Exxaro tiles IPO review.

 Conclusion / Investment Strategy

The company is in the highly competitive field having fragmented (big and small) players. Based on super earnings of FY21, the issue is at a P/E of 35+ and is fully priced. Being IPO under Rs. 250 cr. it will list in T2T with lower circuit limits and this may restrict speculative moves. Hence cash surplus/risk seekers may consider investing in this a “high risk - low return issue.

ABOUT COMPANY:

Exxaro Tiles Ltd. (ETL) is engaged in the manufacturing and marketing of vitrified tiles used for flooring solutions. Having started its operation in the manufacturing of frits, over the years it diversified and expanded to its current status. It manufactures broadly two products i.e. double charge vitrified tiles and glazed vitrified tiles.

Its product basket has 1000+ designs and it is sold under its own brand "Exxaro". As of the date of filing its RHP, it had 2000+ registered dealers across 24 states/union territories with PAN India presence. It is also exporting its products to over 12 countries internationally.

COMPARISON WITH LISTED PEERS:

As per the offer documents, ETL has shown Kajaria Ceramics, Asian Granito, Somany Ceramics, Orient Bell and Murudeshwar Ceramics as its listed peers. They are currently trading at a P/E of around 52.43, 12.23, 43.73, 39.32 and 00 (as of July 30, 2021). However, they are not truly comparable on an apple to apple basis.

ISSUE DETAILS/CAPITAL HISTORY:

To part finance its plans for repayment/prepayment of certain borrowings (Rs. 50.00 cr.), working capital funding (Rs. 45.00 cr.) and general corpus needs, ETL is coming out with a maiden IPO via book building issue to mobilize Rs. 161.09 cr. (at the upper cap). The company will be issuing 11186000 fresh equity shares (Rs. 134.23 cr. at the upper cap) as well as an offer for sale of 2238000 equity shares of Rs. 10 each (Rs. 26.86 cr. at the upper cap). Thus overall it will be issuing 13424000 equity shares. ETL has fixed a price band of Rs. 118 - Rs. 120 per share. Minimum application is to be made for 125 shares and in multiples thereon, thereafter.

The issue opens for subscription on August 04, 2021, and will close on August 06, 2021. Post allotment, shares will be listed on BSE and NSE. ETL has reserved 268500 equity shares for its eligible employees and from the residual portion, it has allocated 25% for QIBs, 35% for HNIs and 40% for retail investors. Allocation of the IPO has surprised one and all for the mainboard IPO. The issue constitutes 30% of the post issue paid-up capital of the company.

The issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue.

Having issued initial equity at par, the company raised further equity in the price range of Rs. 15 to Rs. 110 per share between August 2008 and March 2018. The average cost of acquisition of shares by the promoters/selling stakeholder is Rs. 4.69, Rs. 7.54, Rs. 14.88, Rs. 23.95 / Rs. 5.49 per share.