Aro Granite Inds Q2 FY20 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
Yes
Order
N/A
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 3- Quartz plant expected to be operational by Q2 FY2021, adding new product lines and customers.
- Jaipur plant (started production August 2019) expected to do well, with profitability anticipated in the first year.
- Focus on existing customers and markets initially; Quartz expansion offers potential to regain lost market share and enter new markets.
- Current sales channels for granite and Quartz partly overlap, easing market penetration for Quartz.
- Sales expected to grow with contributions from Jaipur and Quartz plants.
- Margin improvement anticipated as Jaipur plant ramps up volumes.
- Raw material availability expected to improve with new Jaipur unit, aiding production capacity utilization.
- GST refund streamlining to positively impact working capital and operations.
See what Aro Granite Inds management said on margin guidance — free account, 30 seconds.
Fundraise plans
Yes- No fresh loan is planned for the Quartz plant; the Capex of approximately 35 Crores will be managed through internal accruals and supplier credit (720 days credit for machinery).
- Supplier credit funds the machinery cost (~20 Crores), while the remaining Capex will be covered internally.
- Current net debt position is around 40 Crores, mainly term loans for the Jaipur plant.
- No additional working capital limits have been taken for the Jaipur plant yet; future working capital needs will be assessed based on progress.
- No indication of equity fundraising mentioned in the call or transcript.
- Management will continue monitoring financial needs and may adjust as production and operations evolve.
See what Aro Granite Inds management said on order book — free account, 30 seconds.
Capex plans
Yes- ARO Granite Industries is setting up a Quartz plant in their existing Hosur facility with a capacity of 180,000 square meters per annum.
- The total expected Capex for the Quartz plant is approximately ₹35 Crores, comprising ₹20 Crores for plant and machinery, ₹12 Crores for building and civil works, and ₹3 Crores for electrical and maintenance expenses.
- The Quartz plant erection work started in August 2019 and is expected to be operational by Q2 FY2021 (around July-September 2020).
- The Quartz plant will share existing infrastructure like polishing, finishing, and packing between granite and quartz production.
- The Jaipur plant, started production in August 2019, required no new debt with its machinery funded by supplier credit and internal accruals.
- No fresh loans are being taken for these expansions; funding primarily comes from internal accruals and supplier credit.
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Margin guidance
Category 3- Jaipur plant expected to become profitable in the first year of production, likely improving margins.
- Quartz plant (1.8 lakh sqm capacity) at Hosur expected operational by Q2 FY2021, contributing to sales growth and margin improvement.
- Quartz segment targets both existing customers and new markets, potentially increasing volumes and revenues.
- Current EBITDA margin stable at ~10.48%; margins expected to improve as volumes increase with new plants.
- Shortage of raw materials remains a challenge but is being mitigated by opening Jaipur plant and stocking good quality material.
- Net debt stable at around ₹40 Crores; Quartz plant capex (~₹35 Crores) funded through internal accruals and supplier credit, limiting debt increase.
- GST refund process improving, releasing working capital and aiding cash flow.
- Overall, growth driven by expanded capacity, new product introduction (Quartz), and market expansion, supporting earnings and profit growth over the next 1-2 years.
Order book
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