A visitor looks at samples of interior wall tiles. (Photographer: Kiyoshi Ota/Bloomberg)

Why Tilemakers’ Shares Have Tumbled

Increased compliance under the goods and services tax regime was expected to hurt smaller tilemakers and aid larger listed peers in the mostly unorganised market. That hasn’t panned out as foreseen. A protracted slowdown in real estate has only made things worse.

Shares of India’s three largest makers of ceramic tiles have declined between 40 percent and 60 percent this year as realisations and margins declined.

Why Tilemakers’ Shares Have Tumbled

Unorganised dealers contributed 60 percent of the sales before the GST, a survey of 20 ceramic tile distributors in 10 states by BloombergQuint had revealed. Smaller peers could undercut bigger peers as they paid no or less tax. The new nationwide sales tax was expected to bring them under the tax net. That hasn’t worked, at least for now.

Amid high competition, the big three companies couldn’t increase prices even as the cost of natural gas—used for drying and heating the tiles—rose. That put pressure on their margins.

Major Concerns

Fall in Realisations

Realisations per square metre fell 10 percent on an average even as volumes grew in double digits.

That’s because of a decline in realisation for the value-added glazed vitrified tiles segment due to excess capacity in Morbi, slowdown in real estate and a weak surveillance under the GST regime, according to a report by broking firm Antique.

Margin Pressure

An increase in competition from unorganised players, rising gas price and the inability to pass on higher input costs to customers impacted the operating margin of ceramic tilemakers. The Ebitda margin of all the three companies in the quarter ended June contracted on a sequential basis.

Key Positives

Sustained Demand Momentum

The government’s incentives such as the Pradhan Mantri Awaaz Yojana for affordable housing and the toilet construction drive under the Swach Bharat Abhiyan is expected to drive the demand, according to brokerage Elara Capital. The demand is estimated to increase 13 percent in the financial year through March 2020, it said in a report.


The recent correction in share prices of these companies has brought valuations at multi-year lows. Kajaria Ceramics, India’s largest tilemaker, trades at a one-year forward price-to-earnings multiple of 26, the lowest since the third quarter of 2014-15.