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Timbor s IPO : a new dimension in furniture industry

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Mr. Anant Maloo, Managing Director, Timbor Home Ltd. is armed with Bachelor of Commerce and Post Graduate Diploma in International Business from International Management Institute (IMI), New Delhi. A dynamic 42-year-old, Mr. Anant Maloo has over 15 years of experience in the cement, building material and timber industry. Active in the trading business, he has been associated with large industrial houses like Birla, Tata, Eternit group for their products like cement, plywood and building boards. He is a very active member of the interior designer’s fraternity and is currently the Vice Chairman of Indian Institute of Interior Designer (Ahmedabad Chapter), a National organization affiliated to the International Federation of Interiors (IFI). In his free-time, he is an active sportsman who has captained his state (Gujarat) and University tennis team at national events.

Timbor Home Ltd. is a manufacturer-retailer having a pan-India presence with more than 80 exclusive stores of kitchen, door and furniture retail outlets operating on a Franchise model. The Company is one of the major retailers and manufacturers of durable, affordable yet trendy modular kitchens in India. It has three manufacturing units one located at Changodar in Ahmedabad District; the second unit at Vatva GIDC, Ahmedabad; and the third at Umreth, in Anand district. The total manufacturing facility of the Company amounts to 200,000 sq. ft. It manufactures kitchen & kitchen components, furniture, door & door frames, kitchen baskets and accessories. Timbor Home markets its products under the brand names “Timbor Cucine” (Modular Kitchens), “Timbor Doors” (Doors & Door Frames), “Timbor Home” (Home Furniture) and IKI Kitchens (Hi-end kitchen solutions using ‘Hettich’ hardware and accessories.

In an exclusive interaction with Hemant P. Maradia of IIFL, Mr. Anant Maloo says: “We are raising money for expansion. We are planning to open 20 large format stores for modular kitchen and home furniture.”
Tell us about the purpose of the IPO? How much money are you aiming to raise? What kind of response do you expect from the market? 
At the higher end of the price band, the amount that we will be able to raise will total Rs.23.24 crores. This will be 25% of the fully diluted equity. We are offering 36.90 lakh shares in the IPO.

The response that we found at the Mumbai and Ahmedabad roadshows has been very encouraging.

We expect a good response from the general public as well the trade partners.

I am bullish on the IPO as it will be the only furniture company to be listed on the exchanges.

What is so compelling about your company’s business? 
We are a pan-India company. We are present in 18 states and 65 cities.

It’s a good margin business at the retail level. In the modular kitchen space, we are a very strong brand. We operate in all markets – Tier I, Tier II and Tier III.

In April, Timbor Cucine was voted The Kitchen Retailer of 2011 at the Indian Kitchen Congress.

We manufacture 75% of the components that go into our finished products. That gives us lot of flexibility in terms of pricing and customizing them as per customers’ needs.

What is the purpose of the IPO?  
It will give Timbor a good exposure and visibility in the market. Our business model is scalable through the franchise route.

We are also raising money for expansion. We are planning to open 20 large format stores for modular kitchen and home furniture products. Our distribution and marketing will then be a mix of franchise run stores and company owned stores. We expect the company owned stores to add the bottomline going forward.

We see institutional business as a potential big opportunity where real estate developers provide modular kitchens in their residential projects. In metros, this trend is very much in vogue while the non-metro markets will also slowly catch up.

What are your key strengths? 
Our manufacturing facilities, processes and 360 degree integration are our key strengths. The only thing we buy from outside are the hardware components. We source the hardware parts from Germany’s Hettich.

We don’t have layers. We don’t have a distributor and we don’t have dealers; that give us tremendous flexibility in pricing.

The modular kitchen market is growing at 50% per annum.

We also hope to gain a lot from the opening up of the institutional market.

We have started furniture retailing in Ahmedabad. We have received a couple of enquiries. We are in talks with a couple of builders. Once a few builders start providing modular kitchen, others will follow suit.

What will be the main challenges? 
Modular kitchen and home furniture is a consumer centric business. So, service is of prime importance. One has to have the pulse on the consumers’ changing needs. Keeping customers happy is the biggest challenge.

How fast we can adopt new designs and implement them for our customers will also be crucial for us. We also have to keep in mind the way kitchen is utilised in India.

How fast we can replicate our model in the non-metro regions will also be a key challenge.

Going forward, what will drive growth for your company? 
Majority of other organised players in India right now are European. In Europe companies who manufacture components for the kitchen are different from the companies that assemble modular kitchens.

We are the only company that manufactures our cabinet, doors and even the raw materials. Except hardware, we manufacture everything.

The European companies are mainly present in the metro cities. They cater to a different customer segment. Their products start from Rs. 3 lakh onwards. Our range starts from Rs.50,000. The IKI Kitchens range starts from Rs. 1.5 lakhs.

We are a FSC certified company. It’s a very prestigious certification. If you want to sell in Europe and the US, you have to have this certification.

We also have “The chain of custody” certification.

How do you source the raw material for your business?
We use both imported and local timber. Import is a major component. Furniture grade timber and plywood grade timber is imported.

Around 90% of our furniture is made in teakwood, plywood and veneer. It is different from the furniture that comes from China, Vietnam, Indonesia, Malaysia, etc.

What about exports? 
We did export some doors to Africa. But we are more interested in the domestic market. The Indian market has been booming and we have done pretty well. With the FSC certificate, we can export to any part of the world now. But we will wait and see if we are getting better prices. As of now, the domestic market is on an upswing.

Give us a break up of revenues in terms of different product categories? 
Modular kitchen constitutes almost 60% of our revenues.

The furniture volume is less as we are operating out of only one store in Ahmedabad. This has been there for the last one and half years.

We opened another two stores last month. These stores have been opened on a Store-in-store (SIS) format with Reliance Fresh at Jaipur and Surat.

These are all company owned stores. So, we will go for either Rental or Shop-in-Shop or Revenue Sharing format.

How many stores do you have right now? What are the expansion plans? 
We are running 84 modular kitchen stores today. We will continue to grow modular kitchen business the way we have been doing it for the past few years. At the same time, we are looking to expand the furniture business as well because that is even a bigger market than modular kitchen. Furniture is an almost US$8bn industry in India.

Are you looking at any capacity expansion as well? 
Yes, we are adding capacity. We have three factories in Gujarat right now. The expansion will take place at Changodar and Umreth. Right now these facilities manufacture modular kitchens. We will now add the furniture range also.

How do you see threat from the unorganized sector and imports? 
The Indian furniture market is worth over Rs. 400bn; 85% of that is still in the unorganized space. So, the untapped unorganised market is huge and is waiting to be exploited. Organised retail is also growing and the furniture industry is also growing. The shift from the unorganized segment has already started, especially among the young people.

Could you tell us what has been the revenue CAGR over the past five years? 
We have grown our topline by over 60% over the last five years whereas the industry has expanded by 30%.

That clearly shows that the share of the unorganized market is coming to us. The organised retail market is evolving very fast.

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