Ladies and gentlemen, good day and welcome to the Kajaria Ceramics Limited Q3 FY2025 Conference Call, hosted by Equirus Securities. As a reminder, all participant lines will be in the listen-only mode, and there'll be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touch-tone phone. I now hand the conference over to Mr. Pranav Kshatriya. Thank you, and over to you.
Yeah, thanks, Mike. Good afternoon, everyone. On behalf of Equirus Securities, I welcome you to the call for Q3 2025 post-result management call of Kajaria Ceramics. From the management side, we have Mr. Ashok Kajaria, CMD; Mr. Chetan Kajaria, JMD; Mr. Rishi Kajaria, JMD; Mr. Sanjeev Agarwal, CFO; and Mr. Nehal Shah, DVP, Strategy and IR. I'll now hand over the call to Ashok sir for his opening remarks, post which we'll have the Q&A session. Over to you, Ashok.
Thank you, Pranav. Good evening, everyone. It gives me great pleasure to welcome you to the Q3 FY2025 earnings conference call of Kajaria Ceramics Limited. Joining me on this conference call are my sons, Chetan and Rishi, our CFO, Mr. Sanjeev Agarwal, and Nehal Shah, DVP, Strategy and Investor Relations. Contrary to our expectations, the sustained weakness in the domestic market and sluggishness in exports has led to another subdued quarter for the tile industry. Nevertheless, our tile volumes in Q3 FY2025 grew by 6.7% year to year to 28.90 million square meters. We, however, remain optimistic on the demand outlook for the tile industry in the near to medium term. Our consolidated revenue for the quarter grew to INR 1,164 crores, indicating a 1% year to year increase compared to the corresponding period last year.
Our EBITDA margins remain soft at 12.78% for the quarter due to lower realization and loss in bathroom division, which was largely attributable to new sanitary unit commenced in Morbi. Our Nepal project, which commissioned in September 2024, has seen a gradual ramp-up in production and operated at 70% utilization in Q3 2025. On the export front, India's tile exports experienced a 16% fall in value in the first eight months of the current year, totaling to ₹11,600 crores, which surpassed ₹13,800 crores in the same period last year. This was largely attributed to a significant jump in ocean freight rates due to ongoing Red Sea crisis and uncertainty in the Gulf market. Now, for this quarter, segment-wise financial performance. Tile segment grew by 3%, reaching ₹1,041 crores compared to ₹1,013 crores in Q3 FY2024.
Bathroom segment registered 2.5% growth in revenue, reaching INR 95 crores compared to INR 92 crores in Q3 2024. The plywood revenue decreased to INR 8 crores as compared to INR 34 crores in Q3 2024. Revenue from the adhesives grew to INR 20 crores in Q3 2025 as compared to INR 13 crores in Q3 FY2024. PAT for the quarter decreased by 25% to INR 78 crores in Q3 2025 as compared to INR 104 crores in Q3 2024. As of 31st of December 2024, the working capital days were higher marginally by one day to 59 days compared to 31st of March 2024. With this, I take this opportunity of thanking you for joining us today. Over to you, please.
Sir, can you hear us?
Yeah, yeah. You can go ahead with the Q&A, Q&A.
Okay, fine. Ladies and gentlemen, we'll now begin the question-and-answer session. Participants who wish to ask a question may press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants, the request to kindly wait for a moment while the question queue assembles. We have the first question from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the opportunity. Sir, it's very heartening to see Nepal, you know, hitting 70% utilization. Is it possible to give you what was the Nepal sales in Q3? And is it a fair understanding Nepal sales are not clubbed in this quarter in total sales volume? From next quarter onwards, it will be clubbed as it will become subsidiary. And initial, you know, initial color, how is Nepal margin and what are the ramp-up plans? How is the demand looking? That would be a lot helpful.
The Nepal project, the Nepal sales are not clubbed in this quarter and probably will not be clubbed in the next quarter also. It should take effect only from 1st of April 2019 for 1st of April 2025, number one. Sales figure we don't have right now because we just get the bottom line right now. The plant has operated, as I said, at 70% capacity. Hopefully, as we gradually go up, the capacity will be ramped up to about 80%-85% by end of March/April.
Okay, understood. Sir, how has been the domestic sales in January month? Have you seen any pickup in market? And there were, you know, talks about Morbi taking a shutdown. What is the progress on that and what is your take on that?
See, there is a slight improvement. I think the budget will also give a lot of improvement as we go along. And also, this government RBI policy is expected on 7th of February. I think that should change things slightly on the ground. Morbi shutdown, we have no news because they have not done anything as far as the shutdown is concerned.
Understood. One last question from my side. The bathware, we are hoping, you know, to close this year with 15% growth. Still, this quarter also, bathware growth has been sort of muted, and ply has seen a big degrowth in this quarter. So what is the outlook for both this segment?
Bathware this year we should grow roughly at about 10%, close to 10%. That's what we are looking at. Market ground level has been very tough. And plywood also has slightly slowed down for a simple reason that raw material prices went up very high. So we thought let us see how things are because we were losing money. And as we go along we'll review. The focus as Chairman said is less on sales and more on market recovery because we are not going to compromise. We will not compromise on. We are very concerned about the working capital. So we are focusing on recovery rather than pushing sales. So unless the situation is like this we'll continue to focus on recovery.
Understood. Got it. That is helpful. Thank you.
Okay.
Thank you. We have the next question from the line of Jyoti Gupta from Nirmal Bang. Please go ahead.
Good evening, sir. Thank you for the opportunity. I'm lucky that my numbers are completely in line. The only thing is I know the Morbi has not grown. They've been contemplating, but no such action has been taken so far. However.
Ma'am, ma'am, can you speak a little louder?
Hello, can you hear me? Now am I audible?
Yeah
Yeah. So I'm saying that, my numbers are in line. So obviously, the cost pressures are quite well aligned. My question is, while Morbi had been contemplating to shut down, but no action, no notice of action has been taken, how has been the outlook in Q1 ? How's been the situation so far? Because cement has picked up and, how does it and what about the Q1 of FY2026?
Is there any pickup in demand? And the other thing is, sir, is it that the tiles is, you know, suffering because while the real estate is growing at a robust growth because of ultra-luxury segment where more it's basically the demand is more for Italian marbles and less of tiles because by the, you know, the segment should have grown this second half, but it has not picked up. What could be the possible reasons more from the export, you know, angle?
So, answering your first point, then when Morbi also, a lot of plants have taken a shutdown.
Yeah.
There's no actual demand happening. And yes, you read a lot in the newspapers that a lot of real estate projects are coming. So, you know, retail at the retail level, the dealer level, the sales is still very, very low. Right now, there's no demand. The dealer shops where there's no demand. Projects, yes, projects are still happening, but as in Kajaria, we have 70-75% of our sale is through retail and about 20-25% is through projects. So retail sale is very low. The shops and sell and buying, you know, that that's still low. So that is the reason. But we see going in future, we see hopefully the demand should improve and things should get better.
So, sir, in the project sales, has it been consistent? Like, is the demand decent? Is it only the retail which is struggling, or is it both? Even the project sales is struggling.
The project sale is still okay, but because, as a company, our overall, you know, our, we are very heavily dependent on the retail sale as well, so retail sales also have to pick up in order for us to grow and get our margins in place. If you also see, our realizations have fallen, so another reason is that we have supplied more in projects, and projects, you know, is very, very competitive. Anybody who's giving us such big orders, they will, you know, negotiate the hardest price.
Correct. So which means that this quarter, we again expect the prices might, you know, there be no increase in the prices for tiles. We don't, obviously, because demand is still quite muted. So obviously, pricing will again take a hit this quarter as well.
So yeah, we are not expecting any price increase, but we are hoping that the retail sales improve a little bit more so our mix becomes better and our realizations increase.
Okay, so, on the P&F side, the Power side, sir, any response that you've got because, you know, I mean, I mean, do we see that while the demand would still be muted and prices may not increase, that there'll be some response coming from the cost front? So anything on that front in terms of the, this thing?
Sorry, your voice was not audible. We couldn't understand your question. Can you repeat the question?
My question is, can we expect any decline in cost for this quarter? Cost?
No, in this quarter, there's no decline, but we see some operating leverage happening going forward because the sales will increase and the expenses should not go in proportion to the sale. So some margin would come up.
I meant fuel prices.
Fuel prices. No, fuel prices, there is no change. No change. There was no change in Q3 . There is no change expected in Q4 .
Okay.
But, as you know, that in between, the fuel oil prices have went up, but still the gas prices have been more or less constant.
Okay. Thank you so much, sir. That is it my side.
Thank you. Thank you.
Thank you. We have the next question from the line of Omkar Ghugardare from Shree Investments. Please go ahead.
Yeah. Given how the nine months have performed, you had earlier given a three-year guidance. Do you think you would have to revise that guidance?
We will not try to revise that guidance. We hope that's a year which has run by. You are absolutely correct, but I don't think at this stage we are looking for any revision of the guidance. We'll put our best efforts as things should improve. Everybody says so. So we will look at the scenario where the guidance remains the same, and we do our best to make up in the next two years, next two financial years.
Okay. And what about the EBITDA margin, sir? Do you think there is scope to move upwards from here on, or it would be somewhere in similar range of 13 or 14?
EBITDA margin will definitely improve for a simple reason. We made some losses in the new sanitaryware plant. The moment that plant sets upright, every quarter things will start looking up, and EBITDA margin has to improve. Two things. What my, our CFO said, Mr. Sanjeev, that, with the volume, some improvement will be there. Some operating leverage will be there as sanitaryware plant, new sanitaryware plant improves, which we have already committed. So with this, the EBITDA margin will improve gradually, quarter to quarter.
Okay. And what would be the asset turns for the Nepal Joint Venture?
Nepal Joint Venture now, with this, after this Q4 , once it becomes part of the company, part of the our subsidiary, it becomes a subsidiary. We'll get more details. Right now, we are only getting the bottom line because of the 50/50 thing. As we go along, right now, the plant is operating at 70%. I said that in the next two months, we try to raise it to 80%-85%, so things should start looking better.
Yeah.
Now, last week, we have made profit, but it is so small quantity that it is not a number I can put for the future sale. So we have to wait for another quarter to give a proper guidance and revise as to what the margin would look like, and one thing has happened very positive for Nepal, that interest rate, which used to be 13-14% when we conceived this plant, is now around 8-9%. And we have locked all of our interest liability at 9%. So when we conceived the plant, it was 14%. It's a 5%. It's a big saving, and it is not going to go since we have locked this number. So that is going to a big help to us.
As the plant capacity moves, the margin will improve. It's already making profit, but the offtake is not much. When the offtake is more, then it will result in good numbers.
Okay. The last thing is on the payout. You have gradually increased your payout, in the last one, two years. So with that, do you think it will continue and how that would impact your ROCE?
In our dividend policy, we have clearly stated that it has to be around 40%-50%. Sometimes it can be 40; it can be 50. It will be near to that unless any special circumstances come. We have some big effect or some other thing. Otherwise, there is no change. We don't see any change going forward in near to medium term as far as payout is concerned.
Okay. Thanks.
Thank you. Participants who wish to ask a question may press star and one on your touch-tone telephone. We have the next question from the line of Yogesh Patil from Dolat Capital. Please go ahead.
Thanks for taking my question, sir. Sir, as you mentioned, domestic demand weakness and the challenges in the export market, particularly because of the freight rates. My first question is related to the freight rates for the export. As the Israel and the Palestine situation is at a ceasefire and a truce level, when do you expect that freight rate will come cool down, come down, and will it help you or your exports that much?
So, your question was not absolutely clear. As you said, as the freight rates come down, then the exports will definitely increase from Morbi to the rest of the world.
Correct.
That's your question?
Correct. Correct. Correct.
This is how the Israel problem is being solved. It is temporary right now, but all indications are that it should be positive. It will give us stability in the Gulf market, and exports will pick up again. The freight rates have already started coming down with this development.
If we compare with the last year in the same period, how the flat rates are right now, you can give us a ballpark number?
We can give you certain numbers. Like, let's say for UK, the freight, which was $1,600 before this problem, had gone up to $4,000. It has now come back to $1,750, $1,750. So this much changes only happened.
Okay. So, sir. Thanks. Sir, second question is related to what are the major reasons behind the domestic demand slowdown and how many months it will take to revive this demand or weakness? So, sir, as per your experience, what would be the big trigger for the demand revival in medium to long term?
First trigger will be the rate cut, which everybody is expecting, which should happen on 7th of February with the Reserve Bank of India policy. I think that's a rate cut is a very important thing for housing and for a home buyer because it affects him in many ways. Number one. Number two, with the money being released into the hands of the individuals in the budget.
I think that should give a lot of buying power to the people at lag. I think these are the two things. Lastly, infrastructure investment by government because as we all are aware, in this financial year, a lot of infrastructure investment by government got affected because of elections and because of rains in August and September. So I think things should start looking up as early as Q4 , Q1 next year.
Lastly, we are reading that the ceramic plants are facing challenges of receivable days. It has been consistently increasing. Is it a real issue, sir? Can you throw some light on that side?
Can you repeat the question? Hello. That is their problem. They have to solve. What do I do? See, that's why, you know, every two months, they talk about a shutdown. I think they manage. So it's a scenario which goes on and on. So we can't answer that. But a lot of plants are shut down in Morbi. Yeah. Those.
Okay. Those plants.
Those plants, no, just for information, those plants who are old, they are not able to manage it for a simple reason. Energy-efficient plants have come, and the old plants are shut down.
Okay. And, sir, if you allow me, the last question related to cost of gas.
Go ahead.
Sir, propane prices are much cheaper compared to the PNG industrial prices. So any thoughts on that side? Will you switch to the propane side?
Propane prices are not much cheaper. They are cheaper by about four, five, six %. And in Morbi, you know, whenever the propane prices are cheaper, even our plants convert to propane instead of gas, and it happens with everybody. But the difference is not more than five, six %.
Thanks. Thanks a lot, sir. This was really helpful.
Thank you. We have the next question from the line of Vinamra Hirawat from JM Financial. Please go ahead.
Hi, sir. I'm Audible.
Yes.
So, sir, it seems, you know, difficult to meet our guidance of a second-half recovery, 9-10% volume growth with realizations bottoming out. Kajaria has done better than peers. But do you think this real estate cycle will be significantly different for tile players compared to the last, you know, where you had multiple years of double-digit sales growth? Because, you know, whether it's a weaker consumer, more competition, which have access to large amounts of capital, or for any other reason?
See, as we mentioned earlier, our focus is primarily retail, which is 75%, and project is 25%. Now, project is a very competitive space where major multi-brands are compared for the pricing for the builder. So also, the real estate cycle has a large with the tile usage. It's 24-30 months. So definitely, the outlook is positive, but our primary focus is retail, which gives us better margins versus the projects, basically.
See, you yourself said that in the years when the real estate was not doing well, we have come with better volume growth, better margins, better volume growth. In reality, if you ask, real estate boom or increase in prices have not been beneficial to us for two reasons. One, in first year or first one and a half year, they sold their inventory and the construction started. Now, that impact should start coming in, and multiple factors are positive, which is coming out. One is the budget, which we all saw. Second is expected rate cuts in the Reserve Bank policy. I think this will help us in driving the sales growth, effective Q1 of next year, financial year.
So, sir, I can't expect this real estate cycle, you know, despite higher competition in every price point, to, you know, give us that same double-digit growth for consistent years, going forward.
We'll do our best. I can only assure you that.
Of course. Of course, sir. Of course. Just another question.
Yeah.
Sir, in the last call, you had stated that there's some margin pressure in the faucets segment because of increased cost of metals, which will be passed on. Have we taken any price increases in faucets this quarter? Is it around the corner? And, yeah, just any color on that?
That happened in Q1 , and we passed on that benefit that time itself. After that, the prices of brass have been very constant. They have not moved much. This happened, if you recall, in May, June of 2024, 2025. After that, the brass prices have been very constant.
Okay, sir. Got it. Thank you.
Thank you. We have the next question from the line of Pankaj Tibrewal from ICICI Prudential Asset Management. Please go ahead.
Yeah. Good evening, Ashok ji. One thing which was a little bothering me on the overall results was the employee cost. So when I look at last year versus this year, the sales is absolutely flat. But almost 150 basis points has got increased on the employee cost, now 13% of sales. And when I look at all the companies in India with a gross margin between 35% to 40%, we have one of the highest employee cost. How do you address that? Because if market tends to be sluggish, then this is a sticky cost which can remain with us for a long time, and margins could be under pressure. Just wanted your thoughts on that side.
Pankaj ji, you are absolutely correct, and we have attempted a lot in the past, and I thank you all the time for the guidance which you have given in the past when you were with Kotak. But let me tell you honestly, and it's a very good question. I appreciate. We are working on that front, and I can assure you next year, that means the next financial year, that is 25, 26, it will be at par with 24, 25, 23, 24. Those numbers in terms of percentage will be at par with 23, 24.
Okay, so about 150-200 basis points, which is looking higher right now. Probably.
Correct. That will be corrected. Two, one, we are doing that cost-cutting exercise. And number one, the sales will go up, as I have already said. So with this, percentage-wise, it will be on the level of 23%-24%.
Okay. That's good to hear that, and the second part is on the price realization side. How do you see it moving forward, because your other expenses have also gone up, when I look at? So from a realization perspective, over the next 12 months, even if the demand remains sluggish, is there a way in terms of minimization on product mix which can help us on the pricing side?
Now, two things. You said there's two points. Let me answer you. The point number one, the other expenses are flat this year. They are 23-24, this year is 24-25. The other expenses are flat. There's no increase.
Okay.
Point number two, why the realization has gone down, as said earlier by Rishi.
Mm-hmm.
Well, this year, because of the sluggish demand in retail, we had more focus on projects, which is not normal for Kajaria. Kajaria's percentage, as you recall, is 70% retail through the dealer network, and 30% is through institutional sales. This year, it slightly varies because we had to keep our plants going. And as you are aware, with the data which is there, that all the plants have but overall, the plants have operated 95% plus. And with retail improving, this realization will be back to what it was in Q1 . I would put it like that. It will not go down because the decrease in realization is only 2%. And that will be made up the moment retail picks up.
Okay. So, the margins which have come to a, you know, almost a very low level. You believe that it could move to 14%-15% next year with.
It will. It will. It will, sir. It will.
Okay. Fair enough. And last but not the least, on the distribution side and the PIN codes, that there is a large market still untapped, and we have to move from 350-370 PIN codes to 540. Where is that distribution-led strategy? How is it working? Because in a market like this, you have to make sure that you enter new areas, take away market share. So can you explain?
It is already happening. Sir, it is already happening for the last three, four months. And we are entering new areas. And now we are not talking about 350 to, what the if you recall earlier, I said the Lok Sabha numbers, that 540 to the Lok Sabha. Now we are talking about the Vidhan Sabha numbers, which is 4110 all over India, where we have to penetrate and go to the smallest town where Kajaria can be there. Either of the dealers can be there, but we penetrate to the smallest town.
Okay. Okay.
Just to tell you, currently we have 1,880 dealers across India, and out of which 460 are exclusive Kajaria.
Okay. Okay. And last but not the least, in times of slowdown, always in every sector, we see the leader doing better and taking away market share. Somehow, for us, it's not happening, though I appreciate on the balance sheet, you and Sanjeev ji has done a great job in terms controlling the working capital cycle. But from a growth perspective, if you are having such a hard time, I'm sure the smaller players in the industry must be having a tough time. So we must be taking away market share from a balance sheet perspective, the strength which we have. How should we look at this scenario right now from, from our understanding perspective? Because you are the leader of the sector.
The growth of the industry has been flat because if you look at the numbers, every now and then, they have been talking for the last three months, taking a shutdown. Why they're taking a shutdown? They are thinking of taking a shutdown because they're over capacity. So basically, we have taken a market share. The industry per se has not grown. And as you rightly said, being a leader, we have to take the market share of others, which we are doing. But that number will be speeded as we go along. The moment we penetrate more to the smaller market, that number will be speeded up.
Okay. Fair enough. Okay. All the best, Ashok ji, and the entire team.
Thank you. Thank you.
Thank you. Participants who wish to ask a question may press star and one on your touch-tone telephone. We have the next question from the line of Praveen Sahay from PL Capital. Please go ahead. Mr. Praveen Sahay, can you hear us?
Hello. Yeah. Thank you for the opportunity. Can you give a bifurcation of the ceramic, PVT, GVT for a quarter?
Do you want the split, basically?
Yeah.
So the volume is the ceramics is 42%, PVT is 25%, and GVT is 33%. And revenue by the ceramics is 37%, PVT is 26%, and GVT is 37%.
Okay, and also, if you can give the gas prices, the north, west, and south, and aggregate.
So for the quarter of the north, gas price is INR 38 per SCM. South is also Q3 , the fuel price. Correct. Which includes biofuel, LPG, and coal. South is 38, west is 37, and the average is 37 for the current quarter, Q3 .
The next question is related to the Nepal project. There, the increase of 1%, but there is a CAPEX has increased significantly. Why is it so?
So the CAPEX is INR 31 crore. We are building a godown, which is a warehouse and a shed. First, talking the inventory, that is where the CAPEX is being required right now.
Even the working capital CapEx has increased there quite significantly.
Yes. So some inventory has increased because the plant is running full, and we are selling here 70% of the capacity. So inventory has gone up. That is where the working capital has also increased, which will come down in the coming months as the sales pick up.
Okay. Okay. Also related to the sanitaryware, in the last four quarters, we are seeing your growth is, you know, going down continuously. So even at this size, you are not able to grow in the market because a demand is not there? Or is there a lot of competitive intensity which restricting you for a growth?
As I mentioned, basically, because the retail demand is slow, so in sanitaryware mostly our 90%-95% would be sales in the retail market. And the project market is very, very less because it's still a newer brand in the market, Kerovit. So because the retail sales being slow, that's why we couldn't really grow this year. But hopefully as the demand increases and the things look better, I think next year should be a much better year. Also, we had some issues with our sanitaryware plant, which has now stabilized. And the real impact will start coming from next, every quarter here. You see an improvement in that.
Yeah. Can you give some color to what happened in the sanitaryware plant? Sorry.
So you know the sanitaryware plant, we set up a new plant. It takes about six to 12 months to stabilize production, unlike a tile plant which happens in a month. So, we were stabilizing production. At the same time, now production is quite stabilized, and the demand is also coming up. And we see a much better, from here on, every quarter the sales should be much better.
Okay. Okay. Got it. Last questions, sir, related to the institutional versus the retail mix. Definitely you maintain 70%-75% retail. But over the last couple of quarters, as you had also highlighted that the institutional sales has increasing. So can you give a color in the last nine months and this quarter? How has been the mix change? And also some more color on the institutional, like, direct to the, you know, large builder or, how much is contribution coming from that kind of a businesses?
So we supplied a lot of large builders like L&T Realty, Hiranandani, even in North, a lot of these guys. So, the mix has become a little higher in the last nine months. So that we didn't want to, our factories are running. We didn't want to lose out on our sales. Right? So we are selling to them at a, let's say, a more competitive cost whereas compared to what it used to be earlier. And as the retail sales pick up, that mix will start getting better.
Any number you want to highlight? Like how much is the institutional right now, versus 30% earlier?
So generally the norm is 70-30. But as we said earlier in the earlier question, this quarter the sales, the proportion has been more in favor of the project. So we don't know exact number, but maybe 65-60-40-80% estimate to really we, we didn't know.
Exact numbers you have.
Exact number we have.
Okay. Got it, sir. Thank you and all the best.
Thank you.
Thank you. We have the next question from the line of Rishikesh Chandra from Kotak AMC. Please go ahead.
Hi. Good evening. So, first is thanks for clarification on the employee cost. But is there any non-cash ESOP cost also that is sitting in the employee cost?
No, non-ESOP. Not much. Not much. Not much to be quantified.
No.
Okay.
No, no, no, no. There is nothing. No, sir.
No, there is no non-cash ESOP cost, basically.
In this quarter, you're in ESOP.
Nah.
In this quarter. Nah.
Yeah. I'm talking about this quarter.
In this quarter.
Is it like the admin, other overheads are more? You're looking for that?
Yeah. Sorry?
You're looking for my other expenditure or more?
No, no, no. Only employee cost. Because there is a ESOP cost also generally that sits in there. So just clarifying on that.
Not because of the ESOP cost.
Okay. The second is, a lot of discussion on the call happened on clearly the institutional mix being higher this quarter. But just from the product mix in the sense that we supply to institutional, is there change also in that? And that is getting reflected in realization, or is it higher discounting only?
See, in institutional sales, definitely vitrified size is more preferred. But all the divisions are selling to projects also. And discounting is happening a little bit, as we said earlier, because there is competitive space. So that is the reality of projects. And as the retailers pick up, the project sales will start coming down a little bit.
Okay. And lastly, in terms of the reported segments that we have, clearly the non-tile segment, other segment there, the EBIT losses have come off. It's more to do with plywood sales, reduction in plywood sales, right? Ramp-down of plywood sales, lower sales in plywood. The bathware losses seem to have gone up.
So what is the question?
So in other segments, the non-tiles EBIT segmental margins that we provide in our press release P&L.
Correct.
So in that, then if I look on the EBIT, EBIT losses there, I think that has come off. But clearly, is it more to do with lower Plywood sales? That's how we should read it. The Bathware losses persist, right?
Mainly because of the Bathware losses, there's not much change in plywood. Plywood we sold less, but there is no much change in the losses of plywood.
Okay. Thank you.
Thank you. Participants who wish to ask a question may press star and one on your touch-tone telephone. We have the next question from the line of Souvik Mohanty from Nuvama Wealth Management. Please go ahead.
Hi, sir. Thank you for taking my question. I just had one question in terms of, can you help me understand how much, how many months of inventory do the distributors hold? And, has there been any major change in the last one year?
Distributors don't hold that much inventory. Let's say our distributors are very many dealers, right? Dealers. So we have about 1,800 dealers all over India. And they hold about a month's of inventory or something. Not more than that. It's not that they are full. So we see it has come down significantly. And we also encourage them not to hold much inventory because our supply chain is very robust.
Okay. Thank you. That is my only question.
Thank you. Participants who wish to ask a question may press star and one on your touch-tone telephone. We have the next question from the line of Utkarsh Nopany from BOB Capital. Please go ahead.
Hi. Good evening, sir. Sir, my first question is, like, whether our understanding is clear that we are mainly dependent on outsourcing model to grow our sales volume as our domestic capacity operated at 105% rate in previous December quarter. And our outsourced sales volume grew by 17% on a YOY basis in December quarter. And what could be our maximum capacity utilization for our domestic tile plant on an annualized basis? That's for you.
All our plants are running at full capacity and we're selling all the material of our plants. Now the rest is what we are outsourcing. That's only about 20-25% of our total sale.
No, sir. My point was that, like, our manufacturing sales volume is going to remain flat only going forward because what we are noticing that whatever the incremental volume is coming, that is mainly coming from the outsource model. And is that going to continue going forward also?
Right. So we have enough capacities built in. We are not looking to put any new capacity. And the further sales will come from outsourcing.
Okay.
Going forward, the net CAPEX is going to be very low. We are not contemplating any future capacity expansion. The endeavor is to sell this capacity well and at a better price, and if need be, we'll be meeting that from outsourcing.
Okay. Sir, second question is, like, we are planning to acquire 75% stake in a group entity called Kajaria Adhesives Private Limited, as we are planning to put up an adhesive plant in Tamil Nadu. So wanted to know why we are not acquiring the entire 100% stake in that company.
We'll be ultimately acquiring a 100%. No, it's a 90%. 10% is, you know, basically, Kajaria Adhesives Private Limited, the share capital is 4 CR in that. Three is Kajaria Ceramics, and one is one of the biggest dealers in the country called Lakshmi Ceramics based in Coimbatore. So he's a 25% partner in that. He has 17 showrooms in Tamil Nadu. So we roped him in as an equity partner because of two reasons. First, he helped us promote our sales of adhesives in Tamil Nadu. And secondly, any local issues which comes up in the plant we're looking to acquire, he'll help us manage that also as a local entity out there. That was the thought process behind this, giving him that stake.
Okay. And sir, like, what would be our advertisement cost for December quarter?
So basically, last year, we spent roughly around INR 131 crore. December should be in the range of roughly INR 30 crore as an advertising cost. INR 30 crore-INR 32 crore, basically.
Sir, lastly, like, if you can provide the EBIT margin guidance for the tiles and non-tiles segment for FY2026?
Right now, we are not giving any guidance. We give the guidance at the end of Q4 .
For what?
Next year. We talk about it at the end of Q4 because things are still to look up in the country, and as you know, all building material products are under pressure, so keeping that in mind, it's not the right time to give any guidance. We review as things go up, and at the end of Q4 , when we meet, we'll try to give you some guidance.
Okay. Thanks a lot, sir.
Thank you.
Thank you. We have the next question from the line of Omkar Ghugardare from Shree Investments. Please go ahead.
Yes, sir. My question is regarding you earlier mentioned that you will be trying your best to achieve the guidance which you had given, but I mean, even if you do around INR 4,000-4,700 crores of sale this year, considering a 10% growth in the Q4 , you would still have to grow around 17-18% to meet that guidance, and you had earlier given a CAGR of 12%.
We are not looking at that. Our overall volume growth this year should be close to between 8% to 9%. That's what will happen. That's a reality on the ground. We are not looking at anything beyond that existing because things are very tough on the ground. You are all aware of what is happening on the ground. So if I give you anything which is not correct, it's not right. So current scenario, we are looking at a scenario where Kajaria Ceramics should grow 8% to 9% in volume terms for a full year.
Similarly, you had given 15%-17% guidance. How realistic is that in the next two years to achieve that, given the scenario?
We will talk about next two years at the end of Q4 . So only we'll talk about next two years.
So you had given this guidance a year back. That's what I'm asking.
I'm doing nothing right now, as I said. That's what the three-year vision we had unveiled last year. So we are not changing much in that vision as of now. When we will, after the year, we will sit back. If there is a major deviation, we'll come back as of what Chairman wants to say. At the moment, we have not examined whether to revise this guidance and to what extent. So that we will do. It's a very careful process. It cannot be answered on every quarter. See, the three-year mission was made on a certain assumption. The assumption, some quarter it happens, some quarter it doesn't happen. That doesn't mean every quarter I'll be changing my three-year guidance.
Post this year, after seeing all the economic scenario of the general economy in the country and the tile industry, if need be, we'll change our guidance. And at that time, we'll unveil our revised guidance if need be.
Okay. Thanks.
Thank you.
Thank you. Participants who wish to ask a question may press star and one on your touchtone telephone. We have the next question from the line of Rishab Bothra from Anand Rathi. Please go ahead.
Hello, sir. Good afternoon. Just wanted to understand whether we track residential, commercial, and infra consumption. Where which segment is the fastest growing for us?
When it comes to retail, it's a combination of real estate and commercial. When it comes to projects, it's more of commercial, less of retail. That's how it works, basically. And Kajaria's focus has been on retail more because, as we said, that we are 70% retail. That's what we have been doing for the last so many years. 30% institutional sales. So that's what the focus will be.
Lastly, sir, in residential, do we aim for large housing projects or standalone projects as well? Both are our focus area.
Combination of all. Combination of all.
Okay. Thank you.
Thank you.
Thank you. We have the next question from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Sir, thank you for taking my question. I mean, most of the questions are answered. I just wanted to pick your brain on, has anything changed in the industry in the last four, five years, whether it is in respect of competition, whether it is in respect of technology? Are your peers now being able to produce the same product as you, or is there some change between marble and ceramic? I mean, I just wanted to get a sense because, you know, multiple people have asked this question in different ways. But if real estate, sale is strong, eventually it has to result in some bit of retail sale, right? If the builder is making the lobby, the flat also is required to be made. So any sense on if anything's changed in the industry in the last four, five years based on your experience and expertise?
Correct. First, we talk about the industry. In terms of industry, in terms of machine technology, the latest machines, whatever the latest technology is, Continua+ technology. But your company already has two of those plants. So you are at par with all the technology, right? And compared to product also, we are making all the products, so there's no differentiation in terms of that, that somebody else is doing and we are not doing. What we are saying is that at this tough market, if you're doing it 7-8%, when the retail market increases, the volume will be much better. But we don't want to comment and we don't want to give any guidance right now. We're not going to leave the projects which you're already doing. We are waiting for the market to revive.
The retail market revives, automatically, our volumes will be better, and our realization will also get better. But there's nothing new in the industry which we are doing and nobody else is doing or somebody else is doing and we are not doing.
No, no. Fair. I, I mean, you've always been the leader. So my question was more about something that you were doing, which competition is doing. Maybe let me just extend that one step further. Do you think the supply situation is much worse, i.e., there's much more excess supply today than it was a few years back in this industry?
So if the demand slows down, the supply will be excess, right? We already have built-in capacities. We are the number one. You know, our production is very high. So yeah, we have to make sure that, and the factories should not be shut down. So the supply will always be high. And yes, today the supplies are a little excess as compared to what it used to be earlier.
Yeah. Talking about the industry.
The industry, everywhere the supply is high. Okay. This particular year, as we have been talking, what has happened is exports have come down, so that INR 4,000 crores of exports partly has come in the domestic market. I wouldn't say fully, but partly has come to the domestic market, so that has kept the market in depression, number one. Demand has not gone up because of various reasons. We are all aware in most of the building material segment. This is what the reason is that the pressure has been there. With things looking up, I think things going ahead should be better.
Sure, sir. This is helpful. Thank you.
Thank you.
Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments.
Thank you, Pranav. I think it's been a good interaction. A lot of good questions were asked. I hope on behalf of the management and on my own behalf, we have been able to answer it to your satisfaction. But if anybody has any queries, you can come back to Sanjeev and Nehal for further clarification. Thanks a lot, everybody, for joining us today.
Thank you. On behalf of Kajaria Ceramics Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.