Orientbell Tiles lays the ground for a turnaround

Abhishek Law Kolkata | Updated on January 07, 2021

Demand recovery continued into October-December period: Himanshu Jindal, CFO

Two years after a management rejig, Orientbell Tiles looks to get back on the growth path.

Improved demand from upcountry markets, renewed sentiments in tier-1 cities, and gaining market share from unorganised players in the post pandemic “new normal” seem to have helped the company script a turnaround.

In the quarter ending September 2020, the company, listed on the bourses, saw a 6 per cent volume growth while profitability margins improved to around 8 per cent. Post a washout in the April-June quarter, recoveries started Q2 onwards, with the trajectory sharpening in the pre-festive period.

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According to Himanshu Jindal, Chief Financial Officer, Orientbell Tiles, demand recovery continued into the October-December period. Secondary sales (from shops to customers) have improved and sales “will hold ground” in the January-to-March period. This, coupled with a low base effect in Q4FY21, will aid “top line and bottom line expansion”.

“Turnaround in tier-III and tier-IV towns has been fastest. Cities like Delhi and Mumbai began coming back on track August onwards. The trends should hold good at least for the next 8-9 months or so”, he told BusinessLine.

“Margins in the 8-10 per cent range should be decent ones,” Jindal said.

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Gaining market share

Since the Covid-induced lockdown , many small and unorganised players — who would typically play at a cost advantage and with controlled distribution chains — faced working capital and labour issues.

Morbi (Gujarat), a major manufacturing hub for ceramics and tiles, witnessed consolidation post unlocking. Moreover, demand-supply mismatch happened. Upward movement in product prices and uninterrupted supply acted to the advantage of the branded players.

This apart, demand from new markets like Indonesia, the Far East and the US increased. Previously dependent on China for supplies, the changing geo-political equations saw increased queries for Morbi players. These players got into tie-ups to ensure supplies to overseas markets.

“As of now we are not into exports. But, it could be a possibility if numbers start coming in. The focus on exports to new markets, by Morbi players, led to a vacuum in the supply side which branded players like us are filling in,” Jindal explained.

Management rejig

Orientbell Tiles came into being after the Kolkata-based Daga-family (which managed Orient Ceramics) acquired Bell Tiles of Bengaluru. The management rejig — that saw professionals come in and separate the management team from promoters — began in FY19.

It also led to consolidation of similar products and shape-up of the distribution network. Channels and credit periods were re-worked. The company digitised processes to remove information asymmetry. Digital tools like Quicklook (for channel partners) and Samelook (targeting architects) were introduced. Orientbell Tiles entered into manufacturing joint ventures to focus on cost efficiencies.

“For two-odd years, we streamlined processes. Capex had stopped. Net debt soared to above ₹100 crore in FY19. There was hardly any cash reserve at that time,” Jindal said, adding that at present net debt “is close to zero” and the cash situation has improved “considerably”.

Spends on advertisement and branding have increased while with the resumption of MF-2 floor plant at Sikandrabad (closed for over two years), the process of modernisation is under way.

Published on January 07, 2021

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