Paint makers spared from demand slowdown as raw material prices rise, says Indigo Paints CMD Hemant Jalan

Although packaged consumer goods companies have experienced a slowdown in consumption for a few quarters, the trend has not hurt demand in the paints industry, according to Hemant Jalan, Chairman and Managing Director of Indigo Paints.

“The consumers have taken it in their stride, at least as far as paint consumption is concerned,” Jalan said in an episode of Life After Listing, a Moneycontrol series that focuses on the key changes for a company’s management and founders after their company goes public.

Jalan warned that if prices of raw materials continue to climb, it could start impacting demand for paints.

“If inflation continues to be at a high level in the next one year or something, at some point in time, it will start affecting demand. We are hoping it won’t happen,” he said.

Jalan said government and Reserve Bank of India (RBI) intervention should keep inflation in check

“We are hoping that with the monetary steps the RBI is taking and interest rates moving up… inflation will start moderating sooner than later. And as long as that happens, we don't foresee any great upheaval in terms of the demand trend,” he added.

The paints industry has been hit by unprecedented inflation in crude derivatives, a key raw material, because of rising crude prices. Companies such as Asian Paints and Berger Paints have raised prices by the highest level in the past decade. Asian Paints in June announced price hikes of Rs 3-5 a litre in its decorative portfolio and Rs 5 a litre in water-based interior and exterior emulsions.

Indigo Paints, too, has hiked prices.

“Traditionally, the price increase of raw materials would get passed on almost immediately to the customer. In this particular scenario, last year was the first time in the last 20 years that we saw a price increase on the selling side. It was long overdue and, therefore, the volume of that price increase was very sudden and very high,” Jalan said.

“But since then, we have seen a return to the earlier regime of having minor price increases of half a percent once every two months or something as and when raw material prices go up,” he added.