Revenue seen rising 4–5% this year despite export headwinds; credit profiles to remain stable
After a challenging year marked by export pressures, India’s ceramic tile industry is poised for a revenue rebound, driven primarily by sustained domestic demand linked to the residential real estate upcycle. According to an analysis by Crisil Ratings, the sector is expected to register 4–5% revenue growth in the current fiscal and 5–6% growth in the next, reversing a 2% decline recorded last year.
Domestic market emerges as growth engine
Domestic demand, which contributes nearly two-thirds of industry revenue, continues to strengthen on the back of steady housing project launches and improving completion timelines. The real estate cycle remains favourable, providing consistent demand for tiles, particularly in mid-income and premium housing segments.
“Demand for ceramic tiles typically materialises three to four years after real estate project launches, coinciding with completion phases,” said Nitin Kansal, Director, Crisil Ratings. “The sharp increase in residential project supply during fiscals 2021 and 2022 will translate into healthy tile demand over the current and next fiscal.”
As a result, domestic revenue is expected to grow 6–7% this fiscal, largely driven by volume growth.
Premiumisation lifts realisations
A notable trend supporting revenue growth is the rising preference for premium tiles, including glazed vitrified tiles and polished glazed vitrified tiles. Over the past five years, the share of premium tiles in domestic revenue has increased by 700–800 basis points, reaching around 60%.
This shift towards higher-value products is helping manufacturers improve realisations, partially offsetting cost pressures.
Exports remain under pressure
While domestic demand is robust, exports are expected to decline for the second consecutive year, though at a much slower pace. Export revenue is projected to fall 2% this fiscal, compared to a sharp 15% contraction last year.
Weak demand from key export markets such as the Middle East, Europe, and Mexico, coupled with elevated logistics costs due to geopolitical disruptions, continues to weigh on shipments. Additionally, tariffs imposed by the United States—a market that, along with Mexico, accounts for about 15% of India’s ceramic tile exports—are expected to cap export growth, despite an 8% rise in exports during the first half of the fiscal.
Market diversification offers some relief
To mitigate export risks, Indian tile manufacturers are increasingly diversifying into newer markets such as Vietnam, Israel, Russia, and Saudi Arabia. The industry’s ability to produce customised tiles in smaller batches is aiding this diversification strategy and helping soften the impact of tariff-related disruptions.
Margins under mild pressure, balance sheets steady
Operating margins are expected to moderate slightly, declining by 30–40 basis points to around 10.3–10.4%, due to rising input costs. Kaolin, which accounts for 25–30% of total production costs, has seen price pressures driven by lower mining output and higher logistics expenses.
However, minimal capital expenditure requirements and improving cash flows are expected to keep balance sheets healthy.
“With revenue growth returning, cash flows will strengthen,” said Nilesh Agarwal, Associate Director, Crisil Ratings. “Asset utilisation levels of 64–66% should allow companies to comfortably fund working capital needs while maintaining low leverage below one time and interest coverage above four times.”
Outlook remains stable
Overall, Crisil expects the credit profiles of rated ceramic tile manufacturers to remain stable, supported by steady domestic demand, limited capex, and prudent financial management. That said, ongoing geopolitical risks and volatility in raw material costs remain key monitorables for the sector.
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