Cera Sanitaryware Ltd Management Discussions

ECONOMIC OVERVIEW

Global economic growth remained modest in 2025, rising slightly to 3.4% from 3.3% in 2024, despite disruptions caused by the April 2025 US tariff shock, which increased trade uncertainty even after partial reversals. Advanced economies saw marginal improvement to 1.9%, while emerging markets remained resilient at 4.4%, and global inflation declined sharply to 4.1%. Among major economies, the US slowed to 2.1%, China remained steady at 5.0%, and Europe and Japan showed mild recovery. Looking ahead, global growth is projected at 3.1% in 2026 and 3.2% in 2027, with inflation expected to rise temporarily before easing. In contrast, India stood out as the fastest-growing major economy, with FY26 GDP growth estimated at 7.7% in FY26, driven by strong consumption and investment. Inflation remained exceptionally low at 2.1%, enabling rate cuts, although the rupee depreciated amid global volatility. Despite record foreign outflows, strong domestic inflows supported markets, while gold prices surged as a safe haven. The banking sector strengthened with lower NPAs and improved profitability. Growth was led by a robust services sector and a strong rebound in manufacturing, with both consumption and investment maintaining healthy momentum. Supported by policy measures, tax relief, and stable macroeconomic conditions, India is expected to sustain strong growth at around 6.6% in FY27, underpinned by resilient domestic demand and structural advantages, even as global risks persist.

(Source: MoSPI, Business Standard, Press Information Bureau, Business Standard, Deccan Chronicle. NDTV Profit, Outlook Business, The Asian Banker, OECD Interim Economic Outlook, IMF, World Economic Forum, Federal Reserve, Bank of England, European Central Bank, Bank of Japan)

INDIAN SANITARYWARE INDUSTRY

Indias sanitaryware industry is undergoing a structural shift, led by rising incomes and evolving lifestyle aspirations. Demand is increasingly moving toward design-led, water-efficient, and space-optimized solutions, supported greater hygiene awareness and a growing preference for enhanced bathroom experiences such as larger shower formats. The market remains bifurcated, with organized players accounting for nearly 60% of the industry and driving growth in the mass-premium and premium segments, while unorganized players continue to serve value-driven demand. Backed by cost-efficient manufacturing and strong raw material availability, India is also strengthening its position as a competitive global production hub.

The market is projected to reach USD 1,336.95 million by 2030, supported by urbanisation, steady construction activity, and government-led sanitation initiatives. Growth is increasingly concentrated in the mass-premium segment, where affordability intersects with aspiration, driving adoption across both residential and commercial spaces and accelerating the shift toward efficient, aesthetically refined solutions.

Indias urban transformation remains a key structural tailwind. The urban population is expected to nearly double from 48 crore in 2020 to 95 crore by 2050, with cities already contributing close to 60% of GDP. This expansion is driving sustained demand for modern housing and commercial infrastructure, reinforcing the need for sanitaryware that aligns with contemporary urban living.

Further, Indias real estate sector projected to grow from USD 532.6 billion in 2025 to USD 1.26 trillion by 2034 (CAGR 10%) continues to amplify this demand. Supported by infrastructure development, policy initiatives, and rising middle-class aspirations, real estate growth is directly translating into higher uptake of modern, eco-friendly, and design-oriented sanitaryware, positioning the industry at the intersection of functionality, affordability, and aspirational living.

(Source: Economic times, IMARC Group, openpr.com)

GOVERNMENT POLICY INITIATIVES

Capital Expenditure: The Union Budget FY27 increased capital expenditure to 12.2 lakh crore (from 11.2 lakh crore), reinforcing infrastructure-led growth. Rapid expansion across airports, hospitals, hotels, and institutions is driving demand for specialized sanitaryware, linking public investment directly to sector growth.

Swachh Bharat Mission: With an allocation of 7,192 crore, the focus has shifted from toilet construction to sustaining open defecation free status, improving service quality, and strengthening waste management systems, ensuring long-term sanitation outcomes.

AMRUT 2.0: Focused on water security and urban sanitation, the programme targets universal sewerage and septage bymanagement across cities. 583 projects worth 66,117 crore have been approved, boosting urban infrastructure demand.

Pradhan Mantri Awas Yojana (PMAY): Continued emphasis on affordable housing, with 78,126 crore allocated in FY26 and over 122 lakh houses sanctioned, driving sustained demand for sanitaryware in residential construction. UDAN Scheme: With 550 crore allocation, the scheme supports regional connectivity and infrastructure development. Expansion of airports in underserved areas is indirectly boosting demand for sanitaryware across new and upgraded facilities.

(Source: Money control. Economic times, PIB- Press Release, CNBC, Times of India)

GROWTH DRIVERS OF THE INDIAN SANITARYWARE MARKET

Rising disposable incomes: Indias per capita disposable income increased from US$2.11 thousand in 2019 to US$2.54 thousand in 2023, and is expected to reach US$4.34 thousand by 2029. As incomes rise, consumers are placing greater emphasis on design, aesthetics, and functionality when choosing bathroom fixtures. This shift is fueling demand for modern, designer ceramic sanitaryware, including water-efficient toilets, stylish washbasins, and innovative shower panels.

Highpopulationgrowth:As of March 2026, Indias population was estimated at 1.47 billion. With global population levels continuing to rise, the demand for housing, schools, hospitals, and other public facilities has expanded sharply driving parallel growth in the sanitaryware sector, including toilets, sinks, and bathtubs. This trend is particularly pronounced in urban areas, which now accommodate 37.61% of the population. The steady influx of people into cities has intensified the need to modernize and upgrade existing infrastructure. In turn, demand for innovative, high-quality sanitaryware products is accelerating, as urban development seeks to match the pace of rapid population growth.

Growing demand for mass-premium products: The mass-premium segment is emerging as the key growth driver, bridging affordability and aspiration. Rising middle-class incomes and a shift toward branded, design-led products are accelerating upgrades from unorganized to value-enhanced solutions across urban and tier II/III markets. For developers and commercial projects, this segment offers the right mix of cost efficiency, durability, and aesthetics, making it the preferred choice. As a result, it is growing faster than the overall market and reshaping competition, driving innovation in design, functionality, and pricing.

Advancing technology landscape: Rapid advances in technology are reshaping the sanitaryware industry. Smart solutions ranging from touch-free faucets to self-cleaning toilets are redefining convenience and hygiene standards. These innovations not only elevate product performance and efficiency but also introduce a sleek, contemporary aesthetic that resonates with modern consumers. As digital integration deepens, the industry is moving toward more intelligent, sustainable, and design-forward sanitaryware. This evolution is fueling market expansion, as customers increasingly seek products that combine functionality, style, and eco-consciousness.

Eco-conscious choices: Heightened environmental awareness is reshaping consumer preferences, with growing demand for eco-friendly and sustainable sanitaryware. Buyers are increasingly choosing products crafted from sustainable materials and designed to minimize water usage. This shift in mindset has spurred the industry to innovate, leading to the introduction of environmentally conscious, resource-efficient sanitaryware solutions. As sustainability becomes a defining factor in purchase decisions, the market is witnessing strong momentum toward greener, smarter product lines.

Construction fuels demand: The expansion of Indias construction industry is set to accelerate growth in the sanitaryware market. The Indian construction market is projected at USD 0.74 trillion in 2025, rising to USD 0.79 trillion in 2026, and reaching USD 1.10 trillion by 2031, reflecting a CAGR of 6.87% between 2026 and 2031. Construction encompasses residential, commercial, and infrastructure projects activities such as building, repairing, renovating, and maintaining. As construction activity intensifies, the requirement for bathrooms and sanitation systems grows in parallel. Large-scale housing and commercial developments demand sanitaryware in significant volumes, directly propelling market expansion.

Growth of the hospitality and healthcare sectors: Indias hospitality and healthcare sectors are key drivers of sanitaryware demand. The hospitality market is projected to grow from USD 24.36 billion in 2025 to USD 55.67 billion by 2031 at a CAGR of 14.76%, with hotels and resorts investing in premium sanitary solutions to enhance guest experience. Tourism, expected to reach USD 512 billion by 2028, is further fueling demand for luxury and smart products. Meanwhile, the healthcare sector continues to expand, requiring hygienic and durable sanitaryware across hospitals, clinics, and medical facilities. In FY26, transactions worth over Rs.10,000 crore were announced in hospitals, diagnostics, and specialty care, underscoring strong momentum and its direct impact on sanitaryware consumption.

Growing demand for wellness: The Indian spa market, valued at USD 2.22 billion in 2025, is projected to reach USD 4.93 billion by 2034, growing at a CAGR of 9.28% (2026 2034). As wellness becomes central to home design, consumers are increasingly transforming bathrooms into personal spa retreats. This trend is driving demand for high-end sanitaryware designer bathtubs, wellness-focused shower systems, and hydrotherapy solutions that deliver luxury, relaxation, and modern aesthetics. The shift toward . wellness-oriented living is positioning sanitaryware as an essential element of lifestyle-driven home upgrades.

(Source: Mordor Intelligence, Research and Market, Worldometer, EY, IBEF, IMARC Group)

COMPANY OVERVIEW

Cera Sanitaryware marks 46 years of operations as Indias fastest-growing home solutions provider, headquartered in Kadi, Mehsana district. The company envisions becoming the nations leading bathroom solutions brand anchored in sustainability, stakeholder value, and superior customer experience. Its mission is to deliver innovative, high-quality products that blend sustainability with cutting-edge technology and emerging trends, while strengthening customer-centricity, elevating brand equity, and driving growth across both mass and luxury segments.

RISKS AND CONCERNS

Economic risk: A slowdown in economic growth could reduce cash flows and profitability.

Mitigation: India is projected to remain the worlds fastest-growing economy, with GDP growth of 6.8 7.2% in FY27.

(Source: Economic times)

Regulatory risk: Stricter environmental regulations may demand heavy investments in new technologies or restrict operational capacity.

Mitigation: The Companys robust compliance framework, proactive investments, and employee training have lowered its carbon footprint and strengthened its standing as a responsible corporate citizen.

Competition risk: Intensifying market competition could erode market position.

Mitigation: Strategic investments in brand building, marketing, distribution, and digital transformation have sharpened responsiveness and reinforced competitive advantage.

Fraud risk: Weak internal controls could expose the Company to fraud.

Mitigation: A stringent control system including centralized payments, dual authorization, and enhanced financial oversight safeguards against fraud and malpractice. Inflation risk: Rising inflation, if not fully passed on to consumers, could compress margins.

Mitigation: The Company continues to leverage economies of scale, cost discipline, and logistics efficiencies to protect profitability and sustain competitiveness.

Gas price risk: Sustained increases in gas prices could weigh on profitability.

Mitigation: By maintaining a weighted average gas cost below the industry benchmark, the Company has effectively cushioned the impact of price volatility.

OUTLOOK

This years performance was characterized by a notable acceleration in growth, particularly from the third quarter of FY2026 onward, reflecting the effectiveness of the companys strategic initiatives and operational improvements. The upward momentum during this period highlights stronger market demand, improved execution, and a more resilient business model. Despite facing challenges arising from recent geopolitical uncertainties, the company demonstrated its ability to adapt and sustain performance.

During this period, gas availability was constrained and prices rose sharply, creating a challenging operating environment for the company. These conditions could have significantly impacted production efficiency and structures. However, owing to the companys strategic arrangement with GAIL, it was able to manage supply disruptions effectively by optimizing its production planning and aligning output with available resources.

In addition, the company leveraged this situation as an opportunity to rationalize its inventory levels by liquidating existing stock. This not only helped in maintaining operational continuity despite input constraints but also supported better working capital management. The Company remains confident in its strong fundamentals and maintains optimism in its overall growth outlook. We remain dedicated to optimizing our operations and fostering growth in the face of varying market conditions.

Key financial ratios: (in times/%)

Particulars	FY25-26	FY24-25
Inventory Turnover ratio (in Times)	5.12	5.01
Interest Coverage Ratio	43.82	44.23
Trade receivables turnover ratio (in times)	8.90	9.58
Current ratio (in times)	4.26	3.80
Debt - Equity ratio*	0.03	0.05
Operating Profit Margin (in % )	13.82	16.43
Net Profit ratio (in % )	9.96	12.87
Return on equity ratio (in %)	14.47	18.31

* The decrease in the debt equity ratio during FY25 26 is primarily attributable to a reduction in overall borrowings compared to the previous year.

FINANCIAL OVERVIEW

During FY 2025-26, the Company delivered steady revenue growth despite a challenging demand environment and continued cost pressures. Revenue from operations increased by 7.0% to Rs. 2,05,012 Lakhs from Rs. 1,91,525 Lakhs in the previous year, reflecting the resilience of the Companys brand portfolio and distribution network.

Operational Performance

Total expenses increased by 9.3% to 1,82,606 Lakhs during the year, primarily due to a 14.2% increase in material and procurement costs driven by elevated input prices and higher business volumes. Employee benefit expenses increased by 7.4% from Rs. 24,154 Lakhs to Rs. 25,943 Lakhs and represented 12.7% of revenue. The increase was attributable to annual salary revisions and strategic workforce expansion undertaken to support the launch and growth of the Companys new brands, Senator and Polipluz. As a result of higher input costs and increased market support initiatives, the Companys EBITDA margin moderated to 15.3% in FY 2025-26 from 17.9% in the previous year. Net profit margin stood at 10.0% compared to 12.9% in FY 2024-25. The decline in margins was primarily due to elevated raw material costs and higher discounts offered during the year in response to subdued market conditions. cost

Capital Structure and Financial Position

The Companys capital employed increased by 8.3% to Rs. 1,59,217 Lakhs as at 31st March 2026 from Rs. 1,46,987 Lakhs as at 31st March 2025, largely driven by growth in shareholders funds resulting from retained earnings generated during the year.

Net worth increased by 9.0% to Rs. 1,47,234 Lakhs, reflecting the Companys continued profitability and strong financial position. Return on Capital Employed (ROCE) stood at 17.8% compared to 21.4% in the previous year. The moderation in ROCE was primarily due to higher capital employed and a marginal decline in EBIT.

The Company maintained a conservative capital structure with long-term debt of Rs. 3,679 Lakhs, comprising non-current lease liabilities. The debt-equity ratio improved to 0.03x as at 31st March 2026 from 0.05x in the previous year. Finance costs declined by 9.1% to Rs. 647 Lakhs, reflecting lower interest costs during the year.

Capital Expenditure and Investments

The Company continued to invest in strengthening its manufacturing capabilities and infrastructure. Gross fixed assets increased by 3.7% to Rs.61,618 Lakhs as at 31st March 2026 from Rs.59,423 Lakhs in the previous year. Capital expenditure during the year amounted to Rs.2,195 Lakhs, primarily towards buildings and plant & equipment. Depreciation on tangible assets remained largely stable at Rs.2,784 Lakhs compared to Rs.2,792 Lakhs in FY 2024-25. Non-current investments stood at Rs.1,381 Lakhs as at 31st March 2026 compared to Rs. 2,995 Lakhs a year earlier. The reduction was primarily due to the divestment of the Companys interest in two LLP subsidiaries during the year.

Working capital management

The Company continued to maintain a strong liquidity position and prudent working capital discipline. Current assets increased by 10.6% to Rs. 1,55,908 Lakhs as at 31st March 2026, primarily due to higher investments in mutual funds and increased bank balances.

The current ratio improved to 4.3x from 3.8x, while the quick ratio improved to 3.2x from 2.7x, underscoring the Companys strong liquidity profile.

Inventory levels reduced by 2.5% to Rs. 39,577 Lakhs as at 31st March 2026 from Rs. 40,582 Lakhs in the previous year, reflecting emerging green shoots of demand recovery coupled with disciplined inventory management practices. As a result, inventory days improved to 71 days from 73 days in FY 2024-25.

Trade receivables stood at Rs. 27,387 Lakhs as at 31st March 2026 compared to Rs. 26,796 Lakhs in the previous year. Debtor days increased marginally to 41 days from 38 days, while trade payable days stood at 58 days compared to 56 days in FY 2024-25.

Outlook: Despite a year marked by demand challenges and cost pressures, the Company maintained healthy growth, a robust balance sheet and strong liquidity. Continued investments in brands, product innovation, manufacturing capabilities and distribution expansion position the

Company well to capitalize on future growth opportunities while maintaining financial discipline and creating long-term value for stakeholders.

MATERIAL DEVELOPMENTS IN HUMAN

RESOURCES, INDUSTRIAL RELATIONS, ENVIRONMENT, HEALTH AND SAFETY

The Company has prioritized talent development through continuous training initiatives, consistently investing in programs designed to enhance employee skills. As on 31st March 2026, CERAs manpower strength stood at 2520. Further more details are available in the Business Responsibility and Sustainability Report, which forms part of the Directors Report (Annexure VII).

CERA is certified under ISO 9001, ISO 14001, and BS 18001 standards, underscoring its commitment to quality, environmental responsibility, and occupational health and safety. The Company is also a member of the Indian Green Building Council (IGBC), promoted by the Confederation of Indian Industry (CII).

In addition, CERA actively engages with industry influencers and professional associations, including the Institute of Indian Interior Designers (IIID), and the Indian Plumbing Association (IPA), strengthening its presence and partnerships within the design and construction ecosystem.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

CERA has established a robust internal control framework, aligned with the size, scale, and complexity of its operations. The framework is supported by well-defined policies and procedures, system automations, authorization protocols, access controls, segregation of duties, and physical safeguards to ensure statutory compliance, protect assets from unauthorized use, and strengthen overall corporate governance.

Internal financial controls, as mandated under the Companies Act, 2013, have been formally laid down. Their design and operating effectiveness are regularly reviewed by the in-house Internal Control team and further validated by independent Internal Auditors engaged by the Company. In addition, the Statutory Auditors have independently audited the internal financial controls over financial reporting as of 31st March 2026 and confirmed that such controls were operating effectively.

Oversight is further reinforced by the Audit Committee of the Board of Directors, details of which are provided in the Corporate Governance Report. The Audit Committee reviews audit reports submitted by the Independent Internal Auditors on a quarterly basis, ensuring continuous monitoring and accountability.

ANNEXURE - II TO THE DIRECTORS REPORT

Disclosure of particulars with respect to Information on Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules 2014 and forming part of the Report of the Board of Directors for the year ended 31st March, 2026.

A. Energy Conservation

Discussed in main report

B. Technology Absorption

Pressure Casting: Advance casting technology ensuring high dimensional accuracy and Consistent product quality with reduced variability.

Glazing Robot: Superior finish and consistent gloss and Uniform glaze thickness, enhance the aesthetic appeal of the final sanitaryware products.

XRF Machine: Advanced testing for accurate raw material composition, ensures strict quality control at incoming stage, Strengthens overall process reliability and consistency with minimum variation. CNC Router and 3D printing for rapid prototyping, reduced development cycle time and increase efficiency & speed.

Color Products with Advance inhouse PVD Facility for Superior finish quality, enhanced durability and premium look, Cost reduction, Shorter new color product development lead time New Advanced Plating for Nickel-Chrome plating for stainless steel, additional Copper plating for superior finish, higher consistency in coatings and improved durability, better adhesion and smoothness, reduces process time, Premium product appeal.

Research and Development (R & D)

1. Specific areas in which R & D is carried out:

The Companys Research & Development Unit, recognized by the Department of Scientific and Industrial Research (DSIR), Government of India since 1989, has continuously focused on enhancing the quality of its sanitary ware products. Its efforts emphasize reducing costs by adopting alternative, cost-effective raw materials, optimizing waste utilization, improving quality standards, minimizing production losses, recycling both unfired and fired waste, and implementing effective pollution control measures. These initiatives have reinforced the companys competitive advantage. In recent years, a number of innovative R&D projects were successfully developed and commercialized.

Use of refire pitcher powder in production. Development of new Snow-white glaze with better glaze surface and also cost effective. Development of Alumina Body for thin rim TT

Wash Basin.

Development of deflocculant to improve the quality of ETP and STP Water. Development of Indian Plaster in the replace Imported plaster, reduction of wastage of plaster of paris during the mould preparation, and increase mould life in casting department.

Development of high alumna body, high casting body having high green strength and Single Ball clay body to improve recovery. Development of metallic Glazes and antifobicity in glaze.

Development of Indian binder by replacing imported. Development of Single Ball clay in place of multi ball clays for casting slip and this has helped ESG. Strengthening of ZLD through reuse of process water.

Development of biscuit fired shrinkage plate tiles. These tiles reduce squat, undulation, foot crack of critical items by loading on it. Especially quality of wall hung products has improved significantly by using this. Faucet Robotic Surface Grinding, helps in uniform coat of chromium plating that will lead to surface endurance also installed Faucet Peeling Machine for impeccable body finish.

Our Zamak plating technology in Faucetware has set a new industry bench mark for the durability, aesthetics and performance.

Also, in final product quality, Company has introduced automatic leakage detection test and overflow test. These tests help to improve functional quality of final products.

Introduced different colours of silk glazes which enhance uniqueness as well as verity and versatility. Under the initiative of ‘Waste Minimization and Waste Utilization, numerous measures have been taken. This includes recycling of solid and liquid, ZLD

(zero liquid discharge) plant, high energy efficient rated machines, compliance to pollution norms, awareness-generation among employees etc.

In keeping with eco-friendly tradition, the Company has developed 04 Liters flushing system with same effectiveness as 06 Liters flushing system. By 30% reduction in water consumption, this technology will help to save precious water. The company also reduced its water dependence on state supply by recycling full water requirement of manufacturing process. The company developed a fully functional rain-water-harvesting system.

Company has received prestigious international NABL certification on its plant quality lab. This will further enhance our capability to check and provide best international quality Product Certifications: All companys products are ITC (Institute for Testing and Certification, Czech Republic) certified. The company have completed IAPMO (USA Certification Agency) for almost half of companys products and are in process to get more products under this certification. The company have also started its product certification from SGS (Emirates Authority for standardization and Metrology).

Companys all products are CE (Conformite Europeenne) certified from QVC Certification. Companys Products have GRIHA (Green Rating for Integrated Habitat Assessment) Certification and company is getting more products under this certification. All the Qualified products are Green Pro certified from CII.

2. Benefit derived as a result:

The use of new, more economical raw materials sourced from alternative suppliers, along with the substitution of imported raw materials, pigments, and other production inputs, is expected to significantly reduce overall manufacturing costs. This initiative not only helps in minimizing dependence on imports but also enhances supply chain efficiency and cost stability. By adopting locally available and cost-effective materials without compromising on quality, the company aims to achieve improved production economics and strengthen its competitiveness in the market.

3. Future plan of action:

The Company aims to strengthen its capability and expand its capacity to manufacture high-value products with ergonomic and aesthetically appealing designs. These products will be larger in size and offer a premium look and feel. Advanced surface technologies such as stain-resistant, antimicrobial, and self-cleaning coatings will be integrated, along with the introduction of new finishes, including metallic and copper glazes.

Aligned with its focus on automation, the Company plans to deploy additional robots across various stages of the manufacturing process. In addition, an automatic gas pressure regulation system is proposed for the firing process to enhance operational efficiency, consistency, and process control.

The Company shall keep increasing product portfolio of the colour and keep adding new product as per increasing demand of the customers. As part of its eco-friendly initiatives, the Company aims to enhance the use of renewable energy sources primarily solar energy, which is already in place. Additionally, plans are underway to redesign the glaze spray system to maximize glaze recovery and recycling.

The Company is focused on strengthening its manufacturing capabilities to support the production of more complex product designs. In this direction, it has planned additional conversions from bench casting to battery casting, which provide improved efficiency and higher productivity. Battery casting also offers better ergonomics, thereby contributing to improved worker health and safety. In addition, the Company has incorporated advanced semi-automatic casting methods, including pearl casting, vertical casting, and beam casting, into its production processes.

4. Expenditure on R & D: a) Capital : Rs. 1.24 Lakhs b) Recurring : Rs. 145.45 Lakhs Total : Rs. 146.69 Lakhs c) Total R & D Expenditure : 0.07% as a percentage of total By turnover

C. Foreign Exchange earnings and outgo

The Company has continued to maintain focus and avail of export opportunities based on economic considerations. Foreign exchange used and earned by the Company during the year is as under: Total foreign exchange used : Rs. 4016.43 Lakhs Total foreign exchange earned : Rs. 1347.93 Lakhs

	Vikram Somany
Ahmedabad	Chairman and Managing Director
8th May, 2026	(DIN:00048827)