Paint firms get a breather, but will it suffice?

Shares of Asian Paints Ltd, Berger Paints India Ltd and Kansai Nerolac Paints Ltd rallied 3-5% on Wednesday as crude oil prices eased. Following the news of a two-week ceasefire in the West Asia war, Brent crude slipped to around $93 a barrel from a closing high of $107.9 a barrel on 18 March.Crude derivatives such as solvents, resins and binders comprise around 40% of the raw material basket for paint companies, so higher oil prices weigh on gross margins.

To counter inflation in crude-oil-linked input costs, listed paintmakers recently undertook calibrated price increases.Decorative paints giant Asian Paints announced a 6-8% price increase in two phases. In the first phase, prices in key decorative categories of emulsions, enamels, primers, and distempers, will increase from 10 April, showed a dealers’ channel check by Motilal Oswal Financial Services.

The second phase will begin from 21 April, covering waterproofing, adhesives, and wood finishes.Close rival Berger Paints India has implemented its first phase, hiking prices by almost 3% from 25 March, and will increase prices another 5-10% from 9 April, said the Motilal report on 2 April. Indigo Paints and Kansai Nerolac have also hiked prices to various degrees.Paint companies have also reduced the trade schemes and discounts they give dealers on the listed price of a product to encourage bulk buying.

Benign costs and increased competitive intensity over the past two to three years had led to a massive increase in trade schemes.The benefit of price increases on margins and realizations should reflect in the June quarter (Q1FY27). But this may not be enough to rekindle investor confidence.