Kajaria Ceramics Share: Can Its 19% Margins Outshine Smaller Tile Players After the Fuel Shock?

Synopsis: As fuel costs and supply disruptions shake India’s tile industry, Kajaria Ceramics appears better positioned than smaller Morbi-based players. With 19.19% EBITDA margins, controlled price hikes, diversified fuel sourcing, and full-capacity operations, the company could turn an industry-wide cost shock into a competitive advantage while sustaining growth across tiles, bathware, and adhesives.

India’s ceramic tile industry is facing one of its biggest cost disruptions in recent years after fuel shortages and higher gas prices hit manufacturers in Morbi, the country’s largest tile hub. While many smaller players are grappling with rising costs, shutdowns, and working capital stress, Kajaria Ceramics has delivered 11% volume growth, ₹1,373 crore in quarterly revenue, and 19.19% EBITDA margins in Q4 FY26. Can India’s tile leader use this disruption to widen its competitive edge? 

With a market cap of Rs 16,950 crore, the shares of Kajaria Ceramics Ltd are trading at Rs 1,064 and are trading at a PE of 32.7 compared to their industry’s PE of 35.2. The shares have given a return of more than 20% in the last 5 years.

A Quarter That Changed the Narrative

The first nine months of FY26 saw Kajaria Ceramics engaged primarily with its internal restructure. The company’s management dedicated their first nine months to working on sales unification, channel stock rectification, manpower synchronisation, and logistics improvement. 

Hence, during these nine months, there was limited growth for the company. However, towards the end of the fiscal year, results began reflecting the hard work that had been put into the company over the previous nine months. Kajaria Ceramics reported volume growth of 11% in Q4. 

This was because demand had gained momentum since January, with demand volumes in January and February growing 8% to 9%, despite the industry shock in Morbi. Consolidated revenues increased by 12% on a YoY basis to ₹1,373 crore, indicating that volumes as well as realisations were beginning to improve.

The Margin Story That Caught Investors’ Attention

The most significant positive aspect of the quarter was its profitability. The company achieved an EBITDA margin of 19.19% during Q4 FY26 against 10.01% in the corresponding quarter of the previous year. The profit before tax stood at ₹228 crore, which was significantly higher than ₹85 crore registered in the previous year. 

Additionally, the profit after tax jumped to ₹136 crore, which was a marked increase from ₹43 crore. According to management, the reason for such a massive surge in performance was the optimisation of costs, improved realisation, production efficiency, sales productivity, and improved supply chain execution. Notably, despite rising fuel costs in the entire industry, the management was confident that the company would continue achieving margins between 18% and 19%.

What Exactly Triggered the Fuel Shock?

This disruption occurred following the restrictions placed by the government on the supply of propane to industries in March. As per the management, propane would have been supplied mainly for domestic LPG and fertilisers, leaving ceramic producers in Morbi with no option but to switch to natural gas. 

The financial effects were quite alarming. As per the management, fuel costs for Morbi factories increased from approximately ₹47-48 to ₹84.50, making it nearly twice as costly within a span of several weeks. The challenge worsened because advance commitments to the gas suppliers were required by customers. This proved to be a big problem for the smaller manufacturers with little profit margin. The management at Kajaria referred to the Morbi crisis as one of “cost, labour, and cash flow”.

Why Smaller Morbi Players Are Under Pressure

Morbi’s business model has been characterised by low prices and high volumes. The management said that while a typical 4×2 tile used to be sold at Rs 20 per sq. foot, it will have to be sold at Rs 27-28 per sq. foot owing to the rise in fuel prices, thus representing a price hike of about 35%-40%, solely due to the rise in fuel prices. 

This is a dramatic change for an industry known for aggressive discounting. When the earnings call took place, management had estimated that of around 500-600 plants in Morbi, only 70-90 plants were running, and they expect only about 150-160 plants to be sustained. On top of all this, the economics of export were adversely affected as freight charges had increased to $4,000 against the earlier $300 in order to ship tiles to the UAE.

Kajaria’s Pricing Power Looks Very Different

In contrast, for Kajaria, the current fuel crisis is different from those experienced by Morbi players in the sense that Kajaria was entering the shock with the pricing baton. The management revealed that their firm has already adjusted prices by 12% to 13% in the northern part of India, while in the western regions, where Morbi plays a role, prices have been adjusted by 16% to 17%. 

According to the management, the adjustment “has more or less covered the gas increase with some margin”. It is important to note that the difference here is significant because while smaller firms need about 35% to 40% increases just to remain alive, Kajaria can handle price inflation at lower rates due to its high realisation base.

Fuel Diversification Gives Kajaria an Edge

The cost structure of Kajaria also seems relatively stronger. The average cost of gas during Q4 was ₹55.54 per SCM in the north, ₹49.60 in the south, and ₹46.57 in the west. These have increased to ₹62.5 per SCM in North, ₹81 per SCM in South, and ₹79 per SCM in West during April. 

But Kajaria enjoys a very crucial factor that many smaller players don’t enjoy: diversified fuel sources. According to management, Kajaria uses biofuel at its North facilities for 30% of its energy requirements, which comes at a cost equivalent to ₹20 per SCM. Since biofuel is used in the spray dryers, Kajaria partially protects itself against fluctuations in natural gas prices. It does not mean that there will be no effect of inflation.

Capacity, Inventory and Supply Chain Are Working in Kajaria’s Favor

However, while Morbi-based plants were undergoing shutdowns, Kajaria’s internal operations continued to remain robust. According to management, production was down 7% for Q4, as their Morbi-based plants were shut down in March. 

However, all plants have now started their operations again from 16 April and are currently operating at full capacity. Inventories were reduced by around 1.5 million square metres in March, although management did point out that Kajaria still has adequate stocks and productions to meet market needs. 

In the previous financial year, Kajaria sold 118 million square meters of products, produced around 86–87 million square meters, and outsourced roughly 32 million square meters. For the fiscal year 27, management expects outsourcing to increase to 40 million square metres or above, and management is confident of being able to source them from whatever vendors restart operations first.

Beyond Margins, the Broader Business Is Also Strengthening

This story of margins is not an isolated one. Kajaria’s tile operations have registered growth of 11% to ₹1,212 crore in Q4. Bathware witnessed growth of 6% to ₹117 crore, and adhesives witnessed double-digit growth from ₹21 crore to ₹44 crore. 

The company has improved its working capital position from 65 days to 51 days, owing to a reduction in inventories and strictness in the collection of receivables. In addition to all these, management mentioned that new talent has been hired for HR, marketing, digital, procurement, and Kerovit businesses. 

On the other hand, management has mentioned that companies like Kajaria, Somany, and Johnson, having multiple plants, stand to benefit from disruption in Morbi till FY ’27.

Conclusion 

Fuel shock is creating one of the biggest structural disruptions in the Indian tile industry in recent years. Morbi-based small-scale companies face challenges such as fuel inflation of nearly 80%, price escalation of 35%-40%, uncertainty regarding the restart of operations, disruption in exports, and working capital issues. 

In comparison, Kajaria comes into this phase having EBITDA margins of 19.19%, operating at full capacity, diversified fuel supplies, improved working capital, better pricing power, and diversification to other growth areas besides tiles. 

While the management hasn’t directly claimed an increase in market share, it keeps emphasising that the “companies operating with factories in multiple locations will have a big advantage” and that “their volumes will go up” in FY27. If the current industry structure continues, then maintaining a margin level of 18%-19% will not only sustain profitability but will also give Kajaria a bigger competitive edge over other unorganised competitors in India’s tile sector.

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