Indigo Paints: Navigating Monsoons and Market Shifts Towards a Brighter Horizon

Indigo Paints Limited has presented its Q2 and H1 FY26 results, showcasing a resilient performance amidst an extended monsoon season and evolving market dynamics. The company reported a standalone revenue from operations of INR 298.5 crore for Q2 FY26, reflecting a 3.5% year-on-year growth. For the first half of the fiscal year, the standalone revenue reached INR 593.4 crore, growing 1.9% year-on-year. Despite the challenging environment, Indigo Paints maintained its industry-leading gross margins, expanding to 45.1% in Q2 FY26 from 44.1% in the prior year, and achieving an EBITDA margin of 15.3%. This performance underscores the company's strategic focus on differentiated products and operational efficiency.

The quarter saw a strong start in July, followed by a slowdown in August due to persistent monsoons, before regaining momentum in September. The management noted that all product categories, with the exception of putty and cement paints, recorded healthy growth in both value and volume terms. A significant trend observed was the outperformance of premium products within the emulsions and enamels segments, where value growth outpaced volume growth. This premiumization strategy is a key driver for the company's robust gross margins, contrasting with a broader industry trend of down-trading.

Financial Highlights (Standalone)

Strategic Initiatives and Capacity Expansion

Indigo Paints is actively pursuing its 'Indigo Paints 2.0 Strategy,' focusing on product innovation, geographic expansion, capacity augmentation, brand and marketing, and expansion into adjacencies. The company's dealer network has expanded to over 18,900 active dealers, supported by more than 11,650 tinting machines, fortifying its presence in Tier 3 and 4 cities while growing in Tier 1 and 2. On the capacity front, the water-based plant at Jodhpur (90,000 KLPA capacity) is in its final construction stages, expected to be commissioned in Q4 FY26. The solvent-based plant (12,000 KLPA capacity) at Jodhpur is undergoing equipment commissioning, with commercial production slated for December 2025. Additionally, trial production at the brownfield Putty plant is set to begin by mid-November 2025. These expansions are designed to support growth comfortably until FY29 without significant further capital expenditure.

The company's subsidiary, Apple Chemie, specializing in waterproofing and construction chemicals, delivered robust growth with revenues of INR 13.6 crore in Q2, a 22.6% increase year-on-year. Apple Chemie is expanding its reach beyond Maharashtra to Southern and Eastern regions, with a target to achieve INR 200-300 crore in revenue within three years. This segment is crucial for Indigo Paints' foray into non-decorative adjacencies, leveraging the growing Indian infrastructure sector.

Outlook and Management Commentary

Management expressed optimism regarding demand recovery, citing strong secondary sales, healthy dealer collections, and unprecedented levels of painter token scanning as clear indicators of ground-level demand. They anticipate a good post-Diwali sales period, driven by the wedding season, and expect to achieve double-digit growth by Q4 FY26. The company projects improved EBITDA margins for FY26, supported by better demand, lower raw material prices, and an improved product mix. The A&P expense as a percentage of revenue is expected to decline marginally for the full fiscal year, with a continued focus on below-the-line activities to enhance influencer engagement.

Indigo Paints' strategic focus on premium products, network expansion, and capacity building positions it well for sustained growth. The company's ability to maintain strong margins despite market headwinds demonstrates disciplined execution and a clear strategic vision. With improving market conditions and ongoing initiatives, Indigo Paints aims to continue its growth trajectory and strengthen its market position.