KAJARIACER

: Weak Demand, Fraud Impact, and the Path to Recovery

, India’s largest tile manufacturer, disclosed a ₹20 crore fraud involving embezzlement during a vendor onboarding process at its subsidiary Kerovit Global Pvt Ltd. While the financial impact is manageable relative to Kajaria’s scale, the incident raises corporate governance concerns and highlights weaknesses in internal controls. This comes at a time when muted revenue growth, industry headwinds, and pricing pressure have already weighed on performance. A senior employee created a fake vendor and siphoned off funds earmarked for capex at Kerovit Global. The fraud will be recognized as an exceptional item in FY26. Analysts flagged the incident as a sign of weak process controls, despite the plant being operational and capex fully incurred. The Indian tile industry faces weak demand, intense competition, and pricing pressure, particularly from Morbi-based manufacturers. This has hampered Kajaria’s volume and realization growth, compounding internal challenges. Kajaria is implementing a restructuring plan to boost profitability. It has already achieved ₹150 crore of annualized recurring cost savings. By FY26-end, growth is expected to improve through industry recovery, dealer productivity, cross-selling, and higher utilization of existing capacities. Importantly, this growth is planned without large new capex, supporting ROE and ROCE. In FY25, Kajaria exited non-core businesses, including its loss-making plywood division and UK operations under Kajaria International DMCC, which had structurally high costs and weak profitability. This streamlining supports focus on core tile and bathware operations. Nuvama Research cut its target valuation to 28x forward P/E (from 33x), 20% below the ten-year average, citing risks of de-rating if governance lapses recur. Earnings estimates remain intact, but investor sentiment hinges on execution of Kajaria 2.0 and restoration of trust in internal controls.