Chennai: The €1.7-billion turnover bathroom fittings major Roca of Spain has bought 50-per cent stake in the Parryware Glamourooms Private Limited for €50 million (around Rs275 crore). The latter, part of the city's $1.6-billion Murugappa group manufactures the Parryware brand of bathroom products.

The Rs250 crore revenue Parryware Glamourooms was a division of EID Parry (India) Limited. In 2005 the Murugappa group decided to hive it off into a separate company, started looking out for foreign partners, and finally signed up with the Roca.

The Spanish group would pay the consideration to EID Parry. "We will also put in more money if needed. We will do that after getting the sanction from India's Foreign Investment Promotion Board (FIPB) for the present investment," said Roca's CEO Jose Miguel Roca. A name change to reflect the new equity holding pattern will be considered once FIPB approval is obtained.

According to him, Roca would also consider sourcing some products for its global market from the Indian venture.

"The enterprise valuation was mutually agreed between the two parties to the agreement," said vice chairman, EID Parry A Vellayan. According to him, the group is changing with the times. In the '80s the group bought out the stakes of its collaborators in its companies as it felt that they did not add any value. "Now we partner with others in products where they could add value."

The Parryware Glamourooms commands a market share of 42 per cent in the domestic bathroom ceramic product market and has a turnover of around Rs250 crore. For FY 2005 the Parryware range of products fetched Rs195 crore and a profit of Rs23 crore on a capital employed Rs97.32 crore. The company has three functioning plants and one would go on stream shortly. Given these, with technology acting as an entry barrier, and the fact that the Roca brand is aimed at the market's super-premium category, couldn't the group have got a higher price?

Answered Vellayan, "The final price is nearly twice the turnover which is good enough. Secondly, Roca will bring in the process technology that would help the company increase its yield. Even while the joint venture negotiations were going on, Roca gave its expertise in setting-up our new plant at Perundurai." The Rs60-crore new plant will have a capacity to make 10 lakh pieces per year.

Adds director K E Ranganathan, "The enterprise valuation is arrived at taking into account factors like future profitability, growth, the earnings before income and taxes and the cultural fit of the new investor. We feel the price is right."

According to him, Roca's technical know-how would increase the yield rate by reducing the production loss at the moulding and glazing stages.

The total domestic market for bathroom solutions is estimated at 22 million pieces valued at around Rs750 crore. Of the share of super-premium product segment is estimated to be in the region of Rs50 crore and growing at the rate of 25 per cent.

Presently Parryware Glamourooms imports some super-premium products and markets them in India under the Parryware brand. It is in this segment, that Roca's brand will be positioned with a range of products.

Globally Roca has a good position in the institutional segments like hotels, hospitals and others.

Tappping the taps market
Speaking about the company's plans, Ranganathan says, "We will start marketing our taps in other parts of the country. Launched last year in the southern market, Parryware taps has acquired a 5-per cent market share, essentially from the institutional sales segment." This year, the company will be launching six more models.

In the bathroom solutions product segment - vitreous sanitaryware, seat covers, plastic cisterns, bath tubs, kitchen sinks, electronic flushing - Ranganathan says the target is to increase production to four million pieces this fiscal and hike the company's market share by two per cent to 44 per cent.

``The company will be launching a dual flush out system which would economise on the water usage," says Ranganathan.

"We will now focus more on branding and promoting the product in B class towns in India." Last fiscal the company earned Rs50 crore from the institutional segment and the target for FY 2007 is Rs75 crore. The company is also planning to increase its exports. Currently 6 per cent of the turnover is accounted by exports to Sri Lanka, Middle East, South Africa and others.