After recording a muted growth in the last four years, the revenue of the ceramic tiles industry is set to grow faster at an 8 percent CAGR over the current and next fiscals due to higher domestic and offshore demand, CRISIL in its recent report, found that large companies using natural gas to bake the tiles will benefit the most as the National Green Tribunal has banned use of coal-based gasifiers in Gujarat where the state houses a majority of India's tile manufacturers. The move, however, has eroded the cost advantage of unorganized tiles makers, who offered tiles at least 30 percent discount. Domestic consumption of ceramic tiles grew at a mere 3 percent CAGR in the last four fiscals, as the demand was impacted by a slowdown in the real estate sector. Domestic consumption is now expected grow to 5-6 percent CAGR, riding on the government's push for affordable housing, smart cities, and creation of new industrial corridors. Exports, which account for a fourth of the production, could grow at a faster 15 percent 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, utilization rates of ceramic tile makers would improve over the medium-term, after being weighed down by over capacity. Senior Director, CRISIL Ratings, Subodh Rai, said that the faster growth in demand would correct the demand-supply mismatch in the sector, and improve capacity utilization to 75 percent from the current 65 percent, over the next two fiscals. Large organized players with revenues over ₹500 crore, account for half of the industry's market share. Director, CRISIL Ratings, Rahul Guha, said that the use of expensive natural gas and rising compliance cost for e-way bills will slash profit of unorganized players by 4 percent, unless they raise selling prices by 10 percent.
📅Published on:
30 August 2019
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