Berger Paints

Berger Paints reported a standalone volume growth of 8.5% for Q3 FY26, however, value growth remained significantly lower at 0.4%. This disparity was attributed to a shift towards higher-volume, lower-value products like economic emulsions, textures, and tile adhesives, coupled with price corrections in the economy emulsion segment. Despite the muted value growth, the company achieved a gross margin of 41.2%, matching its highest level in the past 15 quarters, supported by an improved product mix and stable raw material prices. The EBITDA margin stood at 16.1%, falling within the guided range of 15-17%.

Demand momentum in Q3 FY26 was impacted by an extended monsoon spillover into October, which led to a slower start to the festive season. Management noted that while demand picked up in November and December (mid-single-digit growth), it did not rebound as strongly as anticipated, partly due to dealer stock buildup that occurred during the elongated rainy season. The company expects demand to stabilize and improve progressively in February and March. For the next year, management anticipates double-digit volume growth and a value growth of 7-8%, maintaining a 4-5% value-volume gap.

The competitive intensity in the paint market remains elevated but stable, with no significant increase or decrease. Berger Paints experienced a minor market share loss of 0.2% overall, with its share moving from 19.5-19.6% to 19.4%. This loss was primarily attributed to gains by a new entrant (Birla) which had a very low base in the previous year, rather than aggressive actions from established players. Management highlighted that the new entrant has also started taking price increases and is becoming more stable in its competitive approach.

The company is actively focusing on both distribution expansion and product innovation to drive growth. Over the last 3-4 quarters, Berger Paints has been aggressively ramping up its distribution network, installing over 2,500 color bank machines and expanding to over 1,800 stores. Concurrently, new product launches like Emulsion Color Plus, Silk Metallics, and DAMShield are contributing to growth, particularly in premium and super-premium categories, which also offer higher profit margins. These initiatives are expected to continue driving both volume and value growth.

Berger Paints has significant capital expenditure plans, including the establishment of two new factories in Panagar and Orissa, with a combined investment estimated between ₹1,800 crore and ₹2,000 crore. These projects are expected to absorb the free cash flow generated by the company, which is projected to be around ₹1,400-1,500 crore over the next two years. The company's strong consolidated net cash position, which improved to ₹918 crore by December 2025, provides a solid base for funding these expansion plans. Management also indicated an interest in small acquisition opportunities for new technology or geographies, but ruled out buybacks at present.

While the automotive segment, particularly Berger Nippon Paint Automotive Coatings, showed strong double-digit revenue growth, other industrial segments like Loop In Protecton and general industries experienced muted performance. Management acknowledged that pricing in the protective coating segment might be slightly higher than competitors and indicated a need for adjustments to restore growth rates to double-digits. A positive development was the court's judgment in favor of the company regarding anti-dumping duty on Titanium Dioxide (TIO2), leading to refunds and a marginal reduction in raw material costs.