The acquisition of 80% stake by Royal Ceramics (RCL) in Lanka Ceramic PLC last week would enable Royal Ceramics to enjoy a monopoly status in the country’s tile manufacturing industry where imported tiles being the only competition with RCL having around 25% market share at present, a report from a brokerage firm stated last week. RCL acquired Lanka Ceramic PLC, the holding company of walltile segment market leader Lanka Walltile (LWL) and also the ultimate holding company of RCL’s direct competitor Lanka Tiles (TILE) for a total consideration of Rs. 2.9bn
“Having the domestic industry being protected with CESS and other duties on imports, threat from imported substitutes is minimal for RCL. Furthermore, this would almost double the floor tile manufacturing capacity to 27,000 sqm per day and adds the only wall tile manufacturing plant in the country (capacity 7,500 sqm/day) under the control of RCL. Synergic benefits and scale would definitely help RCL to further expand its market share and improve the margins yielding higher ROEs”, TKS Securities said in an Event Update issued following the announcement of change of hands.
The report noted that with this acquisition, wooden flooring and tile allied product manufacturing company Swisstek (Ceylon) and Horana Plantations would also get consolidated into the business.