19-Sep-2026      12:06

Varmora Granito

Varmora Granito (VGL) manufactures and markets ceramic and vitrified tiles, including glazed vitrified tiles (GVT), polished vitrified tiles (PVT) and ceramic tiles. The company sells its products under the brand 'Varoma'.

The company focuses on premium, technology-driven products, with GVT and technical tiles accounting for around 84% of its tile revenue in FY2026.

The company operates eight manufacturing facilities in the Morbi cluster of Gujarat, with 81.72% of its revenue in FY 2026 generated from in-house manufactured products. It has also adopted integrated stone technology (IST) through a technology partnership with Italy-based SACMI, supporting its focus on innovative and premium tile products.

VGL has a wide distribution network comprising 305 exclusive brand outlets(EBO's) and 2,758 multi-brand outlets(MBO's) across India and overseas, along with business to business (B2B) sales to builders, contractors, developers and government entities.

The company also focuses on sustainability, with 16.22 MW of renewable energy capacity from wind and solar.

As on September 26,2026, VGL has paid an aggregate consideration of Rs 25.0 crore towards allotment of 1,80,00,000 equity shares aggregating to 36.00% of the equity share capital of Allemby Ceramics Private Limited, and acquisition of equity shares aggregating to 14.00% of the equity share capital of Allemby, by way of a secondary transfer from one of the existing Allemby promoters. As on September 16,2026, VGL holds 50% equity shareholding in Allemby.Allemby is identified as a Joint Venture of the company.

Allemby's operations at the manufacturing facility in Tezpur, Assam, commenced in July 2026, with an installed production capacity of approximately 6.40 million square meters of GVT tiles per annum. The total investment is estimated to be Rs 149.97 crore and certain key materials for the facility will be locally sourced with the aim of reducing transportation emissions and to minimise the impact on the environment.

Object of the offer

The offer consists of both a fresh issue and an offer for sale component (OFS). The fresh issue will include 2,16,21,622 shares, aggregating up to Rs 320.0 crore at the upper price band of Rs 148. OFS includes 2,62,17,634 shares of Rs 2, aggregating up to Rs 388.0 crore at upper price band of Rs148.

Katsura Investments will offload a part of their stake in the OFS.

The funds raised to the tune of Rs 245.0 crore will be used towards repaying certain borrowings by the company and its subsidiaries namely CovertekCeramica Private Limited and VarmoraSanitarywares Private Limited (formerly, VarmoraSanitarywares LLP). The balance is towards general corporate purposes.

Strengths

Established player operating in the tile industry in India in a large attractive market.

VGL has one of the largest and most diverse premium tile portfolios among selected listed peers, with 3,500+ SKUs across GVT, PVT and ceramic tiles and 20 surface types as of March 31, 2026.

VGL's focus on product innovation is supported by a 17-member R&D team and 20 designers, which helped the company launch 2,900+ new tile SKUs and eight new surface finishes between April 2023 and March 2026.

The company has built a wide distribution network covering 949 cities, with 305 EBOs and over 2,758 MBOs across India and overseas as of March 31, 2026, helping diversify its geographic and dealer base.

Manufacturing facilities are located in Morbi, Gujarat, the ceramic hub of India and accounts for 70-80% of ceramic tiles production in the country. This facilitates easy access to clay (key raw material), contractors, skilled labour and criticalinfrastructure such as gas and power. Also, transportation costs are low as Morbi is close to the major ports of Kandla and Mundra.

The extensive experience of the promoters, their strong understanding of local market dynamics and healthy relationships with customers and suppliers will continue to support business risk profile.

Weaknesses

73.8% of the total revenues in FY2026 was derived from the

sale of GVT, exposing the company to a slowdown in demand for this product category.

100% of revenue is linked to manufacturing facilities located in Morbi, Gujarat, and increasing exposure to regional disruptions affecting production or supply chains.

Products manufactured by third-party contract manufacturers contributed 17.60% of FY2026 revenue, creating risks from supply disruptions, delays, quality issues or higher manufacturing costs.

The company faces volatility in raw material and packaging costs, while its top 10 suppliers accounted for 8.10% of total expenses in FY26, exposing it to supply interruptions and price increases.

Manufacturing requires substantial and uninterrupted power and fuel. Power failures or higher-cost alternative fuel sources, including diesel generators, could increase production costs and reduce profitability.

The B2C retail chain accounted for 66.80% of domestic sales in FY26, with all EBOs and MBOs operated through franchisees. Poor franchisee performance could affect sales and distribution.

The company derived around 21.11% of its revenues from exports, exposing the company to risks inherent to operations in these foreign jurisdictions and also to foreign currency fluctuation risk.

Valuation

Consolidated sales were up by 4.6% to Rs 1512.46crore in FY2026.Revenue growth was primarily driven by higher GVT sales and increase in sales through EBOs resulting in an increase in the average selling price.OPM expanded from 10.49% to 11.34%, leading to a 13.1%increase in operating profit to Rs 171.49crore. Other income inclined 7.3% to Rs 50.06crore. Interest cost declined 7.3% to Rs 39.40 crore and depreciationcost declined by11.2% to Rs 105.99crore. PBT was higher by 109.3% to Rs 76.17 crore as against Rs 36.39crore.PAT was higher by 79% to Rs 55.09crore as against Rs 30.77 crore in FY2025. Tax expenses was 21.53 crore in FY2026 as against Rs 6.88 crore.

Katsura Investments acquired 17,96,998 equity shares in the last 3 years at an average cost of Rs 97.81 per equity shares.

At the higher price band of Rs 148, the offer is made at a P/E of 60.11 times FY2026 EPS (of Rs 2.46).

As of March 31, 2026, total consolidated borrowings of the company stood at Rs 357.95 crore. The company proposes to pay off Rs 245.0 crore of the borrowings from the net proceeds from fresh issue. Repayment of the borrowings will reduce the interest cost. The EPS for FY26 works out to Rs 3.3 if its interest cost is reduced, keeping all other items, including tax rate, same. The re-worked P/E at the upper price band moderates to 45.10 times of its FY26 EPS

Listed peers are Kajaria Ceramics, Somany Ceramics, Asian Granito India and Orient Bell. Kajaria Ceramics trades at 33.0times TTM P/E, Somany Ceramics trades at 21.2 times TTM P/E,Asian Granito India trades at 113 times TTM P/E and Orient Bell trades at 27.1 times TTM P/E. The OPM and ROE stood at 11.34% and 7.79%, respectively, in FY26. These were 18.0% and 17.9% for Kajaria Ceramics, 9.0% and 10.4% for Somany Ceramics, 5.0% and 1.27% for Asian Granito India, and 6.0% and 3.8% for Orient Bell, respectively.