Nitco Tiles Ltd, India’s third largest tiles company, says its real estate business may become as large as its core tile manufacturing and sales business. The company plans to free up lucrative real estate in the greater Mumbai region for development, by relocating some of its tile manufacturing facilities.
“In three years from now, when the projects of our 100% subsidiary Nitco Realties Pvt. Ltd are ready, real estate will become the prime driver of our business,” said Vivek Talwar, managing director, Nitco Tiles.
The subsidiary company currently holds a 20% stake in a 40-storeyed apartment being constructed at Worli in central Mumbai and a similar stake in a five-lakh sq. ft residential development at Worli Naka. “In addition to this, we are developing a 25,000sq. ft office complex and a high-end villa project at the beach resort town of Alibaug in Maharashtra,” said Talwar.
Nitco Tiles plans to free up two-three lakh sq. ft of developable property in its 90-lakh sq. ft mosaic tile facility in Thane. It is also relocating its imported Italian marble processing facility at Kanjur Marg in Mumbai to the Union territory of Silvassa. This will enable it to develop a five-lakh sq. ft commercial complex at Kanjur Marg.
Revenue from Nitco’s tiles business has been growing by around 50% for the fourth year in a row. The company follows an outsourcing model that helps it grow without the constraints of limited manufacturing capacity, especially for vitrified tiles, which accounted for 54% of the company’s sales in 2006-07 and is its fastest growing segment. It gets vitrified tiles contract manufactured from Foshan Lungo Ceramics and Foshan Chancheng Oulian Construction Ceramic Co Ltd in the Guangdong province in China.
Nitco is also in talks with one of its suppliers to set up a 50:50 joint venture vitrified tile making facility in China, with a capacity of 10 million sq. m per annum at a cost of around $20 million (Rs82 crore). The firm plans to export to the US using the joint venture.
Nitco also plans to source high-end sanitary ware and bathroom fittings from China to supply its dealers in India who retail these items. Sales to retail customers typically earn higher margins than those to institutions or builders.
The company is also beefing up its production capacity within India. Under implementation is a doubling of its floor tile manufacturing capacity to 24,000sq. m a day at its Alibaug plant at a cost of Rs40 crore. It is also in talks with a unit in Gujarat to acquire its 10,000sq. m a day, wall-tile manufacturing facility at an undisclosed cost.