MESSAGE FROM THE CHAIRMAN AND MANAGING DIRECTOR
Dear Shareholders,
With immense pleasure, I would like to present our company's
second annual report post listingon the BSE and NSE. I would like to begin this message by
expressing my heartfelt gratitude and extending a warm vote of thanks to all our
shareholders who have been with us since the day we went public through our IPO on August
16, 2021. The previous year witnessed numerous challenges in the face of global
geo-political conflicts, supply chain disruptions, inflationary pressures, volatility in
energy prices, and COVID-19 led restrictions in China. Duringtheyear, the elevated costs
in crude oil and gas prices had a direct impact on the tiles industry's operation
costs as it heavily depends on these resources for its energy requirements. It was a year
that brought a mix of emotions, as we faced significant challenges along with promising
opportunities. However, we remained steadfast in our course, driven by determination and
unwavering commitment, which enabled us to navigate through temporary setbacks smoothly.
We value your continued support and look forward to building a successful future together,
guided by our shared vision and belief in our company's story.
Market Dynamics
The past year has been a period of mixed performance for the Indian
ceramic tiles industry. The sector experienced a noticeable rise in demand as the real
estate sector showed signs of recovery and witnessed a resurgence in demand post COVID-19.
However, inflationary pressures and higher energy costs added to the cost burden for
ceramic tile manufacturers. Moreover, the Reserve Bank of India's decision to raise
interest rates had a few implications for homebuyers, as it increased borrowing costs and
impacted consumer sentiments. Despite the challenging economic conditions, our company not
only withheld its market position but also launched new product offerings during the year.
Resilient in Adversity
Throughout the year, our company encountered an array of formidable
macroeconomic challenges, including an intense pricing war, escalating input costs, and
disruptive supply chain disturbances. Furthermore, we undertook a temporary halt at
ourTalod plant to introduce an advanced production line for Big GVT slabs, prioritizing
product enhancement and innovation. As a consequence, our plant's capacity
utilization fell short of its optimum potential. Notwithstanding these hurdles, our
company accomplished a revenue of ?3,170.9 million in the FY23 compared to ?3,253.4
million in FY22, signifying a 2.5% decline. It is imperative to acknowledge that the 7.9%
decrease in volume was partially counterbalanced by a favorable amelioration in the
product mix. The EBITDA margin for FY23 was reported at 10.6%, compared to 14.9% in FY22.
This decline can be attributed to an abrupt surge in natural gas prices and elevated
logistical costs. Nevertheless, as the price of natural gas has receded and stabilized at
customary levels, we anticipate an enhancement in the margin. Furthermore, we envisage
that superior capacity utilization, augmented product realization, and an improved product
mix will drive growth in FY24. We remain steadfast in our commitment to maintain a robust
financial ratio by upholding a judicious level of working capital. This prudent approach
will enable us to navigate challenges adeptly and position our company for sustained
prosperity. Moreover, we are actively considering enhancements to our internal systems and
processes in order to improve our existing working capital cycle..
A Year of Product Innovation and expansion for Exxaro
Our company consistently introduces new variations with revised designs
across all product categories. By leveraging our internal design research and development
capabilities, we position ourselves strongly in the market. We strive to stay ahead by
delivering innovative solutions that meet the evolving needs of our customers. Taking into
consideration the latest market trends and customer demands, our company has successfully
started the production of GVT BigsizeSlabina new manufacturing line within our existing
plant atTalod, Gujarat. This expansion required a capital expenditure of I NR 300 million,
which was funded through our internal accruals. The GVT Big size Slab is a premium product
that incorporates the latest technology and serves as a replacement for traditional
materials such as marble, granite, and quartz. This initiative aligns with our commitment
to offering superior products that meet the evolving needs of our customers.
Enhancing Market Penetration
Considering the changing market dynamics and the growing potential in
Tier-11 and III cities and rural areas, we have decided to diversify our focus towards the
affordable segment as well. This strategic move will enable us to reach a wider customer
base and establish a stronger presence across different market segments. To support our
shift towards the affordable segment, our company is actively exploring opportunities to
outsource affordable products. This approach allows us to leverage the expertise and
capabilities of external suppliers who specialize in manufacturing affordable ceramic
tiles without compromising on quality.
Strengthening Brand Recall with Lasting Impact
Strengthening our brand presence remains a top priority for us. We
recognize the significance of brand building in enhancing our competitive advantage and
expediting our growth journey. To enhance the visibility of our esteemed brand EXXARO, we
recently entered a partnership with renowned Bollywood actor, Ajay Devgn, who will serve
as the brand ambassador of our superior tile products, particularly our GVT Slabs. This
strategic decision to engage Ajay Devgn is an integral component of our comprehensive
four-fold expansion plan in the ceramic industry. Immense emphasis has been placed on
fortifying our brand presence and broadening the range of tiles within our product
line-up. With the inclusion of all our products in the EXXARO brand under our pan-India
operations, we aim to capture the largest possible market share within the unorganized
sector.
Expanding Distribution Network for Seamless Market Coverage
Another crucial component of our growth strategy is the expansion of
our distribution network. We understand the importance of reaching our customers
effectively and efficiently, especially in the affordable segment, where accessibility
plays a noteworthy role. Through an expanded distribution network, we can foray into new
markets, penetrate deeper into existing markets, and multiply our customer base. This
enables us to capture a larger share of the market and capitalize on the growing demand
for our products. Additionally, an expanded distribution network helps us establish strong
relationships with distributors, retailers, and channel partners, fostering mutually
beneficial collaborations.
Outlook
We hold an optimistic perspective regarding the prospects of the tiles
industry, primarily due to a resurgence in demand within the residential market following
a prolonged period of stagnation. This revival is further bolstered by government
initiatives aimed at boosting the housing sector and increased investments in
infrastructure development. Furthermore, the correction of natural gas prices from their
peak levels to a more stable range has positively influenced the industry. Additionally,
the export market has begun to recover, overcoming challenges such as inflationary
pressure, elevated freight costs, and container shortages. The Indian real estate market
has absorbed the impact of continuous interest rate hikes by the Reserve Bank of India,
and consumer sentiment is showing signs of improvement. Considering these factors, we
anticipate a substantial increase in demand forthe Indian tiles industry.
As we look back on the previous year, I express my gratitude to all our
stakeholders who have consistently supported and believed in our company. Your unwavering
belief in our company, trust in our accomplishments, acceptance of our current endeavours,
and confidence in our future growth have been instrumental in shaping our journey.
Warm Regards
Mukesh Patel
Chairman and Managing Director