Berger eyeing ‘good growth’ in Jan-March quarter

The country’s second largest paint-maker, Berger Paints India Ltd, is eyeing “good growth” in the January to March quarter and subsequent ones, on the back of continued demand pick-up in upcountry markets and following demand revival for non-decorative paint categories.

Contributions from “adjacencies business” — an 18-month-old vertical the company started investing in following an acquisition (of STP Ltd) and by bringing in a brand ambassador (Akshay Kumar) — have seen growth across key markets, adding to the top line and bottom line.

The segment has grown at over 40 per cent, albeit on a smaller base. The vertical includes waterproofing and construction chemicals, apart from sanitisation solutions (like disinfectant spray and wipes).

Berger Paints posts 53% rise in profit at ₹253 cr

According to Abhijit Roy, MD and CEO, Berger Paints is investing ₹120-150 crore in shoring up capacities with greenfield and brownfield expansion plans.

Between ₹80 crore and ₹100 crore will be spent towards setting up a new unit — for construction chemicals, waterproofing solutions and putty — at Panagarh in West Bengal. Capacity expansion will happen across three units, Jejuri (Pune), Delhi and Puducherry. These will be operational April 2021 onwards.

‘We should end the fiscal with better growth than the industry’

“The new units will help us shore up the adjacencies business and cater to region-specific demand. For instance, Jejuri will cater to western markets; Panagarh in east, Delhi for North and Puducherry across south. We intend to be amongst the top three players in the waterproofing and construction chemicals vertical over the next few years,” he told BusinessLine .

The market is dominated by a few MNCs, Pidilite and Asian Paints.

Berger, however, will keep a low profile in the disinfectant segment (BreatheEasy brand), where sales continue to be “slow”.

Demand recovery

According to Roy, upcountry markets continue to dominate demand recoveries in decorative paints. Urban markets, which saw renewed demand in the festive season and post-festive wedding seasons, are now seeing some slowdown with infections going up.

“We are not a very strong player in some of the urban areas of Maharashtra or Karnataka, which are affected by a second wave of Covid. Although there will be some impact in buyer sentiments in these geographies, impact on our top line should be negligible,” he said.

Continuous quarters of growth across industrial, automobile and protective paint verticals, coupled with renewed focus on infra projects and a low base effect in Q4, should help generate “good volumes”.

“We are expecting strong double-digit growth in Q4 FY21. Aided by economic recovery and pick-up in demand across segments, growth should continue in FY22,” Roy said.

Price rise

However, raw material price rise is worry.

Crude prices continue to be northward-bound, leading to a 5-8 per cent rise in raw material cost in industrial paint categories (which mostly use crude derivatives). In decorative paints, the price rise was around 2 per cent.

Berger has asked for and got price increases from most customers in industrial paints, except automotive where negotiations are going on. Raw material trends are being closely observed before taking a decision on increasing decorative paint prices.

“If current trend continues in crude, the industry will initiate some price rise. However, there’s a conscious decision not to sacrifice market share. So, there could be some impact on gross margins,” he said, adding that operating (EBITDA) margins may not see much of a change since cost-control measures continue to be in place.