Kajaria Ceramics Limited, founded in 1985, is India’s largest manufacturer of ceramic and vitrified tiles with a robust presence across domestic and international markets. The company operates 8 manufacturing plants with a total capacity exceeding 80 million square meters annually. Its product portfolio spans ceramic wall tiles, floor tiles, glazed vitrified tiles, polished vitrified tiles, bathware under the Kerovit brand, and adhesives. With a strong dealer network of over 1,800 partners, Kajaria is well-positioned as a leader in the building materials sector.
1. Financial Performance – Q1 FY26
- Revenue: ₹1,104 crore (down 1% YoY). Decline was due to muted tiles volume growth and closure of plywood division.
- Margins: EBITDA margin improved to 16.7% vs. 15% in Q1 FY25, indicating cost efficiency and better operating leverage despite weak demand.
- Profitability: Higher margins supported earnings growth even though topline was flat.
2. Market Demand Trends
- Demand for tiles remained soft in domestic markets, affected by subdued real estate activity and weak consumer footfalls at dealer showrooms.
- Exports: After falling from ₹20,000 crore in FY24 to ₹16,000 crore in FY25 (due to high freight costs and geopolitical issues), Q1 FY26 exports showed signs of recovery at ₹4,500 crore. Full-year exports are expected in the range of ₹18,000–20,000 crore, which should also support domestic volumes indirectly.
- Government spending on infrastructure, muted in FY25 due to elections, is expected to pick up in FY26, improving domestic demand.
3. Strategic Shift – Tile Division Integration
- Earlier, Kajaria had separate marketing teams for Ceramic, PVT (Polished Vitrified Tiles), and GVT (Glazed Vitrified Tiles).
- Now, the company is integrating all tile divisions into one unified structure to cut costs and drive efficiency.
- Benefits:
- Single sales representative to dealers instead of three.
- Unified distribution showcasing entire product portfolio.
- Cost savings from reduced duplication in sales, marketing, and experience centers.
- Faster decision-making and agility in responding to market shifts.
- Initial feedback from dealers has been positive, particularly in smaller markets. In large cities, company may deploy 2 reps per dealer if required.
4. Cost Optimization Measures
- Promoters have forgone salary for FY26 (~₹17 crore annual savings in FY25 base). Salary will only be resumed once EBITDA run-rate crosses ₹1,000 crore annually (₹250 crore quarterly).
- Staff rationalization: Some manpower reduction and no increments.
- Other savings: Reduced travel and advertising spend, renegotiation of raw material & outsourcing costs, better packaging optimization.
- Ad strategy: Shifted focus towards Tier-2 & Tier-3 cities, reducing mass media spends but improving targeted visibility.
5. Business Segment Updates
- Tiles: Remains the core business, focus on market share growth and cost efficiency.
- Adhesives: Revenue target of ₹120 crore in FY26 (vs. ₹75 crore in FY25). EBITDA margin ~17%. Two plants operational/underway (Gailpur, Rajasthan operational; Erode, Tamil Nadu expected in 3–4 months).
- Bathware (Kerovit brand): FY25 revenue ~₹400 crore; FY26 target ~₹480 crore. The division, which was loss-making earlier, is expected to turn profitable in FY26 with scale and cost optimization.
- Plywood Division: Closed. Losses absorbed in FY25; residual staff costs in Q1 FY26 (~₹2.5 crore) will phase out by Q2.
6. Regional Sales Mix
- North: 35%
- South: 30%
- West: 15%
- East: 20%
- Growth opportunities are stronger in Tier-2 and Tier-3 cities, where showroom sizes have doubled (from 3,000–5,000 sq. ft. earlier to 5,000–10,000 sq. ft. now).
7. Capital Allocation
- Cash reserves: ~₹500 crore.
- Capex guidance: only ₹100–150 crore in FY26 (office building + maintenance). No new capacity addition planned.
- Dividend payout may increase; Board to decide, as management prefers not to hold excess cash.
- No major acquisitions planned; focus is on consolidation and internal efficiency.
8. Other Key Updates
- Nepal JV: 50:50 venture; 0.61 mn sqm sales in Q1 at 60–70% utilization, but profitability not significant. No plans to increase stake beyond 50%.
- Government projects: Share of revenue from govt. orders rose from 4% to 6%, with scope to move closer to 10% in FY26.
- Competitive intensity: Infra.Market seen as an aggregator, not a brand competitor. Real competitors remain branded tile players like Simpolo and Varmora.
- Keronite brand (economy tiles): Discontinued after weak market response. Kajaria will focus only on its main brand going forward.
Question and Answer Session Highlights
Q: What is the outlook for domestic and export markets in FY26?
- Domestic demand is muted but should recover with govt. spending and real estate pickup.
- Exports expected to rise to ₹18,000–20,000 crore vs. ₹16,000 crore in FY25, supporting overall industry recovery.
Q: What margin guidance can be expected?
- Cost-cutting will continue (staff optimization, advertising focus, raw material renegotiations).
- If gas prices and realizations remain stable, margins should improve further.
- Management avoids giving concrete guidance but expects quarterly improvement.
Q: How does unification of sales teams impact dealers?
- Dealers prefer dealing with a single salesperson instead of three.
- In larger markets, 2 reps may be deployed, but overall structure cuts costs and improves efficiency.
- Positive initial dealer feedback.
Q: Why did promoters forgo salary, and when will it resume?
- Decision taken to show commitment to cost discipline.
- Salary (~₹17 crore annually) will only be resumed once quarterly EBITDA crosses ₹250 crore.
Q: What is the growth outlook for Adhesives and Bathware?
- Adhesives: Target ₹120 crore in FY26 with new plants enhancing reach.
- Bathware: Target ₹480 crore revenue in FY26, expected to turn profitable as sales scale up.
Q: How is Kajaria optimizing advertisements?
- Reduced high-cost campaigns; focus shifted to Tier-2/3 cities, targeting higher market share in growing geographies.
Q: How is regional demand split?
- North (35%), South (30%), East (20%), West (15%). Growth traction stronger in Tier-2 & 3.
Q: What is Kajaria’s approach to competitors like Infra.Market?
- Seen as an aggregator, not a direct brand competitor.
- Main competition remains branded players in Morbi.
Q: Capex plans for FY26?
- Only ₹100–150 crore (maintenance + office).
- No capacity additions; growth to come from better utilization and outsourcing.
Q: Status of Keronite (economy brand)?
- Discontinued after poor performance. Focus fully on Kajaria brand.