Sticks with paint color sit in cups at a manufacturing facility. (Photographer Ari Lindquist/Bloomberg)

Rising Demand May Not Be Enough For Paint Makers. Here’s Why

The stocks of India’s top two paint makers are losing colour.

The profitability of Asian Paints Ltd. and Kansai Nerolac Paints Ltd. has been hit by rising crude oil prices and a weak rupee.

Net profit of Asian Paints, India’s largest paint company, missed estimates in the July-September period, while Kansai Nerolac’s earnings declined for the third straight quarter.

Gross margins of both the companies hit an all-time low as prices of crude oil hovered near a four-year high and the rupee depreciated the most in 20 quarters during the period.

The paint industry uses crude oil derivatives such as monomers and titanium dioxide as raw materials, which account for more than 50 percent of a company’s total expense.

Paint maker reported weaker-than-expected earnings despite higher demand.

Asian Paints’ volumes for decorative paints rose in double digits for the third straight quarter. Kansai Nerolac maintained a positive outlook as it expects the decorative business to outperform industrial paints in near future.

Shares of Asian Paints declined 1.4 percent while Kansai Nerolac lost 37 percent so far this year, compared with a 3.3 percent fall in the NSE Nifty 50 Index.

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