Adhesives maker Pidilite Industries is protecting margins through staggered price hikes amid sharp input cost inflation triggered by the West Asia war.
In the first fortnight of April, it implemented a 4–5% hike, followed by another 5–7% increase in early May. Inflation in the company’s weighted average raw material basket has surged 40–50%, led by the war.
Input shock
Consumption cost of crude derivative vinyl acetate monomer (VAM) has jumped from $840 per tonne in the March quarter (Q4FY26) to $1,800 per tonne currently. While VAM accounted for less than 10% of Pidilite’s raw material basket in FY26, the steep cost escalation could weigh on margins.
Even so, the company remains confident of sustaining Ebitda margins in the 20–24% band. Q4FY26 operating margin expanded over 300 basis points (bps) year-on-year to 23.2%, aided by operating leverage. Gross margin hit an all-time high of 56.6% on benign raw material prices and a favourable product mix.
Unless inflation cools meaningfully, sharp margin expansion may prove difficult.
Volume engine
Pidilite is also focused on maintaining a double-digit trajectory in underlying volume growth (UVG). The calibrated pricing strategy is aimed at protecting demand momentum.
UVG—an indicator of volume growth excluding acquisitions, product mix changes or pricing impact—rose to a multi-quarter high of 15.3% in Q4FY26, surpassing the recent 9–10% range and driving 14% revenue growth.
Growth was led by strong performance in the core adhesives portfolio, including Fevicol, along with continued traction in growth categories such as Roff and Dr. Fixit.
For FY26, UVG stood at 11.1%. The key consumer & bazaar (C&B) segment reported a healthy 15.4% UVG, while the business-to-business (B2B) segment clocked 14.8%.
Segment watch
Pidilite remains optimistic about the C&B segment, though B2B could face near-term challenges amid external headwinds. It is targeting a 100 bps expansion in UVG over the near-to-medium term, supported by pioneer and growth categories.
Its strong brand recall may help it gain market share from smaller and unorganized players, who are likely to bear a larger impact of supply disruptions. A robust balance sheet also provides cushioning.
That said, management has acknowledged the possibility of demand compression if elevated inflation persists. In this environment, balancing margin protection with volume growth could become increasingly challenging.
Valuation hurdle
Encouraged by the robust demand outlook and price hikes, some brokerages have raised Pidilite’s FY27 and FY28 earnings per share estimates.
However, analysts at PL Capital caution that the strong Q4FY26 performance may not be sustainable in coming quarters, citing cyclical peak margins, volatile input costs and the waning benefit of channel stocking seen last quarter.
Exports were disrupted in March due to the West Asia war and supply chain challenges, with Q4FY26 export volumes declining 21.8%.
Progress in the paints business has also been slower than expected. While Pidilite expanded its paints presence into West Bengal and Bihar, in addition to southern states, management indicated that the strategy for larger towns and cities remains a work in progress. It continues to evaluate the right-to-win and differentiated positioning needed for broader expansion.
At ₹1,476, Pidilite’s stock is about 6% below its 52-week high of ₹1,574 seen in September.
While Q4FY26 performance was strong, valuation remains a concern. Based on FY28 earnings estimates, the stock trades at around 50 times price-to-earnings—a premium to its 10-year average, according to Bloomberg data.
Any earnings disappointment in the coming quarters could test investor confidence.