Have a medium-term view

Most brokerages are advising their clients to invest in Asian Granito IPO with a medium-term view, but only at the lower end. The initial public offer of the Gujarat-based manufacturer of vitrified tiles (ideal substitute for high-cost marble and granite) has opened for subscription at the price band of Rs 85-102 per equity share, which analysts term as not so expensive.

Analysts are optimistic about the company in the medium-term, as they feel that increased capacities, that is expected to be in place in the next couple of years, will lead to good earnings growth. The company also boasts of strong financials, a track record of quickly ramping up capacities, and presence in the fast growing vitrified tile business.

For the record, of the total ceramic tiles market, floor tiles segment accounts for the largest share of 53%, wall tiles segment 35% and vitrified and porcelain tiles 12%. The company already has some presence in cheaper ceramic tiles segment and is set to enter the wall tiles business. This augurs well for the diversification of its revenues.

However, the only concern that remains is on the operating margins front. Besides, the company is a small player, in an arena that has many large players who are also adding capacities.