Asian Paints, India's largest paints company, reported September quarter results that were below street expectations. The EBITDA margin expanded 170 basis points to 14.4 percent, a big miss compared to the 17.8 percent estimates.

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Amit Syngle, MD & CEO, Asian Paints though is hopeful for things to turn better for the next quarter with inflation trends going down.

“We saw very strong inflationary trends in quarter one, almost about 6 percent inflation in terms of the overall material prices. This was followed by another 2 percent inflation in quarter two in terms of what we see,” added Syngle.

He further added that if inflation remains flat and the deflationary trend continues, by quarter four Asian Paints can get back to having an EBITDA Margin of 18 to 20 percent.

“Raw material is cooling off very strongly, we will definitely see a deflation of about at least a minimum of about 5 to 6 percent happening in the coming quarter, which we see in all the key raw materials of the paint industry overall to that extent,” said Syngle.

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The company reported 200 basis points decline in gross margin compared to the June quarter. When compared to the same period last year, the gross margin is up 100 basis points.

“I see definitely going forward that there will definitely be a push up in terms of the overall gross margins more towards possibly 37-38 kind of a percentage point and definitely an improvement in terms of the EBIT,” said Syngle.

Further talking about the impact of inflation on the quarter results he said that in the paint industry, there is a lag which really happens in terms of the inflation really hitting the companies to that extent because there is an inventory of raw materials and finished goods, which carries into the next quarter.

“So what we saw was an overall impact of at least about 7 percent happening in quarter one and quarter two, in quarter two to that extent,” said Syngle. ]

Asian Paints net profit although increased 33 percent from last year to Rs 803.8 crore. That figure was also below the estimate of Rs 1,075 crore.

But Syngle further added that after dipping demand due to a bad monsoon in September, demand trends have started picking up now.

“First, the wedding season seems to be very, very strong this year in quarter three as well. The construction is picking up, and our B2B business, the project's business has been doing extremely well, outgrowing the retail sales to that extent therefore given the kick in the real estate despite the interest rate going up I think that is a very strong area, which is kind of auguring the demand,” said Syngle.

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(Edited by : Abhishek Jha)