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In Focus: Losing Sheen?

Rising input costs are squeezing Asian Paints' margins

Asian Paints is a strong player in the decorative, industrial and automotive paint segments.

It ranks among the top 10 decorative coatings companies in the world today. The company came out with poor numbers in the fourth quarter of FY 06, posting a 50.65 per cent decline in net profit at Rs 20.28 crore. However, total sales increased 25.81 per cent at Rs 578.93 crore for the fourth quarter of FY 06. The company is beginning to face the crunch on its operating margins due to rising input costs. With petroleum product prices rising constantly, the margins of the company are bound to come under pressure. While the company may be able to pass on the higher costs to the consumers in the decorative paints segment, it may not do so in the industrial paints sector.

Asian Paints has operations in over 20 countries. It has recently acquired companies in South-East Asian countries like Malaysia and Vietnam, besides South Africa.

The international paints businesses grew by over 15 per cent during the year. However, given the growth prospects in automotive and infrastructure sector, the company will not face problem in volume growth but rising raw material costs will continue to take the sheen off its paints.