Somany Ceramics Limited, India’s third largest tile maker, doesn’t expect the disruption caused by the Goods and Services Tax (GST) to ease in the second half of the year to March even after the tax rate on the industry was lowered.
GST compliance-related hurdles have been a key negative for the company after the new nationwide sales tax was rolled out, Managing Director Abhishek Somany told BloombergQuint in an interview. “The first six months were a complete washout.”
The GST Council lowered the tax on tile makers from 28% to 18% on November 15. Somany said that’s unlikely to help it boost revenue growth in the second half of the fiscal. “The kind of tailwind that we would have felt due to the rate cut will not be completely seen,” he said, attributing it to the delay in formalisation due to GST evasion and compliance issues. Deferring e-way bills, an electronic invoice for transporting goods, is another disadvantage, he said.
Brokerage firm Edelweiss estimated a 16.5% compounded annual growth rate in the tile maker’s revenue in its report on home decor companies. Somany disagrees. There is a lot to be done on value-added and product-mix fronts, due to which the company might inch towards early double-digit growth only by 2019, he said.
Somany outsources manufacturing for 40% of its output and expects to maintain that for the next two-three years.
GST-related pain period will only last for the next six months, and growth shall rebound after that, he said. The government’s initiatives like ‘Housing for All’ will result in buoyant demand and with the tile maker’s expansion plans in place, growth should bounce back next year, he said.