Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA/Stable/Crisil A1+’ ratings on the bank facilities and commercial paper of Cera Sanitaryware Limited (Cera).

 

Cera reported a marginal revenue growth in fiscal 2025 on the back of soft consumer demand across the key segments in both rural and urban areas. The operating margin has also come in at 14.3%, 100 basis points (bps) lower than 15.3% in fiscal 2024 on the back of input cost volatility and increase in operational expenses such as high employee benefit cost.

 

With the market sentiments expected to improve in the second half of fiscal 2026, revenue is expected to register high single digit growth in fiscal 2026 followed by relatively higher growth over the medium term. With the changing consumer aspirations and rising demand in premium luxury segment, the company is entering into the luxury space through its brand ‘Senator’. At the same time the company is also focusing on the rural market, which is largely dominated by unorganized players through its economical product offerings.

 

Additionally, the operating margin is also expected to remain healthy at 15-17% with rangebound input price costs, access to gas at subsidised rates from Gas Authority of India Ltd (GAIL) and expected improvement in retail demand.

 

The financial risk profile remained strong, driven by net worth of Rs 1,368 crore as on March 31, 2025, and low debt. While the company has already purchased land for its greenfield sanitaryware project, the construction of the facility is kept on hold owing to subdued market conditions. The total cost of the greenfield project will be around Rs 150 crore which is expected to be funded completely through cash accrual and surplus liquidity. Gearing was low at 0.01 time as on March 31, 2025, while the debt to earnings before interest, taxes, depreciation, and amortisation (Ebitda) and interest coverage ratios were strong at 0.05 time and 48 times, respectively, in fiscal 2025. The financial risk profile is expected to remain strong, supported by steady operating performance and prudent funding of capital expenditure (capex).

 

The ratings continue to reflect Cera’s established position in the domestic sanitaryware industry, backed by a diversified revenue profile with presence across various markets in south, east, north and west. The company has diversified into allied building products such as faucets and tiles and benefits from its wide distribution network. Besides, the operating efficiency is supported by a mix of manufacturing and outsourcing. The strong financial risk profile emanates from healthy cash generating ability, low debt levels and robust liquidity.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of Cera and its joint ventures (JVs), Packcart Packaging LLP and Race Polymer Arts LLP, as Cera holds majority stake (51%) in each JV. Furthermore, there are significant operational and financial linkages among the entities.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Established market position in the sanitaryware and faucetware segment and diversified revenue profile: Cera has a track record of more than four decades, strong brand image and a large retail network in the sanitaryware and faucetware industry. Sanitaryware and faucetware account for 49% and 39% respectively of the total turnover in fiscal 2025.

 

Over the past few years, Cera has been leveraging its strong market position in the domestic sanitaryware and faucetware industry by venturing into related business segments, such as faucets, tiles, wellness and allied products, thus becoming a complete bathroom solutions provider. Successful diversification into related businesses has helped lower dependence on the sanitaryware business, besides improving the efficiency of the distribution network.

 

Intense competition and subdued demand from retail segments led to sluggish revenue growth in fiscals 2024 and 2025. However, with improving demand prospects expected and demand from real estate to remain healthy with projects reaching completion over the next 2-3 years, revenue in the sanitaryware and faucetware segment is likely to see healthy growth over the medium term. Sanitaryware, faucetware, tiles and other products accounted for 49%, 39%, 10% and 2%, respectively, of the company’s turnover in fiscal 2025. Also, the company has presence across various domestic markets in south, east, north and west, providing adequate geographical diversity.  

 

Healthy financial risk profile: Networth was healthy at Rs 1,368 crore and gearing was low at 0.01 time as on March 31, 2025. Debt protection metrics are expected to remain strong, in the absence of large, debt-funded capex and healthy operating performance. Annual cash accrual is expected over Rs. 200 crore and will comfortably fund the capex plans in fiscals 2027 and 2028 and incremental working capital requirement. Hence, reliance on debt is expected to be low, sustaining strong debt protection metrics over the medium term.

 

Weaknesses:

Exposure to intense competition: Cera operates in the highly fragmented mass and mass premium market. Competition is also intense in the premium segment, where foreign players cater to brand-conscious customers with high spending power. Lack of a well-entrenched premium brand may impact on the company’s position among brand-conscious customers. Though Cera is taking steps to enhance its retail reach and product offerings, the competition will continue to pose challenges over the medium term, aided by the entry of international players and rapid expansion of domestic players.  

 

Susceptibility to risks inherent in the real estate sector: Growth prospects of the sanitaryware, faucet and tiles segments are linked to the macroeconomic scenario and the real estate industry in particular, exposing the company to inherent demand cyclicality. Around 35% of its revenue comes from project sales, while the remaining comes from retail.

Liquidity: Strong

Liquidity is likely to remain strong, supported by expected annual cash accrual of over Rs 200 crore over the medium term. Liquid surplus was Rs. ~720 crore as on March 31, 2025. Bank limit of Rs 55 crore was utilised at 22% on average over the 12 months through April 2025. Cash accrual and cash and equivalent will be sufficient to meet debt obligation, capex and investment requirement in JVs.

Outlook: Stable

Cera will continue to benefit from its established market position in the domestic sanitaryware and faucetware segment and diversified revenue profile over the medium term. Cera is expected to sustain its healthy operating performance, while maintaining healthy financial risk profile over the medium term.

Rating sensitivity factors

Upward factors

• Sustained healthy double-digit revenue growth, supported by better segmental diversity, and maintenance of operating profitability above 16-18%, benefitting cash generation
• Sustenance of strong financial risk profile and debt protection metrics backed by prudent working capital management and capital spend
• Maintenance of healthy liquidity

 

Downward factors

• Sluggish business performance, impacting cash generation
• Large, debt-funded capex or acquisition or a significant stretch in the working capital cycle, leading to moderation in debt metrics (debt/Ebitda of over 1.5-1.75 times)
• Sharp reduction in liquid surpluses

 

Key ESG highlights

• The company’s Scope 1 and 2 emissions at ~13.5 tCO2e per Rs crore of revenue and energy consumption intensity at ~65 MWh per Rs crore of revenue, which are lower compared with the peer average. The company conducted energy audit to identify energy saving opportunities for energy conservation.
• The company’s attrition rate (24% for permanent employees and 3% for permanent workers) is lower compared with its peers. The share of female workers at ~5% is broadly in line with the peer average.
• The company’s lost time injury frequency rate (LTIFR) for workers stood at 2.79 in fiscal 2025, declining from 5.24 in fiscal 2024.
• Cera’s governance structure is characterised by ~57% of its board comprising independent directors, two women directors, dedicated investor grievance redressal system, and extensive financial disclosures.

 

There is growing importance of ESG among investors and lenders. The commitment of Cera to embed sustainability principles across the organisation and its value chain will play a key role in enhancing stakeholder confidence.

About the Company

Incorporated in July 1998, Cera (formerly, Madhusudan Oil and Fats Ltd) is headed by Vikram Somany. The company partly manufactures and partly outsources sanitaryware and faucetware products and while tiles and wellness products are fully outsourced. The sanitaryware and faucetware plants are in Kadi, Gujarat. The company has green energy power plants with installed capacity of 10.325 megawatt, which meet substantial amount of its power requirement. The promoters (led by Mr Somany) held 54.41% stake as on March 31, 2025.

 

Packcart Packaging LLP

In fiscal 2017, Cera established Packcart Packaging LLP, a JV with Kinjal Bhatt (local entrepreneur) to manufacture corrugated boxes used for packaging. It is a captive unit that caters to the packaging requirement of Cera’s products.

 

Race Polymer Arts LLP

In May 2018, Cera set up Race Polymer Arts LLP, a JV (51% equity stake with investment of Rs 5.10 crore) with Shreeyam Ceramics LLP, for manufacturing plastic and products related to its business, such as seat covers, fittings and cisterns.

Key Financial Indicators^

Particulars	Unit	2025	2024	2023
Revenue	Rs crore	1,892	1,871	1,804
Profit after tax (PAT)	Rs crore	249	241	211
PAT margin	%	13.1	12.9	11.7
Adjusted debt/adjusted networth	Times	0.01	0.02	0.02
Interest coverage	Times	36.8	50.4	51.7

^Crisil Ratings adjusted

Any other information: Not Applicable