Varmora Granito Limited DRHP: Key Highlights, Risks, and What Investors Should Watch -

What is Varmora Granito Limited?

Varmora Granito Limited has filed its Draft Red Herring Prospectus (DRHP) dated August 7, 2025, outlining a proposed IPO comprising a fresh issue of up to ₹4,000 million and an offer for sale of up to 52,435,268 equity shares, with provisions for a potential pre-IPO placement up to ₹800 million that would reduce the fresh issue size if executed.

Key highlights and structure

What the DRHP says

The DRHP positions Varmora as a consolidated entity after amalgamating five erstwhile subsidiaries effective April 1, 2023, with restated consolidated financials presented for FY23–FY25 and disclosures aligned with SEBI ICDR norms. The offer includes a book-built issue with QIB, NII, and retail allocations per regulation, and anchor investor participation up to 60% of the QIB portion, with one-third reserved for domestic mutual funds.

Offer structure

Fresh Issue: Up to ₹4,000 million; use of proceeds to be detailed in Objects of the Offer, with net proceeds defined as gross proceeds less offer expenses.
Offer for Sale (OFS): Up to 52,435,268 equity shares by selling shareholders, including investor and promoter group participants.
Pre-IPO Placement: Up to ₹800 million at a price to be decided; if completed, it reduces the fresh issue size; capped at 20% of the fresh issue.
Price Band and Offer Price: To be decided in consultation with BRLMs and advertised at least two working days before opening; cap price ≤120% and ≥105% of floor price.

Business snapshot

Varmora operates in tiles and allied products, with FY25 revenue from operations of ₹14,460.29 million, including other operating revenue such as export incentives and insurance facilitation charges. The company has associates (Fiorenza Granito, Sentosa Granito) and joint ventures (Avalta Granito, Renite Vitrified), with related-party purchases and sales disclosed, indicating ecosystem linkages within ceramics value chains.

Financial highlights

Revenue: ₹14,460.29m (FY25), ₹14,354.81m (FY24), ₹13,349.46m (FY23).
Profit after tax: ₹307.73m (FY25), ₹449.35m (FY24), ₹550.64m (FY23).
EBITDA proxy: Profit before tax of ₹376.50m (FY25) with depreciation/amortization at ₹1,194.08m and finance costs at ₹424.90m, reflecting higher non-cash and financing burdens in FY25.
Equity and leverage: Total equity ₹7,431.95m and total liabilities ₹8,466.09m as of Mar 31, 2025; non-current borrowings ₹2,212.71m and current borrowings ₹2,838.84m.
Cash and liquidity: Cash and cash equivalents ₹821.03m at FY25-end, down from ₹922.15m; bank balances other than cash/cash equivalents ₹330.42m.

Select financials table

Metric	FY23	FY24	FY25
Revenue from operations (₹m)	13,349.46	14,354.81	14,460.29
Other income (₹m)	649.69	371.01	466.46
Profit after tax (₹m)	550.64	449.35	307.73
Finance costs (₹m)	417.28	290.56	424.90
Depreciation and amortization (₹m)	561.52	616.11	1,194.08
Total equity (₹m)	6,692.74	7,033.61	7,431.95
Total liabilities (₹m)	5,949.27	7,728.03	8,466.09
Cash and cash equivalents (₹m)	2,254.27	922.15	821.03
Power and fuel costs (₹m)	3,244.64	2,844.29	3,650.72

Operating drivers

Tiles and allied products comprised the bulk of sales at ₹14,342.62m in FY25, while power and fuel costs rose to ₹3,650.72m, underscoring energy sensitivity in the cost structure. Employee benefits expenses increased to ₹1,091.16m, and ESOP expenses increased (₹88.50m in FY25) reflecting talent investments and share-based compensation adoption.

Key risks

Margin pressure from input costs: Power and fuel surged to ₹3,650.72m in FY25 vs ₹2,844.29m in FY24, impacting operating leverage.
Working capital intensity: Inventories rose to ₹2,859.49m and trade receivables to ₹3,822.15m in FY25, indicating cash conversion risks in cyclical phases.
Debt and finance costs: Finance costs increased to ₹424.90m in FY25; current and non-current borrowings totalled ~₹5,051.55m at FY25-end.
Contingent liabilities: Claims under Income Tax Act ₹139.44m and Central Excise ₹58.96m; additional items under GST and other litigation noted.
Regulatory and environmental: Disclosure of interim compensation demanded by NGT and GPCB for coal gasifier plant usage highlights environmental compliance exposure.

Governance and ownership

The Board includes a Chairman and Managing Director (Bhavesh V. Varmora) and executive directors (Hiren R. Varmora, Pramodkumar P. Patel), alongside nominee directors and independent directors per SEBI norms; BRLMs are JM Financial, Goldman Sachs India Securities, and SBI Capital Markets. ESOP 2023 is active; options outstanding at FY25-end totalled 2,757,332 with a weighted average exercise price of ₹51.20 (post share split adjustments).

Use of proceeds indicators

While detailed deployment will be finalized in the RHP, net proceeds are intended for specified objects in the DRHP, commonly including debt reduction, capex, and working capital in sector peers; Varmora’s disclosures reference monitoring agency appointment and standard use-of-proceeds frameworks.

What to watch next

Price band and valuation: Financial ratios at floor/cap price to be published two working days prior to offer opening; anchor allocation dynamics may signal institutional appetite.
Working capital and inventory: Trend in inventory normalization and receivables collection will be key for cash flow momentum into FY26.
Energy cost trajectory: Any hedging, fuel mix shifts, or efficiency initiatives to mitigate power and fuel volatility could influence margins.
Post-amalgamation synergies: Realization of operational synergies after consolidation of erstwhile subsidiaries should reflect in SG&A and manufacturing utilization metrics.

Bull, bear, base

Bull case: Consolidation-led efficiency, stabilization of fuel costs, improved cash conversion, and calibrated capex funded by fresh issue could drive margin recovery and ROCE improvement.
Bear case: Persistent energy inflation, slow receivable cycles, and higher finance costs could compress profitability despite revenue stability.
Base case: Mid-single-digit revenue growth with gradual margin normalization as inventory and receivables moderate, contingent on execution and sector demand.

Conclusion

Varmora’s DRHP outlines a balanced offer combining primary capital for growth/financial flexibility and a significant OFS, against a backdrop of steady revenue but compressed profitability due to energy and financing costs. The investment case turns on three controllables: energy cost management, working capital discipline, and post-amalgamation efficiency gains, with upcoming price band metrics and anchor participation set to inform valuation appetite. Monitoring contingent liabilities, debt trajectory, and cash conversion into FY26 will be essential for assessing the IPO’s risk-reward.

FAQs

What is included in the IPO?

A fresh issue up to ₹4,000 million and an offer for sale up to 52,435,268 equity shares, with a possible pre-IPO placement up to ₹800 million that would reduce the fresh issue if undertaken.

How has profitability trended?

PAT declined from ₹550.64m (FY23) to ₹449.35m (FY24) and ₹307.73m (FY25), reflecting higher energy costs, increased depreciation from asset additions, and higher finance costs in FY25.

What are the major cost pressures?

Power and fuel, which rose to ₹3,650.72m in FY25, along with other operating expenses and working capital-related inventory changes.

How leveraged is the company?

As of Mar 31, 2025, non-current borrowings were ₹2,212.71m and current borrowings ₹2,838.84m, with finance costs at ₹424.90m in FY25.

Are there material contingencies?

Yes, including claims of ₹139.44m under the Income Tax Act and ₹58.96m under Central Excise, among others under GST and other litigation.

What equity changes should investors note?

Share split and bonus issue effects are reflected in restated EPS; ESOP 2023 increased employee stock options reserve to ₹120.08m, with 2,757,332 options outstanding at a weighted average exercise price of ₹51.20.

Who are the BRLMs?

JM Financial Limited, Goldman Sachs India Securities Private Limited, and SBI Capital Markets Limited.