reflect a concerted effort to navigate the complex web of post-pandemic dynamics. The balance of risks leans toward the downside, although mitigating factors have softened adverse risks to some extent. A resurgence of pent-up demand across economies or a more rapid decline in inflation could provide an upside boost. Conversely, the global recovery could face headwinds if China experiences severe health outcomes, tensions escalate in Russias

Ukrainian conflict, or tightening global financing conditions exacerbate debt distress. Vigilance is also warranted in financial markets, as sudden repricing in response to adverse inflation news or geopolitical fragmentation may impede economic progress.

In summary, the global economy embarks on a path characterized by nuanced shifts and the potential for both challenges and opportunities.


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Indian economy

Amidst a backdrop of global challenges, the Indian economy has showcased extraordinary resilience, emerging as a beacon of growth. Despite the triple shocks of the COVID-19 pandemic, the Russian- Ukraine conflict, and synchronized policy rate hikes by central banks worldwide, India continues to stand tall as the fastest-growing major economy. Projections indicate a robust growth rate of 7% for the year ending March 2023, building upon an impressive 8.7% growth in the previous financial year. This outstanding performance, amidst adversity, speaks volumes about Indias economic strength and potential.

The driving forces behind Indias economic ascent in FY23 have been private consumption and capital formation. These pillars have not only propelled economic expansion but have also been instrumental in generating employment opportunities. The decline in urban unemployment rates and the marked increase in net registrations within the Employee Provident Fund serve as testament to this. Furthermore, the nations unwavering commitment to a massive vaccination campaign, with over 2 billion doses administered, has fueled consumer confidence and invigorated consumption.

A vital catalyst for the Indian economy in the present year has been the central governments capex, which witnessed an impressive growth rate of 63.4% during the first eight months of FY23. This surge in Capex has played a pivotal role in driving the economy forward, surpassing the recovery trajectory of many other nations. Despite the challenge posed by inflation, exacerbated by European strife, the Indian governments proactive measures, coupled with the easing of global commodity prices, have successfully brought retail inflation below the upper tolerance target set by the Reserve Bank of India (RBI) in November 2022.

Looking ahead to FY24, India anticipates an accelerated pace of growth, fueled by robust credit disbursal and a flourishing cycle of capital investments. The strengthened balance sheets of corporate and banking sectors will serve as a solid foundation for this anticipated expansion. Additionally, the expansion of public digital platforms, in conjunction with groundbreaking initiatives such as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive schemes, are poised to revolutionize the manufacturing sector and provide a further boost to economic growth.

Global granite industry

The global granite industry is a testament to the enduring allure of this remarkable igneous rock, composed of feldspar, quartz, and mica. Renowned for its resilience and resistance to staining, granite has become the preferred choice for countertops and flooring in both residential and commercial spaces. With its wide range of captivating colors and patterns, granite is sourced from quarries around the world. The industry has witnessed remarkable growth, with a market value of $16,910 Millions in 2019, projected to reach $22,320 Millions by the end of 2026, demonstrating a steady CAGR of 4.0% from 2021 to 2026.

Driving the expansion of the global granite market is the pressing need for robust infrastructure driven by a burgeoning global population and rapid urbanization. Governments worldwide allocate substantial funds annually to revitalize public landmarks and sites, fueling the demand in the building and construction sector. This demand surge, coupled with the industrys penetration into emerging economies and the presence of established players in developed countries, has paved the way for consistent growth. Moreover, rising disposable incomes and the aspiration for enhanced living standards, particularly in emerging economies, have contributed to increased adoption rates of granite, opening up significant market growth opportunities. The globalization of trade has further facilitated the accessibility of granite through various channels and suppliers. Leading exporters such as the United States, China, Brazil, Italy, Sweden, Germany, and Spain play a pivotal role in sustaining market expansion, ensuring a positive outlook for the global granite industry between 2023 and 2030.

As nations strive for enhanced living standards and robust infrastructure, granites timeless allure continues to captivate markets globally, cementing its position as a cornerstone of the construction industrys success.


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Indian granite industry

The Indian granite industry stands as a pillar in the global construction trade, harnessing the countrys abundant reserves and robust export activities. Geographically, Indias southern and eastern belts boast vast deposits of granite, making it a leading player in mining and exporting this essential construction component. With its superior quality and strength, Indian granite has garnered significant attention in international markets, witnessing active importation by over 145 countries and contributing to an impressive annual value of $498 Millions.

The growth potential of the Indian granite industry is immense, as only a mere 3% of the countrys granite reserves have been explored thus far, ensuring a steady supply for the foreseeable future. Indias noteworthy contribution of approximately 15% to global granite production further solidifies its position as a prominent player. Boasting an impressive array of over 100 commercially viable granite varieties, India caters to diverse preferences with its captivating range of colours and textures. To support the escalating demand, the country hosts 43 granite processing units strategically positioned across Andhra Pradesh, Karnataka, Rajasthan, Tamil Nadu, and Odisha. Over the past five years, exports have exhibited a consistent annual growth rate of 10%, indicating a thriving industry poised for even greater expansion. The commitment of existing companies to expand their production capacities underscores their dedication to meeting the rising demand and delivering top-notch granite products to global markets.

The Indian granite industry currently operates at a robust production capacity of approximately 350 to 400 containers per month. Notably, Europe represents the primary market, with an estimated export volume of 180 to 200 containers each month. The United States follows closely, importing around 50 containers monthly, while Japan receives approximately 40 containers.

The remaining containers find their way to various countries, including Australia, New Zealand, South Africa, and others. Impressively, exports account for a substantial 85-90% of the total granite production in India. The fiscal year 2022 witnessed a significant milestone with granite and marble exports surpassing ?4,000 Crores, with the United States commanding nearly 40% of the consumption market. With the Indian granite industry valued at over ?25,000 Crores, it rightfully claims its position as one of the worlds largest producers and exporters of granite, utilising its extensive reserves to contribute significantly to the global construction landscape.


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Growth drivers

1. Diversified applications

The expanding utilisation of granite in various home applications, extending beyond the kitchen, is set to drive substantial market growth. As consumers increasingly recognize the durability and aesthetic appeal of granite, its demand for flooring, bathroom fixtures, and other interior design elements is expected to soar. This shift towards broader home applications presents a significant opportunity for the Indian granite industry to flourish.

2. Thriving commercial real estate

The rise in investments within the commercial real estate sector presents a promising outlook for the granite market. As businesses and industries continue to expand, the demand for high-quality construction materials, including granite, is poised to surge. The enduring popularity of granite in commercial spaces, such as offices, hotels, and retail establishments, reinforces its status as a preferred choice for architects and developers.

This trend is expected to drive sustained growth and propel the Indian granite industry forward.

3. Renovations and remodelling boom

The increasing use of granite in building renovations and remodelling projects is anticipated to fuel market growth. With a growing emphasis on modernising and upgrading existing structures, the demand for granite as a versatile and visually appealing material for countertops, facades, and other architectural features is projected to proliferate. This presents an opportunity for the Indian granite industry to cater to the evolving needs of the renovation and remodelling market.

4. Urbanisation dynamics

Rapid urbanisation in India creates lucrative opportunities for the granite market. As cities expand and infrastructural development gains momentum, the demand for granite for construction purposes, including roads, bridges, and public spaces, is expected to witness a significant upswing. The durability and longevity of granite make it an ideal choice for urban infrastructure projects, positioning the Indian granite industry to benefit from the urbanisation wave.



1. Growing protectionism

The increasing adoption of protectionist measures by countries, including the imposition of AntiDumping duties, poses a significant threat to granite exports from India. Such protectionist policies can create barriers and hinder the smooth flow of granite products to international markets, impacting the industrys export potential.

2. Raw material scarcity

The scarcity of raw materials in South India has emerged as a significant concern, adversely affecting business operations. The closure of mines further exacerbates the shortage of raw blocks required for granite production. This scarcity can disrupt the supply chain and limit the availability of raw materials, thereby impeding the industrys growth prospects.

3. Economic uncertainty and currency fluctuations

The prevailing economic uncertainty globally can lead to high currency fluctuations, potentially impacting the margins of granite companies. The fluctuating exchange rates can increase the costs of importing raw materials and exporting finished goods, affecting the overall profitability of the industry.

It is crucial for companies to monitor and manage currency risks effectively in the face of uncertain economic conditions.

4. Rising transportation costs

The escalating costs of transportation present a significant threat to the Indian granite industry. Higher transportation expenses contribute to increased landed costs of goods in importing countries, ultimately impacting the overall demand for granite products. The industry must address the challenge of rising transportation costs to maintain competitiveness in the global market.

Global quartz stone industry

The quartz stone industry has witnessed a remarkable surge in global demand, driven by its exceptional properties and versatile applications in the construction and home improvement sectors. Engineered with a combination of crushed quartz crystals, resins, and pigments, quartz stone offers both durability and aesthetic appeal, making it an ideal choice for a wide range of residential and commercial projects.

The market for quartz stone is poised for substantial growth, with a projected CAGR of 12% from 2021 to 2028, reaching an estimated value of $25,230 Millions. This growth can be attributed to several key factors. Firstly, the increasing demand for residential Quartz stone, which accounts for approximately 60.90% of overall consumption, has been a driving force behind the industrys success. Homeowners are increasingly drawn to quartz stone for its captivating aesthetics and long- lasting performance. Additionally, the industry is benefiting from the growing emphasis on eco-friendly and sustainable construction materials. Quartz stone stands out as an attractive choice due to its environmental advantages, further bolstering its market appeal. Furthermore, the expansion of distribution channels and the rise of online retailing have significantly contributed to the accessibility and widespread adoption of quartz stone products, fueling market growth.

In conclusion, the global quartz stone industry is experiencing robust growth, fueled by the rising demand for residential applications and the increasing preference for sustainable construction materials. Engineered Quartz stone, with its exceptional durability and aesthetic appeal, has gained significant traction in the market. The industrys positive outlook is further supported by the expansion of distribution networks and the convenience of online retail platforms, ensuring broader availability and accessibility of Quartz stone products for consumers worldwide.

Growth drivers

1. Evolving consumer preference

Increasingly, consumers are favouring engineered stone materials, such as Quartz stone, over natural stone options due to the consistent colour and pattern it offers. This preference stems from the desire for a cohesive and uniform aesthetic in their residential and commercial spaces.

2. Environmental awareness

Growing awareness about the eco-friendly nature of Quartz stone compared to mined natural stones has become a significant driver for market growth. With a focus on sustainability, consumers are drawn to Quartz stone as it reduces the environmental impact associated with traditional stone extraction processes.

3. Global construction boom

The surge in construction activities and infrastructure development worldwide has created substantial opportunities for the Quartz stone industry. By exploring untapped markets in emerging economies, particularly those experiencing rapid urbanisation and infrastructure development, the industry can capitalise on the increasing demand for high-quality construction materials.

4. Lifestyle shifts and rising Incomes

Rising disposable incomes and changing consumer lifestyles are contributing to the demand for luxury home renovations. As individuals seek to enhance their living spaces, Quartz stone emerges as a popular choice for its durability, versatility, and aesthetic appeal, thereby driving market growth.

Removal of trade barriers: The lifting of the preliminary 161.5% duty on Indian quartz stone in the USA has significantly revitalised the quartz stone industry, particularly in terms of viable exports. This favourable development has reinvigorated trade opportunities and opened up new avenues for market expansion.



Key financial ratios


FY23 FY 22 Change %


Current Ratio

1.54 1.58 (2.53%)


Debt Equity Ratio

1.08 1.01 6.93%


Debt Service Coverage Ratio

0.95 1.85 (48.65%)

Return on Equity Shares

(0.03) 0.05 (160.00%)

Inventory Turnover Ratio

1.15 1.92 (40.10%)

Trade Recievables Turnover Ratio

2.44 3.28 (25.61%)

Because of low turnover and loss in FY23.

Trade Payables Turnover Ratio

3.08 5.45 (43.49%)

Net Capital Turnover Ratio

1.62 2.66 (39.10%)

Net Profit Ratio

(0.04) 0.04 (200.00%)

Return on Capital Employed

0.02 0.05 (60.00%)

Human resources

Aro granite industries ltd. believes that its people are the lifeblood of the organisation. As a Company operating in an industry that values efficiency and innovation, it recognizes the importance of having a skilled and motivated workforce that is committed to driving the Companys growth. Its employees not only contribute to the success of AGILs processes and management, but also drive intellectual growth within the Company.

As we move into a new fiscal year, we remain focused on developing our human capital while attracting and retaining the best talent in the industry. Our commitment to fostering a healthy and cordial work environment that encourages personal growth and skill-building among our employees is unwavering. To this end, the we continue to conduct regular training workshops that enhance the capabilities of the workforce.

With a motivated and engaged workforce, we remain confident in our ability to deliver value to all the stakeholders and capitalise on the many opportunities that lie ahead. As of 31st March, 2023, the Company is home to more than 650+ employees.

Internal control systems and their adequacies

Our prudent and watchful management ensures that the Companys Internal Control System is sufficient to meet its operational needs. Our management has the overarching responsibility to safeguard the assets and ensure the accuracy and reliability of its financial records.

The Internal Control System also guarantees that all transactions are authorised, recorded, and reported properly, and that measures are taken to upgrade the control system continually. We conduct regular asset protection exercises and take measures to prevent unauthorised use. Additionally, the Audit Committee performs a comprehensive review of all financial statements and ensures the sufficiency of the internal control systems. We have have further implemented a comprehensive CCTV Surveillance system that monitors the entire factory premises to protect against material loss and safety breaches. These efforts are continually monitored and assessed by the management, who implement improvements as necessary to ensure the effectiveness of the Internal Control System.

Cautionary statement

Statements in the Management Discussion and Analysis describing the objectives, projections, estimates and expectations of the Company, its direct and indirect subsidiaries and its associates, may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, among others, economic conditions affecting demand/supply, price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors.

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