Colour goes out of paints makers? lives

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By VIVEK NAIR in Mumbai
  • Published 27.03.05

Mumbai, March 27: The rising global crude prices are back to haunt the domestic paints industry. The industry is worried that it will not be in a position to pass on the increase in input costs fully to the customers, resulting in margins taking a severe hit.

Apart from the crude price rise, the forthcoming hike in steel rates is also adding to the industry?s woes. Sources said the small-scale units are the worst affected as they can neither fully pass on the increase in input costs nor bring down their overheads costs.

?If the present trend continues, we could see many paints units, particularly the small-scale ones, shutting down their operations in the next few months,? Indian Paints Association president Pramod Kumar Khanna said.

Large players like Asian Paints and Goodlass Nerolac Paints, who also see firm crude prices as a problem, are now concentrating on controlling costs by bringing down overheads and focusing on operating efficiencies.

Asian Paints vice-chairman and managing director Ashwin Dani said rising crude prices is a concern for the industry and margins have been affected. He is pinning his hopes on a good demand for the industry.

?The paints industry is expected to grow by around 11-13 per cent during this financial year,? he said.

In December last year, Asian Paints had increased prices of most of its decorative coatings products by around 5 per cent to partly compensate for the rising raw material costs.

According to Dani, raw material costs have increased by nearly 7-8 per cent last year. However, the reduction in import duties of raw materials in the budget will be beneficial considering that around 30 per cent of raw materials is imported by the industry.

Asian Paints sources said while the company continues to bet on a good demand to offset the impact of a rise in crude prices, it is simultaneously engaged in bringing down its cost to protect its margins.