The rupee depreciation has impacted India’s paint makers, given that the raw materials are mostly imported. The surging cost of Brent crude has kept prices of crude oil-based derivatives, monomers and TiO2 (titanium dioxide) at higher levels for the past few quarters. As a consequence, paint prices were raised by around 5% in fiscal year 2018. Prices were hiked by 2-3% in the June quarter as well. Subsequently in July, the goods and services tax (GST) on paints was reduced from 28% to 18%. Given the anti-profiteering clause under GST, paint makers passed on the full benefit to consumers by slashing prices. While it remains to be seen how paint companies tackle this, in case no price increase is undertaken, gross margins are estimated to get squeezed by 20-30 basis points in the September quarter.

(Live Mint)