Way back in 1985, Spartek brought the most advanced technology from the USA and Europe and pioneered the new concept of ceramic flooring in India. Back then, the group emerged as a market leader and became the largest ceramic tile manufacturer.
“In ceramic tiles, we were among the first to introduce modern manufacturing technology, fundamentally changing how tiles were made. At that time, it was not an established market. Today, it is a Rs 25,000-crore industry with close to 1000 factories. In a way, we helped create both the category and the market. From the beginning, our strengths were clear. We were strong in production technology, sales, marketing and brand building. Those strengths have stayed with us even today,” observes Krishna Prasad Tripuraneni, Chairman.
The debacle at the prime
As the ceramics market was fast-growing and lucrative at that time, Spartek was hungry for new capacity and went on an acquisition spree. It acquired three companies within a span of three years, including Neyveli Ceramics and Refractories Ltd. (aka Neycer sanitaryware brand) and two other companies, all funded through debt. “Acquiring the companies through debt was a blunder,” admits Tripuraneni. “Instead, we could have raised funds through a rights issue given that our share price at that time was over Rs 250,” he points out.
The acquired companies were under the Board for Industrial and Financial Reconstruction (BIFR). “We underestimated the BIFR process completely. We thought the resolution would take six months to one year. Instead, the process dragged on for 14-17 years. In that period, banks and investors were reluctant to support the group,” recalls Tripuraneni.
Fuel woes
While the LPG availability for commercial use has become an issue in recent times due to the West Asia conflict, the group faced an issue long back. “We were the only ones using LPG, while others had access to natural gas pipelines. Initially, LPG was about 20 per cent costlier, but we managed it through our efficient operations and premium pricing,” points out Tripuraneni.
Between 1995 and 1998, the gap widened and the price difference increased to almost 900 per cent. “The spiraling debt and increasing fuel costs hit the parent company and by 2005-06, the situation became unmanageable,” he adds.
Modernising portfolio
Despite the continuous hits, one thing that worked for the group was its brand recognition, which has also paved the way for its comeback. “By 2019, we started to rebuild. Machinery depreciates. Technology becomes outdated. But the brand survived,” Tripuraneni points out.
Spartek has now decided to move towards an outsourcing model. Rather than investing several crores on heavy assets, the company has invested around Rs 10 crore. The strong brand allows the company to control quality, command pricing and scale faster. “We are leveraging the large MSME manufacturing base with hundreds of factories in Morbi, Gujarat,” says Tripuraneni.
Spartek has set up a product development centre which helps to identify new segments, apart from the existing ceramic floor tiles and sanitaryware segment. It has also ventured into Spartekoncrete that focuses on pre-cast constructions, polished concrete flooring, industrial and warehouse flooring and densified parking flooring. “We are already working with large institutional clients such as IndoSpace, Welspun, Tata Motors, Reliance Industries, TVS Emerald,…” points out Tripuraneni.
Rs 500 crore revenue in three years
The Group is also venturing into luxury tableware. “Tableware is a large global opportunity. We had earlier experience in this segment through a UK company that manufactured and supplied for the British Royal family. We are restarting with a new facility in Tirupati, followed by expansion in Sri City,” adds Tripuraneni. Now the business is being structured into separate verticals, each with a potential to reach around Rs 100 crore revenue. “Overall, we are targeting over Rs 500 crore revenue in three years,” highlights Tripuraneni. The company plans to raise early-stage capital from high net worth individuals, family offices, or venture capitalists. “Once we reach a certain scale, we can evaluate listing. Right now, the focus is on building the business and strengthening the foundation,” notes Tripuraneni.
This is the second innings and the group is leveraging its brand with a new business model to tap the large opportunity. “We want to build a strong organisation with the right people and systems. If we get that right, this business can scale nationally again, and this time, beyond what we achieved earlier,” notes Tripuraneni optimistically. Spartek Group is scripting a turnaround story and perhaps second time is the charm.