Though things are moving as per the expectations, some strong headwinds in the form of inflationary pressure and emergence of COVID-19 second wave have created a sense of uncertainty during the busy season for the decorative paint manufacturers.
Due to an uptick in crude oil price which has gone up 19% as compared to last year, the cost of most of the raw materials used in paint making have witnessed a spurt. The price of TiO2 has gone up by 24% year on year basis and 16% on quarter-on-quarter basis. Due to unprecedented rise in the cost of raw materials the paints industry is currently facing huge inflationary pressure. However, surprisingly most of the paints’ manufacturers have not hiked their prices substantially to pass on the increased cost of production so far. Only Kansai Nerolac has hiked prices by 5-6% for few emulsions and wood finish range and Nippon Paints has increased the prices by 3-4% in a few SKU which may not fully cover the cost increase. Hesitancy on the part of paint manufacturers to go for major price hike may be due to the fact that most of the demand during post lockdown relaxation has come from tier 2&3 cities and towns and rural India which are considered to be price sensitive.
Apart from inflationary pressure, paint manufacturers are also staring at headwinds due to emergence of second wave of COVID-19. Major cities like Mumbai, Delhi and Bangalore which are considered to be major markets for paint industry are affected by the second wave and are on the verge of announcing lockdown 2.0 which if happens may further delay the recovery of demand in these markets.
Most importantly, the second wave has emerged just at the beginning of the busy season for the paint manufacturers when most of the people undertake paint and other home improvement projects across India ahead of the Monsoon.