Inflation to wash out revival dreams for paint makers

Revival due to strong monsoon and buoyant festive season sales likely to be washed out

Any indication of a revival for paint companies due to the strong monsoon and buoyant festive season sales might come to nought because of high inflation.

Ramakanth V Akula , president (decorative), Nippon India, siad, “The strong monsoon had a positive rub-off but the latest inflation figures might hit the industry. The past couple of years have not been rosy but we are expecting a 12 per cent volume growth this financial year.”

Driven mainly by high vegetable prices (food prices soared 14.72 per cent annually), the retail inflation rate accelerated to an all-time high of 11.24 per cent in November from 10.17 per cent October. According to Akula, raising prices would be difficult for companies as they have already been raised seven to nine per cent during the financial year.

Said Abhijit Roy, managing director, Berger Paints India, "It's a matter of concern what the latest inflation figures show. It will remain a problem if this stays like this.".

A senior official at another Japanese paint maker said high inflation would not only hit demand (discretionary in the cities) in the Rs 29,000-crore market but also make import of raw materials costlier.

“I think volume growth would be 10-12 per cent, especially after considering the latest inflation data. New projects are not being taken into the advanced stage and some key raw material imports continue an impact on profitability,” the official said. Cheaper products were being offered with special coating features to drive sales, the official added.

Said Akula, also former president of Indian Paints Association, “Value growth should be around 15 per cent.” That would be five per cent lower compared with the previous financial year.

The only relief seems to be coming from China, from where most companies are importing rutile, a key raw material. It is $500 a tonne cheaper than the European rutile. The former is cheaper by about $500 per tonne. “The China advantage is coming as a bit of relief,” the official of Japanese paint major added.