Berger Paints Eyes 100-150 Basis Points Margin Expansion in H2 FY26 as Raw Material Costs Soften

Berger Paints, India's second-largest paint manufacturer, has projected a significant improvement in its gross margin, anticipating an expansion of 100 to 150 basis points in the latter half of the current fiscal year. This positive forecast is primarily due to a noticeable cooling trend in raw material prices.

Despite this optimistic outlook, the company experienced challenges in the second quarter of FY26. Its standalone gross margin saw a decrease of 80 basis points, falling to 39.6% from 40.4% in the corresponding quarter of the previous year. This decline was largely attributed to continuous and excessive rainfall, which adversely affected sales of high-value exterior emulsion products and encouraged consumers to shift towards more affordable economy segment products, a phenomenon known as down-trading.

Abhijit Roy, Managing Director & CEO of Berger Paints, highlighted that the second quarter was difficult due to inclement weather, which led to high single-digit volume growth but only low single-digit value growth. On a consolidated basis, the net profit declined by 23.53% year-on-year to ₹206.38 crore. The Profit Before Depreciation, Interest, and Taxes (PBDIT) margin also fell to 12.5% from 15.6% in the prior year period. Revenue from operations showed a marginal increase of 1.9% to ₹2,827.49 crore.

The company is also strategically focusing on expanding its dealer network. It plans to onboard more dealers during the third quarter to capitalize on market opportunities and drive better sales results in the fourth quarter.

Impact: The softening of raw material prices is expected to directly boost profit margins. However, adverse weather conditions like heavy monsoons pose a risk to sales volumes and the sales mix, potentially impacting revenue from premium products. The expansion of the dealer network is a strategic initiative aimed at increasing market penetration and sales volume over the medium to long term.

Difficult Terms: * **Gross Margin**: The profit a company makes after deducting the direct costs associated with producing and selling its goods. It is calculated as Revenue - Cost of Goods Sold. * **Basis Points**: A unit of measure used in finance, where one basis point is equal to 0.01% (1/100th of a percent). An expansion of 100-150 basis points means a 1-1.5% increase. * **Exterior Emulsion**: A type of water-based paint specifically formulated for use on external building surfaces, offering weather resistance and durability. * **Down-trading**: The act of consumers choosing to buy cheaper or lower-priced versions of a product, often due to economic constraints or budget limitations. * **Economy Segment**: Refers to products that are positioned as budget-friendly or more affordable options in the market. * **Volume Growth**: An increase in the number of units of a product sold by a company. * **Value Growth**: An increase in the total revenue generated from sales, which can result from selling more units, increasing prices, or selling a higher proportion of premium products. * **PBDIT (Profit Before Depreciation, Interest, and Taxes)**: A measure of a company's operating performance before accounting for non-cash expenses (depreciation/amortization) and financing costs (interest/taxes).