1. 🧐 At a Glance
Shankara Building Products Ltd is a leading omnichannel retailer in South and West India that sells everything from TMT bars to toilet bowls. After a dramatic restructuring and store revamp, it’s going full retail – but are margins still stuck in construction rubble? With 92 stores, a 3% OPM, and steady profit growth, the question is simple: is ₹1,003 justified… or just jazzy?
2. 🛠️ What Do They Even Do?
- Think of Shankara as a Desi Home Depot… but with margin levels of a government ration shop 😅
- Business split:
- Retail (52% in FY25) – B2C hardware, tiles, plumbing, steel, roofing materials.
- Channel & Enterprise Sales – B2B projects, real estate, infra contractors.
- 92 stores + 32 fulfillment centers across 10 states: Mostly South India & pockets of Gujarat-Maharashtra.
- Launched premium “Fotia” brand and experience centers. IKEA meets Kudlu Gate.
3. 📊 Financials – Profits, Margins, ROE
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 2,038 | 2,418 | 4,030 | 4,828 | 5,697 |
| Net Profit (₹ Cr) | 14 | 34 | 63 | 81 | 77 |
| OPM % | 4% | 4% | 3% | 3% | 3% |
| ROE % | 6% | 15% | 13% | 10% | 9% |
| EPS (₹) | 6.06 | 15.02 | 27.59 | 33.46 | 31.92 |
- Sales have nearly tripled since FY21
- But… margins are still in rehab 🧠 – stuck at 3%
- ROE is a lukewarm 9.3% — not bad, but not sexy
4. 💸 Valuation – Cheap, Meh, or Crack?
- CMP: ₹1,003
- Market Cap: ₹2,431 Cr
- P/E: ~31x
- Book Value: ₹358 → P/B = 2.8x
- ROCE: 17% (decent but driven by volume)
- OPM: 3% (construction-level tight)
🧮 Fair Value Estimate (FY26E EPS @ ₹42–45, Fair P/E 18–22x)
FV Range: ₹750 – ₹990
Anything above ₹1,000 requires retail dreams to play out perfectly… and TMT bars to become branded FMCG.
5. 🔥 What’s Cooking?
- 📦 Transition from steel-led wholesale to consumer-led omni-retail
- 🛍️ Replacing low-margin stores with Fotia premium stores
- 🏗️ Demerger plan in 2023: spun off marketplace + manufacturing biz separately. Now, retail core = focus.
- 🧠 Management aiming to make it a “Home Improvement Play” in the long term.
6. 🧾 Balance Sheet – How Much Debt, How Many Dreams?
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Borrowings (₹ Cr) | 169 | 133 | 88 | 87 | 104 |
| Reserves (₹ Cr) | 499 | 533 | 620 | 773 | 844 |
| Total Assets (₹ Cr) | 926 | 1,041 | 1,292 | 1,586 | 1,802 |
- Debt levels controlled, no leverage issues 🧘♂️
- Assets expanding ~₹250 Cr/year – mostly store upgrades, infra, and working capital
7. 💵 Cash Flow – Sab Number Game Hai
| Year | CFO (₹ Cr) | CFI (₹ Cr) | CFF (₹ Cr) | Net Flow |
|---|---|---|---|---|
| FY23 | ₹92 | -₹45 | -₹43 | ₹3 |
| FY24 | ₹10 | -₹27 | ₹40 | ₹22 |
| FY25 | ₹64 | -₹26 | -₹42 | -₹5 |
- Positive from ops ✅
- Consistently reinvesting in retail infra
- Some FY24–25 financing driven by warrant conversion & capex
8. 📏 Ratios – Sexy or Stressy?
| Ratio | FY25 |
|---|---|
| ROCE | 16.8% |
| ROE | 9.3% |
| OPM | 3% |
| Working Cap | 40 days |
| Inventory | 39 days |
| Debtor Days | 51 days |
| Interest Cover | ~2.5x |
Verdict: 🧂 Retail DNA, Infra margins. Not stressy, but not spicy either.
9. 💰 P&L Breakdown – Show Me the Money
| Year | Sales (₹ Cr) | EBIT (₹ Cr) | PAT (₹ Cr) | EPS (₹) |
|---|---|---|---|---|
| FY22 | 2,418 | 61 | 34 | 15.02 |
| FY23 | 4,030 | 93 | 63 | 27.59 |
| FY24 | 4,828 | 119 | 81 | 33.46 |
| FY25 | 5,697 | 134 | 77 | 31.92 |
- FY23–25 looks like “plateauing EPS despite growing sales”
- Operating leverage not kicking in yet – mostly due to low-margin mix
10. 🥊 Peer Comparison – Builders vs Branders
| Company | P/E | OPM % | ROE % | FY25 Sales (₹ Cr) | FV Estimate |
|---|---|---|---|---|---|
| Trent | 135x | 16.5% | 30.1% | ₹17,134 | 🔥 Astronomical |
| Vedant Fashions | 52x | 46.3% | 23.0% | ₹1,386 | Premium Retail |
| Go Fashion | 52x | 31.6% | 14.3% | ₹848 | Niche, expensive |
| Shankara | 31x | 3.0% | 9.3% | ₹5,697 | 🚧 In Construction |
👉 Clearly not a “Trent” yet. More like a Big Bazaar reincarnated with a better supply chain.
11. 🧩 Misc – Shareholding & Structure
- Promoter Holding: Down to 49.25% (from 52%) – due to warrant conversion dilution
- FIIs: Peaked at 11.76% in Dec’23 → down to 5.69% in Mar’25
- Public Holding: Up to 40% now → rising retail interest?
- Number of shareholders doubled in 3 years → 👀
12. 🧠 EduInvesting Verdict™
🎯 Shankara is what happens when a steel trader gets an MBA and starts branding cement bags like Nivea. It’s not a bad business. It’s just trapped between two worlds:
- Retail investor dreams vs contractor reality
- Premium stores vs working capital grind
- Trent aspirations vs tile margins
But the pivot is real – store modernization, Fotia branding, and B2C push are legit. If OPM inches to even 5–6%, this story could unlock.
🎯 Fair Value Range: ₹750 – ₹990
(Assuming FY26E EPS of ₹42–45 and sustainable 18–22x P/E)
Above ₹1,000? Market is already pricing in a home improvement fairytale with steel roots. 👷♂️
✍️ Written by Prashant | 📅 July 5, 2025
Tags: Shankara Building Products, Retail, Steel, Construction, Home Improvement, Smallcap, Demerger, Fotia, EduInvesting, Nifty500, Value Stocks, Trent, IPO Turnarounds
