Manoj Ceramic coming with IPO to raise Rs 14.47 crore

Manoj Ceramic

• Manoj Ceramic is coming out with an initial public offering (IPO) of 23,34,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 62 per equity share.
• The issue will open for subscription on December 27, 2023 and will close on December 29, 2023.
• The shares will be listed on SME Platform of BSE.
• The share is priced 6.20 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Swaraj Shares and Securities.
• Compliance Officer for the issue is Krupa Thakka. 

Profile of the company

Manoj Ceramic (MCL) is into the business of trading of ceramic tiles and Tiles Adhesive under their own brand ‘MCPL’ through dealer network, Retail showroom, wholesale as BTB and export. MCL is in to the business since 1991 in the names and styles of ‘Manoj and Company’, ‘Manoj And Company Trading’, ‘Manoj Ceramic’ in the beginning of the year 2019, the company transitioned from a private limited into a public limited company under the name and style ‘Manoj Ceramic’, as certified vide certificate of incorporation dated January 22, 2019.

In the Company, it specializes in two products: Ceramic Tiles and Tile Adhesive. Its range of Ceramic Tiles offers a captivating designs, colors and sizes, for transforming any space into a work of art. Additionally, its Tile Adhesive guarantees a strong bond, ensuring a seamless and lasting installation for its valued customers. In ceramic tiles, it engages with the manufacturer and based on its experience and customer feedback it finalizes the designs with the manufacture and accordingly they supply the finished goods to it which it sales further through its dealer network, Retail showroom, Export and B2B sale to various end user like architect, builders and contractors. 

In this it supplies Tiles Adhesive in its brand name ‘MCPL’ to end user through its distributor network which is in Maharashtra. It orders the material to the manufacturer which he supplies in Bags with its Brand Name ‘MCPL’. Distributor place order with it and accordingly it supply the same to its distributor who in turn sale to end user. In addition to sale through its distribution network it also sales it in its B2B network i.e. Architect, Builders and Contractors whom it supplies directly.

Proceed is being used for:

• Meeting the working capital expenses
• General corporate purpose

Industry overview

The Indian tile industry is divided into organized and unorganized sector. The organized sector comprises of around 14 players. The current size of the organized sector is about Rs 7,200 crore. The unorganized sector accounts for nearly 60% of the total industry bearing testimony of the growth potential of this sector. India ranks in the top 3 list of countries in terms of tile production in the world. With proper planning and better quality control its exports (presently insignificant) contribution can significantly increase.

Ceramic tiles as a product segment has grown to a sizeable chunk today at approximately 680 Millions Square meters production per annum. The key drivers for the ceramic tiles in India are the boom in housing sector coupled by government policies fueling strong growth in housing sector. The retail boom in the Indian economy has also influenced the demand for higher end products. The main product segments are the Wall tile, Floor tile, Vitrified tile and Industrial tile segments. The market shares (in value terms) are 20%, 23% 50%, and 7% respectively for Wall, Floor, Vitrified, and Industrial tiles. 

The real estate construction activity is also aided by the affordable housing segment, which has witnessed a pick- up in the recent years, driven by various Government initiatives and programmes. The key measures taken include - infrastructure status for the affordable housing segment, relaxation of eligibility criteria for tax exemption, developers brought under Section 80IBA and increase in allocation for the Pradhan Mantri Awas Yojana (PMAY) programme, which plans to build 1.12-crore houses by 2022. To match the expected growth in supply in the affordable segment, measures have also been taken by the Government to improve affordability for the end consumers, especially in the economically weaker section (EWS) and the lower income group (LIG) by providing a credit-linked subsidy.

Pros and strengths

Long-standing client relationships: It provides services with significant expertise to its clients and this helps it in customer retention and repeat business. I have a history of customer retention. In Financial Year ending March 31, 2023, it derived around 91.26% of its restated revenues from operations from repeat customers (defined as customers from which it have had revenues in the past three Financial Years). In Financial Year ending March 31, 2022, it derived 70.01% of its revenues from operations from repeat customers. These long-standing relationships have also contributed to the growth of its revenues from its existing customers and the expansion of its customer base.

Track record of financial performance and consistent growth: It has a track record of financial performance and consistent growth. Total revenue has increased by Rs 2993.86 lakh and 66.54% from Rs 4,499.62 lakh for the Financial Year ended on March 31, 2022 to Rs 7493.48 lakh for the Financial Year ended on March 31, 2023. In Financial Year ended March 31, 2022, total revenue has increased by Rs 768.78 lakh and 20.61% from Rs 3,703.84 lakh in the Financial Year ended March 31, 2021, to Rs 4,499.62 lakh for the Financial Year ended March 31, 2022. Similarly Net Profit/ (loss) for the Financial Year ended March 31, 2021, amounted to Rs 8.24 lakh which was increased to Rs 94.50 lakh Financial Year ended March 31, 2022. Net Profit/(loss) has increased from Rs 94.50 lakh Financial Year ended March 31, 2022, to Rs 362.43 lakh Financial Year ended March 31, 2023, reflecting an increase of Rs 267.93 lakh.

Experienced board and senior management: Its Promoters have led from the front in establishing and growing its business and operations capabilities. It has an experienced board and strong management team led by persons with significant experience in the ceramic and tiles industry. It benefit from the industry experience, vision and guidance of its Promoters, Mr. Manoj Dharamshi Rakhasiya, who has over 31 years of work experience in the ceramic and tiles industry.

Risks and concerns

Depend on third-party manufacturers: The finished products are obtained from its third-party manufacturers, and there is a likelihood, that they may not meet the terms and conditions or performance parameters, which could result in disruption of its business operations and a deterioration in its brand value. It does not have direct control over the day-to-day activities of these third-party manufacturers and only reliance is placed on them to manufacture the agreed products in accordance with the relevant arrangements. It cannot assure that it will not face any loss in the future on account of the unavailability of third-party manufacturers.

Dependent on Top 10 customers: It depends and expects to continue to depend on its major customers for a substantial portion of its revenue. The loss of any of its customers for any reason could have a material adverse effect on its business, results of operations and financial condition. It has not entered into any formal agreements, arrangement, or any other understanding with its customers therefore, its business is dependent upon the continuous relationship with the customers, its traders and the quality of products supplied to the company.

Working capital requirement: Its business requires a significant amount of working capital to finance its operations and its inability to meet its working capital requirements may adversely affect its cash flow cycle. Its working capital requirements increase primarily due to a considerable difference between the holding levels of its trade payables and its trade receivables. Its working capital requirements may further increase if the holding level of trade receivables is further increased or if there is a further decrease in holding period of trade payables. It cannot assure that it will continue to be successful in arranging adequate working capital for its existing or expanded operations on acceptable terms or at all, which may materially and adversely affect its business, cash flows and financial condition.

Outlook 

The company has been actively engaged in the trading of Ceramic Tiles and Tiles Adhesive under its own brand ‘MCL’. It has established a dealer network, retail showrooms and wholesalers to cater to its customers’ needs. Additionally, it has also expanded its business to include B2B transactions and export activities. On the concern side, Tiles, marbles, quartz and bath ware being a global industry, it faces competition from organized as well as unorganized players in domestic market as well as international market. Its Industry is highly competitive and fragmented. It has a number of competitors offering services similar to the company. 

The company is coming out with an IPO of 23,34,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 62 per equity share to mobilize Rs 14.47 crore. On performance front, the total revenue has increased by 66.55% from Rs 45.00 crore for the fiscal year ended on March 31, 2022 to Rs 74.93 crore for the fiscal year ended on March 31, 2023. Net Profit/(loss) has increased from Rs 0.95 crore for the fiscal year ended March 31, 2022 to Rs 3.62 crore for the fiscal year ended March 31, 2023, reflecting an increase of Rs 2.68 crore. Going forward, it intends to promote its brand through different marketing channels to increase its brand visibility and recall. As its business requires it to reach out to its target customers as well as dealers, the effort and the exercise is challenging and requires significant time and effort to ensure reach to its target customers and dealers. It also intends to strengthen its existing brand building activities such as retail branding, web marketing, magazine advertising and outdoor advertising for marketing. It also engages in digital marketing efforts in order to target customers.