Indigo Paints Limited — Q1 FY26 earnings call

Indigo Paints reported a challenging Q1 FY26. Standalone sales saw a marginal value growth of 0.3%, while consolidated revenue degrew by 0.7% to INR308.9 crores. Standalone EBITDA decreased by 4.7% to INR43.6 crores, with the margin at 14.8%. Consolidated EBITDA also dropped by 6.5% to INR44.3 crores, resulting in a 14.3% margin. PAT remained largely flat standalone at INR26.4 crores and declined by 2.2% consolidated to INR26.1 crores.

The quarter was significantly impacted by the early onset of monsoons from mid-May to June, particularly affecting Kerala and the Northeast. An Indo-Pakistan conflict in May also disrupted sales in northern border states. Management noted that consumer demand has been soft across categories, not just paints. However, July showed 'very good growth,' and the company anticipates a 'much better Q2 and a much, much better second half this year,' drawing parallels with recovery seen in FMCG companies like HUL and Britannia.

Indigo Paints maintained a strong standalone gross margin of 46.1%. Enamel and Primer categories recorded positive volume and value growth, with value growth exceeding volume. In the emulsion segment, volume declined by 5.4%, but value degrowth was only 0.9%, indicating a shift towards premium products. Putty, a lower-margin category, also experienced negative volume and value growth, though a price hike was implemented towards the end of the quarter. Raw material prices continue to soften marginally, and margins are expected to remain stable.

As of June 30, 2025, the company had approximately 18,600 active dealers and 11,300 tinting machines. A&P spend decreased to 6.8% of revenue in Q1 FY26 from 7.2% in Q1 FY25, with continued investment in brand building through IPL and digital outreach. Indigo Paints is launching 50-70 'Indigo color canvas stores' this fiscal to showcase its product range. The focus remains on increasing throughput per dealer and targeting high-potential dealers to grow business by 50-100%.

The subsidiary, Apple Chemie, experienced a 17.6% negative growth in Q1 FY26, primarily due to the early monsoons affecting its infrastructure projects. Despite this, gross margins improved due to a strategic focus on profitable projects and product mix. Apple Chemie is launching new MS polymer products by early September, facing competition from only two multinationals. The company expects Apple Chemie's revenue to grow from INR62-63 crores last year to the INR70-75 crore range in the current fiscal year. Retail waterproofing and construction chemical products are manufactured by Indigo Paints and branded as Indigo, while Apple Chemie's B2B products are sold under its own name. The call option to acquire the remaining 49% of Apple Chemie kicks in after April 1st next year.

Work is progressing on new plants at Jodhpur. The water-based paint plant is now expected to be commissioned in Q3 or Q4 FY26, while the solvent-based plant and the Brownfield expansion of the putty plant are anticipated to be operational by the end of Q2 FY26. These new facilities will bring modernization and mechanization, easing production and dispatch processes. The Jodhpur solvent-based plant is particularly important for reducing freight costs to cater to North India, as solvent-based paints were previously manufactured only in Tamil Nadu.

Management noted that the entry of new players like Birla Opus, despite initial aggressive dealer incentives (10 percentage points higher than industry average) and extra grammage offers, did not significantly disrupt the paint sector's margins. Industry gross margins have remained largely stable (plus/minus 0.5 percentage point). The new entrant has reportedly started to normalize its incentive structure and withdraw extra grammage offers, which Indigo Paints views positively.