1. Company Background:
Established
in 1991, Pokarna Limited is one of the largest exporters of finished granites
and engineered stone in India and provides the best quality material to its
clients from more than 50 countries (including Granite & Quartz surfaces)
globally.
Company
majorly exports its products to markets like U.S.A, Europe, Russia and
Australia to name a few, apart from the domestic market.
Company
mainly operates in 3 segments:
- Granite
- Quartz (Engineered Stone)
- Apparels
Initially
Pokarna entered the industry with quarrying and thereafter, expanding its
operations into manufacturing of slabs, tiles and cut to size for the various
requirements in the industry all over the world. Today, company processes more
than 80 premium colors both from India and abroad to the most reputed companies
though out the globe.
The
Company’s main sources of supply are its own quarries. It also sources part of
its requirement from reputed and well established domestic and global
independent suppliers. The Company’s captive quarries are endowed with some of
the most coveted and desirable colors like Silver Waves and Cream Kashmir etc.
The
Company’s two state-of-the-art manufacturing units are equipped with machines
and technology imported from some of the finest companies in the world like
Breton, Pedrini, Pellegrini etc. Company’s color palette is fairly wide and
varied with more than 75 varieties being sourced from within India in addition
to other Countries. The product range comprising of various size slabs and
tiles are supplied to 50+ countries
Pokarna
also manufactures and sells Engineered Stone or Quartz under the brand
“Quantra” Natural Quartz Surfaces from its 100% owned subsidiary M/s. Pokarna Engineered
Stone Limited (PESL).
PESL
is amongst the Country’s leading engineered stone manufacturing Company with
exports across most of the developed and emerging markets, with a strong
presence in the US and Europe. It is also the nation’s only company to
manufacture quartz surfaces using the patented Bretonstone Technology.
Bretonstone
System from Breton S.p.A. of Italy, is considered to be amongst the finest of
its kind in the world. PESL, markets its engineered stone products under the
brand Quantra® which is available in 64 different color palettes besides being
rich in aesthetic appeal also offer an unbeatable quality and panache.
Quantra
is produced using over 95% of natural quartz. The anti-scratch, anti-stain and
anti-bacterial properties make an ideal choice for all kitchen countertop, flooring
and cladding applications.
The
Company’s manufacturing unit located at Vishakapatnam is equipped with
extensive laboratory, enabling the company’s R&D staff to develop new
colors, besides facilitating conducting of tests and analysis of various products
viaits modern machinery. Further, being situated in the port city, offers
several advantages to the Company as it allows the factory to utilize quartz
from the state of Andhra Pradesh, which is noted for its strong physical
characteristics and high level of clarity.
Company also operates its Apparel
Division. Located in A.P, company unit is a one of its kind, state of the art
manufacturing facility. Retail chain of Stanza
as a brand
in Men’s wear was launched in the year 2004 with a vision to become a premium
lifestyle brand for men.
In
last financial year, the Granite Division garnered revenues worth Rs. 183 crore
as against Rs. 155 crore, growth of 18%, while reporting PBIT of Rs 47.56 crore
as against Rs. 30 core of previous year FY14. Quartz segment reported a strong
performance with revenue growth of 120% for the year following revenue and PBIT
of Rs. 135.73 crore and Rs. 31.63 crore. Performance of Apparels Division
continued to remain soft, having generated revenues of Rs. 7 crore during the
year as against Rs. 14 crore during FY14.
2. Industry Outlook:
Granites – India is home to some of the best
quality dimensional stones available across the globe. Endowed with vast
reserves and diversities of almost every conceivable natural stone namely
granite, marble, sandstone, limestone, quartz etc., the country is the third
largest natural stone manufacturer in the world. Of the 300 varieties of
granite present in the world market, India supplies about 200, reflecting the
availability of wide array of color, texture and structure in the country.
India produces more than 27 percent of the overall stone production in the
world and exports over 11 percent of the world’s stone exports.
As
per Ministry of Mines report (January 2015), the country has an estimated
46,230 million cu. m of granite resources. The deposits of natural stones are
situated across the length and breadth of the country with maximum
concentration in states such as Tamil Nadu, Andhra Pradesh, Telangana,
Karnataka, Rajasthan and Odisha.
In
terms of exports, the country shipped granite blocks worth Rs. 12, 047 crore in
2013-14 as against Rs. 9,766 crore in the previous year a growth of 23 percent
over its previous year. The growth was primarily value led as volumes remained
more or less stable during the period. Granite and products, exported mainly as
either raw blocks or after cutting and polishing constituted majority of the
exports revenue, followed by other stones and products, marbles and slate
stone. While Granite was exported to China and European countries, finished
marbles was mainly shipped to Japan.
Demand
for the product continues to remain strong aided equally by improving domestic
and commercial constructions. While, the primary demand for granite is for
flooring and kitchen countertops, it is also used for gravestone segment which
has a large export market.
Despite
impressive growth, presence of inadequate infrastructure facilities,
inconsistent and contradictory leasing policies and dearth of export oriented
policies are curbing the growth of the segment. The Federation of Indian
Granite and Stone Industry (FIGSI) is urging the government to bring granite
under “major” mineral category as it will help lower the royalty outgo on
mining and enhance the segment’s competitiveness. The quarrying industry is
expected to grow rapidly following the acceptance of proposal as the same will
ensure rationalization and result in uniform implementation of granite
policies.
Home
owner’s preference for granite stems from its attractive and durability feature
making it one of the favored surfaces to be used in flooring and countertops.
Of all the tile types, Natural stone / granite is projected to grow most
rapidly through 2017 through US overtaking porcelain, expected to be the second
largest type in area demand terms by 2017.
US
demand for decorative tile is forecast to rise 6.7 percent per year through
2017, reaching 3.2 billion square feet. Gains can be attributed to the
country’s improving housing and commercial construction spending. The new
housing market is expected to show robust demand as housing completions grow
from their low 2012 base.
Tile
demand in non-residential building construction applications will be spurred by
strong growth in office and commercial construction spending and increasing use
of tile as a low-cost, low-maintenance flooring alternative to carpets and
rugs.
Quartz (Engineered Stone) – Quartz is the most commonly
found material on the surface of the earth. Besides hardness, it also possesses
superior abrasive properties and is highly chemical resistant. Engineered
quartz surfaces, comprising of 93 percent quartz particles and 7 percent
binding resins and additives are recognized for their durability, strength,
stain and heat resistance qualities. Such attributes make it near maintenance
free product thus helping it score over other surfaces namely granite, which
can more easily be stained or scratched. Quartz is also a nonporous material,
which restricts the growth of mold, mildew, or bacteria.
It
is on account of such factors that Consumer Reports Magazine has rated quartz
as the top performer amongst countertop materials such as granite, ceramic
tile, stainless steel, laminate, marble, limestone, and concrete when it came to
resisting prime kitchen hazards such as stains, heat and scratches. In addition
to its superior exterior qualities, the initial malleable property of quartz
enables flexibility and innovation in design, style, textures and production
process as well as ease of fabrication. While the usages of natural stones like
granite, marble, soapstone for countertops were dominant in the past, there has
been a visible shift in favor of quartz over the past decade. The migration has
resulted in the product becoming the fastest growing material to be used in the
countertop industry, gradually eating into the share of other materials, such
as granite, manufactured solid surfaces and laminate.

Between
1999 and 2014, global engineered quartz sales to end-consumers grew at a
compound annual growth rate of 15.7% compared to a 4.4% compound annual growth
rate in total global countertop sales to end-consumers during the same period.
The
trend is expected to remain strong in the future, given the greater awareness
and acceptance level of the product across its key markets.
While
the product has attained different life cycle stage across these markets the
common theme of rising usage and acceptability is clearly visible across these
regions. While Australia, Europe, Israel are matured market for engineered
stone the product is still at a nascent stage in America and Canada region. The
rise of the quartz is partially also attributable to its wider applicability
varying from kitchen countertops, bathroom countertops, bar, floor and exterior
walls and so on.
From
single digit share in USA to more than eighty percent usage in market like
Israel, quartz is developing as a preferred choice for customers and
developers. Granite and other solid surfaces continue to dominate the US
countertops market presently, with even laminate scoring over quartz.
Despite,
increasing usage, Quartz accounts for just 8% of all countertops in America,
resulting in one of the least penetrated developed markets in the world. The market
share is very low when compared with Australia and Europe wherein the share of
the product ranges from 30% to 50%.
However,
the awareness for quartz’s fine points -- its beauty and durability is driving
the demand for the product in US and Canada, regions that materially lag the
penetration of other countries and the marginal improvement and acceptability
of the product within these regions will have a disproportionate impact on the
category’s growth trajectory.
Flooring and
Carpet Segment
The
global demand for floor covering is expected to rise 4.5 percent annually to
19.4 billion square meters, reaching a level of $325 billion through 2018. The
improved demand is expected to be fueled by the revival in the housing
construction segment in developed countries in conjunction with sustained
growth in building construction activity in the emerging economies. Sustained
growth in construction coupled with rising per capita income in the developing
world permits households to expend major proportion of expensive floor
coverings. In addition, rising motor vehicle production across multiple regions
is expected to further harden the demand for floor coverings.
Through
2018, demand for floor coverings is expected to be fastest in North American
region, buoyed mainly by the recovery in the US housing sector, with region
wide demand for floor coverings in residential buildings forecast to rise 6.2
percent per year through 2018. The Asia / Pacific region is projected to pose
the second fastest gains in floor covering demand, with China alone accounting
for 36 percent of the incremental demand generated during the period. The
strong growth forecasted for Chinese market is expected to further cement their
place as the largest national floor covering market.
Growth
in other developed countries such as Western Europe, Australia and Japan is
expected to fall short in comparison to those expected to be seen in North
America or emerging economies. However, the renewal in new housing construction
in Australia and Japan both, along with improvement in other Western European
countries is expected to result in firming up the demand for floor covering in
comparison to the one witnessed during recent years.
The
consumption pattern across flooring industry comprising of materials such as
ceramic, laminate, wood, carpeting and natural stone varies greatly across
geographies. For instance, Ceramic tile constituted approximately fifty percent
of flooring covering demand in the Asia / Pacific region and Central and South
America, while carpets and rugs were predominant in North America during 2013.
The same period also witnessed, maximum usage of resilient flooring in Eastern
Europe, where it accounted for just over one-third of regional floor covering
demand.
Non-resilient
flooring products, which represented nearly three-fifths of floor covering
demand worldwide during 2013, are expected to post the fastest growth demand
through 2018. Manufacturers of non-resilient flooring are expected to benefit
from rapid growth demand in Asia, wherein the same account for vast majority of
floor covering sales.
Demand
for carpets and rugs will enjoy its fastest growth in North America due to
these products extensive use in the residential market in the US.
Countertop Segment
Based
on average installed price, (including installation and other related costs),
the global countertop industry generated approximately $81 billion in sales to
end consumers in 2014. Amongst the surfaces, Granite with a share of 27 percent
continued to remain the preferred material for countertops, to be followed by
25 percent share of solid surfaces in 2014.
Quartz
with a meagre 10 percent share remains near the infancy stage of a long term
penetration opportunity. Region wise Europe, Asia Paci! c and North America
with demand in excess of 20 percent continued to remain the top three markets
for the products. Demand in North American market remained strong following the
improved labor and housing market in the region. Improving new and existing
home sales coupled with consistent repair and remodeling spending helped
maintained the growth momentum.
Global
demand for countertops is projected to grow at 4.3 percent annually through
2018 to 505 million square meters (Source: Freedonia), with building activity,
building size and economic wealth being the key pointers of countertops usage. Improved
building construction activity, primarily in the developed economies which
continues to recover from the worldwide recession and the subsequent gradual
recovery through 2013 coupled with the developing economies efforts towards
expanding and modernizing its building stock given their sustained population
growth will principally drive the demand for the segment.
Usage
of countertops in kitchens, bathrooms, and other areas is more predominant in
developed markets like North America, Western Europe, Japan and other developed
markets as compared to emerging countries. Gains in North America which was the
second largest regional market for countertops in 2013 are expected to sustain
given the continued recovery in US building construction and, in particular,
growth in single-family housing completions, which will further benefit from
ongoing consumer preference for spacious kitchens and multiple bathrooms that
require more countertop area. Western Europe is expected to witness similar
growth through 2018 given the pick-up in construction of new houses in many
countries across the region, further boosting the demand for countertops.
The
Asia/ Pacific region was the largest market for countertops in 2013, with
nearly half of the global total. The region, generally an immature market with
free-standing furniture, pedestal sinks, and other low-cost alternatives being
more common than conventional countertops is expected to achieve the fastest
gains in countertop through 2018. Within the region, China owing to its rising
standards of living and continual projects towards modernizing their housing
and nonresidential building stock is expected to drive the growth in the area.
India the region’s second largest market in 2013 will continue to see gains
stemming from its present lower level of countertop penetration, coupled with
the improving per capita income level and enhanced distribution network given
its economic progress.
The
type of materials used in countertops varies depending on factors such as the
relative wealth of consumers and their style preferences, and the availability
of local materials. Laminate and natural stone are the dominant materials used for
countertops at present. Almost 33 percent of all laminate countertops were sold
in North America, wherein usage of the material is predominant given their low
cost. However, Laminate is expected to lose its market share globally to natural
and engineered stone. Engineered stone countertops are projected to record the
fastest growth reflecting lower penetration rates in many markets.
Also, the usage of natural stone countertops is
relatively common in countries endowed with extensive quarries irrespective of
local economic development. In countries, where natural stone has to be imported,
it is utilized more often in high-end applications based on its comparatively
high price. In 2013, Solid surface comprised approximately 20 percent of global
demand, of which nearly 70 percent of was sold in Asia / Pacific region wherein
they are low-cost options because of an extensive local production base