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Tile manufacturing companies are gearing up for another challenging year with demand already falling sharply in the last two years.
Almost all tile manufacturing companies have already suspended operations and the situation would turn even worse with the extension of lockdown till May 3.
As it is, demand for tiles in the domestic market was reeling under pressure over the last two to three fiscals amid prolonged slowdown in its key consuming sectors. In 2018, the overall domestic demand declined for the first time in a last decade.
Suprio Banerjee, Head (Mid-Corporate ratings), ICRA, said the Covid-19 outbreak is expected to further exacerbate weakness in domestic demand, following significant negative impact on the real estate sector, given the expected slowdown in project execution and new launches.
Replacement demand will also be muted due to weak consumer sentiments.
With tile being a discretionary item, demand recovery is expected to be gradual and domestic demand in this quarter will be severely impacted, he said.
Besides being the largest producer and consumer of the world, China also is the largest exporter. India ranked fourth after Spain and Italy, while Iran is fifth largest exporter.
Tiles export from India in the March quarter saw an uptick due to temporary lockdown in China and other major exporting countries.
India’s exports stood close to 20 per cent of its total production.
The top five export markets for India are Saudi Arabia, UAE, Mexico, Iraq and Oman with Gulf Cooperation Council countries accounting for 40-45 per cent of India’s total exports.
Given the relatively lower impact of coronavirus on India’s key export destinations, demand recovery in export markets will emerge faster compared to the domestic market.
Nevertheless, ICRA believes that due to the recent lockdown in India, coupled with weak global demand, exports are likely to face headwinds in the June quarter.
Sanket Thakkar, Assistant Vice President, ICRA, said small and mid-sized tile players with limited liquidity cushion will find notable squeeze in their liquidity levels.
Though the three-month moratorium on term-loan instalments and interest payments announced by the RBI may provide a temporary relief, the same is unlikely to kick-start any meaningful recovery for the industry in terms of demand, he added.
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