Orient Bell looking to get capex cycle, production units back on-track

Continuous quarters of growth, recovery in demand and two years after a management re-jig that led to a turnaround, ceramic and vitrified tile-maker, Orient Bell Ltd – controlled by the Kolkata-based Daga family – is looking to get the capex cycle and production units back on-track.

The company will invest towards modernisation of its existing wall tile plant at Sikandrabad (Bulandshahr of Uttar Pradesh) with the capacity being ramped up to 2.8 million square meters per annum (from the existing 2.1 million square meters per annum).

Orient Bell restarted operations at its floor plant in Sikandrabad and capacity expansion will also happen there.

According to Aditya Gupta, CEO, Orient Bell Ltd, approximately ₹15 crore will go towards capex and these would be funded from own internal accruals. Other investments will also be made across channels, ramping up distributions, new showrooms, and in advertisement and sales.

“This is a result of all the hard work by the team over the last 2-3 years. The company went through a management re-jig with some professional management coming in to add to our existing capabilities. Now as demand recovers, we are restarting the capex cycle, re-jigging products and coming up with new ones,” he told BusinessLine.

Factors like high debt, which the company had acquired during an acquisition, was also paid off over these years. “We are now net debt free and hence the focus is back on growth. Two continuous quarters of sales growth and changes in the tiles market are evident signs that there is demand for branded players like us,” he added.

Cash conversion cycle reduced to 13 days on December 2020, from 53 days at the beginning of this fiscal.

Changing demand

Currently, demand is being driven by upcountry markets and in Tier-II and Tier-III areas. People traveling back home have started spending on home improvements. Moreover, as confidence comes back, and the pandemic continues to be in control, Orient Bell Tiles is expecting improvement in construction activities (aided by softer home loan rates and government policies).

Recoveries in the urban market continue to be slow.

For the quarter ending December 2020, the top-line of the company grew 21 per cent, Y-o-Y, “led by channel expansion, new products, displays & digital tools. The EBITDA (earnings before interest, tax, depreciation and amortisation) margin improved further to l 0.7 per cent in Q3FY21.

In the quarter-ending September 2020, the company saw a 6 per cent volume growth while profitability margins improved to around 8 per cent.

Price Hikes

According to Gupta, the unorganised sector – driven primarily by players in Morbi (Gujarat) have begun concentrating on export markets. As opinion moved away from Chinese products, there are increasing queries for Indian units. Hence, a demand-supply mismatch in local markets came to the advantage of branded players. Branded players like Orient Bell commanded better prices.

Raw material prices have been on the rise. Gas prices are up by 40 per cent and freight and packaging charges are up also. A 5-7 per cent price hike – in a creeping manner (starting with select products) – were made November onwards.