Idle blocks

It is almost noon when we alight the rickety local bus at a deserted derelict stop to conduct an industrial survey of this world-famous marble town. A number of dust-laden concrete and cement roads snake into the horizon. Trucks loaded with gigantic chunks of stone whiz past us. Even before we make our way into the town, we are hounded by a bunch of enthusiastic brokers who mistake us for marble traders. Welcome to Kishangarh. This small town in Rajasthan is located at about 20 km from Ajmer. Touted to be Asia’s largest marble industry, this town boasts of 5,000 marble traders, 338 units and 545 gang-saw machines cutting different grades of marble and granite day and night.  

Later in the day, we land up at Kishangarh Marble Association. SR Sharma, the organisation’s chief functional officer, explains how daily several tonnes of raw stone are picked up from the quarries and the polished marble is ferried out to various parts of the country. “During the monsoon, trucks run the risk of damage due to overloading. In fact, good roads are the only saving grace as those lead to easy movement of the trucks, avoiding huge traffic in the city,” adds Sharma. 

At Kishangarh’s marble industry, almost 4-5 lakh tonnes of raw stone are imported, which constitute around 50-60% of the country’s total raw stone imports. Started by a few entrepreneurs on a small scale in 1980, today, situated in a small town with a population of about 150,000, the lucrative marble trade employs around 30,000 labourers.  

The town achieved this growth riding on the back of the relaxation in the import policy. “In FY10, the government hiked the import quota and the restriction to import from certain countries were lifted. Hence, we could import a variety of raw marble and granite from countries such as Turkey, Vietnam, Italy, China and Egypt. That way we could offer a lot of product options to the companies, especially high-value marble and granite,” points out Sharma. While this has provided the industry with a desired scale, improved logistics have also helped reduce issues related with the industry. 

 Rakesh Chandak, owner of Chandak Marbles, who deals entirely in the imported high-value marble segment, says, “Unlike in the past, when the imported raw material was dispatched via trucks, things have now improved. There is much more efficiency now as the dedicated rail depot, owned and maintained by Adani Ports, has made it quite easy to import raw materials from ports across Gujarat and Maharashtra. This has not only saved time and money but also reduced the risk of damage that would occur in case of road transport.”

Typically, a large stone weighing around 3-4 tonnes is placed on a cutting machine, to be axed by 50-100 blades into 50-100 plates or slabs, over 12-15 hours. While a small unit may have one or two cutting machines, a large one could employ 20-30 machines. Even a firm with a smaller unit of four to five machines could produce a turnover of ₹25-30 crore annually. Usually, huge procurement is called for when dealing in different materials across geographies. This enables most firms to create a market for themselves. “There are about 10,000 varieties of marble starting from ₹20 per sq ft that are cut and sold here. There are newer varieties such as the Vietnam white marble which is very delicate and meant for wealthy people,” explains Chandak. 

Precious resource

Marble is not just a luxury that the privileged classes pay money for; the rural people in Rajasthan are just as enthusiastic about using marble and granite to beautify their homes. Over the years, the use of marble is becoming more of a status symbol. Which is why perhaps the fortunes of the marble vendors is closely linked with that of the construction industry. 

While a construction boom and higher income levels helped the marble industry grow in the last decade, the slowdown of the last few years has shaken the industry. Major firms at this industrial cluster are complaining of a fall in demand. 

Ashish Gupta of AG Marble & Granites, says, “Across major markets such as Mumbai, Delhi and other metros, the builders are sitting on a huge inventory due to a lull in the housing market. Which is why we are now witnessing a faltering demand. As and when the housing sector demand  picks up, it might translate into a subsequent rise in the demand for the marble and granite industry. As of now, there are no such signs. We are hoping things will improve over the next 8-12 months.” 

“Over the last three years, most units have been struggling to maintain their sales figures. Sales have been either flat or declining in some categories due to low demand. However, thanks to the import of high-value raw granite and marble, the slowdown has been mitigated,” chips in Sharma. 

The current state of the marble industry reveals the sorry state of affairs of India’s real-estate sector. Institutional sales account for almost 70-80% of the total turnover of the cluster. While the marble industry is struggling with low demand from developers, a prolonged slowdown might also hit the firms quite badly. Most of them have managed to survive the slump over the last three years or so. “Today, we are no longer working for profits. We are happy with just the recovery of our costs,” says Anup Mundra, who runs Sunflower Marbles, which specialises in Vietnam white marble. 

 On the edge

Mahaveer Kothari of Dhartidhan Stonex, too, complains about the current situation, “It is unbearable. We used to work in double shifts but today most of the units are operating a single shift due to low demand. On the other side, expenses have not dropped significantly. If this situation persists, some people will soon be out of business and might have to resort to harsh measures such as reducing manpower, salary cuts, etc.”

In this situation, only units with deep pockets and a good client base are surviving. Smaller units operating with borrowed funds are finding it difficult. Particularly, new units have very high operating and fixed costs because of the high price of land and machinery. 

“While there is hope that things will improve, many firms have found novel ways to deal with the slowdown. For instance, some firms have shifted their focus to segments where there is high demand like imported granite and value-added or specialised products,” says Sharma. Chandak adds that they have been able to maintain their sales since they have shifted focus to other segments such as granite and high-value marble. 

While demand for specialised and high-value products is still high in the upper-income group, the mass market has witnessed a drop in value and volume, hitting most of the firms in the Kishangarh marble industry. To make matters worse, cost pressure is also hurting profitability. “On an average, in comparison with last year, labour and raw material costs have increased by about 20%. This has added to the woes of the industry as most of the units are now operating at very low operating margin,” says Kothari. “The labour cost has also gone up from ₹200 per tonne, in the previous year to ₹250 per tonne,” adds Sharma. 

That apart, companies have started selling products at lower prices so that they are able to operate at a higher utilisation level. “Companies are selling products at very low prices so that they can retain market share and operate at optimum level to recover fixed and other costs. Sometimes, they resort to price cuts for proper utilisation of their capacities,” says Mundra. 

Companies looking to operate at minimum capacity utilisation are also sitting on a high inventory because of the slowdown. They have increased their production rate to recover expenses. Also, people are selling goods on easy credit terms to clear the inventory, resulting in an increase in the entire receivable cycle. “Today, customers are not releasing funds that easily. Even after extension of the credit terms, to maintain good relations and sales, customers are delaying payments and suppliers are not forcing them to pay right away,” says Pradeep Chandak, owner of Krishna Marble. 

In addition to the slowdown and cost pressure, the Kishangarh marble industry faces issues such as open general license, which the government might consider due to the demand from other states. In case that materialises, the firms across different parts of the country could import raw material without any restrictions and can start their own marble cutting business, which has no real entry barriers. This would increase competition because of the number of new players trying to secure a market share in the initial years at a low margin or even at a loss. “We are opposing the open general license in this industry because this would lead to malpractices in the industry and invite non-serious players,” says Sharma. 

At present, companies have to fulfill certain predefined criteria such as minimum capital, established plant and machinery to import raw materials. Meanwhile, after a three-year long slowdown, the Kishangarh cluster is hoping for achche din to return in around 8-12 months, stemming from the expectations of suitable government policies by the new government. Apart from routine capex infusion and few more machines for granite in the high-demand areas, none of the firms are adding new machines. “As of now, everyone is waiting and watching the situation before committing any new capital,” says Sharma. 

But the industry veterans believe this too shall pass and soon there will be more demand for the industry in the coming years. “This is not new. We have seen gloomy days in the past as well. Around FY05, we were facing a similar situation. And even before that, in the early 1990s, we faced such a crisis. As soon as the demand improved, people went on an expansion spree. In the end, as the Indian economy pushes up demand, the fate of the marble industry is also bound to improve,” says Kothari. Only time will tell if the polished raw stone quarried from depths of the earth will give Kishangarh a reason to smile in the future.