Decolight Ceramics: Avoid

Investors can avoid the initial public offer of Decolight Ceramics for now. This vitrified ceramic company, whose revenues started flowing in only in 2005, may have to garner higher market share in the organised segment to sustain in the tile market. It could otherwise face stiff competition from unorganised players and Chinese products.

At the offer price band of Rs 45-54, the share is being offered at 8-10 times its FY-07 earnings. Post-equity expansion, the price earnings multiple (at the offer price band) is likely to be 10-11 times the expected earnings for FY08. This valuation is at a premium to bigger players in the industry. While Euro Ceramics recently made an IPO with similar valuation, the premium appeared justified considering that it was moving to a slightly higher-end segment of sanitary ware. .