Esprit Stones Limited
Company
| Website 🔗 |  |
| Business Activity | Manufacture |
| Division | Engineered Stone |
| Sub-class | Quartz and Marble Surfaces |
| Location | Udaipur, Rajasthan Rajsamand, Rajasthan |
| Establishment Year | 2016 |
Management
| Managing Director | Sunilkumar Lunawath |
| Educational Qualifications | NA |
| Experience | Over 25 years of experience in the fields of natural stones, mining, minerals, engineered stones, and commercial leasing industries. |
| Annual Salary | ₹ 60 Lakhs |
| Total Number of Employees | 295 |
About
Esprit Stones Limited is primarily engaged in the manufacturing of engineered stones, specifically engineered quartz and marble surfaces. The company focuses on innovation and quality control to produce a wide variety of colours, styles, designs, and textures in its products.
Products and Services:
Engineered Quartz Surfaces:
Manufactured at Manufacturing Facility I, these surfaces are known for their durability, non-porosity, and resistance to scratches, stains, and heat. They are used in various applications like kitchen countertops, tabletops, bathroom vanities, and wall cladding.
Engineered Marble Surfaces:
Produced by the subsidiary Haique Stones Private Limited (HSPL) at Manufacturing Facility IV, these surfaces offer an attractive and durable alternative to natural marble. They are used in flooring, window and door jamming, tabletops, and wall cladding.
Unsaturated Polyester Resin:
Manufactured by the subsidiary Addwaya Chemicals at Manufacturing Facility III, this resin serves as a key raw material in engineered stone production. It is also sold in the open market for applications in other industries.
Clients:
B2B Clients:
Esprit Stones primarily caters to businesses, including those in the USA, Canada, Egypt, Bulgaria, UAE, Saudi Arabia, etc.
Domestic Distributors:
The company has a network of over 50 active distributors across 15 states in India, serving the domestic market under the ‘Haique’ brand.
Manufacturing Facilities:
Manufacturing Facility I: Produces engineered quartz surfaces.
Manufacturing Facility II: Produces quartz grit, a key raw material for engineered quartz.
Manufacturing Facility III: (Operated by Addwaya Chemicals) Produces unsaturated polyester resin.
Manufacturing Facility IV: (Operated by HSPL) Produces engineered marble surfaces.
Manufacturing Process:
Engineered Quartz Surfaces:
- Mixing of Raw Materials: A customized blend of raw materials is mixed to achieve the desired design, pattern, and size.
- Levelling and Pressing: The mixture is poured into a mould and pressed to create a solid surface.
- Heating and Cooling: The slab is heated in an oven to solidify it further and then cooled for 24 hours.
- Edge Cutting and Calibrating: The edges are cut to achieve a perfect rectangular shape, and the surfaces are calibrated for evenness.
- Polishing: One side of the slab is polished to a glossy finish.
- Quality Testing, Labeling, and Packing: Each slab undergoes rigorous quality checks before being labelled and packed.
Engineered Marble Surfaces:
- Mixing and Leveling: Similar to quartz, raw materials are mixed and poured into a block moulding tray.
- Pressing and Curing: The mixture is pressed into a block shape and cured for an extended period.
- Cutting and Polishing: The cured block is cut into slabs, and one side is polished.
- Quality Testing, Labeling, and Packing: The same final steps as with engineered quartz surfaces.
Unsaturated Polyester Resin (Subsidiary – Addwaya Chemicals):
- Pre-processing: Raw materials are mixed and processed in a vacuum pump to remove moisture.
- Polyesterification: The mixture undergoes a chemical reaction in a reactor to form a polymer.
- Cooling and Blending: The polymer is cooled and blended with styrene to create the final resin.
Raw Materials:
Engineered Quartz and Marble Surfaces:
Quartz grit and powder, marble grit, calcite powder, resin, other chemicals, and pigments.
Unsaturated Polyester Resin:
Phthalic anhydride, styrene monomer, and ethylene glycol.
Suppliers:
Local Suppliers:
The company sources most of its raw materials from third-party local suppliers around its manufacturing facilities.
In-house Production:
The company has backwards integrated to produce quartz grit and unsaturated polyester resin, reducing its reliance on external suppliers for these key materials.
Sales and Marketing:
Exports:
A significant portion of the company’s revenue comes from exports to over 10 countries.
Domestic Market:
The company caters to the domestic market through a network of over 50 distributors across 15 states in India, under the brand name ‘Haique’.
Brand Building:
The company focuses on building its ‘Haique’ brand as a premium brand through various marketing efforts, including celebrity endorsements, online and print advertising, and participation in exhibitions and events.
Other Key Aspects:
The majority of the company’s revenue (59.87%) comes from export sales. Within export sales, the USA is the dominant market. Domestic sales are dominated by Rajasthan contributing 19% of the company’s total revenue.
Manufacturing Process Flowchart
Revenue – Category
Revenue – Region
Audit and Legal
Auditor’s Remarks:
The restated consolidated financial statements for FY 2024, 2023, and 2022 do not contain any qualifications or modifications.
Non-Compliances and Other Issues:
Past Delays in GST Returns and EPF Payments:
The company has reported instances of delays in filing GST returns and making payments under the Employees’ Provident Fund which were rectified later.
A member of the Promoter Group, Mangi Lal Lunawath, had received a summon from SEBI in the past regarding share dealings in another company. He complied with the information request in 2010, and there has been no further communication from SEBI since then.
Contingent Liabilities:
As of March 31, 2024, Esprit Stones Limited reported contingent liabilities totaling ₹698.33 Lakhs. These primarily consist of:
- Letter of credits outstanding: ₹313.82 lakhs
- GST-related matters under appeal: ₹384.51 lakhs (₹362.88 lakhs for matters where the company has already filed an appeal and ₹21.63 lakhs for matters where an appeal is yet to be filed)
- Potential customs duties on imports into the USA: While not quantified, the company’s subsidiary, Haique Stones Inc., may be subject to certain additional customs duties on the import of quartz surfaces in the USA.
Legal Cases:
Cases Filed Against the Company
Cases Filed by the Company
Esprit Stones Private Limited vs. Ma Karani Marbles:
A criminal complaint was filed under Section 138 of the Negotiable Instruments Act, 1881, for a dishonoured cheque amounting to ₹34.5 Lakhs. The company is seeking twice the outstanding amount and a letter of apology.
Tax Proceedings against the Company:
Indirect Tax Proceedings: There are 2 cases related to indirect taxes, involving an outstanding GST demand of ₹392.72 lakhs. The company has filed an appeal against the order and is awaiting the outcome.
SWOT Analysis
Strengths
| Prominent Market Position: The company is recognized as a key player in the Indian engineered stone market, indicating a strong brand presence and established customer base. |
| Backward Integration: The company’s in-house production of quartz grit and unsaturated polyester resin reduces its reliance on external suppliers, ensuring better cost control and quality assurance. |
| Strategic Location: The manufacturing facilities’ proximity to abundant mineral deposits in Udaipur offers logistical and cost advantages. |
Weaknesses
| Dependence on Exports: The company heavily relies on export sales, particularly to the USA, making it susceptible to fluctuations in global economic conditions and geopolitical tensions. |
| Underutilization of Capacity: The company has unutilized capacity in its manufacturing facilities, which could impact its profitability and efficiency. |
| Financial Risks: The company has a substantial amount of debt and has experienced negative cash flows from operating activities in the past, which could limit its financial flexibility and growth potential. |
Opportunities
| Growth in Engineered Stone Market: The global and Indian engineered stone markets are projected to grow significantly in the coming years, offering ample opportunities for the company to expand its market share. |
| Expansion into New Markets: The company is actively exploring new markets, both domestically and internationally, which could lead to increased sales and revenue diversification. |
Threats
| Intense Competition: The engineered stone industry is highly competitive, with the presence of both established players and new entrants. This could lead to pricing pressures and a potential loss of market share. |
| Raw Material Price Volatility: The company’s reliance on raw materials, even with backward integration, exposes it to price fluctuations and supply chain disruptions, which could impact its profitability. |
| Technological Advancements: Rapid technological changes in the industry could render the company’s existing processes and equipment obsolete, requiring significant investments in upgrades. |
Porter’s Five Forces1
| Threat of New Entrants | HIGH |
| The engineered stone industry has low entry barriers due to factors like the easy availability of raw materials and limited initial capital investment. This allows for the entry of new players, increasing competition. |
| Bargaining Power of Suppliers | MODERATE |
| While the company has backward integrated for some key raw materials, it still relies on external suppliers for others. The absence of long-term contracts and potential price volatility of raw materials, especially those linked to crude oil, could increase supplier bargaining power. |
| Bargaining Power of Buyers | MODERATE – HIGH |
| The company’s reliance on a few key customers, especially in the export market, gives those buyers significant bargaining power. They could demand lower prices or better terms, potentially impacting Esprit Stones’ profitability. |
| Threat of Substitute Products or Services | MODERATE |
| The market offers substitute products like natural stones, laminates, and other manufactured solid surfaces. While engineered stone has advantages in terms of durability and consistency, the availability of substitutes poses a moderate threat, especially if their prices become more competitive. |
| Rivalry Among Existing Competitors | HIGH |
| The engineered stone industry is highly competitive, with numerous players, including both organized and unorganized entities. This intense competition could lead to pricing pressures, impacting profit margins. |
Peer Comparison
The company’s performance on various financial and operational metrics compared to its peers for FY 2024 is as follows:
| Metric | Esprit Stones Limited | Pokarna Limited | Pacific Industries Limited | Global Surfaces Limited | Elegant Marbles & Grani Ind. Ltd. |
| Revenue from Operations (₹ in Crores) | 273 | 687 | 190 | 225 | 33.99 |
| Operating Profit Margin (%) | 11 | 31 | 6 | 16 | 13 |
| Return on Equity (ROE) (%) | 15.1 | 15.8 | 2.71 | 6.89 | 4.10 |
| Return on Capital Employed (ROCE) (%) | 12.7 | 18.3 | 3.51 | 6.95 | 5.53 |
| Debt to Equity Ratio | 1.73 | 0.68 | 0.12 | 0.52 | 0.00 |
Green Box
IPO Funds:
Funding Working Capital Requirements:
The company plans to allocate a significant portion of the proceeds, ₹1,400.00 Lakhs, to meet its growing working capital needs. This includes managing inventory, accounts receivable, and other short-term operational expenses.
Investment in Subsidiary (HSPL):
₹1,950.00 Lakhs will be invested in its subsidiary, Haique Stones Private Limited (HSPL), specifically for repaying or prepaying a portion of HSPL’s outstanding borrowings and another ₹650.00 Lakhs for working capital needs. This strategic move aims to reduce the subsidiary’s debt burden and improve its financial health.
Growing Preference for Engineered Stone:
Engineered stone’s superior qualities, such as durability, stain resistance, and low maintenance, are making it a popular choice over natural stones like granite and marble.
Success of R&D Efforts:
The company’s R&D efforts have been fruitful, as evidenced by the introduction of over 30 new designs and concepts in the fiscal years 2023 and 2024. Specific examples of successful product launches include the Platinum Statuario, Palais Grey, and Crystal White designs.
Market Expansion:
- Domestic Market: The company is expanding its dealer distribution network in Indian cities to tap into the growing domestic demand for engineered stone. They are also setting up an experience centre in Kishangarh, Rajasthan, to further strengthen their presence.
- International Market: The company is focused on penetrating key growth markets, particularly the United States, due to its size and demand potential. They are also looking to expand their footprint in the Middle East, having recently entered into an exclusive distribution agreement in Saudi Arabia.
Industry Outlook:
Globally, the industry is projected to expand at a compound annual growth rate (CAGR) of 5-6% between 2027 and 2032, reaching an estimated value of $48,104 million by 2032.
In India, the engineered stone market is anticipated to witness even more robust growth. It’s estimated to be valued at $3,643 million in 2022 and is projected to grow at a CAGR of 7-8% between 2022 and 2027
Amber Box
Customer Concentration:
A significant portion of the company’s revenue is generated from a limited number of customers (Top 5 customers contributed 52% of revenue). This dependence on a few key clients makes them vulnerable to any adverse developments or loss of business from these customers, potentially impacting their revenue stability compared to peers with a more diversified customer base.
Capacity Utilization:
Manufacturing Facility I: 56.99%
Manufacturing Facility II: 44.67%
Manufacturing Facility III: 61.55%
Manufacturing Facility IV: 11.78%
Negative Operating Cash Flow:
The company experienced negative cash flow from operating activities in FY 2023. This was attributed to increased working capital requirements due to business growth and changes in sales strategy.
Red Box
Market Volatility:
The engineered stone market, while projected to grow, is also subject to cyclicality and fluctuations in demand. Economic downturns or changes in consumer preferences could impact the company’s sales and profitability.
High Debt Levels:
The company has a relatively high debt-to-equity ratio compared to its peers, indicating a greater reliance on debt financing. This increases financial risk and could limit the company’s flexibility for future investments and growth.
Images
- The force value of “LOW” is considered good Click Porter’s Five Forces article for more information. ↩︎
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