Berger Paints Navigates Monsoon Headwinds, Eyes Diwali Revival

Berger Paints India Limited, a prominent player in the Indian paint and coatings industry, recently announced its consolidated financial results for the second quarter and half year ended September 30, 2025 (Q2 FY26). The period was marked by challenging weather conditions, including an unusually extended monsoon season and heavy flooding across key markets. Despite these headwinds, the company demonstrated resilience with a high single-digit volume growth. However, this did not fully translate into value growth, leading to a marginal dip in gross margins and a more significant moderation in operating profit.

For Q2 FY26, the company reported a consolidated revenue from operations of INR 2,827.49 crore, marking a modest increase of 1.9% year-on-year. The EBITDA (excluding other income) for the quarter stood at INR 352.25 crore, reflecting an 18.9% decline compared to the previous year. Net profit for the period was INR 206.38 crore, down 23.5% year-on-year. The management attributed the subdued value growth to a shift in product mix, with higher contributions from economy segments and lower sales of high-value exterior emulsion products. This, coupled with increased investments in brand building and lower operating leverage, impacted profitability.

Segmental Performance and Strategic Focus

The decorative business, which constitutes approximately 82% of the company's revenue, experienced muted value growth due to the monsoon's impact on premium markets. There was a noticeable marginal shift from premium/luxury to economy emulsions in both exterior and interior segments. In contrast, the construction chemicals and wood coatings segments registered robust and good growth, respectively, highlighting the diversification efforts. The industrial, auto, and protective coatings segment, accounting for the remaining 18% of revenue, saw muted value growth, primarily due to monsoon conditions affecting exterior applications. However, auto and powder coatings within this segment registered mid-single-digit growth in both volume and value.

Berger Paints continues its strategic investments in expanding its market reach. The retail expansion is on track, with the store network now exceeding 1,600 outlets, aligning with annual targets. The tinting network rollout is also progressing well, with over 5,500 machines installed in the first half of FY26, moving towards a target of 10,000 by the end of the fiscal year. These initiatives are crucial for strengthening the company's presence, especially in urban pockets where additional manpower resources have been deployed to target weak markets in the west and south of India.

Innovation and Outlook

Innovation remains a cornerstone of Berger Paints' strategy. The company recently launched new products such as 'Kolor Plus', a premium interior emulsion, and 'Luxol Metallics', offering metallic gold, silver, and bronze finishes, both of which have been well-received in the market. The expansion of the construction chemical and waterproofing product range is also a continuous focus. Furthermore, a new factory for SBL Specialty Coatings Ltd. has been opened in Basauli, Punjab, fully funded through internal accruals, which is expected to bolster sales and profitability for this subsidiary.

Looking ahead, management anticipates a demand revival post-Diwali, driven by improving weather conditions and the release of pent-up demand. They expect gross margins to improve in the short term, supported by benign raw material prices and an improving product mix. The company has guided for Q3 FY26 EBITDA margins to be in the 15-17% range, moving towards the higher end in Q4, with the full-year average projected around 15.7-16%. While forex volatility and international tariff changes pose potential near-term uncertainties, the overall sentiment remains positive regarding domestic demand indicators and the company's strategic investments.

Sustained Growth Despite Challenges

Berger Paints India Limited's Q2 FY26 performance reflects a period of navigating external challenges while maintaining strategic focus. Despite the impact of adverse weather and competitive intensity on profitability, the underlying volume growth and ongoing investments in network expansion, product innovation, and market penetration underscore the company's commitment to sustained growth. The management's confidence in a post-Diwali demand resurgence and improving margins indicates a proactive approach to capitalize on market opportunities. The company's robust net cash position further provides a strong foundation for future initiatives and shareholder value creation.