Kajaria Ceramics shares fall for 7th day even as Emkay says 'buy' amid Rs 20-crore fraud

Kajaria Ceramics shares fall for 7th day even as Emkay says 'buy' amid Rs 20-crore fraud

Shares of Kajaria Ceramics fell for 7th day on December 24 as the company reels from the aftermath of a Rs 20-crore fraud by the chief financial officer of one of its subsidiaries.

Post-market hours on December 19, Kajaria Ceramics said Dilip Kumar Maliwal, chief financial officer of its wholly-owned subsidiary Kajaria Bathware, was found to have committed a fraud of Rs 20 crore over the past two years. The company said Maliwal was involved in embezzlement and siphoning of funds of Kerovit Global, a wholly owned subsidiary of Kajaria Bathware and a step-down wholly-owned subsidiary of Kajaria Ceramics.

In an analyst call on December 22, Kajaria Ceramics' top management said, "Fundamentals of our company remain quite strong, reviewed all other subsidiaries, no discrepancy was found."

"This amount of fraud will be shown as an exceptional item, recovered approximately Rs 50 lakh, not hopeful about the full amount being recovered. But he has promised to return some money," the management further said.

The financial impact will be recognised as an exceptional item in FY26.

On December 24, the stock fell 4% to Rs 974 apiece, thus extending its losses in seven sessions to 8.5%.

Brokerage Emkay said embezzlement, spanning the last two years, reflects company's earlier weak practices but retained its 'buy' rating and gave a target price of Rs 1,550, which implies a potential upside of up to 59%.

While the event has negative implications for the overall governance and controls, the management has handled it effectively; we do not see this event impacting valuations, said Emkay.

"The fraud was detected during the exercise of strengthening the company’s IT/internal systems, including the vendor onboarding process. KJC has taken necessary action, involving termination of the CFO of the subsidiary and filing a police complaint. Internal controls have been made more stringent, with implementation of more such measures lined up, to avoid a repeat of such instances of fraud. The status on full recovery of the fund amount is unclear currently, and would be taken as an ‘exceptional loss’ in FY26. We maintain our estimates for FY27/28," said the brokerage.

"Also, while we retain our target multiple for Kajaria, a repeat of such events in future could pose a risk and lead to de-rating," the brokerage added.

So far in 2025, the stock fell 16%.

Meanwhile, Nuvama Wealth Management has cut the price-to-earnings multiple of Kajaria Ceramics due to concerns about governance and the brokerage now values Kajaria 20% below its 10-year average forward price-to-earnings multiple, cutting the one-year forward multiple to 28 times from 33 times earlier.