Indigo Paints posted mixed earnings for Q1. The company saw a strong year-on-year revenue growth but there has been a sharp contraction in EBITDA margin owing to high expenses.

In an interview with CNBC-TV18, Hemant Jalan, MD at Indigo Paints, said, “As far as our targets are concerned, I think July was an excellent month. We did much better in terms of topline growth compared to the full-year average that we had projected. I see numbers getting better as we go along, so if I gave a guidance of 30 to 35 percent topline growth for the year, we would probably revise it to 35 to 40 percent for the full year, as we go ahead, assuming of course, that we don't have a third wave of COVID. So things look pretty good on the demand front.”

On raw materials impacting margins, Jalan said, “I don't think that crude per se impacts paint raw materials as much as what is widely believed. There are other raw materials that went through the sky as far as price increases were concerned. But most of that really started in the Q3 of last fiscal, it probably reached its peak around December, January and since then, they have moderated a little bit. Now, there was a marginal dip in our gross margins in Q4 and they have kind of maintained themselves, as far as few Q1 is concerned.”

He further added, “The hit on our gross margins have not been nowhere as severe as what the other paint companies have reported, largely because we managed to do price increases well before the rest of the industry did. I think we have been able to manage the selling price versus cost ratio reasonably well. We expect to see a gross margin expansion gradually, as we move forward.”

On EBITDA margins, he said, “Because our spends on advertising and promotion are disproportionately higher as compared to the rest of the industry therefore, the timing of the ad campaigns do tend to cause wide fluctuations in our EBITDA margins. We are not worried about that, because we plan for the whole year. Our guidance is that we will end the year with an EBITDA margin upwards of 18.5 percent, which would be at least 1.6 percent higher than last year, which was at 16.9 percent.”

He added, “As far as Q2 is concerned, Q2 of last year was a period of good advertising. IPL was there in September and October, which comprised of heavy advertising. This year, you have 50 percent of the IPL being carried forward and that really starts from mid-September. So our ad spends this year in Q2 are not likely to be drastically different from the ad spends in Q2 of last year, and therefore we should report good EBITDA margins as far as Q2 is concerned.”

On market share, Jalan said, “The share of differentiated products for the last fiscal was about 30 percent, and they have been inching up by one percentage point every year. We hope that the share will rise incrementally to maybe 31 percent or thereabout at the end of the fiscal, but I think we are doing fine as far as our product mix is concerned.”

For full interview, watch the accompanying video.

(Edited by : Dipika)

First Published:Aug 12, 2021 12:35 PM IST