Rising tensions between the US and Iran have pushed global energy prices higher, bringing ceramic tile manufacturers under pressure. The industry that relies heavily on fuels such as natural gas and propane to fire kilns at high temperatures during the tile-making process feels the pinch of any spike in these fuel prices, which quickly feed into production costs.
In 2026, year-to-date, natural gas and propane prices have increased by 8.3% and 18.7%, respectively.
Power and fuel accounted for about 16% of Somany Ceramics’ consolidated expenses and 12% of Asian Granito’s in the December quarter.
Kajaria and Somany are the biggest players by volume among the listed tile makers.
India’s ceramic tiles market reached 1,255.97 million square metres (MSM) in 2025 and is projected to grow to 1,676.95 MSM by 2034, according to IMARC Group, a global management consulting and market research firm.
Ceramic companies face a dilemma: raising prices to cover higher costs might reduce demand in a competitive market, while absorbing costs would cut margins, market participants said.
Annual reports for FY25 show that Somany Ceramics has a ceramic tile production capacity of 23.52 million square metres (MSM) per year, while Kajaria Ceramics has a larger capacity of 34.15 MSM annually.
Morbi (Gujarat), which accounts for nearly 70–75% of India’s total ceramic tile production and a significant share of exports, is witnessing heightened operational stress, according to a Prabhudas Lilladher report on 6 March.
“Of the 900 ceramic tile units in Morbi (370 fully gas-based and 530 dual-fuel units using gas and propane), shutdown levels have risen materially due to the fuel crisis arising with geopolitical tensions in the Middle East, with nearly half of gas-based units and 70% of dual-fuel units temporarily ceasing operations, underscoring severe stress in the cluster,” the report said.
Troubles for tile firms
Arun Agarwal, vice president of Fundamental Research at Kotak Securities, said that if the Middle East crisis drags on, ceramic tile manufacturers could face margin pressure.
“Another key factor to watch is how much inventory companies have and how well their supply chains hold up,” he explained.
According to him, if the disruption lasts a month or longer, highly impacted players could see near-term earnings downgrades.
Shares of ceramic tile manufacturers have taken a hit since the US–Iran war erupted. Somany Ceramics led the losses with a steep 17.4% decline, followed by Nitco Ltd, which slipped 11.85%, and Asian Granito India slumped 11.3%. Meanwhile, Orient Bell fell 6.8%, while Kajaria Ceramics dropped 2.3%.
“Even before the US–Iran crisis, growth in the tile industry had already begun to lose momentum,” said Keshav Lahoti, institutional research analyst at HDFC Securities. At the same time, the unorganised sector has been steadily eating into the market share of listed players, making it increasingly difficult for them to deliver market-beating returns, he added.
Valuations in the tile sector have corrected appropriately, reflecting subdued volume growth over the last few years, “a trend we expect to continue going forward,” Lahoti said.
From a valuation perspective, the picture across listed tile companies is mixed. Kajaria Ceramics is trading at a price-to-earnings multiple of about 25.2 times, well below its five-year average of 35.6 times. Similarly, Somany Ceramics trades at around 35.74 times earnings, compared with its long-term average of 49.18 times, suggesting some cooling in valuations.
However, Asian Granito India, Nitco Ltd, and Orient Bell Ltd are currently trading at price-to-earnings multiples that are significantly higher than their five-year averages.
Hitting valuations
Several market participants believe that despite the recent correction in valuations, listed tile companies are likely to continue lagging other sectors in the near term.
Looking at mutual fund activity in ceramic tile makers, data from Prime Database for two sector bellwethers, Kajaria Ceramics and Somany Ceramics, shows a slight moderation in holdings, indicating that institutional investors have been trimming their exposure to the sector over the past year.
Mutual funds held 22.92% of Kajaria Ceramics’ total share capital as of January-end 2026, down from 25.35% as of April-end 2025. In the case of Somany Ceramics, mutual fund ownership was at 20.75% as of January-end, compared with 21.72% in April.
All said, some market participants noted that the four–five free trade agreements (FTAs) India has signed or concluded in 2025–2026 are expected to boost ceramic tile exports over the long term.
Prabhudas Lilladher noted that after India signed a free trade agreement with the United Arab Emirates (UAE) in 2022, ceramic tile exports to the UAE grew at a 22.6% CAGR between FY21 and FY25, reaching ₹13.4 billion in FY25 and ₹10.9 billion in the first nine months of FY26.
“Currently, the UAE accounts for 7.6% of India’s ceramic tile exports, the highest share for any single country. We believe a similar opportunity could emerge following FTAs signed with the UK, Oman, and the European Union, which currently account for 4.9%, 1.8%, and 12.3%, respectively, of India’s ceramic tile exports,” the brokerage report said.
Mint reached out to Kajaria Ceramics, which was unavailable for comment. Meanwhile, Somany Ceramics, Nitco, Asian Granito India, and Orient Bell did not respond to queries sent.
Flagging fuel supply
On 5 March, Somany Ceramics said that Sabarmati Gas informed it that R-LNG supplies have been severely impacted by the Middle East conflict and its effects on global energy markets.
Despite gas supply restrictions affecting its Kadi, Gujarat plant, Somany expects no material impact on operations.
On 6 March, Asian Granito said it faces temporary production disruptions due to fuel curbs but expects no significant overall impact.
Several sectors reliant on natural gas or LPG are beginning to see operational disruptions, said JM Financial Institutional Securities on 10 March. “Ceramic manufacturers have already faced supply curtailments, with some factories expected to operate for only 10–15 days at current gas availability levels.”
- US–Iran tensions have increased the cost of natural gas and propane.
- Morbi's ceramic cluster faces massive production shutdowns due to fuel shortages.
- Listed tile makers face potential earnings downgrades if supply disruptions persist.
- Mutual funds have trimmed their exposure to major ceramic tile manufacturers.
- New trade deals with the UK, Oman, and the European Union promise long-term growth.