Varmora Granito IPO review: Premium valuation, flat sales

1. IPO Overview

Varmora Granito is listing on the mainboard on BSE and NSE with an offer opening September 22, 2026 and closing September 24, 2026.

• Price band Rs 140 to Rs 148 a share of face value Rs 2.
• Fresh issue up to Rs 320 cr for the company plus an offer for sale, OFS or shares sold by existing owners, of 26,217,634 shares by Katsura Investments.
• At the top of the band, Rs 148 a share, the OFS is worth Rs 388.02 cr and the total offer is Rs 708.02 cr. At the floor it is Rs 687.05 cr.
• Fresh shares will be about 2.16 crore at Rs 148 and 2.29 crore at Rs 140. Pre-issue shares are 204,390,203 after September 3, 2026 ESOP allotments. Post-issue shares are 226,011,825 at the cap and 227,247,346 at the floor.
• At the top of the band, Rs 148 a share, the company is valued at Rs 3,344.97 cr post-issue. The post-issue P/E is 53.9x FY2026 profit to owners on 226,011,825 shares. Return on net worth, RoNW or profit to owners divided by net worth, was 7.79% in FY2026.
• Promoters held 25.38% pre-issue and do not sell in the OFS. The OFS is larger than the fresh issue, so this is mainly an investor exit with debt repayment attached.
• The unusual flag is history: FY2024-FY2026 consolidated accounts include Simola Tiles LLP, a 59% subsidiary that ceased to be a subsidiary on September 5, 2026, after the last balance sheet.

2. What the company does

How it makes money

Varmora designs tiles and bathware, makes most of what it sells, and is paid when a dealer, builder or overseas buyer takes delivery. Revenue is recognised generally on dispatch on a gross principal basis.

The equation is tiles volume in million square metres times realisation plus bathware, adhesives and small other operating revenue.

Revenue from operations, restated consolidated for 12 months ended March 31, was Rs 1,435.48 cr in FY2024, Rs 1,446.03 cr in FY2025 and Rs 1,512.46 cr in FY2026. Total income on the same basis was Rs 1,472.58 cr, Rs 1,492.67 cr and Rs 1,562.53 cr. Sale of products was Rs 1,421.39 cr, Rs 1,434.26 cr and Rs 1,502.10 cr. The balance is other operating revenue, mainly export incentives of Rs 9.09 cr, Rs 7.97 cr and Rs 7.92 cr plus insurance facilitation fees of Rs 5.00 cr, Rs 3.79 cr and Rs 2.44 cr.

Two factory paths feed sales. In-house plants in the Morbi cluster in Gujarat made Rs 959.35 cr or 66.83% of revenue in FY2024, Rs 1,135.85 cr or 78.55% in FY2025 and Rs 1,235.93 cr or 81.72% in FY2026. Third-party contract makers, all in Morbi, supplied Rs 462.04 cr or 32.19%, Rs 298.41 cr or 20.64% and Rs 266.17 cr or 17.60%. The count was 326, 269 and 304 makers. As two new plants started, volume was pulled inside.

Tiles volume sold was 3.61 crore sqm in FY2024, 3.81 crore sqm in FY2025 and 3.83 crore sqm in FY2026. Realisation on tiles was Rs 352.67, Rs 340.38 and Rs 352.26. Volume grew modestly while realisation dipped then recovered as premium mix rose.

Product lines

Tiles are 87-88% of sales. Three families share kilns but not economics, plus bathware that shares brand and dealers but not factories.

GVT and technical products are glazed vitrified tiles plus advanced surfaces including integrated stone technology, IST, which mimics marble through the body. This is the premium engine at 65.54%, 69.56% and 73.98% of revenue. As a share of tiles alone it was 75.37%, 78.71% and 84.19%. Volume was 2.39, 2.66 and 2.94 crore sqm. The portfolio had over 3,500 GVT SKUs and over 50 IST SKUs as of March 31, 2026. Industry data cited says GVT realisation is 15-30% above ceramic and PVT. All new-launch product sales in FY2024-FY2026 were GVT and technical.

PVT or polished vitrified tiles are plain, durable floor tiles, largely outsourced. Revenue fell each year while volume fell from 64.4 to 57.6 to 47.70 lakh sqm. Ceramics, the affordable wall and low-traffic tile, fell from Rs 125.49 cr to Rs 81.29 cr with volume from 57.8 to 41.70 lakh sqm. The decline is deliberate, freeing kilns and working capital for GVT.

Bathware splits into sanitaryware made in-house and faucets and accessories largely sourced. It has over 600 sanitaryware SKUs and over 400 fittings SKUs. Revenue was Rs 143.28 cr or 9.98%, Rs 128.75 cr or 8.90% and Rs 138.80 cr or 9.18%, still below FY2024. Sanitaryware capacity was 858.60 thousand pieces each year with utilisation at 88.02%, 86.69% and 66.59%. Adhesives and tools are sourced and tiny at 1.42%, 1.45% and 1.50%, but help the dealer basket.

Customers and channels

There is no single customer. An influencer recommends, a dealer displays, a mason installs, a family lives with it for a decade.

Domestic B2C retail through franchisee-owned Exclusive Brand Outlets, EBOs, and Multi Brand Outlets, MBOs, was Rs 820.47 cr or 75.96% of domestic sales in FY2024, Rs 776.73 cr or 68.82% in FY2025 and Rs 791.56 cr or 66.80% in FY2026. Domestic B2B to builders, contractors, developers and government work was Rs 259.60 cr or 24.04%, Rs 351.90 cr or 31.18% and Rs 393.45 cr or 33.20%. Builders served rose from 1,154 to 1,310 to 1,411, with long ties such as Signature Global and Srijan.

EBOs rose from 256 in 209 cities to 286 in 232 cities to 305 in 249 cities. Average EBO revenue was Rs 92.50 lakh in FY2026 versus Rs 26.70 lakh for an MBO. EBOs were 24.90%, 26.95% and 27.72% of domestic tiles. MBO sales were Rs 684.18 cr, Rs 713.09 cr and Rs 736.07 cr. The top 10 MBOs were 6.70%, 7.24% and 7.90% of revenue and the top 10 EBOs were 4.89%, 5.82% and 5.67%, so no dealer dominates. Churn is real: MBOs opened 776 and closed 675 in FY2026, EBOs closed 43 after pruning.

Exports through 154 overseas MBOs were Rs 341.32 cr or 24.01% of product sales, Rs 305.63 cr or 21.31% and Rs 317.09 cr or 21.11%. No export country exceeded 2.85% in FY2026. Tier II cities were 56.96% of revenue in FY2026, metros only 6.40%. EBOs skew north-west, with 170 of 305 in Uttar Pradesh, Rajasthan, Haryana and Gujarat.

A survey of 766 consumers found quality ranked by 88%, design by 61% and value by 42%. About 58% walk in undecided and 68% of those decide during the visit. Architects influenced 52% of purchases. Varmora had second-highest unaided recall, 43% consideration with 15% purchase, and a net promoter score of 95, joint second. Masons are tied via the Sankalp app with over 29,000 users.

Scale and footprint

All revenue traces to Morbi. Total tiles capacity was 3.87 crore sqm in FY2024 and 4.38 crore sqm in FY2025 and FY2026. Production was 2.8, 3.4 and 3.17 crore sqm. Utilisation was 71.86%, 78.20% and 72.49%. Unit 3 at 1.38 crore sqm ran at 87.25% and 86.74% in FY2025-FY2026, while Unit 2 for IST at 39.60 lakh sqm ran at 60.60% and 58.59%. Older units ran around 60-62% in FY2026. A new 64.00 lakh sqm joint venture plant in Tezpur, Assam started in July 2026 to serve the east, where Varmora has only 39 EBOs.

3. Use of Funds

• Rs 245.00 cr of the Rs 320 cr fresh issue to repay or prepay borrowings in fiscal 2027, including Rs 215.00 cr for the company and Rs 30.00 cr via investment in subsidiaries Covertek Ceramica and Varmora Sanitarywares.
• Balance to general corporate purposes, capped at 25% of gross proceeds under regulations.
• The OFS proceeds go to selling shareholder Katsura Investments, not to the company.

4. Financials Overview

All figures restated consolidated. Total income was Rs 1,472.58 cr, Rs 1,492.67 cr and Rs 1,562.53 cr.

Revenue grew 7.53% before the period, then 0.73% and 4.59%, or 5.36% over two years. Margins trace a capex J-curve, troughing in FY2025 under full-year depreciation and interest from new plants, then rebounding in FY2026 as outsourcing exited, ad spend was cut and debt was repaid. Leverage and cash follow the same curve.

5. Financial Analysis

Flat sales reshuffled in-house with a peak-year margin

Two-year revenue growth of 5.36% hides a 14.89 point mix shift. In-house revenue grew 28.8% from Rs 959.35 cr to Rs 1,235.93 cr while third-party revenue fell 42.4% from Rs 462.04 cr to Rs 266.17 cr. Purchases of stock-in-trade collapsed from Rs 362.85 cr to Rs 230.70 cr to Rs 213.15 cr. That lifted gross profit, defined as total income less materials, purchases, inventory change and power and fuel, from Rs 519.23 cr at 35.26% to Rs 581.44 cr at 38.95% to Rs 592.43 cr at 37.92%. EBITDA before exceptional rose from Rs 150.33 cr at 10.21% to Rs 198.29 cr at 13.28% to Rs 221.56 cr at 14.18%. Power and fuel stayed large at Rs 284.43 cr, Rs 365.07 cr and Rs 329.04 cr. The printed trend still includes Simola revenue of Rs 143.45 cr, Rs 127.22 cr and Rs 120.38 cr, which leaves the group after March 31, 2026, so the forward base is about 8% smaller.

Profit does not exist without other income

Other income was Rs 37.10 cr, Rs 46.65 cr and Rs 50.06 cr against profit before tax of Rs 63.04 cr, Rs 37.65 cr and Rs 76.62 cr. That is 58.9%, 123.9% and 65.3% of pre-tax profit. Core pre-tax profit after removing other income was Rs 25.94 cr, negative Rs 9.00 cr and Rs 26.55 cr. FY2025 survived on a Rs 21.05 cr reversal of expected credit loss, 55.9% of pre-tax profit. FY2026 was carried by government grants of Rs 19.94 cr plus foreign exchange gains of Rs 16.94 cr plus a Rs 3.30 cr reversal, together 52.4% of pre-tax profit. Basic EPS of Rs 3.08 in FY2026 sits on profit to owners of Rs 62.06 cr on 201,625,108 weighted basic shares, not total PAT of Rs 55.09 cr. The gap is the Rs 6.96 cr loss to non-controlling interests, up from Rs 4.47 cr loss in FY2025.

Expansion never self-funded, FY2026 free cash flattered

Cumulative operating cash over FY2024-FY2026 was Rs 385.57 cr against cumulative plant and CWIP spend of Rs 493.73 cr, leaving cumulative free cash of negative Rs 108.15 cr. Plant spend was Rs 348.30 cr in FY2024 or 24.26% of revenue, Rs 111.67 cr in FY2025 and Rs 33.76 cr in FY2026 or 2.23% of revenue. The gap was plugged by net borrowing inflows of Rs 145.61 cr and Rs 92.07 cr in FY2024-FY2025 and by running cash down from Rs 225.43 cr at the start of FY2024 to Rs 81.91 cr at end-FY2026. FY2026 free cash of about Rs 200.31 cr exists only because Rs 33.76 cr capex was 0.32 times depreciation of Rs 105.99 cr, down from depreciation of Rs 119.41 cr in FY2025 and Rs 61.61 cr in FY2024. Property, plant and equipment fell 18.45% in two years to Rs 560.89 cr while capital work in progress rose 10 times to Rs 27.48 cr without converting. Non-current investments rose to Rs 52.88 cr on a new Rs 17.68 cr Allemby stake.

Overnight funding and a group history that misleads

Total borrowings spiked to Rs 505.15 cr in FY2025 then were cut by Rs 147.21 cr to Rs 357.95 cr in FY2026 as cash credit fell from Rs 221.45 cr to Rs 136.98 cr. Debt to equity fell from 0.68x to 0.44x. Quarterly stock statements to lenders differed from books by negative Rs 6.58 cr to positive Rs 5.73 cr in FY2026. Finance cost was Rs 29.06 cr, Rs 42.49 cr and Rs 39.40 cr, eating 53.9% of EBIT in FY2025 versus 34.1% in FY2026. FY2026 financing outflow of Rs 188.30 cr absorbed 80.4% of operating cash. Net debtors were held up by cutting expected-loss cover from Rs 70.25 cr or 17.42% of gross receivables to Rs 32.34 cr or 7.79%, while over-one-year overdue was still Rs 33.44 cr and the over-three-year bucket rose to Rs 14.29 cr. Loans repayable on demand were Rs 57.50 cr, 96.99% to related parties. Subsidiaries are captive: Covertek sold 76.7% of its Rs 126.76 cr revenue to the parent in FY2026, and sanitaryware sales to the parent exceeded reported revenue. Covertek PAT swung from Rs 4.13 cr to Rs 96.30 lakh to Rs 11.40 cr, or 18.37% of owners PAT in FY2026, and held Rs 49.17 cr borrowings. Simola lost Rs 16.98 cr in FY2026 and Rs 10.91 cr in FY2025, exactly explaining the minority loss.

6. Valuation Analysis

For a profitable operating maker, earnings is the right lens. At the top of the band, Rs 148 a share, post-issue market capitalisation of Rs 3,344.97 cr on 226,011,825 post-issue shares divided by FY2026 profit to owners of Rs 62.06 cr is 53.9x. At the floor it is 51.3x on Rs 3,181.46 cr and 227,247,346 shares. Post-issue book is 3.0x at the cap and 2.8x at the floor, with post-issue NAV of Rs 50.01 and Rs 49.74 on equity of Rs 810.22 cr plus Rs 320 cr fresh capital before expenses. Pre-issue NAV was Rs 39.64 on 204,390,203 shares.

On the same prospectus basis peers use, price divided by diluted FY2026 EPS of Rs 3.05 on 203,719,830 diluted shares, Varmora is 48.5x at the cap and 45.9x at the floor, or 48.1x and 45.5x on basic EPS of Rs 3.08. Peers trade at 28.55x for Somany, 40.27x for Kajaria, 47.67x for Orient Bell and 72.00x for Asian Granito, with a median of 43.97x and average of 47.12x. Varmora is at a 16.7% to 22.6% premium post-issue and 3.5% to 10.3% premium pre-issue.

The premium is not earned. RoNW of 7.79% trails Kajaria at 15.89% and Somany at 8.79%, growth is 0.73% then 4.59%, PAT margin is 3.53%, working capital is 96 days and net debt is Rs 243.43 cr with over half on demand. Quality cuts further: other income is 65.3% of pre-tax profit, grants plus forex plus reversal are 52.4%, provision cover halved, and Simola exit removes about 8% of revenue. On total PAT of Rs 55.09 cr the pre-issue P/E is already 51.2x to 54.2x.

7. Peer Analysis

Peer P/Es use September 11, 2026 close divided by FY2026 diluted EPS consolidated from the offer document. Peer operations and Q1 FY2027 updates come from the peers' own transcripts, presentations and annual reports, while Varmora figures are from its draft prospectus. Face values differ, so EPS levels do not compare.

Varmora is the GVT purist. GVT is 73.98% of its revenue and 84.19% of tiles with about 6.6% of India's GVT market and Asia-first IST, versus Kajaria at 37.0% of tiles, Somany at 34.1% of revenue and Orient at 42.0%. That mix helped gross margin to 37.92% and EBITDA to 14.18%, ahead of Somany at 9.3%, Asian at 6.5% and Orient at 6.2%, but behind Kajaria at 17.8% on gross of 39.5%. Scale runs the other way: Varmora is 31% of Kajaria, 54% of Somany, 81% of Asian and 219% of Orient. All-Morbi manufacturing plus 304 contractors compares with Kajaria's nine plants across regions at 93.5% utilisation, Somany's nine plants with southern presence, and Orient's five plants. Varmora utilisation fell to 72.49% with IST Unit 2 at 58.59%.

Customers show the same trade. Varmora B2C is 66.80% of domestic sales versus Kajaria near 70%, Somany near 83% and Orient near 78-80%, with B2B at 33.20% rising fast. EBO productivity at Rs 92.50 lakh beats peers on a per-outlet basis, and 136 MBO-to-EBO conversions signal pull. But 55.74% of EBOs sit in four north-west states, exports are 21.11% versus Kajaria under 1% and Somany near 2%, and Tier II is 56.96%. That leaves Varmora more exposed to freight, tariffs and Morbi gas than diversified peers.

Overall, Varmora asks about 51-54x post FY2026 reported earnings versus a 44x median for middle-tier returns, flat growth and weaker cash conversion, a premium that is not earned.

8. Moat

There is no structural moat, only execution edge while it lasts. In-house share of 81.72% gives quality control, GVT at 15-30% higher realisation supports price, 305 EBOs and 2,758 MBOs across 988 cities give reach, and first-mover IST gives design differentiation backed by over 3,500 GVT SKUs and Rs 92.50 lakh per EBO. All of it sits inside one Morbi cluster and a franchisee network it does not own, so the advantage persists only while kiln utilisation, design cadence and collection hold.

9. Risks

• Concentration: all revenue traces to Morbi and 73.98% to GVT and technical products in FY2026. A cyclone, utility outage, pollution action or GVT demand shift hits volume and mix together. This is idiosyncratic; peers are multi-region and less GVT-pure. Cyclone Biparjoy shut plants for about three weeks in FY2024.
• Channel: 66.80% of domestic sales via independent franchisees. Non-performance, service failure or competing affiliation impairs sell-through where brand recall is decided in-store. Idiosyncratic, partly mitigated by in-house display support and loyalty apps, but EBO closures jumped to 43 in FY2026.
• Cost and cash: power and fuel were Rs 329.04 cr or 21.06% of total income in FY2026, with gas and propane volatility. Receivables of Rs 382.67 cr with halved loss cover, 96 days working capital and over 52% debt on demand mean a gas spike or collection slip quickly raises leverage. Idiosyncratic funding, industry-wide input pressure.
• Exports and regulation: 21.11% of product sales exported to over 100 countries, exposed to US tariffs, Red Sea shipping and forex, with Rs 20.87 cr over nine months overdue beyond repatriation timelines. Factory, pollution, BIS and labour-code compliance plus excise, GST and environmental contingencies add overhang. Industry-wide, but Varmora is more export-exposed than Kajaria and Somany.
• Governance and exit: recurring related-party deals at Rs 41.93 cr or 2.68% of income, 7,830,000 promoter-group shares pledged, repeated audit-order observations, 56 cheque-dishonour complaints, and an OFS where the company receives nothing. Proceeds repay debt rather than build capacity beyond the Assam joint venture.

10. Verdict

The call rests on four load-bearing facts already shown: two-year revenue growth of 5.36% on a base that shrinks about 8% after Simola leaves; FY2026 profit where other income was 65.3% of pre-tax profit and grants plus forex plus reversal were 52.4%; receivables held up by cutting cover from 17.42% to 7.79% with 96 days working capital; and a post-issue P/E of 53.9x at Rs 148 versus a peer median of 43.97x for RoNW of 7.79% and ROE of 6.80%.

That follows to expensive. Varmora has a real premium mix and EBO productivity, but the multiple prices peak, low-quality earnings with no growth, return, leverage or cash-conversion superiority over Kajaria at 40.27x and Somany at 28.55x, beating only trough-earnings Asian at 72.00x and Orient at 47.67x. For the thesis to work, new GVT and IST kilns must fill at Rs 352 realisation while receivable days fall from the low-90s and capex normalises without fresh borrowing. It breaks if Morbi disrupts, gas spikes, GVT stalls, or collection needs fresh provisions, because then deleveraging reverses and the 53.9x earnings lens has no earnings.

11. IPO Snapshot