As if rising competitive intensity and muted demand were not challenging enough, the Indian paint industry now faces another headwind: cost inflation.
The sector relies heavily on crude-led derivatives as input materials, so rising oil prices mean higher operating costs, thus hurting margins. Around 30-35% of the sector’s production cost is projected to be linked to crude prices.
Brent crude price has risen 68% so far in 2026 to $102 a barrel due to West Asia tensions. Paint companies have successfully dealt with cost inflation in the past by implementing gradual price hikes.
For instance, as per an ICICI Securities report dated 11 March, paint companies raised prices sharply – by over 15% – in FY08–09, when crude oil touched $150 for the first time. "They also raised prices by around 23% in FY22, when crude oil prices spiked after Covid-19,” the report said.
The Russia-Ukraine war also resulted in inflationary pressures, and the impact on volumes and earnings was negligible during these periods, added the report.
Raising prices seems like a no-brainer, but it may be easier said than done this time. Once an oligopolistic sector with high entry barriers and fewer companies, the industry is seeing elevated competition from a large new entrant, Grasim Industries-led Birla Opus.
The acquisition of Akzo Nobel India by JSW Paints is likely to add pressure to the incumbents’ chase for market share, amid muted demand. Steep price hikes may dent volumes, especially in the crucial March quarter, where companies are usually more focused on meeting year-end sales targets.
Pricing dilemma
As per dealer channel checks by Systematix Shares and Stocks (India), most dealers expect product price hikes of 2-5% or more in April if crude oil prices remain high for longer.
Dealers pointed out that paint companies have not indicated any price hikes so far and might wait out March, said the Systematix report dated 11 March. The broking firm expects price hikes, if any, to be limited to low single digits, and staggered over the June quarter (Q1FY27).
To buoy volumes, companies have expanded capacities, grown dealer networks, and incurred advertisement spends. Paint makers also offered price cuts and dealer incentives to lure potential customers. But this tug-of-war between volume growth and margins has hurt the sector’s earnings outlook amid weak demand.
True, pent-up demand aided Q3FY26 earnings performance of paint makers, but Q4FY26 has been rough. A Yes Securities report dated 4 March said price war has eased a little compared to the last two years; while there were pockets of growth, demand in FY26 hasn't picked up as expected. “Q4FY26 is likely to be muted as January was not good and even February was muted,” added the report.
In the Q3FY26 earnings call, decorative paints giant Asian Paints had cautioned that lower repainting frequency and reduced occasion-led painting weighed on industry growth. The company aims to sustain a single-digit volume growth trajectory in Q4.
Close rival Berger Paints India was cautiously optimistic about industry growth but expects gradual improvement rather than a sharp recovery. Berger expects a double-digit growth trajectory to sustain over the medium term.
Weak demand visibility, elevated competition and the return of cost inflation after nearly four years point to increased pressure on already bleeding paint stocks. The shares of Asian, Berger and Kansai Nerolac Paints have slipped by over 20% each so far in 2026. Valuation multiples have moderated, but that’s not a bright enough selling point currently.