Asian Granito, Kajaria Ceramics: Ceramic tile industry may see up to 2% revenue dip due to West Asia war; other key impacts

The ongoing developments in West Asia have a twin impact on the ₹53,000 crore Indian ceramic tiles industry, the agency said in a statement.

"One, exports to the ME (Middle East) have been impacted by logistical challenges and supply-chain realignment. Notably, exports constitute 40% of the industry's revenue, with the ME accounting for 15% of ceramic exports," it said.

Export revenue may decline 6-7% due to the closure of the Strait of Hormuz, which has disrupted deliveries and increased freight and insurance costs, the ratings agency noted.

This has not only halted exports to ME but also raised the cost of exports to other regions, it added.

Other key details

CRISIL Ratings further said that the supply of liquefied natural gas (LNG) and propane, the key raw materials that make up 35% of the cost of goods sold (COGS), has been curtailed, forcing most ceramic plants to either shut down production or operate at significantly reduced levels.

"With production nearly grinding to a halt in March, domestic consumption growth is likely to slow down. The domestic market is now expected to grow just 4-5% this fiscal, slower than the earlier projection of 7-8%," it pointed out.

What the CRISIL Ratings director said

Commenting on the development, CRISIL Ratings Director Nitin Kansal said, "The ceramic industry will face significant challenges due to the current ME conflict. Specifically, the availability of gas supplies, low-to-no demand from the ME region, and increased logistics costs for other overseas markets will directly impact production schedules."

If the situation persists for a further two to three weeks, he said, "It may lead to longer shutdowns and substantial losses for companies, ultimately causing a 1-2% revenue decline this fiscal."

"If the situation prolongs, we may see a 7-8% monthly decline in revenue," Kansal said.

Other factors

Alongside revenue loss due to plant shutdowns and underutilisation, CRISIL Ratings said companies will face the burden of fixed costs (15-20% of the COGS) and higher logistics costs (3-5% of COGS) due to an increase in freight costs by 45-50% and insurance costs by 25-30% for shipments.

"The above factors are expected to drag down operating profitability by 130-150 basis points (bps) to a five-year low of 9.3-9.5% this fiscal and, if the situation persists in the first quarter of the next fiscal, decline to 8.2-8.5% in fiscal 2027," it added.

CRISIL Ratings said the report analysed inputs of 40 manufacturers rated by it, accounting for about a fourth of the industry's revenue.

What companies said recently

On March 12, Somany Ceramics, in its filing to stock exchanges, said that it has received a communication from GAIL (India), stating that due to the ongoing conflict in the Middle East and its impact on global energy markets and as per the revised supply regulations, gas supplies to industrial consumers shall be maintained at 80% of the past six months’ average gas consumption, and any overdrawal shall be invoiced as per the applicable contractual terms and conditions, with effect from March 12, 2026 (06:00 hours).

In view of the above, the plant of the company located at Kassar, Bahadurgarh, Haryana ("plant") shall receive a restricted gas supply. "This may have a partial impact on the company's production activities at the plant. The company is actively evaluating the situation and taking necessary measures to minimise the impact. Considering the company’s existing inventory levels, supplies are continuing in the normal course of business," it added.

On March 6, the company and its subsidiaries received a communication from Gujarat Gas and Sabarmati Gas regarding a restriction/limitation in the supply of gas due to a force majeure situation arising from the ongoing conflict in the Middle East and its consequent impact on global energy markets.

"In view of the above, certain manufacturing units of the company may face limitations on DCQ (Daily Contracted Quantity) and restrictions on the usage of non-MGO gas until further notice.

Accordingly, this development may have a temporary and partial impact on the company's production activities," the company had said.

How stocks fared on Wednesday, March 18

Shares of tiles companies ended with impressive gains on Wednesday, amid a rebound in the market following a heavy sell-off last week. Somany Ceramics ended 7% higher at ₹388.40 apiece on the NSE, while Asian Granito India stock ended at ₹60.54, up 0.78% on the NSE. Kajaria Ceramics shares ended 4.2% higher at ₹955.45 apiece on the NSE.