Varmora Granito Ltd

Varmora Granito makes tiles (88% of FY26 revenue) and bathware at eight plants in Morbi, Gujarat, and sells through 305 exclusive and 2,758 multi-brand outlets. Key issues that concern us - Revenue growth has stalled at a 4.2% CAGR since FY23, and tile volumes have moved only from 36.1 mn sq m in FY24 to 38.3 mn sq m in FY 26, with the tile volumes flat in FY26. Much of this is industry-wide rather than company-specific. Morbi in Gujarat, where all of Varmora's plants sit, makes 90% of India's tiles. Weak exports left surplus supply chasing the domestic market, and the cluster was then hit from March 2026 when the Iran conflict cut gas and propane supply and shut over 400 units. Peers have slowed too: Kajaria, Somany and Orient Bell grew at 3%, 4% and negative 1% CAGR since FY23.  Peers have reported a quarter after the disruption, but the pickup has largely come from price hikes rather than volumes, with Kajaria's volumes up 6% and Somany's 3%. Varmora discloses nothing for Q1 FY27.

The return on capital employed (ROCE) was just 2.7% in FY25 and 5.4% in FY26. Cumulative capex of u95 cr over FY 24 to FY26 outran the 086 cr the business generated from operations over the same period. Carlyle invested ?640 cr in Varmora in August 2022 through Katsura Investments for a 37% stake, and has been trimming since, with æl 17 cr sold in October and November 2025. It is now selling 38.5% of its stake in the OFS, and the 18.5% left with it turns sellable once the six-month lock-in ends, which keeps an overhang on the stock. At an IPO ask of 19x EVIEBITDA and 61x earnings, the valuation demands far more than the business has delivered, with slow growth, single-digit returns on capital and capex still running ahead of operating cash flow.