exxaro tiles ltd share price Management discussions

Global market Overview

The global economy experienced a quicker-than- expected recovery from the repercussions of economic spillovers during the period of 2021- 22. Following the Covid-19 pandemic, the initial strong rebound in economic activities was dampened by the gradual but significant rise in inflation during the first half of 2021-22.

This led to a slowdown in economic growth for both advanced and emerging economies. Economic activity continues to be affected by the rise in central bank interest rates aimed at combating inflation and the ongoing conflict in Ukraine involving Russia. The rapid spread of COVID-19 in China dampened growth in 2022, but the recent reopening of the economy has paved the way for a faster-than-expected recovery.

In most economies, addressing the cost-of- living crisis remains a priority, with a focus on achieving sustained level of inflation. Given the potential impact of tighter monetary conditions and slower growth on financial and debt stability, it is important to employ macro prudential tools and strengthen debt-restructuring frameworks.

Despite facing challenges such as rising inflation, increased living costs, continuous interest hike, trade disputes, and prolonged geopolitical conflicts, the global economy managed to regain positive growth momentum. Governments worldwide implemented effective economic measures, fostering resilience among nations and businesses and preparing them for the future. According to the IMF World Economic Outlook report in January 2023, the world economy expanded by 3.4% in 2021-22, surpassing the previous forecast by 20 basis points. The IMF projects a real GDP growth rate of 2.7% for advanced economies in 2021-22 and 1.2% in 2022-23, while emerging economies are expected to grow by 3.9% in 2021-22 and 4.0% in 2022-23.


Price volatility and inflation are significant concerns for the global economy in the period of 2021-22. The economic outlook for 2022-23 is anticipated to be relatively moderate, similar to 2021-22, with a projected growth rate of 2.9%. Given this challenging external environment, it is expected that contractionary monetary policies will persist, aiming to address the issue of inflation. At the same time, fiscal policies are likely to be employed to alleviate the pressures associated with the rising cost of living, aligning with the monetary policies that have been adopted.

The UK has been particularly affected by rising costs of living, which have reduced households purchasing power and consumption. Stress has been observed in the banking systems of the US and Europe in recent months. If high inflation levels persist and lead to further rounds of interest rate hikes, it could worsen the business environment. The unresolved Russia-Ukraine conflict also adds to the uncertainty, impacting

energy markets and disrupting the supply- demand balance. These factors pose ongoing risks to the global economy.

However, projections indicate a global recovery in the second half of 2023, as inflation moderates and the Chinese economy reopens. There are already signs of cooling-off in fuel and commodity prices, as well as global container freight rates.

2022 2023 2024
World Output 3.4 2.9 3.1
Advanced Economies 2.7 1.2 1.4
Emerging Market and Developing Economies 3.9 4.0 4.2
Emerging and Developing Asia 4.3 5.3 5.2
China 3.0 5.2 4.5
India 6.8 6.1 6.8

Source: IMF, World Economic Outlook Update, January 2023

India Market Overview:

Despite global headwinds affecting global growth momentum, India continues to shine as a relative bright spot in the global economy, with the International Monetary Fund (IMF) estimating a growth rate of 6-7% annually until 2025. This growth has been driven by increased private sector spending and government efforts to improve infrastructure.

However, the Indian economy also faced inflationary pressures. The increase in crude oil prices and the depreciation of the Indian rupee against the US dollar added to these inflationary headwinds. As a response, the Reserve Bank of India (RBI) implemented interest rate hikes to control inflation. In 2022-23,the RBI implemented sixconsecutive increases in the repo rate,with the latest increment of 25 basis points in February 2023, bringing it to 6.50%. As a result, the Indian economy has begun to experience a gradual easing of inflationary pressures, leading to a more favorable demand scenario in the domestic market.

Indias economic fundamentals remain strong, and despite short-term turbulence, the long-term outlook is expected to be minimally affected. Growth-enhancing policies and initiatives, such as the Production-Linked Incentive and the governments focus on self-reliance, along with i ncreased i nfrastructu re spend i ng, are gene rati ng a multiplier effect on job creation, income growth, productivity, and efficiency, thereby accelerating economic growth. The robustness of the Indian economy is further evidenced by the significant increase in GST collections and E-way bill generation. GST collections for FY 2023 reached ?18 lakh crore, markinga 22%growth compared to the previous fiscal year. Furthermore, the Ministry of Corporate Affairs reported the incorporation of 1.95 lakh new companies in FY 2023, reflecting the positive business sentiments prevailing in India.

Moreover, the emphasis on manufacturing in India, coupled with government incentives and the digitization and technology transformation drive worldwide, are expected to contribute to the countrys economic growth. Additionally, geopolitical conflicts, particularly between Russia and Ukraine and trade conflict with China, are likely to enhance Indias status as a preferred investment destination. Many global in-house centers and multinational corporations are choosing India over Eastern European and China markets, to relocate their operations or establish new facilities.


Despite the persistently high core inflation, the Reserve Bank of India (RBI) maintains its tighter stance in the economy. The RBI forecasts that inflation will gradually move closer to moderate levels in the first half of 2023-24, as domestic demand is expected to increase during that period. The International Monetary Fund (IMF) projects that the Indian economy will experience robust growth of 5.9% in 2023, which is the highest among emerging economies. This growth will be driven by strong domestic demand and healthy consumption growth. Factors contributing to this growth include improved labour market conditions, increased consumer confidence, an anticipated recovery in rural demand, and higher purchasing power as inflation moderates.

In the Union Budget for FY2023-24, the Indian government announced a significant increase in capital expenditure allocation, amounting to INR 10 trillion. This move is expected to experience a boost in demand due to increased government spending coupled with rise in private consumption and investment. Flowever, the steady growth momentum could be impacted by global spillovers, so a cautious optimism is likely to be maintained in the economic system in the near future.

Global Ceramics Tiles Market

The global ceramics tiles market had a value of USD 383.1 billion in 2022. It is estimated to reach USD 663.2 billion by 2030, exhibiting a CAGR of 7.1% during the period from 2022 to 2030, driven by the rapid infrastructure development, growth in building industry, urbanization, population growth, and the attractiveness and durability of ceramic tiles. The Asia Pacific region accounts fora significant share of global ceramic tile production, with China holding the prominent position of the largest manufacturer of ceramic tiles worldwide. Following China, India is also a major player in the global ceramic tiles manufacturing industry. In advanced economies, the volume of ceramic tile consumption is primarily driven by the housing sector. On the other hand, in emerging economies, such as India, tile consumption is experiencing significant growth across multiple sectors, including housing, commercial projects, and infrastructure investments made by both the government and the private sector. This robust demand in emerging economies is fueled by the need for tiles in various construction projects, indicating a broader scope of application beyond residential buildings.

The global ceramics tiles industry has encountered various challenges in the previous fiscal year, including trade tensions, geopolitical conflicts, rising energy costs, disruptions in the supply chain, and volatility in financial markets. These factors have the potential to impact the demand for ceramic tiles in the short term, creating uncertainties for the industry. Flowever, there is an expectation thatthese challenges will gradually normalise due to the various initiatives undertaken by governments and central banks of different countries to revive economic activity. The global ceramic tiles market is anticipated to experience growth driven by higher demand from emerging countries, including India. These countries are witnessing rapid urbanization, population growth, and increased construction activities, leading to a surge in demand for ceramic tiles. The United States is emerging as a significant market with huge potential for the Indian tiles players. Following the COVID-19 pandemic, Chinas position has weakened, making India a highly favoured country for trade with the United States.

India Tile Industry

India holds the distinction of being the worlds second-largest manufacturer in the global ceramics industry and is one of the fastest- growing countries in this sector. The Indian tiles industry is characterized by a significant level of fragmentation, where unorganized players contribute around 60% of the overall production, while organized players hold a 40% market share. Notably, the Morbi cluster plays a crucial role in this industry, accounting for approximately 65- 70% of the countrys tile production. According to findings from the MESC research centre, the ceramics industry in India has reached a production level of 2500 MSM (Million Square Meters) and is projected to experience a significant growth to surpass 3700 MSM by the year 2026. The growth of the Indian tiles market is driven by several factors, including urbanization, infrastructure development, an increase in per capita income, and a rising demand for visually appealing tiles. The growth is further supported by government initiatives like Pradhan Mantri Awas Yojana (PMAY) and smart city projects. It is noteworthy that the residential sector contributes around 70% of the total demand for tiles in India, while the remaining demand comes from commercial and infrastructure sectors.

Plowever, the real estate market in India has faced several challenges in recent years. These include the impact of demonetization, the implementation of the Real Estate (Regulation and Development) Act (RERA), the introduction of the Goods and Services Tax (GST), the funding crisis faced by non-banking financial companies (NBFCs), and the adverse effects of the COVID-19 pandemic. These factors have had an impact on the real estate sector and, subsequently, on the demand for tiles. Despite these headwinds, the tiles industry has grown at a healthy pace on back of strong demand in the domestic market and rising export.

The ceramic tiles sector in India has witnessed impressive export growth over the period of 2012 to 2021, with volumes increasing by a remarkable 15 times to reach 483.1 million square meters (MSM). In the recent years, the surge in exports can be attributed to the implementation of the China+1 strategy which has led to increased demand for Indias tiles industry. Globally, customers are seeking to diversify their manufacturing and sourcing away from China, thus creating opportunities for Indian tile exporters. Moreover, India has left a significant imprint on the global tile industry by demonstrating competitiveness in various areas, including quality, design capabilities, and cost-effectiveness, when compared to its global counterparts. Currently, the export share of the Indian tiles industry is estimated to be around 25% of the total production. With the ongoing growth trajectory, it is expected to surpass 30% in the near future. The Indian tiles industry primarily exports around 56% to the Asian market, with the Gulf Cooperation Council (GCC) countries being the main market.

Flowever, the industry also encountered challenges stemming from geopolitical issues, lockdown COVID led restriction and uncertainties in the global landscape during 2021-22. These factors led to higher energy costs, increased logistic costs, container shortages, and supply disruptions within the industry. Consequently, the Indian ceramics tiles industry has also encountered significant difficulties arising from the increase in export container freight rates and container shortages. These factors have resulted in adverse effects on the industry, including inventory build-up, price corrections in the domestic market, and a decline in export sales.

Morbi Cluster

The Morbi Cluster, Gujarat holds a prominent position in the ceramic industry, being recognized as the largest tiles production cluster in India and the second largest tiles cluster globally. It serves as the base for numerous organized players within the Indian market. A significant proportion, approximately 95%, of the ceramics tile production in India is attributed to this cluster. It boasts a substantial presence with over 800 Indian ceramic tile companies operating within its vicinity. The clusters size, concentration of manufacturers, and dominance in the Indian market contribute to its significance and influence in the ceramic tile industry. Furthermore, the Morbi Clusters ability to offer cost-effective solutions, its focus on design and innovations, advancements in technology, and commitment to product quality have strengthened its footprint and reputation in the global market over time. During 2021-22, several production units within the Morbi Cluster faced significant challenges and had to cease operations. These shutdowns were primarily caused by increased energy costs, higher freight expenses, a surge in price war, inventory build-up, and a shortage of containers. These factors collectively impacted the operational viability of many production units, leading to their temporary shutdown. Notably, natural gas, which accounts for a significant portion (25%-30%) of the overall cost for the tile industry, experienced a significant price spike during this period from USD 2.20 MMBTU (Million Metric British Thermal Unit) to USD 9.98 MMBTU. These challenges have added further pressure on the operational costs. To mitigate the impact of rising energy costs, many companies in the ceramics tiles industry have started exploring alternative fuel sources such as LPG (Propane) or Bio-fuels. Additionally, the persistent rise in interest rates implemented by central banks worldwide to address inflationary pressures had an adverse effect on consumer sentiments in the real estate sector. As a result, this downturn in consumer sentiment significantly impacted the demand for the tiles industry.

Despite the aforementioned short-term challenges, the Morbi Cluster remains a significant player in the global tiles market. The cluster demonstrated its resilience during a challenging period when the Saudi market, an important export market, imposed anti-dumping duties on Indian tiles. Nevertheless, the Cluster effectively managed to mitigate this risk by diversifying its export destinations. It proactively explored and expanded its exports to countries such as the United States, Thailand, Brazil, Mexico, and other nations within the GCC (Gulf Cooperation Council). This strategic maneuver enabled the cluster to access new markets, reducing its dependence on any single market and ensuring its continued presence and competitiveness in the global tiles market.


The Indian tiles industry has a positive outlook due to strong growth in residential, commercial, and infrastructure sectors. The growth is driven by factors such as rapid urbanization, increasing per capita income, rising disposable income, and a growing demand for attractive and durable tiles. The residential segment, which accounts for 70% of tiles demand, has experienced significant demand in recent times, rebounding after facing challenges like inventory buildup, demonetization, the implementation of RERA, the applicability of GST, NBFC funding crisis, and the impact of COVID-19. Flowever, these challenges have had a positive impact on organized real estate players, leading to an increase in market share for the organised tiles players. The work-from-home and hybrid work culture trends post-COVID-19 have fuelled the demand for tiles in the residential segment as young individuals prioritize homeownership or home renovation to accommodate their remote work needs. Furthermore, government initiatives such as ‘Pradhan Mantri Awas Yojana and ‘Smart Cities are playing a significant role in driving the demand for the tiles market. These programs aim to provide affordable housing and develop sustainable and technologically advanced cities, which require a substantial quantity of tiles for construction and infrastructure projects. The demand for tiles is closely tied to the construction activities. Considering that nearly one-third of the Indian population resides in urban areas, the urbanization trend is expected to continue at a remarkable pace. The technological advancements in tile manufacturing, such as digital printing technology, have opened up new design possibilities and increased the range of tile options available. This has contributed to the growing popularity of tiles as a preferred choice for flooring and wall coverings. Additionally, the Indian tiles industry is capitalizing on its export potential. Indian Tiles producers are placing more emphasis on international markets, utilizing competitive pricing, high-quality manufacturing practices, and a wide range of products to establish a stronger global presence. By leveraging these strengths, Indian tile manufacturers are expanding their reach and exporting their products to international markets. This export- oriented approach is contributing to the growth and success of the Indian tiles industry.

Company overview

Headquartered in Gujarat, ExxaroTiles is a leading player in the Indian ceramic tiles industry. Our company manufactures and markets vitrified tiles, with more than 1,000 designs sold under our own brand "Exxaro". Though we commenced business as a manufacturer of frit, a key raw material used in manufacturing of tiles, over the years, we have evolved and now we offer the most innovative range of vitrified tiles. We essentially deal in two type of vitrified tiles, double-charge vitrified tiles and glazed vitrified tiles, which provide attractive and durable options for both floor and wall applications. Our company has two globally approved state-of-the-art manufacturing and R&.D facilities in Padra and Talod regions of Gujarat, with an annual combined installed capacity 14.6 Msm.

With a focus on creating a distinct identity in the tiles sector, we have garnered a reputation for delivering high-quality products that adhere to stringent quality and technical standards. Our commitmentto excellence sets us apartfrom our competitors and ensures customer satisfaction. Our integrated business model facilitates a robust presence across the entire value chain right from product design, process development, and manufacturing to marketing.

We enjoy an international presence and currently sell our products in more than 6 countries. Our extensive network of over 2,000 registered dealers, sub dealer <?6 touch point spans across 25 states, predominantly in North and West India. This strong dealer network enables us to supply our products for significant infrastructure projects and cater to a wide customer base.

One of our key strengths lies in our double charge plant located in Padra near Vadodara, where the availability of natural gas from ONGCatAPM prices contributes to our high-grossing product, glazed vitrified tiles. To further enhance our operational efficiency and reduce reliance on external energy sources, we are constructing a self-contained LNG gas station on our premises for internal use. This strategic initiative aims to improve our operating margins and ensure a sustainable energy supply.

While financial success is our goal, we are also mindful of our social responsibilities. We actively contribute to charitable trusts and NGOs that work towards improving the livelihoods, health, and education of underprivileged individuals. By supporting such initiatives, we aim to make a positive impact on society and uplift those who are less fortunate.

We aim to expedite our growth journey on the back of new product development, cost efficiencies, integrated business offerings, solid presence, and superior asset efficiencies. We are dedicated to offering top-notch products, enhancing our market presence, and fulfilling our social obligations. In the pursuit of maintaining our position as a distinguished player in the tiles industry, we are also creating noteworthy value for our stakeholders.

Financial Overview

Our companys total revenue decreased from ^3,253.4 million in 2021-22 to ^3,170.9 million in 2022-23, representing a decline of 2.5%. This fall in revenue can be attributed primarily to lower volume. The volume of sales was affected by a low demand environment and underutilization of plant capacity due to product innovation, improvement and expansion effort. The YoY decline in our overall performance was primarily driven by a decline in the volume. However, net realisation improved at a 5% modest growth on a YoY basis, which can be attributed to the introduction of various product mix changes in our product portfolio

The overall operating expenses of our company declined from Rs 2,769.0 million in 2021-22 to Rs 2,836.0 million in 2022-23. This increase in operating expenses can be primarily attributed to the increased costs for energy and logistics.

EBITDA: Our companys EBITDA stood at Rs 334.9 million for 2022-23 from Rs 484.4 million for 2021- 22. Decline in the EBITDA due to pricing pressure and higher input costs.

Depreciation: Our companys depreciation stood at Rs 157.7 million for 2022-23 from Rs 136.4 million for 2021-22. Capitalisation of brownfield expansion costs during the year led to higher depreciation.

EBIT: Our Companys EBIT stood at Rs 177.24 million for 2022-23 from Rs 348.04 million for 2021-22

Finance Cost: Our Companys finance cost decreased to^92.8 million for FY 2022-23 from ^99.8 million for FY 2020-21. This decrease in financial cost can be attributed mainly to efficient fund management.

PBT: Our Companys PBT decreased to Rs 101.6 million for FY 2022-23 from ^261.5 million for FY 2021-22.

PAT: Our Companys PAT decreased to Rs 73.0 million for FY 2022-23 from Rs 181.1 million for FY 2021-22

Capital Employed: Our Companys capital employed increased to 3,123.93 million for FY 2022- 23 from ^2,968.52 million for FY 2021- 22.

• Net Worth: Our Companys networth increased to Rs 2,740.9 million for FY2022-23 from Rs 2,667.9 million for 2021-22.

Return on Capital Employed: Our Companys return on capital employed ratio stood at 5.67 for FY 2022-23 as compared to 11.72% in FY 2021-22.

Return on Net Worth: Our Companys return on net worth stood at 2.7% for FY 2022-23 as compared to 6.8% in FY 2021-22.

Performance of Tiles Business:

The company has two Manufacturing facilities:

1) Padra

2) Talod

Installed capacity: 14.6 Msm per annum

Production in FY2023: 9.45 Msm

Capacity utilisation: 67.98%

Volume in FY2023:10.85 Msm

We provides an extensive selection of tiles encompassing various product categories, including ceramic tiles for both walls and floors, glazed vitrified tiles (GVT), and double charged tiles. Within these categories, the company offers a diverse range of products in different sizes, polishes, and finishes, catering to the varied preferences and requirements of customers. Exxaro has been a frontrunner in manufacturing tiles with:

3D effect in Double Charge • FGVT Tiles

More than 95% Glossy Tiles Full Color Body Vitrified Tiles 4 Layer Nano+Micro Polished Tech High Gloss Tiles in GVT Big GVT slab

Within the domestic market, our primary focus lies in expandingour market presence by augmenting our dealer network in both existing and untapped regions while concurrently enhancing brand recognition. With a widespread presence across India, the company boasts a comprehensive distribution network encompassing over 2,000 touch points, dealer &, sub dealer. This network efficiently caters to a diverse range of markets, including metro cities, tier I, tier II, and tier III cities. In FY23, the company successfully expanded its export operations to over 6 countries, progressively widening its global footprint. The company has been at the forefront of innovation, introducing pioneering products that have set trends within the industry. It remains committed to delivering unique and value-added offerings to its markets. This dedication enable us to meet the evolving needs of its esteemed customers, ensuring its continued success and growth.

Competitive Advantage

We operate two manufacturing facilities located in Padra (Unit 1) and Talod (Unit 2) in Gujarat, India. These facilities play a crucial role in our ability to produce stylish and high-quality tiles. Both units are fully integrated, encompassing all processes from handling raw materials to manufacturing finished goods and dispatching them to customers. Our facilities are equipped with modern equipment, including kilns, presses, digital printing, and glazing technology, which enable us to develop tiles in various designs and sizes while minimizing human intervention and optimizing cost efficiency.

To ensure international quality standards, we have imported most of our equipment, which adheres to stringent quality requirements. Unit 2, in particular, is one of the largest plants in India for manufacturing glazed vitrified tiles under a single roof. It holds certifications such as ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018, reflecting our commitment to quality, environmental management, and occupational health and safety. Additionally, both our units are CE compliant, meeting the necessary European standards.

Our manufacturing capabilities are further strengthened by our in-house R&D, which enables us to conduct tests and analyze various products. This facilitates product development and ensures that our tiles meet the highest standards of quality and performance. Looking ahead, we remain committed to enhancing our manufacturing processes, increasing asset productivity, and further solidifying our competitive position in the industry.

Widespread salesand dealer network In India, we supply our products through two models:

We distribute our tiles through a robust dealer network across India. Our extensive network includes over 2,000 touchpoints, allowing us to reach customers in 25 states.These dealers play a crucial role in our operations, helping us establish enduring relationships with our customers. Our products cater to both infrastructure- related projects and private customers. We have successfully supplied tiles for various infrastructure projects, meeting stringent quality and technical specifications. Additionally, we serve private customers who seek high-quality and innovative tile solutions.

We prioritize customer satisfaction by offering competitive pricing, favourable delivery terms, and reliable customer support. As a result, our customer retention rate is high, and we conti nuously earn their trust.To support our dealer network, we have an experienced and capable in- house sales and marketing team. These teams work closely together to analyse customer feedback and market demands, enabling us to devise effective product development strategies. Currently, our sales and marketing team comprises over 80 professionals. As the demand for our products grows, we are actively looking to expand our team to ensure we meet customer needs and market trends effectively.

Empowering Customers with an Extensive Product Portfolio

Ourjourney in the ceramics tiles industry began with the production of frit, a crucial raw material used in tile manufacturing. Over time, we have expanded our capabilities and now offer a wide variety of tiles to cater to the diverse needs of our customers. As of March 31, 2023, we have developed and manufactured over 1,000 unique tile designs in six different sizes. To stay at the forefront of the market, we closely collaborate with oursales and marketingteam to understand customer demands and stay updated on prevailing market trends. This enables us to develop innovative products that align with customer preferences.

What sets our tiles a part from others in the market are the unique characteristics they possess.

• double-charge vitrified tiles feature a 3D effect, giving them a distinctive visual appeal.

Replicate the look of natural stones, providing a natural aesthetic to spaces.

• glazed vitrified tiles stand out for their high transparent glaze, achieved through a weight method.

Bigglazed vitrified tiles slab with upgraded continuous technology to replace Marble, Granite and Quartz product

Quality has always been a core focus for us, and we prioritize delivering tiles that meet the highest standards. Our commitment to quality, coupled with continuous innovation, enables us to offer a wide range of designs and sizes that cater to the diverse needs of different customer segments. This approach allows us to capture a higher market share and maintain a competitive edge in the industry.

Experienced management and dedicated employees

At the helm of our company are passionate and experienced individuals who not only strive for business growth but also aim to deliver value to our stakeholders and make a positive impact on the communities we operate in. Their leadership and expertise enable us to stay ahead of market trends, effectively manage and expand our operations, and foster strong relationships with our customers. Our dedicated team comprises over 500 talented individuals who contribute to the success of our organization. Many of our team members have been with us for over a decade, showcasing their loyalty and commitment. Together, our management and team focus on enhancing our operational capabilities, improving the quality of our products, continuously upgrading our processes and designs, and propelling the business to new heights of success. We believe in empowering our employees and providing them with a conducive work environment that encourages growth, innovation, and collaboration. By nurturing our talented workforce, we strengthen our ability to achieve our vision of becoming a leader in the industry.

Growth strategy

1. Strengthening Brand Value through Unwavering Commitment

Our products are sold under the brand name ‘Exxaro, and we consistently strive to enhance our brand visibility through various initiatives. We are committed to building a strong brand presence in the market. We have set our budget to spend around 1% of the total revenue for advertising and sales promotions to capture the attention of both existing and potential customers. We have implemented key branding strategies that encompass a range of activities. These include strategically placed hoardings, displays at high-traffic locations such as airports and main markets, distribution of promotional materials, and increased digital media advertising. We believe that these branding efforts will contribute to strengthening our market presence, attracting new customers, and fostering loyalty among existing ones. In addition to our current branding initiatives, we intend to participate in both domestic and international trade exhibitions, allowing us to showcase our products to a wider audience and strengthen our brands visibility within the domestic as well as international market.To strengthen our presence in the retail segment, we have plans to increase the number of EXXARO Exclusive Shoppe outlets across India, which will provide an incredible shopping experience for our customers. We have recently signed Bollywood actor Ajay Devgn as our brand ambassador. With his popularity and influence, we aim to further enhance our brands image, increase consumer engagement, and attract a wider customer base. To amplify our marketing efforts, we have devised an aggressive digital marketing campaign. We will leverage social media platforms, websites, online advertising, and other digital channels to effectively reach and connect with potential customers. By combining our digital marketing campaign with BTL activities, we aim to create a comprehensive marketing approach that covers both online and offline touch points. This approach will enable us to maximize brand exposure, effectively communicate our key messages, and drive customer engagement across various channels.

2. Expanding Dealer Network and Amplifying Export Presence for Unprecedented Growth

Our company is consistently focused on fortifying its market dominance in the current market by expanding its dealer network. We are actively seeking to establish new partnerships with dealers to enhance our presence in this market. In addition, we are diligently exploring opportunities in new markets and actively working towards establishing new dealer networks in these regions. We have identified significant potential in Tier 2 and Tier 3 cities, as well as rural areas, and are determined to tap into these markets to further broaden our reach and strengthen our market position. Additionally, we are actively appointing new dealers in states such as Arunachal Pradesh, Uttarakhand, and Puducherry, where we already have a presence, further strengthening our market penetration. Aligned with our ambitious expansion strategies, we are keen on augmenting our market footprint in the eastern and northern regions of India. As we venture into these territories, we will conscientiously extend our dealer network, adopting a strategic approach to ensure optimal coverage and efficient customer service. By doing so, we aim to cater to the diverse demands of our customers effectively and fortify our market position in these key areas.

Furthermore, we are actively exploring international markets and have already established our presence in over 6 countries. To capitalize on the high demand for Indian tiles in the international market, we have identified geographies such as UAE, Turkey and Vietnam for further exploration. As our export footprint grows, we will appoint dealers in these strategic locations to facilitate our export operations and ensure efficient distribution. Through these initiatives, we aim to expand our market presence, strengthen our dealer network, and seize opportunities for growth both domestically and internationally.

3. Boosting Sales through Enhanced Manufacturing Capacities and Strategic Outsourced Procurement

At present, our combined installed production capacity stands at an impressive 146,000,000 square meters per annum. To stay in sync with the prevailing market trends, we consistently reinforce our manufacturing facilities. Manufacturing products that align with the latest trends and consumer preferences is pivotal for our success. Therefore, during the year, we have initiated a brownfield expansion of the Big Slab GVT line in our Talod plant, ensuring that our manufacturing process remains up-to-date with the evolving market demands. We have also undertaken a restructuring of our production line to optimize output and enhance operational efficiency. Additionally, we have upgraded our production line with GVT technology in our Padra plant, along with incorporating Double Charge Vitrified tiles to maximize the benefits of our Natural Gas based plant. These modifications to our manufacturing facilities have resulted in a lower utilization rate of 67.98 during the year. Plowever, we acknowledge the growing demand for our products and are prepared to expand our manufacturing capacities. To meet the increasing demand and ensure a comprehensive product range for our dealers, we are open to engaging with companies that can manufacture high-quality products according to our specifications on an outsourced basis. This approach will enable us to overcome any limitations in our manufacturing capacity, enhance our product offerings under the ‘EXXARO brand, and ultimately increase sales and cash flow from operations. By leveraging partnerships with manufacturers in Morbi, we aim to expand our entire product base in the tiles segment.

4. Driving Operating Efficiencies through Technological Advancements

Technology plays a vital role in the ceramics tiles industry, and we recognize its importance in driving our business forward. By leveraging modern technology and equipment, we are able to achieve several benefits, including the development of innovative designs, increased productivity, improved operational efficiencies, and overall strengthening of our business operations. To ensure the highest standards of quality control and enhance customer service, we continue to invest in developing our in- house technology capabilities. This allows us to stay at the forefront of technological advancements in our industry and deliver superior products to our customers. In line with our commitment to optimize costs and improve operational efficiency, we are in the process of setting up our own gas station for internal gas consumption. This initiative will help us reduce our reliance on external sources of fuel and power, thereby minimizing costs. In FY2023, our power and fuel expenses accounted for 35.10 of our revenue from operations. By establishing our gas station, we aim to enhance our operating margins and achieve greater control over our energy resources.

5. Embracing the Affordable Segment for Wider Market Reach

While the company will maintain its focus on the premium segment, it recognizes the increasing importance of the affordable segment. This segment will be a significant area of focus forthe companys operations.The company will actively explore opportunities within the affordable segment across different geographical regions. Currently, the company generates a substantial portion of its sales from the premium markets in the western and southern regions of India. However, the northern and eastern markets are more price- sensitive, and the company aims to expand its presence in these regions by catering to the; affordable segment. By doing so, the company intends to tap into the potential of these price- l sensitive markets and enhance its market reach. Given the evolving market dynamics and) the increasing opportunities in Tier-ll and III I cities as well as rural areas, we have made the strategic decision to expand our focus on the ; affordable segment. This shift in our approach f aims to reach a broader range of customers and enhance our market presence across diverse segments. As part of this strategic ; move, we are proactively seeking opportunities I to outsource affordable products. By doing so, we can tap into the specialized expertise and capabilities of external suppliers who I specialize in manufacturing high-quality ceramic tiles at affordable prices. This enables i us to maintain the desired level of quality without sacrificing affordability.

SWOT Analysis ; Strengths:

Two state-of-the-art manufacturing facilities adorned with advanced and upgraded f technologies

• Strong brand recall, especially in western and southern market

Robust In-house R&.D facility Diversified Product portfolio ;

• Focus on value-added Products

• Heightened responsiveness to branding and promotion

• Enhanced preference for premium aesthetic


• Seasoned management team of proficient, professionals


The operating industry is fragmented in nature, with a significant 60% share held by unorganized players.

Current market share is merely ~2% in the organised Indian tiles industry.

Susceptible to volatility in input prices, which could potentially impact the companys cost structure. Notably, natural gas constitutes 30% of the overall costs.

• Oscillations in exchange rates can affect import costs, export revenues, and overall financial performance


Rebound in demand in the real estate market, particularly in the residential segment. Untapped rural market potential Export potential to capture larger market share of the global market

• Enhancing brand recognition and penetrating deeper into existing regions along with exploring new markets.

Growth opportunity from lower per Capita Consumption in India

Rising disposal income, rapid urbanisation, aspiration of the young population for premium and aesthetically appealing products

Capturing market share from unorganised players

Government supports for affordable housing through PM AY, SCM, AMRUT and Elousing for All and increase investment in infrastructure projects.


• Intense competition from imported tiles

Growing competition from domestic and established international brands

Regulatory Changes

Economic slowdown coupled with unexpected shock.

• Constant advancement in technology &, Innovation forTiles manufacturing

• Continuous change in the consumer preferences and market trends

Substitutes and alternatives materials like vinyl flooring, laminates, and engineered wood

Risk, concern and mitigation

The company has implemented a robust and comprehensive risk management strategy aimed at identifying potential threats that could pose significant risks to its competitive position and overall profitabiIity.This strategy involves regular assessments of existing risks, continuous monitoring of emerging risks, and the formulation of appropriate preventive or corrective measures to mitigate or minimize these risks within specified timeframes. By proactively identifying and addressing risks, the company aims to maintain its competitive advantage and ensure sustained profitability.




Demand Risk A decline in tile demand would have a direct impact on the performance of the company On back of rebound in the construction activities, the real estate market is currently witnessing a resurgence in demand following a pro-longed period of lackluster performance. Moreover, the realm of exports unveils an additional avenue of oppor-tunity
Competitive Risk The sector in which the com-pany operates exhibits a fragmented nature, character-ized by the coexistence of in-fluential unorganised players alongside organised counter-parts. The industrys poten-tial for robust growth is fueling heightened competition, intensifying the companys need to secure its position within the market. Through persistent efforts in developing innovative and unique products, the compa-ny has successfully estab-lished a distinct competitive advantage within the market. This advantage stems from the companys technological capabilities, enabling the production of high-quality products that resonate with customers. Additionally, the company places unwavering emphasis on improving cost-efficiency, further bolstering its ability to maintain a strong competitive position.
Product Risk The company faces a significant risk to its financial performance if its products lose popularity, become obsolete, or fail to adapt to evolving consumer preferences. In such a scenario, the companys ability to generate revenue and maintain profitability could be severely compromised. The company has garnered a strong reputation for delivering specialized products with unique features. This reputation is built upon thorough market research and powered by robust research and development (R&D) capabilities. The companys commitment to innovation is evident through its pioneering efforts in introducing new products to niche markets. Additionally, the company maintains a continuous focus on innovating and updating its product offerings across various segments.
Substitution Risk The company faces a significant risk to its financial performance and long-term survival if its products become outdated due to the emergence of superior competitors. In todays dynamic market landscape, technological advancements and fierce competition can quickly render existing products obsolete. The company must continuously monitor the competitive landscape, stay abreast of industry trends, and invest in research and development. By staying proactive and responsive, the company can identify emerging market needs and quickly adapt its products to meet evolvingcustomerexpectations. This includes incorporating new technologies, enhancing product features, and improving overall value proposition.
Distribution Risk Any of the companys distri-bution locations where the proper product is notalways available at the right time could have a detrimental effect on sales volume, financial performance, and market standing. The Company is present across all of India because of its extensive distribution network there. It has a specialised sales and support team to make sure the proper products are promptly and adequately available at these locations.
Brand reputation Risk The companys brand reputation allows it to accomplish the needed volume sales and give enough pricing powerto sustain its profitability levels despite the industrys sizeable player base. By implementing a number of activities, such as dealer interaction while releasing goods and executing campaigns to develop deeper connections with dealers and consumers, the company continues to strengthen its brand equity
Operational Risk Any adverse internal or external circumstances that disrupt the companys regular business processes could have an effect on both the top and bottom lines. The company has a specialised sales and support team to make sure the proper products are promptly and adeauatelv available at these locations. For all of its operational and financial functions, the com-pany has built a thorough and reliable internal control sys-tem. Regular audit team as-sessments verify that these controls are strictly followed, allowing the company to achieve desired cost and op-erational efficiencies.

Internal control systems

As a company, we have established suitable internal control mechanisms that align with the size and nature of our operations. These mechanisms are designed to protect our assets and ensure the accuracy of our financial records. The management team holds overall responsibility for implementing and maintaining these control systems. All areas of our companys activities are covered by an internal audit program. This program provides regular updates to management on the progress of internal audits. Our Internal Auditors present their quarterly report to the Audit Committee and address any questions or concerns raised by committee members. This ensures that internal control mechanisms are continually evaluated and improved. We have clearly defined internal business rules and procedures that govern our operations. These rules and procedures outline authority levels and organizational structures, ensuring that responsibilities and decision-making processes are well- defined and understood.

People at Exxaro

At Exxaro, we recognize the pivotal role our employees play in the success of our company. We prioritize people management as one of the most crucial leadership skills, as it directly impacts productivity, morale, and motivation throughout the organization. We have implemented game-changing innovations to empower our employees and provide them with a platform for growth. We invest in our people, attract top talent, and cultivate a committed, engaged, fulfilling, rewarding, and responsible work environment. We believe in nurturing and retaining key talented employees who demonstrate a long tenure with our company. This signifies their confidence in our management and growth potential. We focus on organizational development, employee engagement, talent management, and retention to create a strong, progressive, and dynamic organization. Our human resources team supports and stretches high-performing employees who lead our business strategies, ensuring a pipeline of future leaders. Our approach to reward and recognition is transparent, meritocratic, and market competitive. We have built an ethical and values-based performance culture that aligns the interests of our employees, shareholders, and customers.

Quality Culture

At Exxaro Tiles Limited, our dedication lies in producing creative and high-quality goods that in-still pride in our business. We understand the significance of maintaining high-quality standards to keep our customers happy and loyal. We have established our reputation and experience by delivering recognizable, top-notch products and creative solutions that cater to the diverse demands of our clients, whether they are from institutional or retail sectors. We prioritize ongoing quality improvement initiatives to meet international standards and enhance our market appeal globally. To ensure that our products consistently meet international standards and stay ahead of market trends, we make significant investments in research and development. Our RScD efforts are focused on introducing innovative concepts and producing marketleading new goods that promote the popularity of our Exxaro brands and add value to the marketplace. We continuously strive to uphold strategic practices that enhance our competitive position, financial performance, and shareholder value. Our commitment to quality enables us to command premium prices, attract new clients, and foster longterm revenue &, profitability.

Cautionary statement

In accordance with applicable securities laws and regulations, statements in the Management Discussion Analysis that refer to the Companys goals, plans, estimates, and expectations may be deemed to be "forward-looking statements." Results could significantly vary from those stated or inferred. Economic conditions, governmental regulations, and uncontrollable natural disasters are among the variables that could have an impact on the companys operations. The Com pa ny disclaims all liability with regard to any future developments, information, or events that may cause the forward-looking statements herein to alter.