Nearly 2,000 kms away from the Strait of Hormuz, the Indian tile industry is feeling the heat as gas supply curbs stall production across facilities in Gujarat’s tile hub- Morbi. Key Industry players like NITCO, Asian Granito say they have decided to introduce a 5% fuel surcharge to tackle high fuel cost if the crisis continues.
Crisil Ratings highlights the Rs 53,000-crore Indian ceramic tiles industry is expected to lead to a 1–2% decline in revenue in FY26 and 6–7% decline in export revenue.
The supply of liquefied natural gas (LNG) and propane which make up 35% of the cost of goods sold (COGS), has been curtailed, forcing most ceramic plants to either shut down production or operate at significantly reduced levels. Here is how Industry players are dealing with the crisis.
Asian Granito to impose 5% fuel surcharge amid gas curbs
Kamlesh Patel MD and CEO at Asian Granito said that the gas supply curb may cause some temporary operational disruptions for the company and the company will they have decided to absorb most of the higher fuel costs until March 31 while implementing a 5% fuel surcharge.
“The management has decided to absorb the substantial portion of the increased fuel cost until March 31, and during the interim period only a partial fuel surcharge will be implemented.”
“Accordingly, a 5% fuel surcharge will be applicable effective from March 18 and fuel price situation will be reviewed on an ongoing basis,” Patel said.
Tiles companies to face margin pressure, says NITCO
Gas is a critical input in tiles industry for kiln operations. NITCO said, “The situation is leading to increased input costs and tighter supply conditions across the sector, which may gradually impact production cycles if it persists.”
“In the near term, this may translate into some pressure on margins and timelines, but the industry is expected to adapt as the situation evolves.” Subrata Basu, Vice President, Marketing, NITCO said.
Kerakoll says: Not dependent on natural gas only
Another key tile adhesive player, Kerakoll pointed out that they are looking at other alternate fuel options to tide over the curbs. “At Kerakoll, our manufacturing processes are not significantly dependent on natural gas, and we are not experiencing any disruption in production. We remain closely aligned with market dynamics and continue to monitor the situation, while maintaining a stable supply to our customers.” Said Ahzam Javed, Regional Director APAC, Kerakoll.
Ceramic exports may fall 6–7%: Crisil
Crisil expects ceramic sectors’ export revenue to decline by 6–7% due to the closure of the Strait of Hormuz, which has disrupted deliveries and increased freight and insurance costs.
Crisil noted that exports account for nearly 40% of the industry’s revenue, with the Middle East contributing about 15% of ceramic exports.
The ongoing war has not only halted exports to Middle East region but also raised the cost of exports to other regions.
Ceramic makers may see 7–8% monthly revenue decline: CRISIL
“With production nearly grinding to a halt in March, domestic consumption growth is likely to slow down. The domestic market is now expected to grow just 4-5% this fiscal, slower than the earlier projection of 7-8%,” it pointed out.
“If the situation prolongs, we may see a 7-8% monthly decline in revenue,” Crisil said.
Alongside revenue loss due to plant shutdowns and underutilisation, Crisil Ratings said companies will face the burden of fixed costs (15-20% of the COGS) and higher logistics costs (3-5% of COGS) due to an increase in freight cost by 45-50% and insurance cost by 25-30% for shipments.
“The above factors are expected to drag down operating profitability by 130-150 basis points (bps) to a five-year low of 9.3-9.5% this fiscal and, if the situation persists in the first quarter of the next fiscal, decline to 8.2-8.5% in fiscal 2027,” it added.
Conclusion
While Gujarat’s Morbi local player is facing disruption and have shut down large organised players like NITCO, Asian Granito may be in a better position.
Nuvama also noted that large players like Kajaria Ceramics and Somany Ceramics are better positioned because they use multiple fuel sources such as LPG, LNG, propane, biofuels and coal. Their plants in North and South India also help them continue operations while many Morbi units shut down.