Subir Bose, managing director, Berger Paints India, says the expected economic slowdown would not materially affect the paint industry, with the financial outlook still robust. Edited excerpts of a talk with Priya Kansara Pandya. Edited excerpts:
How do you see the expected slowdown in economic growth, led by a series of rate hikes, affecting demand for paints?
We have not seen any sign of slowdown in the demand for paints. This is not the first time our economy has been expected to slow down. I think we are reading too much into it.
Do you think competition is increasing in this space?
I am not too worried, as it has always been there. I do not think the slowdown will materially affect the competitive scenario.
How do you see 2011-12, after the robust performance in 2010-11, led mainly by volume growth?
I am looking at a value growth in excess of over 20 per cent, similar to FY11. I would like to give a forecast for volume growth only after the peak season (August-October) in terms of demand for paints gets over.
Are you planning to raise prices in FY12, given the significant hike of 12 per cent in FY11?
The April-June quarter will see a price increase of 8.5-8.8 per cent. While two price increases totalling 6.8 per cent have already been undertaken, another two per cent will be happen soon. Any further prices rise will depend on the future upsides in raw material costs.
What is the outlook on crude oil-based raw materials and margins?
In the past month, several raw materials have started cooling off. I believe raw material prices have reached their peak and would remain steady or slightly cool off.
On margins, I see marginal improvement from FY11 levels, aided by sales growth, benefits of economies of scale, expected cooling of raw material cost and improved product mix.
What are the company’s capex and retail plans?
We’re developing a new project at Hindupur (Andhra) and it is in the process of getting environmental clearance. We are spending Rs 200 crore in the next two years under Phase-I. We are also in the process of expanding capacity at the Goa and Rishra plants by spending Rs 25 crore each. While Hindupur will be operational by 2013-14, the other two expansions will be ready by this September. All these initiatives will more than double our current capacity of 200,000 tonnes to 450,000 tonnes.
On the retail front, we have started with 30-odd stores under the franchise model in Tamil Nadu and Andhra Pradesh. Depending on the feedback, we will go ahead with other states or look at different models. We do not plan to have our own stores in the medium term.
