Ceramic tiles sector eyes faster growth due to increasing demand

Our Bureau Mumbai | Updated on August 28, 2019 Published on August 28, 2019

Unorganised players lose cost advantage due to ban on coal usage in Gujarat, finds CRISIL study

After registering a muted growth in the last four years, revenue of the ceramic tiles industry is set to grow faster at eight per cent compound annual growth rate over the current and next fiscals due to higher domestic and overseas demand.

A study by CRISIL found that large companies that use natural gas to bake the tiles will benefit the most as the National Green Tribunal in March banned the use of coal-based gasifiers in Gujarat. The state houses a majority of India’s tile manufacturers.

The move has eroded the cost advantage of unorganised tiles makers, who offered tiles at least 30 per cent discount to branded product prices.

Demand up

Domestic consumption of ceramic tiles grew at a mere 3 per cent CAGR in last four fiscals, as the demand was impacted by a slowdown in the real estate sector following demonetisation, implementation of the Goods and Services Tax and the Real Estate Regulation Act.

Domestic consumption is expected grow by 2-3 per cent to 5-6 per cent CAGR, riding on the government’s push to affordable housing, smart city projects and creation of new industrial corridors.

Exports, which account for a fourth of production, could grow at an even faster 15 per cent due to reduced cost competitiveness of China, which is struggling with higher cost of coal, levy of environment tax and anti-dumping duties imposed by the European Union countries, Brazil, Taiwan, Korea, Vietnam and Chile.

Consequently, utilisation rates of ceramic tile makers should improve over the medium-term, after being weighed down by overcapacity.

Correcting the imbalance

Subodh Rai, Senior Director, CRISIL Ratings, said that the faster growth in demand would correct the demand-supply imbalance in the sector, and improve capacity utilisation to 75 per cent from 65 per cent over the next two fiscals. Large organised players, with revenues over ₹500 crore, account for half of the industry’s market share.

Rahul Guha, Director, CRISIL Ratings, said that the use of expensive natural gas and rising compliance cost for e-way bills will slash profit of unorganised players by 4 per cent, unless they raise selling prices by 10 per cent.

Published on August 28, 2019

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.