{"id":43720,"date":"2023-10-09T11:39:29","date_gmt":"2023-10-09T11:39:29","guid":{"rendered":"https:\/\/histarmar.net\/?p=43720"},"modified":"2023-10-09T11:39:29","modified_gmt":"2023-10-09T11:39:29","slug":"rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat","status":"publish","type":"post","link":"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/","title":{"rendered":"Rising costs, competition leave paint sector in need of fresh coat"},"content":{"rendered":"

Festival season may add vibrant strokes to volumes, but margins remain a blank canvas.<\/strong><\/p>\n

Paint companies have lagged behind their consumer peers in the past year.<\/p>\n

<\/p>\n

While the four largest listed paint companies have seen marginal negative returns, the S&P BSE Fast Moving Consumer Goods (FMCG) and the National Stock Exchange Nifty FMCG indices have delivered a solid 16 per cent return during the same period.<\/p>\n

Initially, volume growth and reduced costs bolstered the sector’s sentiment, but brokerages have grown cautious due to increased competitive pressures.<\/p>\n

The entry of new players and the necessity for additional advertising investment are anticipated to impact incumbent players’ profitability.<\/p>\n

Worries about slowing volumes and a sharp increase in crude oil prices have intensified the headwinds facing the sector.<\/p>\n

Therefore, market watchers will closely monitor margin movements in the July-September quarter, as well as the trajectory of volume growth.<\/p>\n

In the April-June quarter, paint majors delivered an impressive double-digit volume growth performance compared to the previous year.<\/p>\n

Asian Paints, the market leader, reported a 10 per cent growth in the decorative paint segment, while Berger Paints saw a 12.7 per cent increase.<\/p>\n

Analysts at Kotak Institutional Equities Research, led by Jaykumar Doshi, note that after the double-digit growth in the first quarter, demand for decorative paints in the current quarter has been relatively subdued.<\/p>\n

“We estimate industry volume and value growth to be 5-6 per cent and 3-4 per cent, respectively, for the July-September quarter,” they add.<\/p>\n

ICICI Securities also predicts low-to-mid-single-digit volume growth for the sector in July and August this year.<\/p>\n

Dealers are anticipating a strong September and October, thanks to a favourable base and a delayed Diwali in 2023, according to analysts at the brokerage, led by Manoj Menon.<\/p>\n

Looking ahead, the sector faces two key challenges.<\/p>\n

First, there’s concern about the surge in crude oil prices and its impact on raw material costs for the listed majors.<\/p>\n

Second, Grasim’s paint brand, Birla Opus, is set to launch by the end of the current financial year (2023-24).<\/p>\n

Brent crude oil prices, currently trading at $94 per barrel, have risen by 26 per cent over the past three months.<\/p>\n

Titanium dioxide, a crucial raw material for paint companies, is a derivative of crude oil, so its rising prices will make raw materials more expensive.<\/p>\n

Approximately 50-60 per cent of the raw material costs for paint makers come from crude oil.<\/p>\n

In a recent report, Motilal Oswal Research highlighted that crude oil prices have surged, surpassing $90 per barrel, reaching their highest level in nearly nine months.<\/p>\n

This increase comes as Russia and Saudi Arabia decided to prolong their supply reduction.<\/p>\n

Kotak Institutional Equities Research points out that crude oil prices in rupee terms have risen by about 10 per cent sequentially in the second quarter, at a time when the competitive landscape is pushing for higher rebates and discounts.<\/p>\n

The brokerage expects high paint input commodity prices to exert some pressure on the margins of paint companies.<\/p>\n

While lower input costs and strong operating performance helped Asian Paints report a 523-basis point (bp) year-on-year (Y-o-Y) jump in gross margins to 42.9 per cent and a 502-bp Y-o-Y improvement in operating profit margins to 23.1 per cent in the June quarter, margin expansion on a sequential basis could be challenging (with little impact on a Y-o-Y basis).<\/p>\n

Grasim’s entry into the Rs 70,000 crore paint sector in the country with the brand Birla Opus could pose a challenge to the incumbents, given its substantial investment of Rs 10,000 crore and the strength of its existing distribution network.<\/p>\n

<\/p>\n

Brokerages hold mixed views on the impact that the large entrant will have on the incumbents.<\/p>\n

While Nuvama Research suggests that Grasim is likely to be a serious challenger, they highlight that decorative paint leaders Asian Paints and Berger Paints have maintained double-digit volume growth in most years despite competition from several domestic and international players entering India’s paint market with aggressive advertising spending and product innovation.<\/p>\n

Analysts at the brokerage, led by Abneesh Roy, believe that their ability to withstand competition and grow at a robust pace reflects multiple entry barriers in the sector.<\/p>\n

Considering Grasim is gunning for the no. 2 slot in the paint sector, Kotak Institutional Equities Research believes that Berger Paints is more vulnerable than Asian Paints to Grasim’s entry.<\/p>\n

The new entrant is likely to avoid a head-on battle with Asian Paints and focus on displacing the top two to four brands in dealer outlets.<\/p>\n

Additionally, Asian Paints’ strength in adjacencies such as waterproofing and home décor could help it defend market share better in large retail outlets (mega\/platinum dealers), according to the brokerage.<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Festival season may add vibrant strokes to volumes, but margins remain a blank canvas. Paint companies have lagged behind their consumer peers in the past year. While the four largest<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"yoast_head":"\nRising costs, competition leave paint sector in need of fresh coat - histarmar<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Rising costs, competition leave paint sector in need of fresh coat - histarmar\" \/>\n<meta property=\"og:description\" content=\"Festival season may add vibrant strokes to volumes, but margins remain a blank canvas. Paint companies have lagged behind their consumer peers in the past year. While the four largest\" \/>\n<meta property=\"og:url\" content=\"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/\" \/>\n<meta property=\"og:site_name\" content=\"histarmar\" \/>\n<meta property=\"article:published_time\" content=\"2023-10-09T11:39:29+00:00\" \/>\n<meta name=\"author\" content=\"mediabest\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"mediabest\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/\",\"url\":\"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/\",\"name\":\"Rising costs, competition leave paint sector in need of fresh coat - histarmar\",\"isPartOf\":{\"@id\":\"https:\/\/histarmar.net\/#website\"},\"datePublished\":\"2023-10-09T11:39:29+00:00\",\"dateModified\":\"2023-10-09T11:39:29+00:00\",\"author\":{\"@id\":\"https:\/\/histarmar.net\/#\/schema\/person\/bd83d16d88852f915ed79f4ac43b288e\"},\"breadcrumb\":{\"@id\":\"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/histarmar.net\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Business\",\"item\":\"https:\/\/histarmar.net\/category\/business\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Rising costs, competition leave paint sector in need of fresh coat\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/histarmar.net\/#website\",\"url\":\"https:\/\/histarmar.net\/\",\"name\":\"histarmar\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/histarmar.net\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/histarmar.net\/#\/schema\/person\/bd83d16d88852f915ed79f4ac43b288e\",\"name\":\"mediabest\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/histarmar.net\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/41b05721f7d80e1e707b70447e9375b5?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/41b05721f7d80e1e707b70447e9375b5?s=96&d=mm&r=g\",\"caption\":\"mediabest\"}}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Rising costs, competition leave paint sector in need of fresh coat - histarmar","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/","og_locale":"en_US","og_type":"article","og_title":"Rising costs, competition leave paint sector in need of fresh coat - histarmar","og_description":"Festival season may add vibrant strokes to volumes, but margins remain a blank canvas. Paint companies have lagged behind their consumer peers in the past year. While the four largest","og_url":"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/","og_site_name":"histarmar","article_published_time":"2023-10-09T11:39:29+00:00","author":"mediabest","twitter_card":"summary_large_image","twitter_misc":{"Written by":"mediabest","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/","url":"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/","name":"Rising costs, competition leave paint sector in need of fresh coat - histarmar","isPartOf":{"@id":"https:\/\/histarmar.net\/#website"},"datePublished":"2023-10-09T11:39:29+00:00","dateModified":"2023-10-09T11:39:29+00:00","author":{"@id":"https:\/\/histarmar.net\/#\/schema\/person\/bd83d16d88852f915ed79f4ac43b288e"},"breadcrumb":{"@id":"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/histarmar.net\/business\/rising-costs-competition-leave-paint-sector-in-need-of-fresh-coat\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/histarmar.net\/"},{"@type":"ListItem","position":2,"name":"Business","item":"https:\/\/histarmar.net\/category\/business\/"},{"@type":"ListItem","position":3,"name":"Rising costs, competition leave paint sector in need of fresh coat"}]},{"@type":"WebSite","@id":"https:\/\/histarmar.net\/#website","url":"https:\/\/histarmar.net\/","name":"histarmar","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/histarmar.net\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/histarmar.net\/#\/schema\/person\/bd83d16d88852f915ed79f4ac43b288e","name":"mediabest","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/histarmar.net\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/41b05721f7d80e1e707b70447e9375b5?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/41b05721f7d80e1e707b70447e9375b5?s=96&d=mm&r=g","caption":"mediabest"}}]}},"_links":{"self":[{"href":"https:\/\/histarmar.net\/wp-json\/wp\/v2\/posts\/43720"}],"collection":[{"href":"https:\/\/histarmar.net\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/histarmar.net\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/histarmar.net\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/histarmar.net\/wp-json\/wp\/v2\/comments?post=43720"}],"version-history":[{"count":1,"href":"https:\/\/histarmar.net\/wp-json\/wp\/v2\/posts\/43720\/revisions"}],"predecessor-version":[{"id":43721,"href":"https:\/\/histarmar.net\/wp-json\/wp\/v2\/posts\/43720\/revisions\/43721"}],"wp:attachment":[{"href":"https:\/\/histarmar.net\/wp-json\/wp\/v2\/media?parent=43720"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/histarmar.net\/wp-json\/wp\/v2\/categories?post=43720"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/histarmar.net\/wp-json\/wp\/v2\/tags?post=43720"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}