Recently, Kajaria Ceramics surprised the market by taking a lead in hiking the prices of its products. Many in the market were expecting price hike in the beginning of next year but Kajaria effected 1.5% price hike in the ceramics segment and another 1.5% in the vitrified segment. While some of the other prominent players too followed the market leader in hiking the price, leading dealers say even Morbi manufacturers are emboldened by Kajaria’s price hike and are now contemplating similar action. In the first half, industry has hardly grown by 4-5%.
According to some tile manufacturers, price hike had become necessary due to bare-minimum margins amid pressure on demand and no room left for higher raw material costs being absorbed, ultimately being passed on and supporting margins. The recent spurt in oil prices (up 50% over last one year) and a lower Indian rupee (down 15% from the beginning of the year vs USD) have impacted the margins of the industry. It may be recalled here that in last one year prices of vitrified tiles have fallen by as much as 30%. While tides have turned in last one month with oil price falling below $60 a barrel and rupee appreciating, they still remain a key risk and any unfavourable movement might lead to further compression of margins.
Kajaria Ceramics is India’s largest tile manufacturer, with 11% market share in a highly fragmented industry. It has 5-6% brand premium over its closest rivals.