Aro Granite Industries Ltd Management Discussions.

Global Economy

After a challenging year in 2020 due to Covid pandemic year 2021 started on a positive note with the roll-out of vaccination globally which curbed the spread of virus. The ease in lockdown restrictions spurred the demand and helped businesses in recovery. As per World Economic Outlook report, after the pandemic-led degrowth of 3.3% in 2020, the global economy rebounded fast and reported a growth of 5.7% in 2021. Aligned with the recovery of global output, global goods trade and global services trade also reported strong growth and reached pre-pandemic levels during the beginning of year 2022. The global economic recovery was soon slowed down by the spread of Delta and Omicron variant of Covid-19. However, the spread of Delta and Omicron variant had limited economic impact due to controlled lockdown, widespread vaccination coverage and strong government support. The global economy was materially impacted due to Russia invasion on Ukraine in March 2022. The war in Ukraine has led to supply chain disruption, high commodity prices and surging inflation forcing Central Banks to drive tighter monetary policies. This is expected to impact demand and the Global GDP is now projected to grow by 2.9% in Calendar year 2022.

The world economy is expected to remain under stress and risk of recession is looming over global economy due to higher inflation, tighter monetary policies, slowing growth and persisting geopolitical tensions across the world.

Indian Economy

Indian economy had a robust recovery and GDP grew by 8.7% in FY2022 as compared to negative growth of 6.6% in FY2021. The roll-out of the successful vaccination program in India along with supportive policies from government helped India revive its economic growth. Indian government eased Covid-19 restrictions and the economy grew by 20.1% in Q1FY2022 and 8.4% in Q2FY2022. However, in second half of the year the Delta wave of Covid-19 again drove lockdowns and slowed down the growth trajectory of the economy. Omicron wave-induced restrictions and high commodity prices slowed down economic activities from third quarter onward. Indian economy is expected to grow by 7.2% in FY2023. Increased fuel prices and rising inflation triggered by the Ukraine war has forced tightened monetary policies from RBI and this in turn is expected to hamper economic activities.

Granite Industry

Granite is one of the oldest and most sought-after stone in world. It was used in building monuments for thousands of years and now with the advent of technology for cutting and polishing, its use has further extended for decorative purposes. Granite due to its high compressive strength, longevity and beauty finds applications in building material and decorative purposes. Its usage in kitchen countertop, bathroom and stairs has significantly increased over the last few decades.

Globally granite industry is dominated by a few granite producing countries with huge granite reserves. Top granite producing countries are China, Brazil, India, Italy and Saudi Arabia. On the demand side USA is largest consumer of granite and its demand is largely satisfied by imports from Brazil, India, China and other countries. Europe is the other large market for granite and with limited reserves of its own meets its demand from imports. China plays an important role in global granite industry and has a large market share in global exports. It imports granite blocks from all around the globe for further processing and turn them into slabs and tiles. China exported $3.3 billion of granite in year 2020 and accounted for 59% of global exports. India ranks second after China and comprised of 16% of global exports in 2020. Brazil has 7.2% of market share in global granite exports.

Engineered stone

Engineered quartz stone is man-made stone, manufactured from mix of quartz crystal aggregates, resin binder, pigments and additives. Quartz is natural stone and found in abundance around the globe. It occurs naturally in clusters and does not form huge stone blocks like granite, marble or other rocks which makes it unsuitable for direct use. Quartz is processed further and converted into engineered stone for application in building material.

Engineered quartz stone is alternative to granite and other natural stones. Quartz stones have similar qualities of granite like its durability, beauty, elegance and scratch & heat resistance. But unlike granite it is non-porous and not subject to tone variation as it has added chemicals and binders to control its properties. It can be produced in same colors, texture and designs and can be used in large areas.

Demand for engineered quartz stone is rapidly rising. Engineered stone quartz is preferred over other stones due to its higher durability and weight bearing capacity. The global engineered stone market was estimated to be at $ 20.3 billion in 2020. It is expected to reach $31.6 billion by year 2028 and grow at CAGR of 5.7% from 2021 to 2028. Demand for engineered stone is expected surpass natural stones due to growing need for high quality construction material with consistent design elements. Investments in the construction of large commercial & residential buildings and increased application of stone material for enhancing aesthetics in the interior structure are expected to fuel growth in stone industry.

Indian Granite Industry

India possesses a wide variety of natural stones including granite, marble, limestone, sandstone, slate and quartzite. It has more than 20% of the worlds granite reserves and they are spread across the country. India possesses large variety of over 200 shades, some of which are quite popular across world. Granite Industry plays a vital role in the economy of granite producing states like Tamil Nadu, Andhra Pradesh, Telangana, Karnataka and Rajasthan. Indian granite industry generates huge employment in rural areas with the economic value pegged with it estimated at $40 billion. Indian granite industry produces and exports vast variety of granite with high quality spread across many colors. India is one of the top exporters of granite stone globally.

Source – Indian Mineral Yearbook 2019

Granite is classified as a Minor Mineral under the MMDR Act 1957 in India and its reserves and leasing regulations are governed by the respective state governments. Historically allotment of quarries was carried out by state governments without transparent competitive bidding system. In recent years crackdown on illegal mining has caused shutting down of thousands of illegal quarries. Furthermore, lack of environmental clearance for quarrying has further reduced number of active quarries. The closure of granite quarries in Tamil Nadu and Karnataka has caused severe shortage of raw material for downstream granite processors. Granite processors in Tamil Nadu and Karnataka have to source granite block from other states and other countries which have increased their transportation cost and impacted their competitiveness in the international markets.

Rajasthan, which accounts for 20% of granite reserves in India has lately emerged as new granite hub in India. Rajasthan government has better mining policies which promotes quarrying in an organized way in Rajasthan. Another advantage is that it has unique colors shades which are very popular across globe, especially USA.

Shipping container crisis

Covid-19 pandemic spread across the world and has disrupted logistics across the across the globe. Economic activities, production and supply chain halted due to implementation of lockdowns across countries. Initially demand for shipping containers was declined causing large number of containers not retrieved back from western ports. As the global trade started to rise again from August 2020 demand for containers increased rapidly and this in turn triggered the shipping containers crisis. Lockdowns and tightened clearing norms at borders and ports increased time for cargo clearance. Inadequate staffing for loading and unloading of goods from vessels at ports further worsened situation and large number of containers piled up at ports in Europe and North America. As per Descartes Datamyne Report, North America is facing a 40% imbalance, which means that for every 100 containers that arrive only 40 are exported and balance 60 containers continue to accumulate at ports. Shortage of shipping containers have increased sea freights significantly. On average for Indian exporters sea freight has increased by 300-350% as compare to pre-covid levels. The cost of shipping a 40 Feet Container from India to US has increased to over USD 10,000 per container compared to USD 1500 per container pre covid. The exports from India have been substantially impacted due to increased sea freight and extended exports cycle time. Working capital have increased substantially further impacting margins of Indian exporters.

About the Company

Aro Granite Industries Ltd is the largest processed granite exporter from India. The company has been in granite exports business for more than 35 years. It exports to more than 50 countries across the world and has a 100% EOU plant located in Hosur, Tamil Nadu. It has also set up new 100% EOU unit in Jaipur, Rajasthan and a Engineered Quartz Stone processing plant in its existing facility at Hosur. Company has received numerous awards and recognitions from Government of India for its exports including "Star Export House" certification from Ministry of Commerce and Industry. Company has built a wide product portfolio of stones over the years. It has expanded its product range portfolio from only granite to Quartizite and Quartz engineered stone. It processes granite blocks into slabs, tiles and cut-to-size tiles for large construction projects. It has installed capacity of 7,35,000 square meters for granite slabs and 3,60,000 square meters for granite tiles in Hosur plant. It also has granite processing plant in Jaipur with processing capacity of 1,50,000 square meters of granite slabs per year. It has 2 CNC machines and 1 edge policing machine for Cut-to-Size segment. Company also processes Quartzites which is one of the hardest stone on earth and has production capacity of 50,000 square meters per year. The Quartz manufacturing plant in its Hosur unit has a production capacity of 1,80,000 square meters per year.

Performance during the year

Sales increased by 25.70% to Rs. 225 Crore in FY2022 from Rs. 179 Crore in FY2021 and Profit After Tax increased by 50% to Rs. 9 Crore in FY2022 from Rs. 6 Crore in FY2021. The robust increase in sales and profit was largely on account of good performance in first half of the year. Its Jaipur plant and Quartz plant contributed to its growth significantly. FY2022 started on a good note for the company. However, the company had to face challenges from second wave of Covid-19. The State Government imposed complete lockdown for 1 week in Tamil Nadu which disrupted production and availability of labour in plants and granite quarries. The performance of the company was further impacted due to shortage of shipping containers. Non-availability of empty containers disrupted the supply chain across the world and impacted global trade over extended period of time. Exporters across the world are coping with unprecedent rise in sea fares. Shipping cost from India has increased by 3-4 times in last 2 years to USA and Europe. The landed cost of goods has increased substantially impacting new orders from customers. Shipping costs to USA increased to 40-50% of landed price of goods which earlier used to be 10-15% of landed price of goods. Working capital of the company has also increased substantially due to extended delivery time of its exports orders.

Jaipur Plant

The company has set up manufacturing plant in Rajasthan to procure raw material from North India. Rajasthan accounts for 20% of granite reserves in India. Rajasthan has large variety of unique semi-exotic colors and shades which have good demand in global markets especially in North America. Company has built a portfolio of more than 20 colors from its Jaipur plant, which is in high demand in the export markets.

The Jaipur plant has contributed materially to the sales of the company in the last 2 years. It has contributed 19% of sales in FY2021-22. Currently the plant is running at full capacity and company has installed second multiwire machine to further increase capacity. The expansion will increase production capacity by 50% of Jaipur plant.

Quartz Plant

Company started its commercial production in FY2021 and has completed a full year of commercial production from Quartz plant in FY2022. It is currently producing basic colors and designs due to unavailability of engineers from its Machine vendors due to visa restrictions and Covid related travelling curbs. Overall, the plants performance has been encouraging and it is getting repeat orders from its customers. Over the course of the year the company has significantly reduced the defects and rejection rates and is improving its product quality continuously.

The Quartz plant contributed 19% of sales in FY2022. The Quartz plant utilisation was at 60% of its rated capacity in FY2022 and it has achieved breakeven in the first year of operations. Company is leveraging its granite segment distribution channel for its Quartz segment also, and its long-term relationship with customers is driving its growth in sales of Quartz segment. Quartz Engineered stone is very popular and is increasingly being preferred by fabricators over other natural stones. Company expects that the investment in Quartz plant shall drive the growth in coming years.


Aro granite is largest processed granite exporter from India. It has also started export of Quartz Engineered Stone from FY2021. The company exports to more than 50 countries across the world. Company has been awarded with "Special Export Award" by CAPEXIL for 7 years in a row. Exports accounted for 91% of revenue in FY2022. Its major exports markets are USA, Poland, Germany, Slovakia, Italy and Australia.

Segment performance

Company has 2 segments slabs and tiles. Cut-to-size is reported in the tiles segment and Quartzite and Quartz sales are reported under slab segment.


Slabs are the dominant component of Aro Granites business. The segment contributed 83% of the Sales in FY2021-22. Company has two granite processing plants located in Jaipur and Hosur. It has an installed capacity of 7,35,000 square meters per year for Granite slabs in Hosur plant and 1,50,000 square meters in Jaipur plant. It also has an installed capacity of 1,80,000 square meters per year for Engineered stones slabs in its Hosur plant. The contribution from the Jaipur plant is growing and sales from the plant increased from Rs 36.20 Cr in FY2021 to Rs 42.40 Cr in FY2022. The Jaipur plant is running at full capacity and the company recently increased the capacity by 50% in the Jaipur plant. Aro has also started production from Engineered Stones plant and its sales increased from Rs 2.3 Cr in FY2021 to Rs. 41.72 Cr in FY2022. Quartz engineered stones are quite popular among fabricators and its demand is expected to further increase in future.


Tiles segment has a smaller contribution in Aro Granites business. It accounted for 17% of its revenue in FY2022. Aro has installed capacity of 3,60,000 square meters per year for this segment. It also classifies its Cut-to-size revenue in the tiles segment.


Aro Granite has shown growth in sales and profit inspite of very challenging business conditions. The Jaipur and Quartz plants have contributed to the sales growth, whereas the Hosur slab plant is underutilized due to scarcity of raw material. Jaipur plant is running at full capacity and the company has further increased capacity by 50% in Jaipur plant. The company procures raw material from Rajasthan for its Jaipur plant. Rajasthan has a wide range of colors which are popular across the world especially in North America. Company is aiming to further expand in Jaipur as it is getting good traction for its products.

The engineered stone plant has completed one full year of operation and has achieved operational breakeven. Company is getting encouraging response from its customers and getting repeat orders. Company expects that Quartz segment will contribute to the growth of the company in coming future.

The company continues to face challenges in procurement of raw material for its Hosur plant. The production from its Hosur plant has significantly reduced and it is running at 50% of its capacity due to non-availability of raw material. The company has started processing imported raw blocks to improve its utilization levels.

Aro granite has tried to scale up its operations as per the demands of the industry. It has invested in its state-of-the-art plant and machinery over the years and is running one of the best granite processing plants in India. It has become the largest processed granite exporter out of India based on its processing skills. The company is aiming to scale up its engineered stone business and continue growing amid the challenging environment for the stone industry.

Opportunities & Threats


Engineered stone demand is growing much faster globally. The company recently forayed in this segment and hopes to drive future sales growth from this segment. Dumping duty imposed on stone exports out of China by USA and European Union makes Indian processed granite more competitive in those markets

Natural stone processing is environment friendly. So it fits into the sustainable living movement that is gaining traction

India has one of the largest range of colors in natural stones. As the stone mining business organizes there is a big opportunity for the industry to grow


Increasing protectionism by countries and imposing of Anti-Dumping duty can impact Granite exports out of India

Raw material scarcity in South India has been impacting business significantly. Further closure of mines will impact the availability of raw blocks. Increasing uncertainty in the global economy will lead to high currency fluctuations which may impact the margins of company

Rising costs of transportation makes the landed costs of goods high in the importing countries, which in turn impacts overall demand.

Risk & Concern

Shortage of Raw Material

Raw material shortage has slowed down growth of Indian granite exporters. Closure of large number of granite quarries has caused big shortage in raw material, especially in South India where our Hosur plant is located. Challenges in procurement of raw material has adverse impact on the overall competitiveness of Indian exports. In our case the Hosur plant is operating below capacity and this has significantly impacted our sales and profitability.

To counter the shortage of raw material the company has opened the Jaipur plant and has started sourcing from new mines in other geographical regions like Rajasthan and Andhra Pradesh. The company has also started importing raw blocks, to improve the utilization in Hosur plant.

Adverse Regulatory Policies

The state government policies have been unfavorable for granite industry in Tamil Nadu and Karnataka over the last few years. The policies regarding granite quarry leasing have been ambiguous and not supportive for granite industry in the recent years. Many granite quarries have closed down over the last few years due to allegations of illegal mining, lack of Environmental Clearances or irregularities in the allotment process. This has been compounded by frequent change in rules which have resulted in a grid lock on approval for new granite quarries. This in turn has resulted in reduced availability of raw granite blocks.

The company is trying to source granite blocks from other geographic regions and also importing raw granite blocks

Currency Appreciation

Company generated 91% of its revenue in FY2022 from exports and currency fluctuations can impact the competitiveness and demand for Indian currency. The relative currency appreciation of Indian Rupee vis-a-vis competing nations like Brazil has impacted the business negatively in the past.

The company currently exports to over 50 countries. This helps in diversification of risks and any adverse currency movement in one country will have a lower impact on companys business. Some shades are only found in India and their demand is relatively inelastic and is not impacted by the currency movements. The company is focused on exporting such colors and is also aiming to increase its sales in the domestic market.

Change in Consumer Preference

Stone industry is very dynamic designs and colors preference keep changing. Demand for products, colors and shades depends upon the trend in industry. The demand for engineered stone has increased at the expense of natural stones, which includes granite.

The company has responded to the global trends by setting up an engineered stone unit at its Hosur Unit.