Though lockdown has been partially lifted, normalcy has not yet returned in tiles industry in Morbi. According to industry sources, 300 out of 900 manufacturing units in Morbi have started their production since May 2020. Industry also fears that nearly 100 units may completely shut down their operations due to cash flow issues.
Lockdown took place towards the end of March, that is, from 25th onwards, but it had huge impact on the quarterly (and also annual) sales of tile manufacturers as most of the sales are usually skewed towards the end of the quarter/year. Market leader, Kajaria saw its quarterly sales falling by 19% and the Somany Ceramics suffered as much as Rs 190 crore during the quarter.
However, the industry in general is not much affected by the recent GCC decision to impose additional duty on Indian tiles imported by them. “Duties imposed by GCC countries may not impact exporters significantly, as new export opportunities have started opening from countries like USA,” said an industry source.
However, the present state of uncertainty is having its impact on new projects investment as many companies are postponing their plans till the certainty returns to the market and demand situation stabilises. For example, Kajaria Ceramics will not be undertaking any capacity expansion plan as it is not facing any issues with outsourcing. It would think of capacity expansion only when it sees significant increase in demand from Northern and Eastern India. It can increase its capacity in a span of 8-9 months given the land availability in North India.
Natural gas price is presently ruling at Rs 35/scm for some units in Morbi as against Rs 32/scm a year ago. However, the industry expects the gas price to soften going forward.