By Hritam Mukherjee
(Reuters) -Benign domestic inflation and signs of growth in India’s urban centers are expected to drive a demand recovery for Asian Paints, its top boss said, after the company met first-quarter profit expectations on Tuesday.
The country’s largest paintmaker highlighted marginally improved demand from urban centres, which supported growth in its mainstay decorative paints segment.
Domestic inflation seems to be in control and some “green shoots” in urban areas suggest a revival of demand, CEO Amit Syngle said in a post-earnings call.
Asian Paints has faced lacklustre demand for several quarters, pressured by retail shoppers choosing cheaper alternatives amid rising competition from new players such as Grasim Industries’ Birla Opus.
To win back its buyers, the market leader has been resorting to discounts. It cut prices for its economy emulsions by 2%-3%, Macquarie analysts had said in a pre-earnings note.
Domestic decorative paints volumes rose nearly 4%, compared to the 2%-7% growth range projected by five brokerages. Demand for its mass-market economy products was strong, but its luxury counterpart suffered from buyers switching to low-cost options.
“Volume growth for the quarter surprised positively as we had built in a 2% rise,” said Antu Thomas, a research analyst with brokerage Geojit Financial Services, who added the early arrival of monsoon did not dampen demand as much as they feared.
The April-June quarter, which overlaps with India’s monsoon season, is typically slow for paintmakers as damp weather pushes clients to defer painting projects.
The steady volume growth helped offset the impact of price cuts and rising input costs, keeping overall profitability stable. Total expenses rose 1.3%.
Shares of the paint maker closed about 2% higher.
($1 = 86.8310 Indian rupees)
(Reporting by Hritam Mukherjee in Bengaluru; Editing by Nivedita Bhattacharjee and Vijay Kishore)
