KAJARIACER Q2 FY27 Earnings Call: Guides Double-Digit H2 Volume Growth, Largest-Ever Capacity Additions Underway

KAJARIACER held its Q2 FY27 earnings call on October 24, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Strong Quarter: Volume-Led Growth with Margin Expansion

• Consolidated revenue +24% YoY to Rs.1,468 Cr — supported by healthy volumes and the market's positive response to price hikes; volumes grew 10% YoY on better demand and market share gains.
• Segment revenue mix — tiles +23% YoY to Rs.1,291 Cr (vs Rs.1,051 Cr), markware +22% to Rs.124 Cr (vs Rs.102 Cr), adhesive +69% to Rs.54 Cr (vs Rs.32 Cr).
• EBITDA margin improved to 19.51% — up from 17.94% in Q2 FY 2025-2026; gross margin remained more or less flat despite price hikes, with management pointing to the EBITDA improvement instead.
• PBT Rs.254 Cr, PAT Rs.190 Cr — versus Rs.181 Cr and Rs.133 Cr respectively in Q2 FY 2025-2026.
• Working capital cycle at 48 days — up 2 days from 46 days in Q1 FY 2026-2027, due to higher turnover.
• Subsidiary realizations saw a minor dip — management prioritized volumes over realization; the dip was characterized as nothing major.

Narrowing Price Gap as Morbi Cost Push Reshapes the Market

• Morbi gas prices rose from Rs.50 (28 Feb) to Rs.91 currently — per Chairman Ashok Kajaria, forcing Morbi players to take 35-40% price hikes; the same applies to Kajaria's Morbi plant and outsourced volumes.
• Kajaria's cumulative hikes: 12-13% in north/south, 18-19% at Morbi — across all product categories since domestic gas prices rose; these are till-date increases, not quarter-specific hikes.
• Price gap vs Morbi narrowed from ~40% to 20-25% — management has decided to try to maintain this gap going forward so sales become normal rather than push sales, explicitly linked to pursuing bigger volume growth.
• Propane prices rose Rs.12.5/SCM in the last 2-3 days — narrowing propane's discount to natural gas to ~5%; with Brent at ~$116/bbl, management expects propane to move roughly to parity with gas over the next 15 days (Q3 FY 2026-2027).
• No price hikes planned — none taken in Q2 FY 2026-2027 and none seen as needed in Q3 FY 2026-2027 as of now; strategy is volume-led rather than price-led.
• Morbi industry disruption — of the ~400-500 plants in Morbi, 40-50% are currently not working (exports not happening, domestic selling difficult, costs up); Ashok Kajaria said this will not lead to permanent closure.
• Gas prices not expected to decline — Ashok Kajaria said there is no visibility on any gas price decline; spot prices are very high at ~$28-30/SCM, though Kajaria is receiving gas at normal prices from Gail for the North and is in talks with Gail for the upcoming expansion.

Broad-Based Growth Backed by Largest-Ever Capacity Additions

• Q2 volume growth of 10% was broad-based — MD Rishi Kajaria said growth came from all regions, with both retail and project sales performing well; he estimated market growth at ~5-6% with the balance from market share gains (period unspecified).
• Q2 production of 22.9 MSM vs installed capacity of 20.7 MSM — all plants running above rated capacity; tile sales of 24 MSM exceeded own/JV production, supplemented by outsourcing; overall capacity ~88 million sqm.
• Two brownfield expansions underway — Srikalahasti upsized from 10 million to 12.5 million sqm (commissioning expected by end of June FY 2027-2028; work just started) and Gelpur at 11 million sqm, both on track.
• Kalahasti capex revised to Rs.240 Cr from Rs.210 Cr — capacity raised to 12.5 million sqm with a larger shed and racking warehouse; the same shed can support doubling to 25 million sqm in future, with any future expansion costing roughly half the current one.
• Both incremental expansions will be 100% GVT — focused on the 4x2 size; first-ever large-scale additions of 11 million and 12.5 million sqm versus historical 5-6 million sqm (period unspecified), aimed at lower-cost production and deeper market penetration.
• FY 2026-2027 sales guided at ~130 million sqm — of which 42 million sqm outsourced from Morbi; FY 2027-2028 targeted at ~145 million sqm, with the 22.5 MSM capacity addition yielding ~19-20 million sqm of production and outsourcing declining to roughly 36-37 million sqm.
• Distribution: ~1,800 dealers across India — dealer-only model, of which ~450 are exclusive Kajaria-only dealers; network described as "more or less consolidated."

~19% Margin Sustainment; Cost Levers Underway

• Management not guiding above the current ~19% level — but expects to comfortably sustain it (period unspecified); 18-19% EBITDA is considered a good margin, with focus on absolute EBITDA and volumes over margin percentage.
• Employee cost run rate guided at Rs.141-142 Cr per quarter — for full-year FY 2026-2027 (Q1 FY 2026-2027 was ~Rs.141 Cr); salary increments across plant, general, and white-collar categories are already incorporated.
• Other expenses at Rs.138 Cr in Q2 FY 2026-2027 — Rishi Kajaria said expenses will remain at the Q2 level going forward (period unspecified), attributing the increase entirely to advertisement expenses, which will be increased further.
• Gas cost relief expected from January 2027 (Q4 FY 2026-2027) — management is working on reducing the firing cycle over the next 3-4 months and sourcing cheaper gas, expecting Kajaria's gas cost to become "very competitive."
• Q2 regional gas prices: North Rs.70.56/SCM, South Rs.63, West Rs.75 — average ~Rs.70/SCM; West is costlier due to a higher propane mix; management expects gas prices to rise again in Q3 FY 2026-2027.
• Biofuel usage already optimized at ~30% of cost in the north — across three plants (Ghelpur, Secunderabad, Maluthana) as coal is not allowed there; South also uses biofuel while West uses coal; new expansions will carry the same biofuel ratio (period unspecified).
• Promoters forgoing salaries — Chairman Ashok Kajaria confirmed the promoters intend not to take any salaries "right now," continuing earlier practice.

Non-Tile Businesses to Drive Incremental Value Growth

• Bathware/faucet revenue +21% YoY in Q2 FY 2026-2027 — roughly 50% price-led and 50% volume-led; margins historically 14-15% but currently very low due to low utilization at the new plant, with partial improvement expected in FY 2026-2027 and margins expected to nearly match tile from FY 2027-2028 onwards.
• Adhesive revenue trajectory: ~Rs.125 Cr (FY 2025-2026) → ~Rs.240 Cr targeted (FY 2026-2027) → ~Rs.400 Cr (FY 2027-2028) — the 9,000 MT capacity can deliver peak revenue of ~Rs.60-65 Cr at 12-hour shift operation (period unspecified); the business is freight-oriented, with more expansions planned.
• For FY 2027-2028, tile expected to see no incremental value growth — value growth almost equal to volume growth; bathware and adhesive expected to contribute more to value/revenue growth than tile from FY 2027-2028 onwards.
• Nepal JV at 85% utilization in Q2 FY 2026-2027 — the 5 million sq m plant (ceramic and GVP mix) was commissioned around September 2024; total Nepal tile market ~Rs.2,500 Cr; total JV investment roughly Rs.200 Cr; Nepal to remain a small portion of total profitability.
• Q2 income from associates of ~Rs.2.5 Cr is largely the Nepal JV — CFO Sanjeev clarified all other JVs are majority-owned and consolidated line-by-line; pricing in Nepal is more stable than in India due to very limited players.
• Outsourced realizations surpassing own-manufacturing is inflation pass-through — Morbi prices up ~35%+ versus 12-13% at own north/south plants; Chetan Kajaria clarified the company earns no incremental margin on outsourced price increases.
• Industry shifting toward GVT, which is more margin accretive — GVT share of product mix expected to rise every year going forward, with no significant ceramic expansion planned; the ceramic tile market is declining every year (industry trend).

Double-Digit Volume Guidance; Value Growth Capped by Price Base Effect

• FY 2026-2027 guidance: 10% volume growth over the remaining nine months — reiterating the Chairman's guidance from the last call; top line guidance difficult to give given price uncertainty.
• Double-digit volume growth expected in H2 FY 2026-2027 — Rishi Kajaria said the company definitely expects it to continue over Q3 FY 2026-2027 and Q4 FY 2026-2027, driven by "a combination of both" the retail network and the project network.
• FY 2027-2028: volume growth should remain double digit — per Chetan Kajaria's preliminary color, but value growth will not be much higher than FY 2026-2027 because this year's price inflation will not repeat next year; Ashok Kajaria said it is too early to talk about next year.
• FY 2027-2028 margin improvement expected from operating leverage — management is not anticipating any price increase in FY 2027-2028; fixed-cost increase over the next 2-3 months (Q3 FY 2026-2027) to be much lower than revenue growth, plus more cost-efficient new plants and lower freight/logistics costs.
• Industry-level FY 2026-2027 estimate (not company guidance) — exports down to ~Rs.12,000 Cr due to rising container costs; domestic industry ~Rs.48,000 Cr; total ~Rs.60,000 Cr.
• Project demand in India is picking up — Rishi Kajaria said a lot of projects are coming up and Kajaria foresees taking a good share of this market going forward.
• Slabs and surfaces market increasing but at a slow pace — "not at a very high pace" per Ashok Kajaria; Kajaria operates two plants equipped for both slabs and regular tiles and is concentrating on the category for better value realization (period unspecified).