Kajaria Ceramics: Subsidiary fraud triggers CFO exit; buy, hold or sell?
While the event raised concerns around governance and controls at the subsidiary level, Emkay Global said it did not expect the development to have a material impact on the company’s medium-term earnings trajectory.
- Dec 24, 2025,
- Updated Dec 24, 2025 8:15 AM IST
Stock brokerages on Wednesday said the Rs 20 crore fraud reported at Kajaria Ceramics’ step-down subsidiary Kerovit Global is a governance negative, given the size of the misappropriation relative to the subsidiary’s balance sheet, but did not warrant a change in its valuation view on the stock. They noted that the fraud amounted to about 13 per cent of Kerovit’s total assets as of FY25 and reflected weaker internal practices in the past. They, however, believes the issue had been handled effectively by management.
The incident was detected as part of Kajaria Ceramics’ ongoing efforts to strengthen its IT systems and internal controls, particularly around MIS audits and vendor onboarding. While the event raised concerns around governance and controls at the subsidiary level, Emkay Global said it did not expect the development to have a material impact on the company’s medium-term earnings trajectory or valuation.
Kajaria Ceramics disclosed that the fraud occurred over the past two years at Kerovit Global, a wholly owned subsidiary of Kajaria Bathware. The misappropriation took place during the capex process through forged senior management signatures and the creation of a fake vendor entity, with the subsidiary’s CFO identified as the beneficiary. The discrepancies were flagged during vendor onboarding audits. Around Rs 60 lakh has been recovered so far, though full recovery remains uncertain.
"The CFO of the said Kerovit subsidiary has been apprehended. The company intends to have a strong control system going ahead and continue its focus on market share gains coupled with cost optimisation. Factoring in the current uncertainty on corporate governance, we are cutting target valuation to 28 times from 33 times earlier (20 per cent discount to 10-year average). Maintain ‘HOLD’ with a revised target of Rs 1,160 (earlier Rs 1,318)," Nuvama said.
Emkay Global said the net loss from the incident, estimated at around Rs 19.40 crore after recoveries, would likely be treated as an exceptional item in FY26. The brokerage maintained its FY27 and FY28 estimates unchanged, but cautioned that any recurrence of such incidents could pose a risk to the stock’s valuation multiple.
On controls, Emkay Global noted that Kajaria Ceramics had significantly upgraded its IT and MIS systems over the past one to two years, reducing manual intervention in critical processes such as vendor onboarding. These systems had already been implemented at the parent level, and subsidiaries were expected to migrate to the upgraded platform over the next three to four months.
Emkay Global reiterated its 'Buy' rating on Kajaria Ceramics and maintained its target price of Rs 1,550, based on 42 times its 10-year average price-to-earnings multiple.
Stock brokerages on Wednesday said the Rs 20 crore fraud reported at Kajaria Ceramics’ step-down subsidiary Kerovit Global is a governance negative, given the size of the misappropriation relative to the subsidiary’s balance sheet, but did not warrant a change in its valuation view on the stock. They noted that the fraud amounted to about 13 per cent of Kerovit’s total assets as of FY25 and reflected weaker internal practices in the past. They, however, believes the issue had been handled effectively by management.
The incident was detected as part of Kajaria Ceramics’ ongoing efforts to strengthen its IT systems and internal controls, particularly around MIS audits and vendor onboarding. While the event raised concerns around governance and controls at the subsidiary level, Emkay Global said it did not expect the development to have a material impact on the company’s medium-term earnings trajectory or valuation.
Kajaria Ceramics disclosed that the fraud occurred over the past two years at Kerovit Global, a wholly owned subsidiary of Kajaria Bathware. The misappropriation took place during the capex process through forged senior management signatures and the creation of a fake vendor entity, with the subsidiary’s CFO identified as the beneficiary. The discrepancies were flagged during vendor onboarding audits. Around Rs 60 lakh has been recovered so far, though full recovery remains uncertain.
"The CFO of the said Kerovit subsidiary has been apprehended. The company intends to have a strong control system going ahead and continue its focus on market share gains coupled with cost optimisation. Factoring in the current uncertainty on corporate governance, we are cutting target valuation to 28 times from 33 times earlier (20 per cent discount to 10-year average). Maintain ‘HOLD’ with a revised target of Rs 1,160 (earlier Rs 1,318)," Nuvama said.
Emkay Global said the net loss from the incident, estimated at around Rs 19.40 crore after recoveries, would likely be treated as an exceptional item in FY26. The brokerage maintained its FY27 and FY28 estimates unchanged, but cautioned that any recurrence of such incidents could pose a risk to the stock’s valuation multiple.
On controls, Emkay Global noted that Kajaria Ceramics had significantly upgraded its IT and MIS systems over the past one to two years, reducing manual intervention in critical processes such as vendor onboarding. These systems had already been implemented at the parent level, and subsidiaries were expected to migrate to the upgraded platform over the next three to four months.
Emkay Global reiterated its 'Buy' rating on Kajaria Ceramics and maintained its target price of Rs 1,550, based on 42 times its 10-year average price-to-earnings multiple.