Skip to content

    Orient Bell

    ORIENTBELL
    Consumer Durables·27 May 2025
    Management Summary

    Orient Bell faced a challenging FY25 with a slight decline in net sales and low PAT, primarily due to subdued domestic demand, export volatility, and intense competition from Morbi's overcapacity. Despite this, the company improved its gross margins through cost efficiencies and successfully pivoted towards premium products, with vitrified tiles now forming 58.5% of its mix. Investments in brand building and distribution continue, with management anticipating an industry upturn in FY26.

    Highlights

    5

    • Gross margin improved to 35% in FY25 from 33.6% in FY24, despite challenging conditions.

    • Strategic shift towards premiumization led to GVT growing to 41% of sales and vitrified mix reaching 58.5%.

    • Cost saving initiatives, including a solar power purchase agreement at Sikandrabad, helped prune overall operating costs.

    • Credit ratings were retained (IND A1 by India Rating) and reaffirmed (A by CRISIL, albeit with negative outlook), indicating strong creditworthiness.

    • Significant investments made in enhancing premium product mix, expanding reach to new tile boutiques, and building brand awareness.

    Concerns

    5

    • Net sales for FY25 declined by 0.4% to INR666 crores from INR669 crores in FY24.

    • Profit after tax for FY25 was low at INR2.8 crores, reflecting a challenging operating environment.

    • Finance costs doubled from FY24 to FY25 due to a term loan taken for the Dora line, which was capitalized in September 2023.

    • Capacity utilization for own manufacturing was around 55% for FY25, down from 65-70% in FY24, due to subdued market conditions and overcapacity.

    • The industry faces overcapacity from Morbi, leading to increased pressure on pricing and volume, and a steep erosion in average selling prices.

    What Changed1

    vs Q1 FY26

    Guidance items1 → 6 (+5)

    Key financials

    Single quarter

    04 metrics
    1. 01Net Sales₹666 Cr-0.4%YoY
    2. 02EBITDA₹30.8 Cr
    3. 03PAT₹2.8 Cr
    4. 04Gross Margin35%

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Capex

    ₹5 crores

    Debt

    Debt disclosed

    Guidance & targets

    6
    CategoryTargetPriority
    Capex
    FY26 Capex Nature
    More on maintenance and regulatory, not growth
    		High
    Capex
    FY26 Regulatory & Maintenance Capex
    INR5-10 crores
    		Medium
    Capacity Utilization
    Target Capacity Utilization
    80-85%
    		Medium
    Industry Outlook
    FY26 Industry Performance
    Better
    		Low
    Government Sales
    Government Vertical Performance
    Good results
    		Medium
    Profitability
    H2 FY26 Performance vs H1 FY26
    Much better
    		Low

    Capacity Utilization Improvement

    Before next capex cycle
    Current~55% for FY25
    Target80-85%

    Why it matters

    Achieving higher utilization is key to operating leverage and improved profitability, especially after significant past capex.

    We would wait for the markets to kind of turn a bit and get our capacity utilization to about 80%, 85% before we get on to the next on capex cycle.

    How to verify

    guidance_and_targets[metric='Target Capacity Utilization']

    Risks & concerns

    6
    RiskSeverity

    Subdued domestic demand and export volatility

    Domestic demand for tiles remained subdued and exports continued to be affected by the volatility of ocean freights. — Management acknowledged

    high

    Overcapacity and intense competition from Morbi

    Overcapacity in the industry, especially from Morbi, increased pressure on pricing and volume, heightened competition resulted in an industry-wide drop in average selling prices. — Management acknowledged

    high

    Sacrifice of vitrification benefits due to high discounts

    The steep erosion in average selling prices so a lot of the vitrification benefits have been sacrificed because of higher discounts. — Management acknowledged

    high

    Uncertainty in export markets (US anti-dumping duties, global growth)

    How these antidumping duties in the U.S. will work out, tariffs in U.S. will work out and how growth in Europe, U.S. and all will play out this year is anybody's guess. — Management acknowledged

    medium

    Steeper-than-anticipated downfall in ceramics segment

    The unfortunate part for us have been that the downfall in the ceramics has been steeper than what we anticipated, so while in this financial year, you have seen other results also almost everybody has kind of dropped ASP. — Management acknowledged

    high

    Low dealer inventory due to falling prices

    Dealers have been down stocking for some time, and they are reluctant to keep stocks because of the falling prices and all. So inventory levels at dealer points are kind of low. — Management acknowledged

    medium

    Q&A highlights

    7

    “the Morbi associations are saying about 550 to 600-odd companies in Morbi units -- in Morbi were operating, somewhere in that range. We expect -- I think Morbi would have been at about 60% odd capacity utilization is our estimate last year, maybe even lower. And however, there is more capacity, which is going to come online in Morbi in H1 in spite of the sluggishness in the market. So we expect this capacity overhang to continue till the markets turn for the better.”

    Highlights the persistent challenge of overcapacity and its expected continuation, impacting pricing and volume for the industry.

    asked by Moksh Ranka

    2 min read6 chapters

    Detailed Narrative

    01

    Q4 FY25 Performance and Market Challenges

    Orient Bell reported net sales of INR666 crores for FY25, a marginal drop of 0.4% from INR669 crores in FY24. Consolidated EBITDA stood at INR30.8 crores, with profit after tax at INR2.8 crores. The company faced a challenging operating environment characterized by subdued domestic demand, volatility in ocean freights impacting exports, and significant overcapacity in the Morbi region, which led to intense pricing pressure and a drop in average selling prices across the industry. This environment also resulted in a steeper-than-anticipated decline in the ceramics segment.

    02

    Strategic Pivot to Premiumization and Retail Focus

    Despite the difficult market, Orient Bell successfully executed a strategic pivot towards strengthening its retail business and emphasizing premium products. Glazed Vitrified Tiles (GVT) sales grew to constitute 41% of the total, and the overall vitrified mix reached a new high of 58.5%. This shift was supported by continued investments in brand and sales team structures, including an all-India TV campaign and digital marketing efforts that attracted 2.5-3 lakh website visitors monthly. The company also expanded its reach, particularly in the South and West markets, leveraging the Dora GVT line.

    03

    Cost Optimization and Margin Improvement

    The company implemented various cost-saving initiatives and streamlined processes, which helped prune overall operating costs. A significant win was the go-live of a solar power purchase agreement at Sikandrabad, leading to lower power costs. While a substantial portion of these savings was passed on to the market to maintain competitiveness, Orient Bell successfully retained a part, contributing to an improvement in gross margin to 35% in FY25, up from 33.6% in FY24.

    04

    Capacity Utilization and Future Capex Plans

    Orient Bell has invested INR234 crores in capex between FY19 and FY25, adding 10.9 million square meters of capacity, largely funded through internal accruals. However, due to market sluggishness, the company's own manufacturing capacity utilization for FY25 was around 55%, down from 65-70% in FY24. For FY26, capex will be limited to INR5-10 crores, focusing on maintenance and regulatory needs, with no new growth-oriented capacity additions planned until utilization reaches 80-85%.

    05

    Credit Ratings and Banking Relationships

    The company's unique strength and positioning are reflected in its credit ratings, with India Rating retaining its IND A1 rating and CRISIL reaffirming its A rating (albeit with a negative outlook). Orient Bell also consolidated its banking relationships, resuming banking with State Bank of India, alongside existing lenders like Standard Chartered Bank, ICICI Bank, and Axis Bank, underscoring its creditworthiness.

    06

    Government Business and Institutional Sales Focus

    Orient Bell is actively rebuilding its government vertical, having identified 805 government departments for business focus. The company expects to see good results from this segment in FY26 through a systematic approach to secure project approvals and orders. Institutional sales, including B2B and B2G, currently contribute roughly 20-25% of total sales, encompassing small, medium, and large projects. The company supplies to major builders across the country but maintains a policy of not publicly announcing these deals.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.