New Delhi: Rising volatility in global crude oil prices is expected to weigh on the profitability of India’s paint manufacturers, as petroleum-linked raw materials form a significant portion of their input costs.
The companies may face pressure on margins if crude prices remain elevated in the coming months.
Paint makers depend heavily on crude-derived inputs such as solvents, resins, binders and titanium dioxide, which together account for more than half of the sector’s raw material basket. A sustained rise in crude prices therefore directly pushes up production costs for companies across the industry.
The impact on profitability is set to emerge with a lag, as companies typically carry inventory buffers and try to absorb short-term cost spikes before passing them on to consumers. However, prolonged volatility could gradually feed into the cost structure and squeeze operating margins.
Market leaders such as Asian Paints, Berger Paints and Kansai Nerolac have previously guided for operating margins in the mid-teens to about 20%, but sustained increases in raw-material costs could make it difficult for companies to maintain those levels without pricing actions.
The recent surge in crude oil prices has also weighed on paint stocks in the equity market, with investors anticipating pressure on earnings for sectors heavily dependent on petroleum derivatives.