Schablona India

Schablona India manufactures designer tiles.

It operates three divisions, which are Decorative Tiles (largest), Ceramic Transfer Sheets, and Trading (<20% of revenues).

The company focuses on custom-made design work to mitigate the high competition in its industry and also outsources some of its tile production to maintain cost competitiveness and respond flexibly to market conditions.

It reported consistent growth in revenues and operating profits over the last five years – reporting 3.5cr in operating profits on revenues of over 40cr in the last financial year with similar performance in the last nine months ended 31^st December, 2011.  It operated with a moderate net debt load relative to assets and earnings.

The business is linked to the construction cycle, which is adversely impacted in a high interest rate environment.

The industry is characterised by high competition – particularly from the unorganised sector.  There is substantial bulk selling at the entry level, which depresses selling prices for all competitors.  Moreover, even major customers are increasing their capacity creating a double-barrelled problem of reducing revenues and increasing competition.

The market is somewhat dynamic with consumer preferences changing alongside fashion trends.  The company’s focus on custom designs could result in lower volumes and lack of market acceptance.

The business is exposed to rising costs of input, energy, transport, etc. as a result of inflationary pressures. 

There is also a fair degree of technology involved in the manufacturing process and therefore, substantial technological advancements could render the current operating model obsolete and/or increase upgrading costs substantially.