Stronger Rupee brings relief to Paint companies

KOLKATA: The strengthening of the rupee has brought some respite to paint manufacturers. The price of titanium dioxide, one of the key ingredients of paint, is expected to come down which will bring some relief to paint companies. In December 2011, most of the paint companies had taken a price hike between 2%-4 %.

The size of the Indian paint industry is around Rs 23,000 crore. Of this, decorative paint constitutes Rs 17,000 crore while the industrial paint constitutes Rs 7,000 crore. On an average , raw materials constitute 56% of the total expenditure in paint companies. Titanium dioxide is one of the major raw materials and fluctuations in its prices have a direct impact on the cost of production.

Talking to ET, Ramanath V Akula, president (decorative) at Nippon Paint (India), said: "The strengthening of the rupee has to some extent brought some relief but the impact will not much at this level. If rupee comes down to Rs 45-46 level against dollar, we will have considerable benefit. The currency has depreciated by 15% in the October-December 2011 period , which has significantly affected the third quarter performance of the companies."

The companies had witnessed a 20-22 % growth in the first half. "But in the third quarter, demand slumped due to inflation and a high interest rate. A high input cost added to the woes which forced the companies to take a price hike. This had an impact on demand in the third quarter and it went down to 18%," said Akula, the president of Indian Paints Association.

Abhijit Roy, chief operating officer of Rs 2,500-crore Berger Paints, said that though the price of titanium dioxide had cooled off in November last, it started firming up from the middle of December. "The price of titanium dioxide is hovering around $3,600 per tonne, which is on the higher side.

Though we had expected that the strengthening of rupee would have some impact on input cost but a sudden price rise in titanium dioxide is likely to negate that. Even price of pthalic anhydride, which is also imported, is on the rise. If rupee strengthens further it will be good for us. Otherwise we will have to take a price hike in April depending on the impact of Union budget which will be tables in March.

Already our margins are under pressure." Roy said.Sandeep Sarda, executive director and CEO of Shalimar Paints feel that an appreciating rupee will definitely have a positive impact on the company's import bill. "If this trend continues, the fourth quarter will be a better one," Sarda said.