In Conversation with Kamleshbhai Patel (CMD) and Mukeshbhai Patel (MD), AGIL

Indian Economy & Market decided to present to its readers the fast-paced happening in a sector which certainly is going to be a major beneficiary of central government’s various path-breaking initiatives when the Covid crisis is over. Presented here is a tete-a-tete with two young, dynamic, and enthusiastic entrepreneurs - Kamlesh Patel and his elder brother Mukesh Patel, the brains behind AGIL.
COLLOQUY: Kamleshbhai Patel (CMD) and Mukeshbhai Patel (MD), Asian Granito India Ltd.
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“We are poised for moving to a higher growth trajectory with sustained innovation”

Who could have imagined in the year 2000 that a small 30-employee venture would shortly eclipse some of the big names in a sector which was already flooded with several companies? Still, deprived of the first moving advantage Asian Granito India Ltd. (AGIL) has come a long way. At present, the company has a strength of over 6,000 people including contract labour. With the headcount, the Company had also achieved 40 times growth in its production capacity to around 1 lakh square meters per day clocking a net consolidated turnover of Rs 1292 crore in 2020-21.

AGIL attracted the attention of global market leaders and big users when it was acknowledged in the Vibrant Gujarat Summit 2015 for its phenomenal growth. Today AGIL is ranked amongst the top ceramic tiles companies in India. The company manufactures and markets a wide range of Tiles, Engineered Marble, Quartz, and Bathware. AGIL, besides contributing to sustainable development by its economic activities, is also equally fulfilling its social responsibilities and actively involved in the field of skill development, education, and women empowerment.

What has been the impact of the pandemic?

The Covid-19 pandemic impacted businesses and economies across the globe. The ceramic Tiles industry was however an exception and among very few sectors that witnessed positive growth amidst a challenging business environment. In Morbi alone, which is a manufacturing hub for ceramic tiles production, registered over 100 new plants in the last two years. Demand and production surged after several restrictions were lifted. Crucial factors which proved advantageous for the industry and Asian Granito were the anti-China sentiments, lesser gas prices, and massive export orders from the US, European, and Middle East markets.

The era of Covid has brought several positives through the adoption of technology and digitization aiming at improving productivity, cost rationalization. AGIL was the first among organized players to resume operations post Covid. Due to the focused management approach, we were able to turn around the operations very fast and the company has adopted a well-defined strategy to handle the current slowdown. We’ve also been able to manage the fixed and semi-variable costs very efficiently.

Another factor why Asian Granito did well was that the company is a dominant brand in the non-metro cities – rural, semi-urban areas which have seen less impact of the lockdown. On the positive side, Post Covid 19, there was a new demand emerging from the rural market as migration of labours from urban to rural resulted in the need for home repairs and renovation in the rural areas. We observed that budget and economy tiles saw good demand with construction and repair activity taking full pace.

Please briefly let us know the journey so far.

AGL Group Office

It all started with a dream to create the world’s most sustainable building materials company. With that dream in mind, passion for success, and hard work, the founding stone was laid by me and my brother in the year 2000. Today we’ve emerged as India’s leading home décor brand. AGIL manufactures and markets a wide range of Tiles, Engineered Marble & Quartz, and Bathware. The Company has achieved nearly 40 times growth in its production capacity, from 2,500 square meters per day in the year 2000 to around 1 lakh square meters per day (including contract manufacturing). Further to leverage the synergies and provide a complete bathing solution to its customers, we’ve added CP Fittings and Faucets to our sanitary division.

It was a great moment for us when AGIL was acknowledged in the Vibrant Gujarat Summit 2015 for its phenomenal growth. The Company today has 9 state-of-the-art manufacturing units spread across Gujarat and 310 exclusive showrooms, 13 display centers across India. We have got an extensive marketing and distribution network pan India with a strong presence in tier II & III cities and rural markets besides exporting to more than 100 countries.

Are there any new products in the pipeline?

We’ve invested a sizable amount in R&D, Product innovation, energy conservation which has resulted in innovative products that not only meet international quality but are better in many aspects. This has resulted in ‘Many Firsts’ in the tile industry by AGL. The company today offers over 1400 designs in Tiles, Marbles & Quartz, and Bathware. We have set up a centralised, ultramodern laboratory compliant with IS 15622, ISO 13006, and EN standards. In a move to create living and business spaces safer, beautiful, and more hygienic than ever, the company has launched ‘AGL Tuffguard Anti-Bacterial Tile (TAB).’ In addition, to be 99% free from bacteria and germs, AGL T.A.B tile is full of features like anti-skid surfaces, stain, and high abrasion resistant, scratch resistance, durable body, chemical & alkaline resistant which makes it ideal for high traffic areas of hospitals, schools, restaurant, hotels, gym, clubs, clinics, labs, etc.

AGIL Products

The company has almost doubled its quartz stone capacity. After expansion at the Himmatnagar plant, what is the next plan? 

Quartz is a premium product and has fast emerged as the latest trend for flooring solutions and its demand is growing across the world on account of aesthetics, durability, strength, variety and less wastage or damage compared to natural Marble. The United States is the biggest market for quartz followed by Europe, Canada, Australia, and New Zealand.

I must mention here that today AGL is one of the top players in engineered marble and quartz with a capacity of 4100 sq meters per day. AGL’s quartz is available in more than 55 designs and thicknesses of 12mm, 15mm, and 20mm respectively. Countertops and interiors (floor) in the kitchen, Malls, airports, high-end hotels, commercial spaces are the major application of Quartz. Its demand is growing across the world on account of aesthetics, durability, strength, variety and less wastage or damage compared to natural Marble.

We also offer a wide variety of designs and textures within the composite and engineered marble categories. With class and finesse, these marbles are available in large format of 3025 x 1225 mm size and quartz available in 3100 x 1400 mm. For FY20 company was operating at optimum capacity for Quartz which was reduced in FY21 due to lockdown in the domestic and exports market.

Your products are very prone to defects leading to rejections. What strategy does the company apply to lessen its effect? 

In addition to the development of new products, our R&D department has also instituted a comprehensive quality control of all units to ensure that all our products meet or exceed international standards. Our transformation journey is a result of continuous investments in R&D, brand building, quality enhancement, and logistics. The Company constantly strives to upgrade its extensive product portfolio. Our tiles offer astonishing endurance, high durability, anti-bacterial, high resistance to abrasion, and are stain-free and scratch-free even in cases of rough usage to help retain the premium elegant look of the floor even after many years.

How do you maintain the large channel partners and dealers for so long period? We are thankful to every stakeholder of the company especially our channel partners and dealer-distributors for their continued support over the last 20 years. Today we have around 6500 touchpoints across India. Our channel partners have been key drivers of our success. We consider our stakeholders as part of the family and all efforts are made to empower them with technology and digitization. We intend to adopt unique methods for enhancing engagement with dealers who in turn are key drivers of our B2C business. We organise product launches, dealer meets events regularly in metro cities, top B towns and have received an impressive response from the dealers in showcasing the product range, new launches, and facilitating strong order booking. We are also leveraging our FOFO model to expand reach in smaller towns having a population of more than 1 lakh to enhance our proximity to customers. We have set a target to increase touchpoints to over 10,000, expand the network of exclusive showrooms to 500 in the next couple of years.

How AGL hopes to make a mark in the Aatmnirbhar Bharat initiative?

As I said earlier Asian Granito is a major brand in the ‘Bharat Markets’ – non-metro cities, rural, semi-urban areas. These markets contributed over 70% of the company’s sales in FY21. Lower spread of COVID in rural areas, renovation activities, good monsoon and better sowing of crops, and agriculture reforms are likely to drive the growth in these markets. While demand from metros and megacities has taken a hit post-COVID, demand from rural and semi-urban markets has remained intact. The Government’s ‘Make In India’ drive, ‘Housing-for-All by 2022’, ‘Swachh Bharat Abhiyan, ‘Smart Cities Mission’, Vocal for Local is further expected to generate a volume-driven growth resulting in economies of scale. Almost 63% of the rural population is living in homes with mud flooring and per capita consumption is very low at 0.59 sq mt versus the global average of 1.40 sq mt. So I feel the Indian tiles market holds immense growth potential owing to the especially high population and rapid urbanization.

Please share financials?

For FY 21, Net sales of the company were Rs 1,292 crore with a 6% growth over the previous year’s net sales of Rs 1224 crore. EBITDA for Year ended March 2021 was Rs 135.9 crore with a margin of 10.5% as compared to Rs 117.7 crore with a margin of 9.6% in the corresponding period last year. Net Profit for the FY2021 stood at Rs 57.2 crore with a PAT Margin of 4.4% as compared to a net profit of Rs 41.9 crore with a PAT Margin of 3.4%. The company’s performance improved considerably in FY 21 driven by strong sales in domestic and overseas markets post unlock. Strategically we have also reduced our overall consolidated debt by Rs 35 crore, resulting in a debt-equity ratio of less than 0.5x. We are further committed to reducing debt in the coming years.

“We are focusing on Asset and Capital light business model, becoming a strong retail brand in the domestic as well as exports market and achieve a leadership position in key business segments.”

What is the share of retail sales? Tell us more about the exports plan?

We are confident that operational efficiencies, financial prudence, geographical and product expansion along with low CAPEX and asset-light model for expansion are likely to drive the growth in the revenue and margins for the current financial year. Over a period of time, we’ve gradually shifted from B2B to B2C business model. Today, retail sales contribute 42% of the company’s total sales which was around 20% a few years back. The improvement in retail sales has resulted in reduced dependency on low-margin project business and improvement in margins. We are aiming to become a strong retail brand with a focus on 50% sales from retail business and 500 showrooms.

The company is also focusing on High-end products such as premium GVT Tiles, Quartz & Marbles, etc., and to become a ‘Complete Bathroom Solution Provider’, AGL has ventured into the Sanitaryware segment this year. Due to a healthy product mix, the EBITDA margin has improved to 9.5% in the quarter ended March 21. On the same lines, the capacity utilisation also improved to 95% in this period.

We have launched a 15,000 sq ft ‘AGL Export House’ at Morbi. It will house the complete range of sanitaryware, bath-ware, and tiles, in all designs and sizes, for our trade partners. We hope this initiative will help the Company expand its network to more than 120 countries from a present network in 100 countries.

AGIL Factory

Some of the industry-first initiatives by Asian Granito

  •   First to Introduce 450×450 Outdoor Tile with 12mm thickness
  •   30 MM Thickness Multi Colour Quartz
  •   First to establish Online Vitrified Technology
  •   First in India to have Digital 9 Colour Printing Technology
  •   Pioneer in Best Water Jet Technology
  •   Introduced large format wall and vitrified tiles
  •   Introduced Grestek XXL large format tiles
  •   Introduced 16mm thick heavy-duty vitrified tiles – Grestek Hardstone
  •   Introduced Slimgres tiles
  •   Introduced world’s whitest double charge vitrified tiles – Carrara White
About the author: IE&M Team
IE&M Team
Indian Economy & Market is an Indian media and information platform producing data-backed news and analysis on all the vital elements at the intersection of the economy, stock markets, mutual fund, insurance, commodities, currency, technology, startups and business.

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