Berger bets on pent-up demand as prolonged monsoon, higher ad spends hit Q2

Mumbai: An abnormally long monsoon and higher marketing spends washed away the second-quarter earnings growth of Berger Paints India Ltd when India’s second-largest paintmaker and its peers grapple with rising competition in the sector. The company has pinned hopes on pent-up demand.

Festive buying had occurred earlier in the year, so October was soft for the industry, the company’s management said in an analyst call after reporting its results for the quarter ended September. The company believes it fared “slightly better” than others.

Berger Paints expects a mid-single-digit value growth in the third quarter ending December, with higher volume growth, assuming November performs well.

“It kept on raining until almost the end of October as well. But now, for the last few days, at least, it has abated completely for most parts of the country,” said Abliijit Roy, managing director and chief executive of Berger Paints. “Therefore, we expect solid pent-up demand, which is there to come up.”

Amid heightened competition, Berger’s advertising spending rose 20-23% year-on-year (y-o-y) in the second quarter.

Competition continues, but the intensity has stabilized, according to Roy. He believes the new entrant’s sales likely declined sequentially, in line with the industry. With a base now established, its growth and market-share gains should moderate in the coming quarters, reducing the impact on existing players.

Birla Opus, backed by the Aditya Birla Group, has shaken up India’s ₹70,000 crore decorative paints market since entering in April 2024. JSW Paints Ltd’s acquisition of a 74.76% stake in Akzo Nobel India Ltd, which has also received approval from the Competition Commission of India, has intensified competition.

Berger is ready to spend more on brand building. “If we see that we are having the luxury of spending a little bit more, we would like to invest in brand building a bit more than what we are doing even today,” Roy said. “We have increased it, but we would like to increase it further.”

Roy said the company would “like to gain share, which is very important in the current situation”.

Profit drops nearly 25%

The paint maker’s net profit fell by 23.5% y-o-y to ₹206.4 crore in the September quarter, according to its regulatory filings on Tuesday. The profit also declined 34.5% sequentially.

“We could not sell, and especially in our key states of West Bengal, Kerala, Northeast, there were excessive rains ending right up to September and it carried on,” said Roy. “Therefore, much more of our exterior category, which drives up profit, got impacted to a large extent.”

Berger reported a 1.9% y-o-y increase in revenue to ₹2,827.5 crore. Revenue declined 11.7% sequentially.

While the revenue growth was muted, according to the company’s estimates, it continued to gain market share in April-September 2025 over the previous year among major listed paint companies.

The paint maker’s Ebitda for the September quarter fell by almost 18.8% year-on-year to ₹352.3 crore. Ebitda is earnings before interest, tax, depreciation and amortization, a measure of operating income.

“The growth in advertisement, the growth in overhead could not be absorbed by the softer sales, which is the main reason for this deterioration in the overall operating profit margin,” said Roy, adding that the company continues to invest in expanding the dealer network and adding stores in urban pockets to strengthen its reach.

"Revenues were muted, while higher employee costs and elevated other expenses—largely due to stepped-up advertising pressured earnings, as freight typically moves in line with revenue and did not contribute meaningfully to the cost increase," said Manoj Menon, head of research, ICICI Securities. The brokerage, in its 30 October report, said it expects a recovery in revenues and margins in the second half of FY26.

For the September quarter, the company reported a standalone volume growth of 8.8% and value growth of 1.1%, according to the investor presentation.

“We had a high single-digit volume growth with low value growth,” Roy said. “Higher contribution from products like tile adhesives, admixture and putty, and lower sales of high-value products such as exterior adhesives and roof coating resulted in an increase in the volume-value gap,” Roy explained.

The gap will not disappear soon, but should reduce to about 4-4.5% by Q4 or early FY27, he said. To achieve this, Berger will need double-digit volume growth to achieve high single-digit value growth, he said.

Acknowledging that the second quarter was tough, he expects improved investments in brand and manpower, and the strengthening retail and dealer networks to capture upcoming demand momentum. However, he said, “forex volatility and tariff changes” may pose near-term uncertainties.

"Berger’s muted quarter was largely driven by unusually heavy monsoons, which hurt premium exterior paint demand and created negative operating leverage. While competition in distribution has stabilised, advertising intensity remains elevated and companies will continue investing to protect share,” said Amit Purohit, senior vice president at Elara Securities. “As weather normalises, the volume-value gap should narrow meaningfully in Q3, and Berger should be able to maintain the lower end of its 15-17% margin guidance for the year."

Berger Paints’ shares closed 0.52% lower at ₹536.20 ahead of the results, tracking the 0.64% decline in the benchmark Nifty 50.