Market Share Gain Prioritisation Over Margins In Paints Driving Delay In Price Hikes: ICICI Securities
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ICICI Securities Report
Despite 10-50% YoY inflation in input costs, market-leading paint companies have not yet increased selling prices (despite three years of price stability – last price increase was in FY2018).
Probable reasons, in our view, are -
- desire to gain market shares (accelerate formalization) and
- create speed-breakers to decelerate revenue performance of smaller players.
During FY2016-2021, due to multiple one-off factors such as demonetization, goods and services tax, Covid-19, slower economic growth etc., the business model of informal segment has been under stress.
Higher input prices have likely created stronger headwinds.
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