Asian Granito files draft letter of offer for Rs 500 crore rights issue

Plans to raise funds to fuel capacity expansion, foray into sanitary ware, surface flooring

As part of its mega expansion plan of setting up three new manufacturing units in Gujarat-based listed entity Asian Granito India Limited (AGL) has filed a draft letter of offer for rights issue of equity shares to raise up to Rs 500 crore ($70 million).

A leading ceramic tiles maker, AGL now plans to enter foray into manufacturing of sanitaryware and stone plastic composite (SPC) flooring, apart from adding capacity for value-added luxury surfaces & bathware segments for large format glazed vitrified tiles (GVT).

To be commissioned by April 2023 at the ceramic tiles cluster of Morbi, the new facilities will see a combined investment of over Rs 260 crore. AGL will also be setting up one of the largest display centres covering an area of roughly 150,000 sq. feet at Morbi. So far, the company's nine manufacturing units are all located in North Gujarat.

The move comes in the wake of the Indian industry witnessing a shift in recent years from double charge tiles to value added GVTs and slabs, said Kamlesh Patel, Chairman and Managing Director, Asian Granito India Ltd. According to Patel, India is the second largest manufacturer of sanitaryware after China while SPC flooring is also emerging as the fastest hard flooring product across the globe with pent-up export demand.

With its presence in GVT tiles and sanitaryware through third party manufacturing, AGl is now foraying into its in-house manufacturing plant for the same.

"To fuel the mega expansion plan in these segments and various strategic initiatives, the board has approved issuance of equity shares for up to Rs 500 crore via rights issue. With commercialisation of the proposed plans as above, AGL is expected to further strengthen its position as an integrated luxury surfaces and bathware solutions brand and up the group’s margin profile in near to medium term," Patel added.

The company has roped in mid-market merchant banker, Pantomath Capital Advisors Pvt Ltd, for the draft letter of offer filing.

The expansion plan entails new entities being established as wholly owned subsidiaries of AGL, including Future Ceramic Pvt Ltd - FCPL for GVT capacity of 6.6 million square metres (sq mts) per annum at a project cost of around Rs 175 crore. Similarly, the company's another subsidiary AGL Sanitaryware Pvt Ltd (ASWPL) plans to establish an in-house manufacturing unit of sanitaryware products with an installed capacity of 0.66 million pieces per annum at an estimated cost of Rs 50 crore.

In a bid to expand its product portfolio as well as presence in exports, the company's new entity AGL Surfaces Pvt Ltd (ASFPL) will set a manufacturing unit for new age SPC flooring at an installed capacity of 2.97 million sq mtrs of flooring per annum at an estimated cost of Rs 35 crore.

The commercial operations in all the three wholly owned subsidiaries are expected to commence in the beginning of financial year 2023-24. In the first year of operation, the company expects capacity utilisation ranging from 45-60 per cent to be scaled up gradually.

Earlier, the company had raised roughly Rs 225 crore via rights issue in October 2021 for debt repayment, thereby becoming a net debt free company on a standalone basis.