Decorative paint companies have implemented staggered 14-16% price hikes so far to offset input cost inflation driven by elevated crude oil costs and a depreciating rupee.

Recently, hopes of de-escalation in the West Asia war have brought Brent crude oil prices down to $75-80/barrel from over $100/barrel. The Indian rupee is gradually appreciating, and supply chain constraints for importing crude-based raw materials used to make paints are said to have eased.

These factors provide paint companies with room to cut prices and boost volumes. After all, before the West Asia war broke out, competition for market share gains among incumbents and new entrants was intense. Pricing/discount strategies were key to luring dealers and end customers.

Revenue boost

Historically, paint companies have cut prices in FY09, FY10, FY16 and FY24 whenever commodity prices have declined sharply, notes ICICI Securities. However, the rollback has been partial (covering less than 50% of price hikes from earlier quarters). This time, paint companies could wait for this benign crude cost trend to sustain before reducing selling prices in phases.

ICICI Securities expects them to initially increase influencer spends, trade spends, and schemes and then resort to price cuts only after the key season of Diwali. Price cut earlier than this year’s Diwali and more than 7% might be perceived negatively by consensus, it cautioned.

However, if prices are not cut, it could lead to gross margin expansion in H2FY27 as high-cost inventory typically takes a quarter to get absorbed.

For now, in the June quarter (Q1FY27), price hikes augur well for revenue growth. Paint companies under the coverage of Systematix Shares and Stock Broking, making up for around 70% of industry sales, likely delivered aggregate revenue growth of around 13% in Q1FY27. It estimates Asian Paints and Berger Paints India to clock 9% year-on-year volume growth each.

Margin protection

The slower volume offtake is not surprising, as consumption of discretionary items remains soft. Demand in Q1FY27 was aided by channel stocking ahead of price hikes and the delayed monsoon.

According to PL Capital, primary demand outpaced secondary demand; the latter remained mixed, with rural consumers deferring repainting amid inflationary pressures, partly offset by healthy urban demand, aided by the delayed monsoon and the wedding season. Primary demand is bulk sales from the manufacturer to dealers; secondary demand is sales from dealers to end-users.

Higher costs of monomers, titanium dioxide, and packing materials seen during the quarter are likely to push sequential raw material procurement costs higher. Consequently, Asian Paints and Berger could see gross margins contract by 120-140 basis points (bps) year-on-year and 350-400bps sequentially, according to Systematix. Cost savings and operating leverage may offer some cushion to operating margins.

Once the input-cost inflation worry is out of the way, the focus would shift back to competitive intensity. Companies would fight for sales growth ahead of the crucial festive season in the second half of FY27. “Competitive intensity remains elevated; however, dealer migration appears to have largely stabilized as the trade incentive gap between Birla Opus and Asian Paints narrowed sequentially. JSW-Akzo has set an aggressive target to emerge as the second-largest decorative paints player over the medium term,” added the PL Capital report dated 8 July.

Meanwhile, easing crude prices and price hikes to defend margins have helped paint stocks pare some losses. So far in CY26, Asian Paints and Berger stocks are now down 2% and 6%, respectively, but steep earnings upgrades may not happen in a hurry.

Decorative paint companies have implemented staggered 14-16% price hikes so far to offset input cost inflation driven by elevated crude oil costs and a depreciating rupee.

Recently, hopes of de-escalation in the West Asia war have brought Brent crude oil prices down to $75-80/barrel from over $100/barrel. The Indian rupee is gradually appreciating, and supply chain constraints for importing crude-based raw materials used to make paints are said to have eased.

These factors provide paint companies with room to cut prices and boost volumes. After all, before the West Asia war broke out, competition for market share gains among incumbents and new entrants was intense. Pricing/discount strategies were key to luring dealers and end customers.

Revenue boost

Historically, paint companies have cut prices in FY09, FY10, FY16 and FY24 whenever commodity prices have declined sharply, notes ICICI Securities. However, the rollback has been partial (covering less than 50% of price hikes from earlier quarters). This time, paint companies could wait for this benign crude cost trend to sustain before reducing selling prices in phases.

ICICI Securities expects them to initially increase influencer spends, trade spends, and schemes and then resort to price cuts only after the key season of Diwali. Price cut earlier than this year’s Diwali and more than 7% might be perceived negatively by consensus, it cautioned.

However, if prices are not cut, it could lead to gross margin expansion in H2FY27 as high-cost inventory typically takes a quarter to get absorbed.

For now, in the June quarter (Q1FY27), price hikes augur well for revenue growth. Paint companies under the coverage of Systematix Shares and Stock Broking, making up for around 70% of industry sales, likely delivered aggregate revenue growth of around 13% in Q1FY27. It estimates Asian Paints and Berger Paints India to clock 9% year-on-year volume growth each.

Margin protection

The slower volume offtake is not surprising, as consumption of discretionary items remains soft. Demand in Q1FY27 was aided by channel stocking ahead of price hikes and the delayed monsoon.

According to PL Capital, primary demand outpaced secondary demand; the latter remained mixed, with rural consumers deferring repainting amid inflationary pressures, partly offset by healthy urban demand, aided by the delayed monsoon and the wedding season. Primary demand is bulk sales from the manufacturer to dealers; secondary demand is sales from dealers to end-users.

Higher costs of monomers, titanium dioxide, and packing materials seen during the quarter are likely to push sequential raw material procurement costs higher. Consequently, Asian Paints and Berger could see gross margins contract by 120-140 basis points (bps) year-on-year and 350-400bps sequentially, according to Systematix. Cost savings and operating leverage may offer some cushion to operating margins.

Once the input-cost inflation worry is out of the way, the focus would shift back to competitive intensity. Companies would fight for sales growth ahead of the crucial festive season in the second half of FY27. “Competitive intensity remains elevated; however, dealer migration appears to have largely stabilized as the trade incentive gap between Birla Opus and Asian Paints narrowed sequentially. JSW-Akzo has set an aggressive target to emerge as the second-largest decorative paints player over the medium term,” added the PL Capital report dated 8 July.

Meanwhile, easing crude prices and price hikes to defend margins have helped paint stocks pare some losses. So far in CY26, Asian Paints and Berger stocks are now down 2% and 6%, respectively, but steep earnings upgrades may not happen in a hurry.