The government’s demonetisation move impacted paints demand by nearly 40-50 percent initially, said Abhijit Roy, MD & CEO of Berger Paints. However, Roy clarifies that the primary sale to dealers is not impacted but the demand from customers to dealers has reduced on back of concerns over availability of cash.The company’s 85 percent revenues comes from repainting. States like Kerala which has less rural populations are expected to recover faster than others.Below is the transcript of Abhijit Roy’s interview to Latha Venkatesh, Anuj Singhal and Sonia Shenoy on CNBC-TV18. Latha: What are your retailers telling you? People are painting their homes less you think? Seven days, material difference?
A: Initially there has been a bit of a dip because after the announcement, there was a bit of a drop there and there is still this issue of how the cash flow will pan out. But in our case, for example, in paint, at least for us, 80-85 percent of the purchase happens through retail team and that is consumer driven. It is going to improve, but it will improve slowly, as soon as the cash flow gets normalised.
As of now, from the 8th to the 15-16th when I was there in the market place, I have seen some improvement happening already. So, it has sunk to about 40-50 percent of original level and that started improving now, restoring it and the dealers have also started taking action in terms of electronic payment collection.
Latha: That is what I was coming to. If you can give me a split as to how much of your demand comes from tier-I, tier-II and III, IV and V cities. Also, how much of the payment comes in cheque so far and how many people pay in cash?
A: It depends from state to state. Like Kerala essentially, much of it is urban though there is hardly any rural population as such. So, it is a continuum and there is enough banking penetration here. So, the problems are less in this state compared to some parts of Northern India where it might be a bigger issue. Therefore, I see the situation improving much faster possibly in some pockets while others will take a little bit more time.
Anuj: Even the new construction of real estate will get delayed and that will also have an impact, right?
A: That is a very small portion of our business essentially. In any case, we were not a very significant player in that particular segment, so that will not affect us so much as it is presumed to be. So that is something which I am not worked up on. I am much more worried about the consumer sentiment improving in the short-run.
Sonia: You said that paint demand has fallen 40-50 percent since demonetisation, is that correct?
A: Our primary sales to dealers have been continuing at a good pace. There has been no let up in demand there. However, from dealers to consumers, initially, that drop had happened because everyone was panicking that whether the money will be there and therefore consume first the essential items and then only they could look at it.
All the work which had begun was continuing, but new work was getting a bit pushed backwards so that the money flow improved and then they could start off.
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