Varmora Granito

IPO Size: Rs. 708 cr

• 45% of IPO is Fresh Issue of Rs. 320 cr (10% dilution) to repay Rs. 245 cr of Rs. 351 cr gross debt as of 31.5.26
• 55% of IPO is Offer for Sale (OFS) of Rs. 388 cr, by investor Carlyle (33.2% stake to drop to 18.5% post IPO) part-exiting at 18.5% IRR in 4 years  

Price band: Rs. 140-148 per share

M cap: Rs. 3,345 cr (IPO is 21% of m cap)

IPO Date: Tue 22^nd Sep to Thu 24^th Sep 2026, Listing Tue 29^th Sep 2026

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

 

Morbi-based Tile Manufacturer

Varmora Granito is a 23-year-old Rajkot, Gujarat based manufacturer of vitrified tiles, across 9 plants with aggregate installed capacity of 54 million square meters per annum (sq mtr pa). Of this, 8 plants are located in Morbi, Gujarat, highlighting risk of high input prices due to West Asia crisis, besides high geographic risk.

FY26 capacity utilization was 72%, and going ahead, company plants to increase utilization by producing more in-house as against outsourcing. Mix of inhouse manufacturing now stands at 82%, up from 73% in FY23.

 

9^th Plant in Assam

For geographic diversification, 6.4 million sq mtr pa capacity plant was inaugurated in July 2026 at Assam, with investment of Rs. 150 cr, to cater to North East market. Thus, FY27E capacity increases by 13%, with Assam plant having potential of Rs. 250 cr topline, when fully operational. Thus, 15% growth is likely from H2FY27E onwards.

 

Net Profit unchanged since FY23

Between FY23 to FY26, company’s revenue has grown at just 4% CAGR from Rs. 1,335 cr in FY23 to to Rs. 1,512 cr in FY26. While de-growth in polished vitrified tiles and ceramics was compensated by glazed vitrified tiles and technical products, volume of tiles sold also rose at just 4.7% CAGR to 38.3 million sq mtr.

FY23 PAT stood at Rs. 55 cr while FY26 PAT was also Rs. 55 cr. Of this Rs. 55 cr PAT, nearly 2/3^rd comes from other income, which is very concerning. FY26 net margin stood at 3.6% with EPS of Rs.3 on equity of Rs. 40 cr (FV Rs. 2 each).  

 

Single Digit RoE

While company undertook capex of Rs. 450 cr in the past 3 years, its RoE has been in single digit, at just 7% for FY26, on a net worth of Rs. 806 cr. This is due to low fixed asset turn and poorer working capital management. Company’s working capital of 96 days is higher than peers Kajaria (64 days), Somany (42 days), Orient Bell (38 days).  

 

Expensive Pricing

M cap of Rs. 3,345 cr and Enterprise Value of Rs. 3,336 cr implies a historic PE multiple of 48x. Even if 15% growth is factored in due to new plant and lower interest outgo, current year estimated EPS of about Rs. 4.25 leads to a PE multiple of 35x which is quite high. Larger peer Kajaria Ceramics with Rs. 4,800 cr topline, 10% net margin (negligible other income), 18% RoE, is ruling at only 30x PE.  

While Carlyle-owned Katsura Investments acquired shares in Aug 2022, having effective cost of Rs. 74.82 per share, company’s PAT for FY23 was Rs. 55 cr. After 3 years, it is seeking double the price, when PAT has not grown, which is unjustified.