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In India, building materials sector has experienced a consistent growth and business expansion. The thrust in infrastructure development, coupled with the uptake in real estate demand is positive for the sector.

Source: Shankara Building Products Investor Presentation


Building materials segment includes products like – TMT, cement and construction chemicals; plumbing, sanitary ware and fittings; tiles, adhesives and floorings; electricals, lighting and paints, etc.

While there are many small-mid sized shops retailing such products in India, unlike US, there are very few large organized retailers of building materials.

Shankara Building Products is India’s one of the India’s leading organized retailers of home improvement and building products and is aiming for consistent 25-30% growth in sales over longer term.

Below, we have shared interesting insights from the Q2 FY 24 con-call of Shankara Building Products to understand the current situation and the outlook for the industry.


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Shankara Building Products – Insights from Q2 FY 24 con-call of the company

– General

  • For the quarter, our total revenue was Rs 1,142 Crores, up by 26% YOY, while our EBITDA stood at Rs 36 Crores, up by 23% YOY
  • Our quarterly EBITDA margins have improved sequentially by 13 basis points to 3.2% compared to 3% of Q1 FY 24, aided by an improvement in the steel mix and operating efficiencies
  • We have strategically introduced our private label, named Fotia Ceramica designed to address a wide spectrum of customer requirements within the tile segment
  • Currently our online sales is negligible. We are as I said it is more of a discovery platform
  • Our stores – how it would look is we have a space next to the showroom which would be a shed that would usually have the steel, cement and what you would say as the aggregate and more of the dirty products, and we have a showroom right next to the finishing product
  • We do not believe we really need too many new stores, maybe 2-3 in a year. We believe that there is still a lot more we can get out of the existing stores, and we can grow our revenue substantially from the existing infrastructure that we have
  • Currently basis our estimates analysis the existing infrastructure, we have the potential to double our turnover in next 4-5 years

– APL Apollo

  • Revenue contribution – it would be around 35% to 40%
  • We share a very cordial relationship. They have helped us grow with their wide portfolio and we have helped them strongly penetrate in the South

– Retail business

  • Our retail business grew by 27% YOY to Rs 1,223 Crores during H1, with the same store sales increase of 23% during this period
  • Even with the same store base of 91, we have been able to achieve a 13% YOY growth in the number of transactions and a 12% YOY growth in the average ticket size per transaction, primarily led by the introduction of newer product categories
  • Our EBITDA for the segment was up by 20% YOY during this period
  • Our rental costs have grown by just 4% YOY, against a 27% growth in revenues
  • We are in the process of opening two new fulfillment centers, one in Maharashtra and the other one in Madhya Pradesh in the coming months

– Channel and Enterprise business

  • The segment has grown by 36% YOY during the first half of the fiscal
  • Given the significant focus of investment in infrastructure and real estate upcycle, we believe the segment to continue to grow steadily in the coming quarters and years

– Product mix

  • Both steel as well as non-steel building materials has grown at around 30% during the half year period
  • Currently non-steel is around 10% and we aspire to bring it to around 25% of the overall topline
  • The gross margins are between 10% to 12% for the non-steel and since we are still in the initial stages of building our team, our expenses a bit high, so EBITDA comes to around 5% to 5.5%

– Geographical expansion

  • Currently we are very strong in the South
  • Over the last year we have been making good intro in Maharashtra and Madhya Pradesh, so I think for now we are looking at expansion in the West
  • We are also coming up with a display center in Morbi in Gujarat

– Guidance

  • We have guided towards 25% to 30% YOY growth as a CAGR, and I think we are on track to achieve that…This would be long-term
  • While we grow our revenues, we also commit to slightly improve our profitability margins from the current levels
  • We are strongly working towards our ambitious target to elevate the contribution of our non-steel business to 25% within the next 4-5 years
  • Our EBITDA margin is expected to remain around the same level. Our aspiration is to increase it by the 50 to 100 basis point, and we are actively working on it in terms of focusing more on non-steel



Disclaimer: This is not a recommendation to buy/sell Shankara Building Products. The securities quoted are for illustration only and are not recommendatory.


Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/


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