No rosy picture: Rising input cost forces paint makers to hike prices

Abhishek Law

Paint-makers have hiked prices by 2.5-3 per cent since the beginning of this month. This is the second time prices have gone up in the decorative paints category this fiscal, and the third during the calendar year. Earlier hikes of around 2 per cent each were initiated in March and May.

Rising input cost, particularly, driven by northward movement of crude prices and falling rupee are said to be the reasons for the hike.

Compared to the decorative segment, price hike across the industrial paints sector could be a bit steeper, at around 6-7 per cent. But, it will be the first hike in the category during this fiscal.

All major paint companies, including market leader Asian Paints, Berger Paints, Kansai Nerolac and Akzo Nobel, are said to have revised prices.

While Berger Paints confirmed the move, others did not respond to queries and calls by BusinessLine .

According to Abhijit Roy, MD and CEO, Berger Paints, an upward revision in price had to be initiated in order to ease margin pressure. Roy is also the President of the Indian Paints Association, an umbrella organisation of paint-making companies.

“Decorative paints have seen a 2-3 per cent price hike beginning October, while in the industrial segment it will be around 6-7 per cent,” he said.

Input cost hike

On a year-on-year basis, the price of the key input, titanium dioxide, saw a 6 per cent increase in the second quarter, while price of monomers have also increased, say market sources. As Roy points out, the chemical is imported and hence the rupee depreciation has an impact on cost.

This apart, majority of the raw materials used by paint companies are crude oil derivatives like pthalic anhydride and others (including monomers). These have seen “quite an increase” in prices with crude prices moving up.

“From Q3 onwards, we expect margin pressures to ease. Ideally, margins should be around the 15-18 per cent levels for paint companies,” he said.

Impact on demand

Despite the upward revision in prices during the festival season, demand is unlikely to be hit, Roy said.

Paint companies had in July, cut prices by 10 per cent to pass on the benefit of the reduced GST (Goods and Services Tax) rate on paints. (GST rates were reduced from 28 to 18 per cent earlier this year.)

“There was a 10 per cent price cut that happened post GST rate changes in July. Now only a 2-3 per cent increase is done over that reduced price. So, prices remain on the lower side and we do not see much of an impact in volume sales,” he explained.