Indian ceramic tiles industry thrives domestically but struggles in export markets: ICRA report

New Delhi [India], October 23: The Indian ceramic tiles industry is currently facing a pivotal moment, with a recent report from ICRA highlighting diverging trends in domestic and export markets.

The domestic sector remains robust, contributing about 64 percent of the industry's revenue, while exports are experiencing a downturn. This decline follows inquiries launched by the US Department of Commerce in May 2024 regarding ceramic tile imports from India, raising concerns about the future of exports in a competitive global environment.

The potential for exports is further jeopardized by a proposed anti-dumping duty (ADD) by the United States, which could hinder export growth in the upcoming fiscal year.

ICRA reports that the introduction of anti-dumping duties, estimated to range from 328 percent to 489 percent, could significantly impact India's ceramic tile export revenue. This follows an existing decline caused by rising freight costs associated with the ongoing Red Sea crisis and sluggish residential markets in the US and Europe. In FY2024, the USA represented 9 percent of India's ceramic tile exports.

Chintan Lakhani, Vice President and Sector Head - Corporate Ratings at ICRA, stated, "ICRA anticipates exports to decrease by approximately 8-10 percent in FY2025, mainly due to the likely implementation of ADD in the USA and continued weakness in Europe's residential markets."

He also noted, "The decline could be even more pronounced if the Red Sea crisis continues. Exports to Europe and the Americas have already been impacted in recent quarters by rising logistics costs, which have diminished competitiveness. While freight rates have slightly decreased, overall logistics costs remain higher compared to last year, continuing to hinder export demand."

Despite these export hurdles, the domestic market remains strong, buoyed by favorable trends in the real estate sector.

ICRA forecasts an overall revenue growth of 7-9 percent for the ceramic tiles industry in FY2025, primarily driven by domestic demand. However, exports are expected to continue dragging down the sector's performance in the short term.

Capital expenditures in the industry are projected to decline from 8-9 percent of operating income in FY2023 and FY2024 to below 7 percent in FY2025.

Operating margins are expected to remain stable at around 11-12 percent in FY2025. Nevertheless, these margins face pressure from intensifying competition and an oversupply in the domestic market, which may restrict pricing power and reduce profitability.