Speaking on the company’s market debut following its ₹708 crore IPO, Varmora said the tile and ceramic maker is focusing on premium products, higher margins and reducing debt.
The company plans to use part of the IPO proceeds to completely repay its ₹240 crore net debt, turning it into a net cash company.
The move is expected to reduce interest costs by around ₹40 crore on an annualised basis. Varmora said the company could see a benefit of around ₹20 crore in the current year, with the full impact expected from next year.
₹450 crore capex to drive growth
Varmora Granito has completed ₹450 crore of capital expenditure across FY24 and FY25 and does not expect to require any major additional capex until FY29.
The company expects depreciation to fall to around ₹85 crore this year from ₹105 crore last year.
The ₹450 crore investment is expected to generate an asset turnover of roughly 2.5 times, creating an additional revenue potential of around ₹800 crore to ₹900 crore.
At full utilisation by FY29, the company expects its EBITDA margin to reach 18.5%-19.2%, while its profit after tax margin could be between 9.5% and 10%.
That would translate into a profit after tax of around ₹250 crore, compared with ₹55 crore previously.
Premium products become bigger growth driver
The company is increasingly shifting towards higher-value products, particularly glazed vitrified tiles, or GVT.
GVT’s contribution to total sales increased from 57% in FY23 to 84% last year and is expected to reach 95% this year.
Varmora is also expanding its integrated stone technology, or IST, business, which produces lab-grown marble.
The company sees an opportunity in both the premium tile and marble markets. Varmora said the marble market is worth around ₹41,000 crore-₹42,000 crore, while the company’s IST product generated ₹19 crore in sales last year.
Company targets lower working capital
Varmora is also expanding its channel financing programme to improve cash flows and reduce the amount of time money remains tied up in the business.
It aims to bring working capital days down from 96 days last year to 75-80 days from next year onwards.
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The company has also reduced its dealer network to 3,063 by removing lower-end ceramic dealers and adding dealers focused on GVT and lab-grown marble.
On costs, Varmora said gas prices have settled at around ₹90 per cubic metre. Since the company has passed the higher costs on to customers, it does not currently expect significant pressure on margins.
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