Companies

Berger Paints sees recovery in urban markets

Abhishek Law Kolkata | Updated on September 25, 2020 Published on September 25, 2020

Abhijit Roy, Managing Director and CEO, Berger Paints

Berger Paints India Ltd, the country’s second largest paint-maker, is witnessing recoveries in urban markets, particularly metros. Demand is back to 85-90 per cent of pre-Covid levels, and should improve further by the December quarter banking on festive demand.

According to Abhijit Roy, the company’s MD and CEO, post unlocking sales in urban markets were at 40-45 per cent of pre-Covid levels. Subsequently they improved to 85-90 per cent levels, except in Mumbai. Trends suggest further improvement banking on festive demand, particularly, a delayed Diwali season.

“There is a very slow improvement in decorative paint sales on metros and other urban markets now, except in Mumbai. The current trends suggest we will soon cover Covid level sales in cities. In fact, if things go well, we should cover Covid level demand in the third quarter (October to December) of this fiscal,” he told BusinessLine post the company’s Annual General Meeting.

Market sources indicate that there is some demand for repainting among urban consumers, including increased awareness on hygiene. This has made many paint companies, including Berger, launch anti-viral paints; and also promote safe home painting options. Repainting accounts for over 70 per cent of the demand for decorative paints here in the country.

Incidentally, demand in rural, semi-urban and upcountry markets — which are witnessing double digit growth — continues to be better than urban markets.

Business outlook

Kolkata-headquartered Berger has seen double digit volume growth (in decorative paint demand) in August. A sequential improvement in sales is also expected. “In second quarter (July to September) we will have double digit profit growth and a double digit volume growth,” Roy said.

Raw material prices, that of various chemicals. continue to be “relatively softer compared to last year”. Titanium di-oxide price, the prime raw material and a crude derivative, not as volatile as it was previously used to be. “Titanium di Oxide prices has not moved so much, but other chemicals softened quite a bit,” he pointed out.

Berger expects improvement in margins in Q2 FY21 and also in the second half of the fiscal provided there are no major raw material price disruptions.

“Our EBITDA to Sales margins were in the 14-16 per cent range last fiscal. And we hope it will be slightly higher than this in FY21,” Roy added.

Waterproofing and construction chemicals are now a focus vertical for Berger as the company aims to be amongst the top three players over the next three years. It is eyeing “doubling of business” in the segment over the next few years.

Capex plans

Berger Paints will go ahead with construction of its plant at Lucknow (Uttar Pradesh) at a proposed cost of ₹260 crore. Cost has been revised upwards after new product lines, focusing on the waterproofing and construction chemicals segment, were included. The plant will go on stream in end-2021 or early 2022.

The company’s Jejuri plant in Pune (Maharashtra) is expected to be fully operational by November.

In terms of ad-spends the company will look at maintaining last year’s levels or “maybe a little more”. It has roped in actors Akshay Kumar and Kareena Kapoor as brand ambassadors.

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Published on September 25, 2020
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