New Delhi, Sep 7 | The Covid-19 pandemic has exacerbated weakness in the domestic tile demand, following the negative impact on its end-consumer industry, the real estate sector, ratings agency ICRA said on Monday.
The ratings agency said owing to a significant hit on the domestic volumes, the turnover of the tile players may decline by up to 15 to 25 per cent in FY2021, depending on the sales diversification of the company into the domestic and the export market.
As per the ICRA note, slowdown in project execution and new launches will impact industry revenues and margins, and credit metrics of the players may come under pressure.
Further, the demand in the domestic market is likely to remain weak for the current fiscal owing to low disposable income and weak consumer sentiment and it is likely to rebound slowly and gradually closer towards the next fiscal.
“In the medium to longer run, the expected recovery in the residential real estate sector, replacement demand, the rising exports and increasing budgetary allocation for various government initiatives like ‘Housing for All’ and the ‘Smart Cities’ project, are the key growth drivers for the industry,” the ratings agency said in the research note.
However, exports have proven to be silver lining, said the research note, adding that it is expected to continuously support demand owing to improved competitiveness of Indian tile players following large investments in technology upgradation and imposition of ‘ADD’ on China by some importing countries.
“ICRA’s channel-check suggests that in the ongoing pandemic situation, the demand recovery in the export market is faster compared to the domestic market,” the note said.
“In the first two months of the fiscal 2021, exports sales stood at Rs 800 crore however, the same jumped to around Rs 2,500-2,700 crore for June and July 2020, while monthly average for FY 2020 stood close to Rs 830 crore,” the note said.
“The uptick in June and July can primarily be attributable to pent-up demand post lockdown across the world.”