asian granito india ltd share price Management discussions

ECONOMIC OVERVIEW Global Economic Overview

The global economy grappled with several challenges in CY 2022, like inflationary pressure, continued geo-political conflict, and a resurgence of Covid-19 in China. However, several economies, including the United States, the euro area, and many emerging markets and developing economies (EMDEs), saw some respite from the third quarter. The growth was led by domestic private consumption and investment, amidst strong fiscal support. Global economic growth stood at 3.4% in CY 2022 and is expected to decline slightly to 2.8% in CY 2023 and 3% in CY 2024. Advanced economies posted 2.7% growth in CY 2022 with expectations of 1.3% growth in CY 2023 and 1.4% in CY 2024. EMDEs which grew 4% in CY 2022 are expected to continue to grow at 3.9% in CY 2023 and 4.2% in CY 2024. Global headline inflation appears to have peaked in the third quarter of 2022. On the supply side, easing bottlenecks and declining transportation costs reduced pressures on input prices. Strict monetary policy stance adopted by several central banks is starting to cool demand and inflation. However, the full impact is unlikely to be realised before 2024. Prices of fuel and nonfuel commodities are declining. Core inflation, however, remains well above pre-pandemic levels in most economies. About 84% of countries are expected to have a lower headline inflation in CY 2023 than in CY 2022. Global inflation is set to fall from 8.8% in CY 2022 to 6.6% in CY 2023 and 4.3% in CY 2024. The slower growth in CY 2023 as compared to CY 2022 is predominately attributable to the muted growth in advanced economies. Growth in EMDEs is estimated to have bottomed out in CY 2022. Growth is expected to pick up in China, with the full reopening in CY 2023. The expected pickup in CY 2024 in both advanced economies and EMDEs lies on the expectations of a gradual recovery from the effects of the war and subsiding inflation.

(Source: IMF April 2023 – World Economic Outlook)

Indian Economic Overview

The Indian economy exhibited strong resilience while the world economy continued to grapple with several challenges. The robust growth can be attributable to the large domestic consumption and fixed investment. According to the Provisional estimates of National Income 2022-23, the economy is expected to grow at 7.2% in FY 2022-23 as compared to 9.1% growth witnessed in FY 2021-22. Exports of goods and services accounted for 23.5% of GDP, the highest level since FY 2014-15. Private consumption hit the highest level since FY 2006-07 at 58.5%. In FY 2022-23, robust growth in the banking sector coupled with strong exports, aided in improvement in current account deficit. RBIs stringent monetary action played a crucial role in curbing inflationary pressure.

Prompt government action and moderation in oil prices aided control of inflation.

The governments strong intension of boosting economic growth amid mounting fears of recession were made clear in the Union Budget 2023-24. The Budget adopted seven priorities namely, inclusive, green growth, reaching the last mile, infrastructure and investment, unleashing the potential, youth power and focus on financial sector. Led by strong measures and huge allocation to capital expenditure, despite volatile global developments, the Indian economy remains resilient. The government is laying strong emphasis on making India the third largest global economy and a world-class manufacturing hub. The three primary assets to capitalise on this unique opportunity are the potential for significant domestic demand, the governments drive to encourage manufacturing, and a distinct demographic edge, including a considerable proportion of the young workforce. The government is investing in skill development through campaigns like PM Kaushal Vikas Yojna. In addition, PLI schemes adoption in 14 sectors will contribute positively towards manufacturing capabilities.

The Indian GDP growth is expected to clock 6.9% growth in FY 2022-23 and 6.6% growth in FY 2023-24, according to the World Bank. India is expected to become the fastest growing economy in FY 2023-24. The inflation trajectory in India is likely be determined by extreme weather conditions like heatwaves and the possibility of an El Nino year, volatility in international commodity prices and pass-through of input costs to output prices.

Source: NSO, World Bank, PIB

INDUSTRY OVERVIEW Global Tiles Industry

The pick up in world tile production and consumption that started in 2020, saw a sharp acceleration in recovery in 2021. World tile production in 2021 stood at 18,339 Mn square meters (sq. mtrs.), up 7.2% from the 17,101 Mn sq. mtrs. recorded in 2020. Asia Pacific continues to dominate the world production, with China and India being the biggest manufacturers of ceramic tiles in the world. Production in Asia grew by 4.9% to 13.6 Bn sq. mtrs., equivalent to 74% of global production. The growth was primarily driven by the increase in volumes produced in China, India and Indonesia, which offset the sharp contraction experienced in Vietnam. The European continent produced a total of 2.12 Bn sq. mtrs., constituting 11.6% of world production. Production in the European Union grew 18% to 1.39 Bn sq. mtrs. and in non-EU Europe grew 14.6% to 731 Mn sq. mtrs. driven by the sharp increase in Turkey. Production in the American continent grew strongly to 1.74 Bn sq. mtrs., with North America posting 17.4% growth, while Central and South America saw the biggest increase of 24.5%. The only area to experience a contraction in 2021 was Africa, where production dropped 3.3% due to steep declines in Algeria and to a lesser extent Nigeria which outweighed the increases in all other countries on the continent.

There was a strong increase in tile demand in all geographical areas, which brought the world tile consumption growing to 18,209 Mn sq. mtrs., up 6.8% from 17,050 Mn sq. mtrs. In 2020. In Asia, constituting 72.3% of global consumption, demand grew 5.2%. In Europe consumption increased both in EU and in non-EU European markets by 14.2% and 15.3% respectively. The Americas saw growth in both Central and south America and North America growing by 16.4% and 11.5% respectively. Demand grew 1.5% in Africa.

In 2021, global imports/exports grew 8.7% to 3 Bn sq. mtrs., witnessing a broad-based recovery across geographies, approximately 242 Mn sq. mtrs. more than in 2020. Asias exports, equivalent to 47% of the world total, grew to 1.41 Bn sq. mtrs., up 2%. The EUs exports rose sharply by 14.3% amounting to 35% of the global total. Non-EU European countries reported 12.3% growth in exports, largely due to growth in Turkish exports. In Central and South America exports grew 36.3%, 10.7% in North America and 4.6% in Africa. EU remained the area with the highest export share in 2021 at 75.7% of its production. All the other areas lagged well behind. Non-EU Europe exported 31.6% of its output volumes, North America 11.9%, South America 13.4%, Asia 10.4% and Africa 9.6%. Spain regained the second place in the ranking of the worlds largest exporting countries, surpassing India by a small margin.

The top ten largest importing countries imported a total of 1,155 Mn sq. mtrs., up 4.6% accounting for 38.3% of global import/ export flows. The United States continued to be the worlds largest tile importer. Barring Indonesia and Saudi Arabia, which imported 17.9% and 41.5% of national consumption, the other top 10 countries imports covered for more than 70% of their domestic demand. This ratio was the highest at 98.1% in Iraq and between 90% and 95% in France, Germany, Israel and Great Britain.

WORLD MANUFACTURING AREAS

AREAS	2021 (Sq.mt Mill.)	% on world production	% var. 21/20
EUROPEAN UNION (27)	1,393	7.6%	18.1%
OTHER EUROPE	731	4.0%	14.6%
(Turkey included)
NORTH AMERICA	377	2.1%	17.4%
(Mexico included)
CENTRAL-SOUTH	1,360	7.4%	24.5%
AMERICA
ASIA	13,585	74.1%	4.9%
AFRICA	888	4.8%	-3.3%
OCEANIA	5	0.0%	0.0%
TOTAL	18,339	100.0%	7.2%

WORLD CONSUMPTION AREAS

AREAS	2021 (Sq.mt Mill.)	% on world production	% var. 21/20
EUROPEAN UNION (27)	1,141	6.3%	14.2%
OTHER EUROPE	649	3.6%	15.3%
(Turkey included)
NORTH AMERICA	603	3.3%	11.5%
(Mexico included)
CENTRAL-SOUTH	1,448	8.0%	16.4%
AMERICA
ASIA	13,166	72.3%	5.2%
AFRICA	1,148	6.3%	1.5%
OCEANIA	54	0.3%	-0.5%
TOTAL	18,209	100.0%	6.8%

TOP MANUFACTURING COUNTRIES

COUNTRY	2017 (Sq.m Mill.)	2018 (Sq.m Mill.)	2019 (Sq.m Mill.)	2020 (Sq.m Mill.)	2021 (Sq.m Mill.)	% on 2021 world production	% var. 21/20
1. CHINA	10,146	9,011	8,225	8,474	8,863	48.3%	4.6%
2. INDIA	1,897	2,011	2,223	2,318	2,550	13.9%	10.0%
3. BRAZIL	867	872	909	840	1,049	5.7%	24.9%
4. SPAIN	530	530	510	488	587	3.2%	20.3%
5. IRAN	373	383	398	449	458	2.5%	2.0%
6. TURKEY	355	335	296	370	438	2.4%	18.4%
7. ITALY	422	416	401	344	435	2.4%	26.5%
8. INDONESIA	307	383	347	304	410	2.2%	34.9%
9. VIETNAM	560	602	560	534	370	2.0%	-30.7%
10. EGYPT	300	300	300	285	310	1.7%	8.8%
TOTAL	15,757	14,843	14,169	14,406	15,470	84.4%	7.4%
TOTAL WORLD	18,208	17,430	16,803	17,101	18,339	100.0%	7.2%

TOP CONSUMPTION COUNTRIES

COUNTRY	2017 (Sq.m Mill.)	2018 (Sq.m Mill.)	2019 (Sq.m Mill.)	2020 (Sq.m Mill.)	2021 (Sq.m Mill.)	% on 2021 world consumption	% var. 21/20
1. CHINA	9,244	8,163	7,453	7,859	8,268	45.4%	5.2%
2. INDIA	1,678	1,742	1,867	1,884	2,069	11.4%	9.8%
3. BRAZIL	765	775	802	829	902	5.0%	8.8%
4. INDONESIA	336	450	413	357	478	2.6%	33.9%
5. VIETNAM	580	542	467	400	300	1.6%	-25.0%
6. TURKEY	251	236	185	241	291	1.6%	20.7%
7. USA	284	289	273	264	289	1.6%	9.5%
8. EGYPT	252	236	239	237	278	1.5%	17.3%
9. MEXICO	242	236	238	242	276	1.5%	14.0%
10. SAUDI ARABIA	210	206	223	284	252	1.4%	-11.3%
TOTAL	13,842	12,875	12,160	12,597	13,403	73.6%	6.4%
TOTAL WORLD	18,037	17,313	16,638	17,050	18,209	100.0%	6.8%

TOP EXPORTING COUNTRIES

COUNTRY	2018 (Sq.m Mill.)	2019 (Sq.m Mill.)	2020 (Sq.m Mill.)	2021 (Sq.m Mill.)	% on 2021 national	% on 2021 world exports	% var 21/20	value 2021 (million €)	average export price (€/sq.m)
1. CHINA	854	779	622	601	6.8%	19.9%	-3.5%	3.453	5.7
2. SPAIN	414	415	422	496	84.4%	16.5%	17.4%	3.668	7.4
3. INDIA	274	359	437	483	18.9%	16.0%	10.6%	1.486	3.1
4. ITALY	328	323	318	364	83.6%	12.1%	14.3%	5.199	14.3
5. IRAN	150	162	179	182	39.8%	6.1%	2.1%	198	1.1
6. TURKEY	99	112	132	154	35.2%	5.1%	17.1%	829	5.4
7. BRAZIL	106	101	96	128	12.2%	4.3%	33.8%	413	3.2
8. POLAND	43	50	58	62	55.9%	2.1%	7.1%	394	6.4
9. UNITED ARAB EMIRATES	43	45	52	48	57.1%	1.6%	-8.3%	184	3.9
10. MEXICO	46	41	37	41	14.1%	1.3%	9.8%	211	5.2
TOTAL	2,356	2,387	2,352	2,558	17.2%	84.9%	8.8%
TOTAL WORLD	2,815	2,831	2,771	3,013	16.4%	100.0%	8.7%

WORLD EXPORTING AREAS

AREAS	2021 (Sq.mt Mill.)	% on world production	% var. 21/20
EUROPEAN UNION (27)	1,055	35.0%	14.3%
OTHER EUROPE (Turkey included)	231	7.7%	12.3%
NORTH AMERICA (Mexico included)	45	1.5%	10.7%
CENTRAL-SOUTH AMERICA	183	6.1%	36.3%
ASIA	1,414	46.9%	2.0%
AFRICA	85	2.8%	4.6%
OCEANIA	-	0.0%	0.0%
TOTAL	3,013	100.0%	8.7%

TOP IMPORTING COUNTRIES

COUNTRY	2017 (Sq.m Mill.)	2018 (Sq.m Mill.)	2019 (Sq.m Mill.)	2020 (Sq.m Mill.)	2021 (Sq.m Mill.)	% on 2021 national consumption	% on 2021 world imports	% var. 21/20
1. USA	202	210	204	197	215	74.5%	7.1%	9.5%
2. IRAQ	129	125	138	161	168	98.1%	5.6%	4.0%
3. FRANCE	111	111	113	114	134	92.1%	4.4%	17.0%
4. GERMANY	109	107	111	123	126	93.5%	4.2%	2.4%
5. PHILIPPINES	82	91	86	77	116	75.1%	3.8%	50.8%
6. SAUDI ARABIA	132	116	126	167	105	41.5%	3.5%	-37.3%
7. INDONESIA	64	77	72	73	85	17.9%	2.8%	17.4%
8. SOUTH KOREA	78	76	68	69	76	72.2%	2.5%	10.0%
9. GREAT BRITAIN	52	51	59	60	66	92.0%	2.2%	9.7%
10. ISRAEL	58	61	61	63	64	94.5%	2.1%	2.6%
TOTAL	1,016	1,025	1,037	1,103	1,155	61.8%	38.3%	4.6%
TOTAL WORLD	2,785	2,815	2,831	2,771	3,013	16.5%	100.0%	8.7%

Source / Fonte: Mecs / Acimac Research dept. "World production and consumption of ceramic tiles", 10^th edition 2022

Indian Tiles Industry

India remains one of the fastest-growing ceramic tile markets at the global level. India is Asias second largest ceramic tile producing country as well as the worlds second largest consumer and third largest exporter of ceramic tiles. Indias strong economic and social growth are key catalysts for large growth margins in public and private construction and infrastructure. Consequently, these factors are resulting in the increased consumption of building materials, including ceramic tiles. The governments has strong ambitions to transform India into the worlds manufacturing powerhouse in most production sectors, including ceramics, within a decade. This in turn will enable India to rapidly scale the rankings of leading tile exporter countries in the world.

The strong position is attributable to the growing real estate sector coupled with strong Government support for infrastructure and housing sectors. The Government schemes such as Pradhan Mantri Awas Yojana and Smart Cities, among others, are likely to provide a further impetus to the real estate market in India. In addition, rising disposable incomes and growing number of dual income households is resulting in increased desires for beautification of living and working spaces. These factors are significantly contributing to the growing demand for ceramic tiles in the country. Demand for products like the new touchless and other hygiene-centric products in bath ware and the germ-free tiles is expected to take centre-stage. The demand for tiles is not only high in new projects but is also increasing in application of tiles in replacement and renovation projects.

Nearly 60% of the industry continues to be dominated by unorganised players. The Morbi district in Gujarat, is the worlds second largest ceramic cluster and home to 95% of Indias ceramic tile producers. However, with time the share of organised players is gradually rising. Several leading tile manufacturers are entering into JVs with smaller unorganised players or outsourcing to them. These JVs or associate concern partners will eventually enter the organised space, benefiting the entire industry in the future.

In terms of segmentation, the Indian tiles industry is mainly classified into two broad product segments, namely ceramic tiles and vitrified tiles. In terms of application, the floor tile segment dominates with about half of the share. Wall tile, floor tile, and vitrified and porcelain tile segments account for 40%, 48% and 12%. The growing demand for floor tiles has increased the competitive intensity in the market. This can be attributed to its significance in various infrastructures such as residential, hospitals, educational, transport, commercial, institutional etc. Based on the consumers, the market is segmented into residential, commercial and others with the residential sector dominating the market.

In 2021, India maintained its position as the worlds second largest tile producer and consumer country. The total production in India grew by 10% from 2,318 Mn Sq. mtrs. in CY 2020 to 2,550 Mn Sq. mtrs, accounting for nearly 14% of total worlds production. Domestic consumption saw a similar increase of around 9.8% to 2,069 Mn Sq. mtrs., accounting for nearly 11.4% of total worlds consumption. The growing consumption is mainly driven by a surge in construction work following the slowdown in activity caused by the pandemic.

Despite a 10.6% increase in exports to 483 Mn Sq. mtrs., India dropped to third place in the ranking of the worlds largest exporters after being overtaken by Spain. Indias exports now account for 16% of the world total and 19% of its domestic production. In value terms, exports reached €1,486 Mn, equivalent to an average selling price of € 3.1 per Sq. mtr., which remains one of the lowest values of any major exporter country. Saudi Arabia retained its position as the Indian tile industrys largest export market, despite the fact that import duties on Indian tiles introduced in the GCC countries caused sales to plummet by 50.5% from 91 Mn Sq. mtrs. to 45 Mn Sq. mtrs. This contrasted with a growth in sales in all the other main export markets like exports to Kuwait grew 96%, to Iraq grew 13.5%, to United Arab Emirates grew 12.5%,46% to Nepal, 8.6% to the United States and 7.5% to Mexico. Amongst the biggest increases were the two-fold growth in exports to Russia, ~1,000% surge in exports to the Philippines from less 1 Mn Sq. mtrs. to 10. Mn Sq. mtrs., and a 427% rise in exports to Jordan. Overall, the Asian continent absorbed 57% of Indias exports, Africa 16%, North America (NAFTA) 8.7%, Europe (EU + non-EU) 13% and South America 5%.

Outlook

The Indian tile industry has doubled in size since 2012, maintaining 8.6% CAGR. In CY 2022, growth is estimated to have slowed slightly due to soaring energy costs, which forced several Gujarat producers to turn off their kilns for several months. However, the industry has more than 900 increasingly large and efficient production lines. This huge number, supports the growth in the tiles market with expectations that India will reach a production volume of more than 3.7 Bn sq. mtrs. by CY 2026, according to MECS research. Domestic demand absorbs about 70% of the total output, while exports are set to exceed 1 Bn sq. mtrs. by CY 2026.

Source:

India Ceramic Tiles Market Size and Overview 2021, Industry (openpr. com) Indian Ceramics Asia 2023 - The Tiles of India Tiles Sector in India 2022 : Indian Tile Industry - IndianCompanies.in India Ceramic Tiles Market Size & Share Analysis - Industry Research Report - Growth Trends (mordorintelligence.com) India Ceramic Tile Market - Industry analysis and Forecast (2022-2027) (maximizemarketresearch.com) India Ceramic Tiles Market Size, Share Report 2023-2028 (imarcgroup. com)

GROWTH DRIVERS

Make in India and other Government Schemes

The Government of India has launched several programs which are helping tile industry to grow and flourish. Building of toilets to eliminate the open defecation in the country, under the Swachh Bharat Mission in urban and rural areas has successfully boost the ceramic tile industry with high growth in demand of small size tiles. The implementation of government programs such as cluster development program (MSE-CDP) has also boosted the ceramic tile industry growth. In addition, under the MSE-CDP scheme, the government offers aid for infrastructure expansion and development of other technological and backup service. Similarly, under the Credit Linked Capital Subsidy Scheme (CLCSS), the Government of India provides around 15% capital subsidy for development of plant and installation of machinery aiding demand for ceramic tiles. Other schemes significantly contributing to growth in demand of ceramic tiles include Make in India, push for housing and infrastructure development, the Pradhan Mantri Awas Yojana (Urban and Gramin) and vocal for local.

Urbanisation

Rapid urbanisation is the main key factor that will drive the growth of the tile manufacturing industry in India. The cities are continuously expanding with significant investments being made in housing, shopping malls, hospitality, and other sectors. Moreover, the introduction of smart city projects by the Indian Government will propel the growth rate in future markets.

Housing Shortage

Despite several schemes launched by the government, there continues to be a severe shortage of houses in India due to ever increasing population. With steps being taken to address this housing shortage, the ceramic tile industry is expected to receive huge traction.

Low per Capita Consumption

Per capita consumption of tiles in India is 0.6 sq. mtrs. This is significantly lower as compared to 4.0 sq. in China and 3.4 sq. mtrs in Brazil. Indias per capita tile consumption is less than half of the world average of 1.4 sq. mtrs. This is indicative of huge scope of growth for the Indian tile industry.

Home Extension and Home Improvement Needs

There is a significant need for bigger and better homes in India as ~41% of households live in smaller than one-room homes and only 53% households are in a good condition. This huge scope for home extension and home improvement in turn presents significant growth opportunities for the ceramic tiles and sanitaryware industry.

Hotel and Commercial Sector Demand

The Hospitality Industry in India is estimated at USD 23.50 Bn in 2023 and is expected to reach USD 29.61 Bn by 2028, growing at 8% CAGR. Being rich in culture and diversity, India has been attracting a large number of tourists from all over the globe. India has also been recognised as a destination for spiritual tourism for international and domestic tourists. This bodes well for the ceramic tile and sanitaryware market as hotels will invest in refurbishment and extensions to maintain the aesthetics.

Similarly, Indias commercial real estate sector is projected to be accelerated by large-scale investments by institutional investors in the coming years. The retail real estate sector has been dramatically boosted by government initiatives, such as Make in India, and other reforms in the realty sector, such as the introduction of the Real Estate Regulatory Authority (RERA) and

GST. The growth in commercial real estate works in favour of growth in demand for the ceramic tile and sanitaryware market.

Hospitality Industry In India Market Size & Share Analysis – Industry Research Report – Growth Trends (mordorintelligence. com)

Evolution of Large Format Tiles and Slabs

Globally, consumer preference is shifting from Double Charge tiles to large format GVT and Porcelain slabs. The same trend is gradually gaining traction in India. Several players are launching new format tiles with modern designs and thicknesses, inspired by innovation of glazing and digital printing technologies. These products are aimed at capturing export market as well cater to the slowly growing domestic demand for these novel products. Large format tiles and slabs are increasingly being used as countertops, kitchen tops, floorings, facades, wall cladding, etc.

Emergence of new trends

Emerging tile trends will boost the growth of the tile manufacturing industry in India like printed ceramic tiles, germ-free tiles, 3D tiles, and visually stimulating mosaic tiles. Digitally printed tiles are becoming a popular choice of consumers because they provide ways to improve the aesthetic appeal of a house or office space. Similarly, customers are becoming hygiene conscious and they prefer germ-free tiles.

Anti-China Sentiment

The central government has imposed a definitive anti-dumping duty of USD 2.05 per sq. mtr. on luxury vinyl tiles imports from China and USD 1.44 per sq. mtr. on imports from Taiwan based on the recommendations of the Commerce Ministry to benefit the local tile manufacturers. The anti-dumping duty would be valid for five years.

Source: Anti-Dumping Duty: Finance ministry imposes anti-dumping duty on luxury vinyl tiles from China, Taiwan - The Economic Times (indiatimes.com)

COMPANY OVERVIEW

Incorporated in 1995 as Karnavati Fincap Private Limited, Asian Granito India Limited (AGL) commenced tiles operations in 2001. Headquartered in Ahmedabad, AGL has emerged as Indias leading Luxury Surfaces and Bathware Solutions brand in a short span of two decades. Ranked amongst the top ceramic tile companies in India, AGL has achieved nearly 40 times growth in its production capacity, from 2,500 sq. mtrs. per day in 2000 to over 1,65,000 sq. mtrs. per day (including capacity of JVs). AGL is also the only tiles company to be acknowledged in the Vibrant Gujarat Summit 2015 for achieving phenomenal growth.

The Company manufactures and markets a wide range of products viz. floor tiles, wall tiles, parking tiles, glazed vitrified tiles (GVT), polished vitrified tiles (PVT), double charge tiles, countertops, quartz surfaces, marble surfaces, sanitaryware, bathware, CP fittings, faucets and construction chemicals. Our thorough expertise and knowledge of building materials, has enabled us to evolve as a brand providing integrated solutions under a single umbrella. AGL products are synonymous with reliability, adaptability, innovation, quality consciousness and the Company has created a strong brand identity, well recognised globally and loyal customer base across segments.

The Company has 14 state-of-the-art manufacturing units under 11 facilities spread across Gujarat and 235 exclusive franchise, 11 company-owned display centers across India. Currently the installed capacity is around 54.46 Mn sq. mtrs. We leverage the strategic location of our plants to procure key raw materials from the quarries in Rajasthan at competitive prices.

Further, the Company has an extensive marketing and one of the largest distribution network pan India. Its presence is spread across the length and breadth of the country and globe with 6,500+ touch points and 2,700+ distributors, dealers and sub-dealers spread across 35 states and Union Territories. The Company has a strong presence in 100 export markets. We offer solutions for every surface and bathroom need across India.

Globally our products are used by designers, architects, construction companies and homeowners. The Company looks to strengthen its identity as the leader in the Indian ceramic industry by consistently introducing innovative and value-added products in the market to keep pace with the demands and aspirations of its valued customers. We strive to become a complete solutions provider, encompassing quality assurance, packaging, and efficient supply chain management. We ensure strict compliance and abide by high standards of ethical norms in the industry. We are doing our part in making India a global manufacturing hub for tiles and sanitaryware.

OPERATIONAL PERFORMANCE

Performance of the Tiles Business Snapshot

• Manufacturing facilities: Dalpur-Himmatnagar, Mehsana, Morbi, Dholka and Idar

• Installed capacity: 1,58,920 sq. mtrs. daily (including 37,300 sq. mtrs. of contract manufacturing)

• Production in FY 2022-23: 24.27 Mn sq. mtrs.

• Total Consolidated Sales in FY 2022-23: Rs 1,281 Crores

• Capacity utilisation: 49%

• Sales growth over FY 2022-23: Stable

• Contribution of Tiles in total revenue: 82%

Business Overview

We manufacture tiles under four verticals, namely, ceramic, polished vitrified, glazed vitrified and double charged. The tile revenue almost remained constant at Rs 1,280.80 Crores in FY 2022-23 as compared to Rs 1,282.20 Crores in FY 2021-22. Exports stood at Rs 223 Crores, contributing 17% to total sales.

Operational Strength

We offer an array of products in different sizes, polishes and finishes. Led by our strong and widespread distribution network, superior production capacity, technologically advanced manufacturing units, we have established a strong dominance in the Indian ceramic tiles industry. We remain focussed on developing innovative and value-added products catering to the ever-evolving needs of our domestic and global customers.

Retail Strength

Our strong franchise base comprises of 235 exclusive franchisee-owned and franchise-operated Outlets and 11 Company-Owned display centers. In addition, a 15,000 sq. ft. ‘AGL Export House at Morbi has been established to boost exports. We aim to expand our network to over 10,000 touchpoints and 500 exclusive brand showrooms.

Performance of the Marble and Quartz Business Snapshot

• Manufacturing facilities: Dalpur

• Installed capacity: 4,100 sq. mtrs. daily

• Capacity utilisation: 69%

• Consolidated sales in FY 2022-23: Rs 272.7 Crores

• Contribution to the total revenue FY 2022-23: 17%

Operational Strength

The Company boasts of decade long experience in the business leading to better consumer connect due to deep understanding of the consumer needs. We are thus able to offer unique and innovative products led by strong R&D capabilities. Our product range includes multi-color quartz with 99.9% silica content against the standard offering having 97% silica concentration. Our Quartz products range includes multiple products with thickness of 20 mm and 30 mm against standard 15 mm thickness products available in the market. Such differentiated and superior products help us earn high dividends from satisfied customers.

Performance of the Sanitaryware Business

Established in 2019, AGL Bathware offers 30+ SKUs of faucets, showers and bathware accessories in addition to our previously launched sanitaryware and CP fittings range. Under this business segment, we offer complete bathroom solutions. Our aim is to establish a strong presence in the domestic bathware market, leveraging our widespread distribution network and strong brand equity. We also plan to build a standalone network of 500+ touchpoints through more than 100 distributors for faucets and sanitaryware over the next 12-18 months. We also plan to come up with own manufacturing facility of around 2000 pieces per day which is expected to commission by Mid-2023.

SWOT Strengths:

• Strong demand in both domestic and overseas markets

• Growing preference for value-added products by youth, millennials and working women

• Ample availability of low-cost skilled labour

• Technologically advanced state-of-the-art manufacturing facilities

• Strategic plant location, enabling ample raw material availability at competitive rates

• Rapid expansion of premium, value-added and aesthetic product

Weakness:

• Regulatory hurdles

• Strong competition from imports from China

• Steep rise in prices of key raw material and fuel

• Volatility in forex

Opportunity:

• Several Government led initiatives like PMAY, Make in India, Vocal for Local, Smart Cities Mission, AMRUT, etc. providing growth opportunities for the industry

• Rapid urbanisation

• Strong growth in commercial sector

• Strong growth in hospitality sector

• Growing disposable incomes

• Rise in dual income households

• Improving standards of living

Threat:

• Rise in import duty on key input materials and energy

• Inconsistencies in quality and pricing of raw material

• Widespread unorganised market

OUR COMPETITIVE STRENGTHS

Advanced Manufacturing Facilities with Strong Focus on Design, R&D and Quality

We have state-of-the-art manufacturing units which are completely integrated and capable of handling the entire process from raw material handling to finished goods and warehousing processes. These units are capable of handling various sizes of products with minimum human intervention as they are laden with high-end technology/machinery, such as kiln, spray dryer, press, digital printing, glazing line, robots etc. Technological prowess also helps us in achieving cost efficiencies. All machines whether imported or domestically procured, adhere to international quality standards. Our in-house R&D team allows us to develop innovative products, and carry out different tests and analysis of various products. We are able to cater to evolving customer needs and customise our offerings, with minimal future capital investments. This flexibility in operation is possible as our facilities are multi-purpose. We continuously strive to enhance our technological systems and processes to improve productivity, operating efficiencies and market position.

Wide Product Portfolio of 1,400+ Unique Designs

Once a pure play wall tiles player, we have emerged as Indias leading Luxury Surfaces and Bathware Solutions brand. Our extensive product portfolio comprises of ceramic floor tiles, glazed vitrified tiles, polished vitrified tiles, engineered marble & quartz stone, and bathware solutions. We offer 1,400+ unique designs built by our R&D team post thorough interaction with network partners like dealers, distributors and customers. This makes our offering very relevant and are able to achieve utmost customer satisfaction as sizes and material meet customer aspirations. We keep a close control on quality and design with the help of our in-house laboratory.

Widespread Sales and Dealers Network of 2,700+ Backed by 235 exclusive franchise

We cater to different needs of all our customers – retail, government and private players, led by our well-established dealer-distributor network spread across the length and breadth of the country. Globally, we have 6,500+ tpuch points with 2,700+ registered dealers, including sub dealers, 235 exclusive franchise and 11 company-owned display centers. Our strong relationship with our dealers enables us to achieve high customer retention. To ensure market competitiveness, our in-house sales and marketing team strives to liaise with the dealers regularly for customer inputs, market demands, design improvements, new product development, and product positioning.

Experienced Management and Dedicated Employee Base

Our esteemed promoters and directors have been an integral part of our Company since inception. They possess multi decade experience in the tiles industry. In addition, our adept management team also has a rich industry experience, with execution capabilities in technical, operational and business development domains. With immense talent and experience at our disposal, we are in a strong position to address market trends, manage and grow our operations, and maintain and leverage customer relationships. Several key areas of activities allied to operations are taken care of by our technical and support staff.

Strategic Proximity and well connected to Raw Material Sources and Customer Locations

All our manufacturing units are strategically located near Rajasthan, key source of raw materials used in tile production. Thus, we have easy access by road to large quantities of raw materials. This provides us operating leverage leading to cost efficiency and need for lower inventories. Also, Gujarat is well connected through multiple transportation mediums, providing ease of mobility for products to reach customer touchpoints on time.

Efficiency of Production Processes

Our technologically advanced manufacturing plants, conform to international standards. We strive to constantly upgrade all our major processes. Process improvement is an ongoing activity. Our trained and experienced staff strives to improve the production process to deliver maximum efficiency through optimum utilisation of resources. We are committed to ensure effective management of labour and productivity related issues. For optimum operational efficiency, we make use of Management Information Systems (MIS) tools. Our business operations run smoothly, led by our employee-centric HR policies which have resulted in strong relationships with all our employees.

BUSINESS STRATEGY

Demand for tiles in domestic market is likely to remain a mixed bag on account of inflationary pressure on retail as well as institutional customers. However, we believe that government will continue to spend on low-cost housing and construction, which will drive demand for ceramic products. Margin will continue to remain under pressure in the short term on account of inflationary pressure in input costs and limited ability to pass on the cost pressure to customers.

Export market continue to remain slightly sluggish. However, new avenue for companies continue to open resulting in good growth in the future. Export have started to return to normalcy on account of good demand across geographies and improvement in availability of containers and reduction in freight cost. As this play becomes more interesting going forward, Indian manufacturers like AGL, having right kind of technologies, product focus and innovation and broad portfolio of offerings are bound to emerge as leaders in this lucrative market. We expect the challenges of containers shortage, freight escalation, etc. to be short-lived and in the long term, Indian Ceramic Tiles Industry is expected to lead the world at First Position.

We have embarked on a journey of enhanced strategic integration programme (ESIP) to achieve our long-term vision of achieving a total revenue of Rs 6,000 Crores. For this strategic growth acceleration, we aim to achieve:

• Expansion of multi-material portfolio including establishing Indias largest single roof wall tile plant at Morbi, one of largest display centre of 1.5 lakh sq. ft. at Ahmedabad, new quartz surfaces plant at Morbi, new mega slab plant at Morbi, new manufacturing plant for large format GVT tiles at Morbi, expansion of quartz surfaces capacity

• Brand visibility enhancement by induction of a renowned and respected celebrity icon as brand ambassador, and expand and leverage social media presence and following through campaigns and influencer marketing.

• Global go-to-market expansion by increasing domestic touch points through addition of exclusive showrooms presence under current franchise model, dealers and sub-dealer additions in the territories with existing low presence, and addition of large company-owned display centres to improve engagement with retail customers.

• Expand international presence by adding new dealerships and distribution points in the our existing developed markets, build large presence in developed markets with growing demand through opening up of Subsidiaries and Warehouses to supply products in real time and explore OEM partnerships with importers, distributors and manufacturers abroad

• High margin in-house manufacturing of bathware

• Enhanced focus on innovation and value-added products through manufacturing of large format slab,

FINANCIAL REVIEW

Profit and Loss Account Analysis

• Consolidated Revenue from Operations: Total revenue from operations remained stable at Rs 1,562.7 Crores in FY 2022-23 as compared to Rs 1,563.8 Crores in FY 2021-22. Capacity utilisation for FY 2021-22 stood at around 73%. Export revenues at Rs 226 Crores with growth of around 12% as compared to Rs 202 Crores in FY 2021-22.

• Consolidated EBITDA Profit: The Company clocked an operating loss of Rs 51.3 Crores as compared to an operating profit of Rs 169.5 Crores in FY 2021-22. The decline is attributable to high input costs of gas, coal, freights and other inputs.

• Consolidated Finance Costs: Consolidated finance cost increased marginally to Rs 27.0 Crores from Rs 25.6 Crores in FY 2021-22.

• Total Comprehensive Income: The Company reported consolidated net loss of Rs 72.8 Crores as compared to consolidated net profit of Rs 91.8 Crores in FY 2021-22. There was an exceptional income of Rs 38.1 Crores in FY 2021-22.

Balance Sheet Analysis

• Consolidated Net Worth: As on 31 March, 2023, our consolidated net worth stood at Rs 1,256 Crores as compared to Rs 918 Crores as on 31 March, 2022.

• Consolidated Loan Profile: Our total long-term debt for FY 2022-23 stood at Rs 214 Crores as compared to Rs 189 Crores in FY 2021-22.

RISKS, CONCERNS AND MITIGATION

Our strategic risk management framework is adequately designed to keep a close watch on both internal and external risks which may impact the normal course of business. The risk management framework comprises of various strategies which ensure mitigation of existing risks as well as identifying and managing new and emerging business risks.

Competitive Risk

The tile market continues to be dominated by the unorganised segment, leading to fierce competition. Given the lucrative growth opportunities in both domestic and global markets competitive intensity is high in the industry, especially in terms of pricing.

Mitigating measures: We have unwavering commitment to develop innovative, technologically advanced products with superior quality. Intense market research and focus on R&D enables us to deliver first-time right products giving us a competitive edge. Our moat is further strengthened by our cost-efficient processes, unmatched distribution strength and state-of-the-art manufacturing facilities.

Product Risk

Our business growth faces the risk of our products becoming obsolete and undesirable, or unable to meet market expectations.

Mitigating measures: Our focus on extensive market research coupled with strong R&D capabilities, enable us to launch innovative specialised products with unique features. We have been the torch bearers for innovating several forms of tiles in our industry. We constantly strive to innovate and renovate our product offering to be able to match the pulse of the market. This helps us to strengthen brand equity and connect with our customers.

Brand Reputation Risk

Brand strength is imperative to command premium and ensure strong profit growth.

Mitigating measures: The Company leaves no stone unturned to ensure strong brand equity amongst all stakeholders. Our innovative products are aimed at meeting customer needs. In addition, we ensure strong dealer engagement through various campaigns. This ensures we remain a preferred partner for both customers and dealers.

Substitution Risk

Every product runs the risk of being substituted by a new product category, making the current offering obsolete or redundant. This may severely impact financial performance and business continuity.

Mitigating measures: Our ongoing market research and constant engagement with various market participants enables us to understand the ever-evolving needs of the consumer. Accordingly, we constantly strive to innovate and renovate our offerings to remain relevant in the market. Our innovations are technologically driven, ensuring the robustness of our portfolio.

Operational Risk

Unpredictable, external or internal events may result in unfavourable developments for the business operations. This may impact financial performance and business continuity.

Mitigating measures: All our operational and financial operations are controlled by our carefully designed comprehensive internal control system. We ensure strict adherence to these controls through regular and periodic reviews and audits. Deviations, if any, are immediately reported and met with appropriate action.

Distribution Risk

Being a product driven business, our distribution strength is a key pillar of organisational success. Any negative impact on any of our touch points may result in diminished business performance, hamper brand equity and reduce profit margins.

Mitigating measures: We have created an unmatched distribution network spread across the length and breadth of the country and globe with 6,500+ touch points and 2,700+ distributors, dealers and sub-dealers spread across 35 states and Union Territories. We also have a dedicated sales and support team to support our distribution network, to ensure robustness of our distribution capabilities.

Geographical Risk

In the event that our revenue is over-dependent on a particular geography, any unfavorable events in that geography may impact margins.

Mitigating measures: Our strong distribution network ensures that our product portfolio reaches across the length and breadth of the country. We earn 14%, 31%, 28% and 27% of domestic revenues from East, West, North, and South markets respectively. Exports contribute 12.9% of our revenues. Thus, our revenue flow is not concentrated in any particular geography.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Our internal control systems are devised keeping in mind the size, nature and complexity of our business operations. Our internal control systems properly document all processes related to all our operational and financial functions. The systems ensure adequate safeguard of assets against unauthorised use, efficient productivity at all levels and strict compliance to applicable rules and regulations. The systems help us in securing sensitive data, conduct the audit process smoothly, ensure adequate accounting of records, reliable financial reporting, monitoring operations, conservation of assets, preventing frauds and errors, executing authorised transactions and ensuring compliance with corporate policies. The aptness of the internal control framework and strict compliance, is reviewed by our internal audit team on a periodic basis. The team reports any deviations or observations to the Management and the Audit Committee. Any recommended measures and suggestions for improvement are duly considered. As majority of the branches are electronically integrated with the Head Office, we have a strong control on our internal control systems and compliance.

INFORMATION TECHNOLOGY

We have adopted high level of automation across our business, including production, market research, product development and distribution network. This has helped us in increasing operational efficiency and productivity. Our use of technically advanced programs has led to significant cost reduction as it helps eliminates redundancies and improve employee efficiency.

QUALITY CULTURE

We tirelessly strive to ensure customer satisfaction by developing innovative products with superior quality and latest technology. Catering to the needs of both our institutional and retail customers, we ensure strict adherence to international quality standards. We are well-known for launching first-time superior products given our strong focus on innovation, technology and R&D. Our deep dedication has enabled us to create unmatched brand equity in both Indian and international markets, keeping us ahead of competition. We have been able to add new customers and command a premium in the market led by our strong quality culture. It has also resulted in better organisation growth and creating long-term shareholder value.

HUMAN RESOURCES

We consider human capital to be an imperative pillar of organisational growth. Significant part of our business success is attributable to our talented and dedicated employee base. For the well being of our employees, and to create high level of positivity and motivation, we have devised a comprehensive HR policy framework. This enables us to foster a safe, conducive, equitable and productive work environment. To keep our employees in sync with current business environment and to provide developmental opportunities, we conduct regular skill upgradation and personal development trainings for all our employees. Such employee-friendly policies enable us to ensure good productivity, employee satisfaction and high retention ratio. Our HR policy, thus, plays a crucial role in business growth. We have adopted an open-door policy and a transparent work culture. Open communication has helped develop a bond between the management and the employees, contributing positively to the work environment and employee morale. To ensure merit-based growth opportunities we have performance-based rewards and recognition. With such a people centric approach we have succeeded in creating strong loyalty and unity among employees, and attract new talent. As on 31 March, 2023, our total employee strength was 6,000+.

CAUTIONARY STATEMENT

Statements made in the Management Discussion and Analysis section describe the Companys objectives, projections, expectations and estimations, which may be forward-looking in nature. These statements are made within the meaning of applicable securities laws and regulations. Past performance of the Company is not necessarily indicative of its future results, and actual results could differ materially from those expressed and implied. Important factors that could make a difference to the Companys operations include, among others, economic conditions affecting demand/supply and price conditions, variation in prices of raw materials, changes in Government regulations, tax regimes, economic developments and other incidental factors. The Company assumes no responsibility to publicly amend, modify or revise any forwardlooking statements based on any subsequent development, information or events.

NOTE

Except stated otherwise, all figures, percentages, analysis, views and opinions are on consolidated financial statements of Asian Granito India Limited and its wholly owned subsidiaries (jointly referred as AGL or Company, hereinafter). Financial information presented in various sections of the Management Discussion and Analysis is classified under suitable heads, which may be different from the classification reported under the Consolidated Financial Statements. Some additional financial information is also included in this section, which may not be readily available from the Consolidated Financial Statements. Previous years figures have been regrouped, wherever necessary, to make it comparable with the current year.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS AND RETURN ON NET WORTH

During FY 2022-23, the significant changes in the financial ratios of the Company and change in Return on Net worth as compared to that of the previous year (i.e. change of 25% or more as compared to the immediately previous financial year) are summarised below:

Financial Ratio	FY 2022-23	FY 2021-22	Change %	Reason for change
Inventory Turnover	6.25	4.99	25.26%	Due to increase in input cost of material and liquidation of slow moving inventory during the year
Interest Coverage Ratio	(2.97)	16.50	(118.01%)	Due to loss incurred during the year
Debt Equity Ratio	0.06	0.01	776.47%	Due to increase in working capital requirement
Operating Profit Margin (%)	(0.56)	9.82	(105.66%)	Due to loss incurred during the year
Net Profit Margin (%)	(1.95)	6.52	(129.89%)	Due to loss incurred during the year
Return on Net Worth	(2.16)	10.51	(120.56%)	Due to loss incurred during the year

	For and on behalf of the Board of Directors
	Kamleshkumar B. Patel
Place: Ahmedabad	Chairman and Managing Director
Date: 12 August, 2023	DIN: 00229700