# 1. Financial Performance ## A. Key Figures * **EBITDA Margin:** **20.0%** Q3 FY'26 (+442 bps YoY, -74 bps QoQ) * **PBT:** **₹165 Cr** Q3 FY'26 (+49% YoY) * **PAT:** **₹88 Cr** Q3 FY'26 (+13% YoY) * **Working Capital Days:** **64 days** (Dec '25) (+8 days QoQ) ## B. Revenue Growth * **Advertising Spend Recovery:** Ad spend expected to rise **significantly in Q4** following lower outlays in Q3, with overall annual spend down due to event cancellation and efficiency measures. * **Higher Ad Value Despite Lower Spend:** Management expects advertising to deliver **greater value than last year** despite reduced spending, driven by optimized allocation and vendor negotiations. ## C. Profit Margins * **Resilient Gross Margins:** Gross margin held at **17%+** despite a sharp decline in selling prices, supported by aggressive **cost optimization** across operations. * **Sustained Margin Outlook:** Management expects gross margins to remain **around 17–18%**, underpinned by ongoing efficiency initiatives. * **Adjusted Margin View:** When including power and fuel, gross margin was **36–37%** in recent quarters, indicating strong underlying operational profitability. ## D. Cash Flow Trends * **Working Capital Pressure:** Increase in working capital days to **64** reflects higher receivables and lower liabilities, signaling temporary cash flow drag. * **Advertising Efficiency:** Q3 ad spend of **₹24 Cr** was slightly below prior year, contributing to **year-on-year savings** from canceled events and discontinued low-return campaigns. --- # 2. Product & Segment Performance ## A. Key Figures * **Tiles Revenue:** **₹1,030 Cr** Q3 FY'26 (≈ flat) · **₹1,040 Cr** Q3 FY'25 * **Bathware Revenue:** **₹103 Cr** Q3 FY'26 (+9%) · **₹95 Cr** Q3 FY'25 * **Adhesives Revenue:** **₹35 Cr** Q3 FY'26 · **₹20 Cr** Q3 FY'25 ## B. Tiles Segment * **Stable Performance:** Tiles revenue held steady year-on-year, reflecting **mature market positioning** and resilient demand in a competitive environment. ## C. Bathware Segment * **Export-Led Growth:** Bathware expansion supported by strong export momentum, with full-year FY'26 shipments projected at **₹16,000 Cr**, down from ₹20,000 Cr in FY'24. * **Near-Term Execution:** 9-month export realization at **₹12,000 Cr**, indicating on-track delivery toward annual export targets. ## D. Adhesives Segment * **High-Growth Trajectory:** Adhesives segment delivered **robust double-digit revenue growth**, signaling strong uptake and successful market penetration. --- # 3. Volume & Pricing Trends ## A. Key Figures * **Tiles Realization:** **₹365/sqm** (in-house, current) from ₹401/sqm (Q3 FY23) (≈–9%) * **Export Value:** **₹16,000 Cr** in FY25 (–20%) · **₹4,000 Cr** in Q3 ## B. Realization Pressure * **Pricing Headwinds:** Realization pressure across divisions driven by inventory liquidation and high SKU complexity, now being streamlined to improve focus. * **Margin Resilience:** Despite **240–250 bps decline in sales realization**, gross margin held above 17%, supported by **cost rationalization in raw materials**. * **Recovery Path:** Tiles realization expected to stabilize and gradually improve, with a strategic shift toward **value-added products** and stronger engagement with architects/designers. ## C. Price Hike Implementation * **Faucet Price Increase:** Implemented **8–12% price hike effective January 19** in response to rising brass costs, in line with sector trends. * **Sanitaryware Hike Pending:** Price increase planned for **March 1**, magnitude under review due to smaller cost pressures; strategy remains fluid. * **Pricing Simplification:** Unified, performance-based pricing and incentive structure rolled out for **ceramic, GVT, and PVT** segments from January 1, enhancing sales team clarity and dealer communication. ## D. Export Pricing Impact * **Export Decline Drivers:** Sharp drop in tile export value attributed to **soaring freight rates from Red Sea disruptions** and broader geopolitical volatility. * **Recovery Potential:** Q3 export rebound to **₹4,000 Cr** level; upside seen from a prospective --- # 4. Channel & Distribution ## A. Key Figures * **Dealer Churn Completion:** **70%–75%** of cross-selling-related dealer churn completed, remainder expected this quarter * **Sales Mix (Dec Qtr):** **70% retail** · **30% institutional** (govt + private builders) * **Bathware Distribution:** **Dual model** in place (distributors + retailers), region-dependent ## B. Dealer Network Restructuring * **Network Unification Underway:** Ongoing restructuring to create a lighter, more agile dealer network with **digital systems** replacing manual processes and enhanced cross-selling. * **Cross-Selling Momentum:** Majority of dealer churn tied to cross-selling integration is complete, setting foundation for stronger execution in FY26. * **Regional Execution Focus:** Policy rollouts managed regionally due to pricing and scheme variations; centralized meetings not feasible across zones. ## C. Cross-Selling Progress * **Kajaria 0 Strategy in Motion:** Cross-selling enabled across product lines via multi-vertical dealer engagement, supported by a new **pan-India team targeting architects and designers**. ## D. Distribution Model Mix * **Institutional Channel Expansion:** Government sector identified as key growth vector, complementing private builder projects within the 30% institutional mix. * **Retail Presence Building:** Active efforts underway to onboard dealers and improve product visibility, though progress remains gradual. --- # 5. Manufacturing & Capacity ## A. Key Figures * Ceramic Line Capacity: 9 million sqm converted at Gailpur plant * Total Tiles Capacity: 82.5 million sqm (own + JV), operating at almost full capacity * JV Production: 6 million sqm per quarter from four plants (three in Morbi, one in South Asia) ## B. Production Capacity * **Strategic SKU Rationalization:** PAN-India reduction in SKUs and liquidation of slow-moving inventory to boost plant efficiency and optimize stock levels. * **Capacity Utilization & Competitive Positioning:** Operations running at near full capacity, with total capacity maintained at a level **significantly higher than most peers**, despite competitive expansion. * **Fuel Mix Diversification:** Plants use region-specific fuel blends—biomass and gas in the North, coal and fuel in Morbi—with flexibility to switch to **propane or gas**, supporting cost and supply resilience. ## C. JV to Own Manufacturing * **Full Ownership Pathway:** Approved acquisition of additional **10% stake** in one JV, marking first step toward converting it into a wholly owned subsidiary. * **Operational Control Precedes Ownership:** Kajaria already manages all JV operations with **over 85% ownership in Morbi JVs** and **~60% in South Asia**, and partners are now passive shareholders. * **Integration Rationale:** Full consolidation aims to eliminate related-party complexities and **unlock tax efficiencies**, including loss utilization across entities. * **Transition Plan:** Company intends to shift all **6 crore sqm per quarter** of JV production to owned facilities over time, aligning with long-term vertical integration goals. ## D. Plant Efficiency Gains * **Short-Term Pain for Long-Term Gain:** SKU rationalization caused temporary operational disruptions, but has led to measurable improvements in plant efficiency and inventory turnover. --- # 6. Risks & Operational Challenges ## A. Key Figures * **Gas Price:** ₹37/unit avg in Q3 (North/South: ₹38; West: ₹37) · Expected +₹1 in Q4 * **Gas Cost Exposure:** **4%–5%** of power/fuel use · Potential impact: **₹50–80 Lakh** next quarter ## B. Dealer Transition Delays * **Operational Reset Underway:** Company in a correction phase post-fraud, enhancing processes and governance, with most systems functioning strongly except affected subsidiary. * **Dealer Adaptation Lag:** Transition to unified pricing and structure ongoing; lingering confusion persists as some dealers still contact former managers, with full alignment expected in **1–2 months**. * **Export-Linked Factory Disruptions:** Morbi-based export units face temporary shutdowns during export downturns due to limited domestic absorption of surplus. ## C. Gas Price Volatility * **Near-Term Price Stability:** Q3 gas costs averaged ₹37/unit; modest ₹1 increase expected in Q4, but no significant rise anticipated beyond, with current volatility having **no impact on present quarter costs**. * **Limited Financial Exposure:** Gas represents minor share of fuel mix; any incremental cost impact is minimal and well-contained. ## D. Inventory Destocking * **Volume Pressure from Dealer Adjustments:** Q3 volume growth constrained by dealer destocking, driven by strategic shift requiring dual GVT and ceramic inventory, necessitating display and setup changes. * **Inventory Divergence:** Company inventory rose marginally, while dealer stocks declined amid restructuring efforts. * **Market Share Resilience:** No concern over share loss; ample third-party capacity in Morbi available for outsourcing to meet demand spikes. * **Structural Industry Shift:** GST formalized ~80% of sector, curbing under-pricing; rising home standards accelerate shift to branded, organized players. --- # 7. Guidance & Outlook ## A. Key Figures * **Organized Market Share:** Expected to reach **50%** in 2–3 years (from 40%) * **Gross Margin Range:** **17% to 18%** (stable outlook) ## B. Growth Expectations * **Positive Momentum Ahead:** Growth trajectory turning favorable from Q4, with January showing strong early signals and expectations for robust value growth next year. * **Volume Recovery in Key Segments:** Tiles and sanitaryware both expected to deliver volume growth, with **sanitaryware on track for double-digit expansion**. * **Systemic Levers Driving Growth:** Growth to be fueled by execution on sales process improvements, dealer long-tail management, and proven strategies in identified white spaces. * **Significant Share Gain Potential:** Despite market leadership, current low market share provides substantial runway; organized sector expected to reach parity with unorganized segment within 2–3 years. * **Export Outlook Cautiously Optimistic:** Exports seen stabilizing and growing post-clarity on US tariffs from ongoing trade negotiations. ## C. Margin Stabilization * **Margins to Stabilize, Not Expand:** Gross margins expected to settle in the 17–18% range, with no further structural uplift anticipated from unification initiatives. * **Reinvestment Over Retention:** Any incremental margin gains will be directed toward advertising and market share capture, not bottom-line retention. ## D. Capex & Dividend Plans * **Minimal Capex, Rising Cash Balance:** No major capital expenditures planned over the next 1–2 years, leading to potential cash balance accumulation. * **Dividend Increase Possible:** Board may consider higher dividends due to cash build-up, though no formal decision has been made.