Equity Research: Borosil Limited

Borosil limited is poised for a sustainable growth, with increasing CAGR of 27% from FY23E -FY25E.

Borosil has expanded from being a single Glass brand to include the entire ecosystem of kitchenware and appliances. Its expansion shows the execution was successful. The company uses smart and targeted marketing strategies to keep its opalware brand, "Larah," working at its best. It spends between 4.6% and 5.5% of revenue on marketing, and as a result, its products are getting strong traction and reviews on popular E-commerce websites. This flexibility has allowed the company to become the industry leader in the number of Products verticals it is delivering in the Private and Publicly listed arena. The company is very quick to understand customer preferences and introduce products in line with it to service demand. This will give Borosil Ltd. diversity and numerous drivers of revenue growth. Borosil Limited manufactures and trades consumer products as well as scientific and industrial products (SIP). SIP includes equipment, disposable plastics, liquid handling systems, and glassware that is explosion-proof for lighting. Consumer Products (CP) includes glass mugs, tableware, dinnerware, microwaveable and flameproof kitchenware, appliances, and storage goods.

For both Consumer Product Division CPD (Rs 310 Cr) and Scientific Product Division (SPD), the company has set aside a total of Rs 480Cr in Capex ( Rs 170Cr). Its opalware capacity, which is 42 Tonnes per day (TPD) at full production, will increase to 84 TPD by Q3FY23. The borosilicate press ware factory, which cost Rs 115 cr to build and is anticipated to be operational by Q4FY23, has a 24 TPD capacity. With a rapid upgrade, it incorporates German technology for the furnace to handle 40 TPD from the current 24 TPD. It invests Rs 170 Cr in Klasspack for the SPD business, increasing the capacity from 500 to 700 vials.

Borosil Ltd. engages in the production of consumer goods and scientific goods. Five brands have been created, two from the consumer goods business and three from the scientific products sector. The Borosil brands are used for kitchenware, consumer goods, and appliances, while the Larah name is used for products made of Opal. The Scientific Division also uses three brands: "Borosil" for lab glassware, "Labquest" for lab equipment, and "Klasspack" for pharmaceutical packaging. By FY25E, the Consumerware segment is anticipated to generate 73% of total sales and 27% from the Scientific Products division due to the former's anticipated faster growth than the latter.

Digital Marketing for aggressive growth:

Borosil is planning to focus more aggressively on digital marketing to tap the potential of e-commerce. The Working class population in metro cities are time constrained and e- commerce mode of shopping offers a ease, convenience to customers. Large number of customer base can be tapped with being present on E-commerce sites. Borosil Ltd is aggressive on leading e-com platforms such as Amazon.in, Flipkart.in etc. The company also runs promotional ads. In order to remain first after searching for a particular keywords by buyers. The successful efforts of this can be witnessed in its 2 year CAGR of 43% in opal- ware category vs 9% of La Opala RG who is a market leader. Company’s advertisement expenses are more on the digital marketing and E com- merce sites which are specific in nature rather than traditional TV commercials. Borosil promotes its products through all king od advertising and marketing tactics. The Digital marketing methods is precise and yields high conversion ratio compared to other methods. Its promotional advt. on online shopping sites are one of the reason for its high growth. 

With increased disposable income and rising per capita GDP, Indian households are clearly exhibiting the premiumization trend as they prepare to renovate their bedrooms, dining rooms, and kitchens. This massive trend is enduring and likely to spread across all economic brackets. Traditional identical products are giving way to goods with appealing aesthetics, a variety of features, a focus on comfort, and sturdy ergonomic designs. Such megatrends have been seen in Indian families over the years, and now that basic FMCG products have been widely adopted, attention is turning to consumer durables for use in homes. Following a renovation of the bedrooms and hallways, the attention is now on kitchenware, accessories, and appliances. Over time, Indian families have seen the renovations listed below and a trend towards premium items.

Borosil Ltd. is well-positioned to benefit from expansion in the kitchenware and appliance markets because to its variety of options for customers. The expanded operations from a glass brand to several kitchen product brands are positioned to be the company's growth engine. the transition of kitchenware from steel to Opalware and melamine. Borosil has constructed a whole ecosystem from cooking, serving to storing the food. Additionally, it produces utensils and accessories that make cooking comfortable and simple.

Space For Sustainable Growth And New Product Offering: 

In FY22, the Consumerware Products Division (CPD) provided 68% of the total revenue; this division is anticipated to grow rapidly with a 30% CAGR from FY22 to FY25E. The business adapts its offers quickly to meet customer demand. Offering a variety gives customers options and stops any revenue leaks. Its product line has expanded to include kitchenware, appliances, glass jars and lunchboxes, stainless steel flasks, opal tableware, and other items in addition to microwaveable glassware. Borosil is in a good position to increase its market share in newer product categories thanks to its excellent brand recall. Its La-Rah brands, which compete in the Opalware area, have a 25% market share and are functioning at full capacity. It will soon be able to produce 84TPD worth of opalware. Microwavable products are directly tied to the use of microwave in India, which is predicted to grow with rise in per capita GDP as present penetration is limited to 5%. The business has a talent for understanding consumers since it keeps introducing products that are essential to the cooking process. By utilising the Borosil brand to market future items, the company will succeed.

Rs 12,850 Cr. market for branded consumer goods is anticipated. This is equivalent to 22 (x) its CPD revenue. With a 5% market share and CPD revenue of Rs 573 Cr, it has enormous potential for revenue. Domestic appliance sales currently total Rs 9000 Cr and are rising at a 10% CAGR. Its recently released items are beginning to gain significant momentum. Kitchen appliances provide comfort, speed up the cooking process, and increasing discretionary income makes it possible to purchase them, which has increased demand in the appliance and accessory markets. With the introduction of these products supported by a well-known brand, we anticipate an increase in sales for both the non-glass and opalware product categories. With a current branded market value of Rs 900 Cr, awareness in the opalware segment is driving 15-20% growth. In the opalware sector, its Larah brand has a 25% market share compared to La Opala RG's 35%. With a 73% market share, it also holds the top position in glass microwaveable (FY22). Company’s products has presence across the journey from Prepare, Cook, Serve, Heat to Store. This provides ample diversification across products basket and multiple revenue streams for it. The higher growth appliances segment is dominated by players such as Bajaj Electrical, TTK prestige etc. where company’s products also getting traction. 

Growth in demand of scientific products:

The Scientific Products Division (SPD) of Borosil is a consistently expanding business unit, accounting for 32% of the company's total sales in FY22 and projected to account for 27% of sales by FY25E, representing a 20% CAGR from FY22 to FY25E. It sells laboratory glassware (59 percent of SPD sales), lab equipment (8 percent), and pharmaceutical packaging services (34 percent). the rising expenditure pattern on R&D to support the expansion of goods connected to the lab eco-system. The glassware industry offers the company options for export. In order to expand its product line beyond laboratory glassware, Borosil entered the market for tabletop laboratory equipment, which once more had success. According to management's projections, the pharmaceutical packaging market will quadruple by FY24E. Its management made evident the difference between using glass and plastic labware. Both materials have unique applications and cannot be substituted for particular tests. Therefore, despite the rapid expansion of laboratory plasticware, the use of glass and plastic laboratory equipment is here to stay. We anticipate that the value of Borosil's lab glassware business will quadruple and that it will contribute 68% of the SPD division. In FY25E, the segment of lab instrumentation will make up 10%.

Company focuses more on export oriented growth:

By entering the export market for lab glassware and introducing lab instrumentation in India, the company has begun a strategy to add additional avenues of growth to supplement the domestic lab glassware. Exports of laboratory glassware have been growing as an additional vector. From Q4 of FY22, Borosil began distribution in a number of nations in Asia, Africa, and North America. In addition, it has grown OEM clients to ensure consistent demand for its goods. The potential export market is approximately Rs. 4,000 crore. The market for glassware is up by 250%, and the industry is growing by 8–10%. The company entered the single-player monopoly industry of filter paper manufacture during Q1FY23. The lab glassware can be offered along with this market, which is worth Rs 110 Cr. In order to create new business, nutrition and environmental processes have been recognised as two potential subsectors for lab equipment. global laboratory equipment market is expected to grow at 4.9% CGAR during 2020-25E period. Hence company to benefit with potential revenue opportunity from lab instrumentation segment. The increasing trend in spending of research & Development by CRMO, CDMO pharma companies, quality control labs, food and soil testing labs, medical colleges and educational institutes to benefit company with creation of demand. Company also receives orders from prestigious clientele for pharma packaging business. 

Leading Player among its Peers:

While Hawkins and La Opala RG only sell kitchenware, the top ranked players like Bajaj Electrical and TTK Prestige have a larger selection of appliances and accessories. Private companies like Milton, Tupper-ware, and Cello have a greater number of offerings in both categories. The Borosil Company is the market leader in terms of variety thanks to its extensive line of kitchenware and appliance products. This is one of the company's main strategies since it has an internal system for doing traction analysis on items, which allows it to assess consumer preferences and develop products to meet demand. This might be noted as the company has succeeded in expanding the glass-focused "Borosil" moniker into a comprehensive kitchen appliance and ware brand. We think that the present product verticals have made it possible for several high-growth revenue generators to emerge, providing a cushion for diversification as well. Both a strong physical presence and a strong online presence are necessary to handle distribution. In the coming years, the company's main focus will be on meeting the rising demand.

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Conclusion:

The company has an operating leverage between 1.5-2.5(x). As its sales improved from Rs 365 Cr in FY19 to Rs 839 Cr in FY22, the operating leverage has boosted its ROE/ROCE from 8%/14% in to 11%/18% FY22. further the estimated revenue CAGR of 27% during FY23E-25E and induction of debt (which in turn to raise equity multiplier) aids boost in ROE and ROCE of Borosil. Hence the incremental performance of the company is set to strengthen in near future.

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