Paint stocks have been in focus after Asian Paints increased prices by 4 to 6 percent, which will be effective from December. CNBC-TV18 caught up with Hemant Jalan, CMD, Indigo Paints, to see how they are viewing the price and demand dynamic.
Jalan said, “The entire paint industry took a massive hike of around 8-9 percent just four days ago. With this price hike, we are sort of adequately covered in terms of the drop in gross margins that happened over the last few quarters. This has been a very aggressive price hike.”
According to him, such an aggressive price hike should not have been attempted at one go but the entire industry was bleeding and therefore they went for such a drastic move.
“So, now we are reasonably comfortable as far as margins are concerned, having done these price hikes,” Jalan added.
When asked if smaller players would witness demand pressure due to these aggressive price hikes, Jalan said, “I don't think we have seen any problems as far as demand is concerned. As far as passing on the prices to the customer is concerned, it works in exactly the same way as it does for a market leader as it does for a smaller player like us. I don't think that has ever been a problem, it is not that our products sell to the customer at a price lower than the market leader. In fact, sometimes it may be the other way around. So, I don't think that there is too much elasticity of demand with respect to price.”
Having said that, there is a thin line that one should not cross, and also one should not take the consumer for granted and go with repeated price hikes at very short intervals. Therefore, we are not necessarily looking at an immediate second round of price increase in the next month, he added.
“We are keeping our options open, watching the trend of raw materials, there seems to be some stability in sight as far as the raw materials are concerned albeit at an elevated level. A couple of materials continue to spiral upwards but at this point in time, we are not very sure as to whether another price hike in two to three weeks is the answer to the problem,” he explained.
For the entire interview, watch the video