Monday, November 29, 2021
HomeMarket Live UpdatesBerger Paints to roll back prices only if it's sustainable: CEO

Berger Paints to roll back prices only if it’s sustainable: CEO


Berger Paints‘ CEO, Abhijit Roy, talks to ET Now about the festival season – a great time for the paint industry – and the links between an improvement in the real estate market and their own fortunes. Edited excerpts:

Is this a boom period for the paint industry?
We’ve been doing good so far, and things look good going forward too.

Define good? Do you mean better than last year? Is this anticipation of a bumper Dussehra and Diwali? What is the word?

In the months of July and August, dealers have been stocking up in preparation for Diwali and it looks like people are upbeat. It’s going to be good season. This is set to be a non-disruptive year for us, with the last four years seeing some disruption or the other – demonetisation, GST then two waves of COVID-19.

This year, it looks like people have gotten used to the pandemic and are set to celebrate Diwali.

Secondly, people are staying at home much longer, work-from-home keeps going on, which means people might end up looking at their walls a lot more, which is obviously good news for us. And with other avenues of expenditure – restaurants, hotels, tourism – shut, people might divert funds to doing up their home.

So, the value growth you have reported, how much of it is a function of price? Considering higher commodity prices and your price hike?

Volume growth has been pretty strong, but the first quarter results that we’ve reported so far don’t have inflation built in. A part of the price revision will reflect in the second quarter and all of it will show in the third quarter.

The first quarter results are all volume driven. Of course, bases were low, so that impact is there but it was primarily volume driven, not so much from the value inflation that you talk about. That will show up, as I said, in the second and third ones.

Assuming commodity prices drop back at some point, will you be rolling back the price changes?

See, as it stands, historically that hasn’t happened. But, if commodity prices do come down substantially, prices will be rolled back in proportion. It’s a competitive industry, nobody will allow for excessive profits.

Whenever the price comes down marginally, we will only roll back if it is sustainable for us, it depends on the situation really, historically, when there’s a prolonged drop in prices we do cut prices on our end as far as possible.

In the last few months, there’s been a pick up in the construction and realty sectors, is there a correlation between paint sales and the realty sector? Do decorative paint sales and housing sales reflect changes?

Of course there is, as the number of new houses go up, people buying paints go up. Usually, when consumers move into new houses, they will get fresh paint. And typically, when the industry is doing well, buildings are also painted and maximum consumption happens. That’s been stalled for the last year and is returning to normal, but at much slower speeds. It has picked up a bit of momentum though, with pending projects seeing progress now.

However, the real estate industry’s contribution to our total consumption is around 14-15%, so there won’t be tremendous impact but it will add to overall growth.

Have repainting cycles shortened over the past years? Like you said, with people staying inside more, the itch to repaint increases. How have repainting cycles moved in smaller towns?

Repainting cycles have improved of late, like I said because people stay home more now. As far as upcountry markets are concerned, in smaller towns, we continue to see good growth. Last year was unusual because there was little COVID-19 impact there. This year, on that high base, the growth rate is still present but not at the levels of last year.

On the other hand, urban centres – which were a bit depressed last year – have seen growth rates go up because of the respective lower base there.

Overall, growth rate is largely robust because of urban centres doing relatively well and the rural areas continuing to do well.

Last quarter, you said exterior painting demand was higher than interiors, has that changed?

Usually, in the September, October months and ahead, interior paint demand goes up strongly since this is usually when interiors get a refresh. That trend has begun, as the months progress to November, up to Diwali, this trend will be strongly visible.

From November, exterior season starts and those sales peak in November, December, January.

Which sales are higher, those for repainting or new coatings? I’m trying to get an idea of how construction activity is moving, are new houses selling more or are pre-owned ones going off the block?

Generally, the business from repainting is a lot more than that of new homes, but as of now, new home growth rates are higher since the momentum has built up excitement.

But, overall, the repainting segment is much, much bigger than new home paint.

A lot of industries are using the word ‘boom-in-demand’ like never before, which is the right word to capture the mood and the underlying demand trend for the paint industry? Boom like never before or incremental improvement?

I think that’s too premature. At this stage, our main season is just approaching. I will be able to answer this question much better around mid October.

As things stand now, I think it looks good. Whether it will be booming or not, is difficult to say at this stage. It’s just the beginning of September, typically things will be becoming much more clearer around the 20th of the month.



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