Paint cos riding price hikes to double-digit growth

Mumbai: A series of price increases over the last few months is seen helping domestic paint companies report a 10-15% year-on-year growth in both revenue and profit for the September quarter, analysts said, even as volume growth remains relatively lower —in the 5-7% range.

These price hikes will be a key contributor to earnings as they will help offset some of the increase in costs that these companies have seen in the last few months. Crude oil prices have spiked because of the conflict in the Middle East, and derivatives of crude oil account for at least a third of raw materials costs for paint makers.

After the initial hikes taken in April-May and then July, domestic paint companies are raising prices by around 3% with effect from November. Effectively, companies have hiked prices between 10 -15% since April, with market leader Asian Paints among those implementing the steepest hikes.


“Ideally, we would not like to take any increases going forward unless the situation really becomes alarming of what we need to do in certain categories,” Amit Syngle, chief executive officer, Asian Paints, had said in August. Crude oil prices have witnessed extreme volatility since then, even crossing the $100 per barrel mark.

Even with the price hikes, companies are set to see a hit in their profitability, with earnings before interest, tax, depreciation and amortization (Ebitda)margins likely to decline by 70-120 basis points compared to the previous year, analysts said.

While Berger Paints India could see its EBITDA margins improve due to a low base in the previous year, Asian Paints is likely to see an over 100 basis points fall in margins, while that of Kansai Nerolac Paints could be around 50 basis points, they said.

“The margin outlook would depend on crude prices; however, Q3 could witness better margin on account of improved growth and better mix,” Amit Purohit of Elara Capital said.

The September quarter is generally weak for paint companies as monsoon rains during the period impact demand; this is then followed by demand picking up during the festive period. “Festive-driven secondary demand is expected to pick up in October, with the delayed and extended festive season providing support to 3QFY27,” analysts at Motilal Oswal Securities said.

Apart from demand and profitability, the guidance given by companies on competition will continue to remain in focus. “We do not believe that competitive intensity has peaked out yet and expect the rebating intensity to remain elevated as players vie for market share,” analysts at InCred said.