Berger bets on pent-up demand as prolonged monsoon, higher ad spends hit Q2

Mumbai: An abnormally long monsoon and high marketing expenses wiped out Berger Paints India Ltd’s second-quarter earnings growth as India’s second-largest paint maker and its peers grapple with increasing competition in the industry. The company pinned its hopes on pent-up demand.

In an analyst call after announcing its results for the quarter ending in September, company management said festive purchases took place earlier this year, so October was soft for the industry. The company believes it performs “slightly better” than others.

Assuming November performs well, Berger Paints expects mid-single-digit value growth with higher volume growth in the third quarter through December.

“It continued to rain almost till the end of October. But now it has completely reduced in most parts of the country, at least for the last few days,” said Abliijit Roy, managing director and managing director of Berger Paints. “Therefore, we expect strong pent-up demand to emerge.”

Amidst increased competition, Berger’s ad spending increased 20-23% year over year in the second quarter.

According to Roy, the rivalry continues but the intensity has plateaued. He believes the new entrant’s sales have likely fallen in tandem with the industry. Now that a foundation has been established, growth and market share gains are expected to moderate in the coming quarters and the impact on existing players is expected to diminish.

Birla Opus, backed by Aditya Birla Group, shook India ₹70,000 crore decorative paint market since its entry in April 2024. JSW Paints Ltd’s acquisition of 74.76% shares of Akzo Nobel India Ltd, which also received approval from the Indian Competition Commission, intensified the competition.

Berger is ready to spend more on brand building. “If we see that we have the luxury of spending a little more, we would want to invest a little more in brand building than we do even today,” Roy said. “We increased it, but we want to increase it even more.”

Roy said the company “wants to gain share, which is very important in the current situation.”

Profit fell by almost 25%

Paint manufacturer’s net profit decreased by 23.5% on an annual basis ₹206.4 crore in the September quarter, according to regulatory filings filed on Tuesday. Profit also decreased by 34.5%, respectively.

“We could not sell and there were heavy rains, especially in our key states of West Bengal, Kerala and the Northeast, till September and this continued,” Roy said. “So much more of our profit-driving exterior category has been greatly impacted.”

Berger reported 1.9% year-on-year increase in revenue ₹2,827.5 crore. Revenues decreased by 11.7% sequentially.

While revenue growth remained muted, according to the company’s estimates, it continued to gain market share among major publicly traded paint companies in April-September 2025 compared to the previous year.

The paint maker’s EBITDA in the September quarter fell almost 18.8% year-on-year. ₹352.3 crore. EBITDA is earnings before interest, taxes, depreciation, and amortization, which is a measure of operating income.

“Growth in advertising and growth in overhead could not be absorbed by weak sales, which was the primary reason for this deterioration in overall operating profit margin,” Roy said, adding that the company continues to invest in expanding its dealer network and adding stores in urban areas to strengthen its reach.

“While revenues have declined, higher employee costs and other expenses have increased, weighing on earnings largely due to increased advertising pressure; freight has generally moved in line with revenue and has not contributed significantly to cost growth,” said Manoj Menon, head of research at ICICI Securities. said Manoj Menon, head of research at ICICI Securities. The brokerage firm, in its report dated October 30, said it expects improvement in revenues and margins in the second half of FY26.

The company reported standalone volume growth of 8.8% and value growth of 1.1% in the September quarter, according to its investor presentation.

“We experienced high single-digit volume growth with low value growth,” Roy said. “Increased contribution of products such as tile adhesives, additives and putty and decreased sales of high-value products such as exterior adhesives and roofing have resulted in an increase in the volume-value gap,” Roy said.

The gap will not disappear anytime soon, but should narrow to around 4-4.5% in Q4 or early FY27, he said. To achieve this, it will need double-digit volume growth to achieve high single-digit value growth, Berger said.

Acknowledging that the second quarter was challenging, it expects investments in brand and manpower to increase and strengthened retail and dealer networks to capture the upcoming demand momentum. But he said “forex volatility and tariff changes” could create uncertainties in the near term.

“Berger’s quiet quarter was largely due to unusually heavy monsoon rains, which hurt demand for premium exterior paint and created negative operating leverage. While competition in distribution has stabilized, advertising intensity remains high and companies will continue to invest to protect their shares,” said Amit Purohit, senior vice president at Elara Securities. “As weather normalizes, the volume-to-value gap should narrow meaningfully in the third quarter and Berger should be able to maintain the lower end of its 15-17% margin forecast for the year.”

Shares of Berger Paints closed with a decrease of 0.52 percent ₹Ahead of the results, 536.20 follows a 0.64% decline in the benchmark Nifty 50.