Weak rupee a new worry for paint companies

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Subscribe to enjoy similar stories. The paint industry, long an oligopolistic stronghold with high entry barriers, is undergoing a shift. The entry of new players and evolving market dynamics have intensified competition, leaving established players scrambling to defend their turf.

To retain or expand market share, both incumbents and new entrants are ramping up production capacities, expanding dealer networks, and and are set to boost their advertising spends. However, this aggressive push is straining profitability, especially with disruptive pricing strategies from entrants like Birla Opus threatening earnings growth. Companies now face a tough choice: prioritize market share or protect margins.

Against this backdrop, the tumbling rupee presents an additional challenge, intensifying cost pressures for paint companies reliant on imported raw materials. The Indian currency recently breached the ₹85 mark against the US dollar, reaching an all-time low. “Indian paint companies import around one-third of their raw material needs, including crude oil derivatives like titanium dioxide and resins making them vulnerable to higher raw material cost due to a weaker rupee and increasing crude oil prices," said Poonam Upadhyay, director, Crisil Ratings.

Read this | Paint companies fret about rising oil prices. But there are bigger worries ahead. With the rupee expected to remain range-bound in the near term, passing on these costs to consumers in an increasingly competitive market will be difficult. That, along with the anticipated increase in ad spends could moderate the sector’s operating margin to around 15-17% in FY25 from 20% in FY24, according to Upadhyay.