The ceramic industry can be broadly classified under ceramic tiles, sanitary ware and crockery. The overall industry is estimated to be around Rs 27,000 crore as at the end of FY17. Ceramic tiles accounts for 85% of the industry, while sanitary ware and crockery constitute the balance 15%.
India, with production figure of 955 million square meter, is the second largest producer of ceramic tiles in the world just next to China. However, India accounts for just 7% of world’s ceramic production while China, world’s largest producer accounts for 45% of world’s ceramic tiles production. Further, India’s ceramic tiles per capita consumption is one of the lowest, lower than Brazil and Indonesia who rank lower than India in terms of production.
However, one of the major highlights of Indian ceramics industry is that it has been posting double digit growth for the last ten years and it is the only country to achieve this among the top ten producers of ceramics in the world. For example, Brazil has posted negative growth in the last few years (which factor has helped India to overtake her to clinch the second spot). In fact, the tiles industry in India grew at compounded double digit growth for most part of the current century due to rising population, urbanization, affordability, increasing replacement to traditional flooring materials amongst others. Along with the growth, industry also saw a transformation of ceramic tiles from being typically hygiene products into adornment and aesthetic solutions for every household.
Last few years have also seen reduced imports, especially from China, thanks mainly to anti-dumping duties levied by Indian government on imported tiles. Imports have come down from a peak level of 30.0mn sqm in FY12 to 8.5mn sqm in FY17 due to anti-dumping duty imposed by India on China products (USD 1.87 per sqm on glazed, unglazed porcelain & vitrified tiles with polished or unpolished finish and less than 3% water absorption), a depreciating INR and an increase in cost competiveness of the domestic industry.
However,2017-18 was a particularly challenging year for the tile industry as its progress was thwarted by significant road blocks. While the real estate sector continued to being a quagmire due to a sluggish environment (impacting institutional off take of tiles), the newly launched GST regime impacted the MSME sector, resulting in a drop in tile demand. In addition, the industry also faced pressures on its profitability margin owing to a surge in gas prices,which could not be passed on to the consumers. Further, GVT segment faced intense competition due to significant capacity addition by Morbi-based players. This resulted in a drop in prices of this niche product, impacting businessprofitability.
The sanitaryware industry is a much more organized industry as compared to tiles industry. Indian sanitaryware industry is expected to reach Rs 5,000 crore (INR 50 billion) by 2020. Higher growth is expected not only because more consumers are buying these products but there is a higher demand for premium products due to rising disposable incomes and exposure to western designs and aesthetics. Of course, there are some constraints this segment currently faces like low demand in the replacement market, restriction of the market to urban areas, and smaller bathroom sizes in Indian homes.
The Indian tiles industry has immense potential to scale up, led by increasing urbanisation and increased use of tiles for flooring. Further launch of specialised tiles based on area of application at competitive pricing along with real estate revival would lead to demand growth going forward. Also, with GST rate reduced to 18%, tiles and sanitaryware have become more affordable for the aspiring Indian. Further, the implementation of the e-way bill promises to make GST more effective. This will createa level-playing field between the informal segment and the branded players and shall assist organised tile players to capture a larger share of the total domestic market over the medium term.