Granite Companies Up Against A Wall As Profits Tumble

The once flourishing granite industry is in the grip of a slowdown since the past two years. It is bogged down by problems of insufficient working capital and inadequate raw material supply.

Poor quality and lack of market research, inadequate attention to productivity, unscientific exploitation of reserves and cut-throat competition contribute to the grim state.

Till 1994-95, the industry had a booming export market growing nearly by 30-35 per cent in rupee terms.

Italy, Japan, USA and Germany are the major markets for Indian granite. However, in 1995-96 exports rose by just 19.5 per cent in rupee terms to Rs 1,082.7 crore (Rs 905.7 crore). The export target for granite, marble and alabaster is Rs 1,500 crore for 1996-97.

 

Granite exports account for nearly 85 per cent of the total exports of granite, marble, alabaster and other products. The target looks quite difficult to achieve as the exports of total granite, marble and alabaster reached only Rs 1,307 crore (Rs 1,106 crore) during April-February 1997.

Lately, the government is planning to limit exports of granite blocks in response to various representations from Union ministers, state governments and industry association. Untrammeled export of rough granite and cut dimensional blocks has affected the availability of blocks for value-addition. Of the total exports of $32.32 crore (Rs 1082.71 crore), $17.08 crore (Rs 57.21 crore) of rough and cut blocks are being exported.

Another grouse of the industry is that it is deprived of premium quality blocks for processing as a result of indiscriminate export by quarry owners.

The fate of granite processing and polishing units hangs in balance. Many companies have either hived off their granite operations or shut down operations partially.

Paucity of working capital has added to the woes of these units. Hence, the entire profit is normally retained by the companies to meet the working capital requirements with little left for expansion or modernisation.

Industry sources say the shortages of working capital has forced many granite companies to buy raw materials only after securing firm orders.

When a large order comes along, companies find it difficult to get assured raw material of the same shade and pattern. This, coupled with inadequate infrastructure facilities, leads to delayed deliveries and disrupts smooth functioning.

Outdated technology and equipment used in mining is yet another problem.

Even the 100 per cent export oriented units are not given the benefit of duty free import of mining machinery.

This leads to low quality production and under utilisation of capacity.

Technology upgradation means huge investment that seems a distant possibility as the companies are unable to meet even the working capital requirement.

These problems have affected the performance of nine granite companies that witnessed a fall of 5.3 per cent in sales income to Rs 66 crore (Rs 70 crore) in the year to March 1997.

Their operating profit declined by 30.3 per cent to Rs 14 crore (Rs 20 crore). Inlac Granston and Nova Granite (India) made losses at their operating levels.

Gross profit of the nine companies slumped by 59 per cent to Rs 5 crore (Rs 12 crore).

Nine companies turned red with a net loss of Rs 1 crore from Rs 6 crore net profit last year. Inlac Granston, Nagarjuna Granite, Nova Granite and Sti Granite suffered a loss for the year.

Elegant Marble & Granite and Solid Granite managed to raise their bottomlines.

Margins of nine companies came under considerable pressure as the operating profit margin fell to 21.5 per cent from 29.5 per cent and gross profit margin to 7.4 per cent from 17 per cent.

Major companies like Deccan Granite and Madhav Marble & Granite could not be included in the table as their latest results were not available.

The mining of granite is still a state legacy. Granite is still regarded as a minor mineral. There is no harmonisation of state level policies.

This puts granite companies on a sticky wicket. Southern states like Karnataka, Andhra Pradesh and Tamil Nadu and even Rajasthan have a large number of units.

Recently, the Granite Development Council concerned over the sorry plight of the industry, called for greater co-ordination between the Geological Survey of India, the state governments and The Indian Bureau of Mines.

Yet, the Indian manufacturers need not be unduly worried as they can still bank on the countrys huge reserves.

India, with 450 million cubic metres of granite, accounts for nearly 30 cent of the world granite reserves.

It has around 80 of the 300 varieties of granite known to exist on earth. Black granite has higher demand in the international market.

The Chemicals and Allied Products Export Promotion Council projects that Indias annual exports will touch $50 crore by the turn of the century.