1 min read.Updated: 31 Aug 2021, 10:29 AM ISTLivemint
Morbi tile makers usually take a week-long production shutdown during the Janmashtami festival, but this time the companies have decided to go on a month-long shutdown
The Indian tile sector has a large presence of unorganised companies operating in Morbi district of Gujarat. Unlike in the past, this time around these companies are undertaking a longer production shutdown during Janmashtami.
A dealers channel check by JM Financial Institutional Securities Ltd showed that Morbi tile makers usually take a week-long production shutdown during the festival, but this time the companies, involved in manufacturing of polished vitrified tiles, double-charged and wall tiles, have decided to go on a month-long shutdown during August-September.
The channel check shows that this is being done because export orders are being deferred due to sharp rise in freight rates and container availability issues and domestic industry is still on the recovery path. So, the entire production cannot be absorbed by domestic market.
Since regional Morbi companies account for around 50-60% of the production capacity, listed companies in this sector such as Kajaria Ceramics Ltd and Somany Ceramics Ltd are poised to benefit in terms of market share.
"We believe large tile players like Kajaria and Somany are in a sweet spot to gain market share in the near to medium term as they will be well placed to partially fill the supply vaccum created by production shutdowns by the Morbi players and also increase their channel depth (dealers will incrementally prefer organised players due to supply security)," said the JM Financial report.
Further, these production cuts taken by Morbi-based companies also augur well for the tile industry as it will help in creating demand-supply equilibrium and
pricing discipline, which will eventually benefit the organised companies, added the report.