IGI Logo

Rating agency ICRA highlighted that the domestic market, which accounts for around 64% of the Indian ceramic tiles industry’s revenues, continues to witness resilient real estate demand, auguring well for the sector. However, the export market has started showing signs of a slowdown. The demand slowdown from the USA is visible in the current fiscal, post the commencement of the USA Department of Commerce’s investigations, in May 2024, on ceramic tile imports from India. Further, a sharp increase in freight cost amid the Red Sea crisis as well as slow moving residential markets in the USA and Europe has further derailed the export momentum from Q4 FY2024.

According to the report, India’s ceramic tiles export revenue is likely to decline in FY2025, primarily on account of the anticipated imposition of significant anti-dumping duties (ADD, 328-489%) by the US, resulting in an annual contraction in tile exports in FY25. The US had accounted for 9% of Indian tiles exports in FY24. Demand from the domestic market remains resilient in the backdrop of a favourable outlook for the real estate sector. Consequently, the overall revenue growth of the sector is estimated at 7-9% for FY25, primarily supported by domestic demand, whereas exports are likely to remain a drag in the near term. The share of domestic revenues is relatively higher for larger entities compared to small/mid-sized ones, as large entities enjoy pricing flexibility owing to their strong market position.

ICRA stated that several large tile players have a relatively lean cash conversion cycle, low leverage, and comfortable credit metrics. However, small and mid-size players have limited pricing flexibility and relatively high exposure to exports; hence the headwinds in the export market could have a bearing on their cash conversion cycle and coverage metrics. Moreover, a slowdown in exports will result in a supply overhang in the domestic market, which will curtail pricing flexibility and constrain margins.