← Throughline · holding view Deep analysis ↗ Q3 FY26
ASIANPAINT Asian Paints Ltd · Other Q3 FY26 · concall
Pattern: industry growth has not

Volume rebuilt 1.8% Q4FY25 to 7.9% Q3FY26 with 8-10% band telegraphed.

7 weak · 10 clean — pushback across 7 of 17 Q&A turns

Focused evidence 7 of 17

Manoj Menon · ICICI Securitiesweak

Big picture - you being a 50% plus market share leader, what are the reasons for industry growth being so muted? Looking at last 20 years of paint industry, particularly last 10 years, there appears a two-year pattern - two years good, two years muted. By that logic, growth should have recovered this year. What's your prognosis on why industry growth is not happening the way it should?

There is a little bit cyclicity to it in terms of past patterns. There have been periods when overall cycles of growth have come down. From a CAGR point of view, the industry continues to be strong. We are seeing consumption trends changing - frequency of painting has come down a little bit, occasion-led painting has also come down. Wedding is a very big phenomena - today more destination weddings happen than home weddings, contributing to postponement. It is a discretionary spend - there are other avenues like travel and hospitality which are booming. But industrial sales has really gone up and B2B is showing high-teen double-digit numbers - so there is also a shift in demand happening in some of those areas. With interest rates coming down and people shifting investments to other areas given the volatility, we could see some of those shifts in the painting cycle. The expectation was now, which has not happened.

Manoj Menon · ICICI Securitiesweak

Looking into next 12-18 months, what is your confidence level - 60-70-80-90-100% - to say you will end the next 12-18 months with material market share gains?

That is the endeavour in terms of what we want to take. All our strategies are geared towards the fact that today we would like to possibly grow to some extent higher than the market. So, whether it is from the point of view of innovation giving us that leverage or it is from the point of view of far more different areas which we are driving whether it is waterproofing, whether it is construction chemicals, whether it is the whole B2B business. So, we are reasonably confident in terms of doing that.

Avi Mehta · Macquarieweak

By when do you see volume growth possibly moving to double digit - is this a few months phenomenon or a few quarters phenomenon?

So, progressively, we see that this is the third quarter, which is seeing volume growths. In fact, last quarter we had a double-digit, this quarter we had a high-single-digit growth. So, I think that regime should continue as we go forward.

Mihir Shah · Nomuraweak

On margins - you are at the higher end of the margin guidance band and raw materials are deflationary. Can one expect margins to sustain at current levels excluding mix impact, and is there any case for a price cut theoretically?

The whole price environment seems very volatile today. Given the current geopolitical situation, the whole crude impact can come in very fast. There is some possibility of regulating the key raw material of TiO2 which comes in from outside and there could be some movements in that direction going forward. We want to spend constructively from brand building, services and premiumization. A lot of energy would go into newer products. At the moment, I don't think we are looking at any price change, but we will keep a close watch in terms of where we are going. The areas I have outlined we should look at concentrating on those areas to build ourselves for future.

Percy Panthaki · IIFLweak

Trying to understand the context of growth this quarter for the domestic business - sales growth is about 3% on a base of about minus 7%. What is constraining the growth - is it the competitive environment and some loss of market share or is it industry growth itself that's weak? If latter, is it particular to this quarter or short term so we can expect improvement, or is improvement more of a hope at this point?

It is pertinent to look at the overall coatings growth which is about 4.4% and even from a point of view of volume level, it goes to 8.3%. Given the current demand conditions, it is still quite a good growth and we believe that, while the results are going to come for the other companies, it should be possibly higher than the industry average. We have been pursuing in all the areas where we are seeing growth - namely the B2B and the industrial. A good ticker would be to keep on looking at the volume growth - the value growth would follow from that point of view. Anything in volume in the current context which is between that 8% - 10% is a good growth under the current circumstances.

Amit Sachdeva · UBSweak

On the value-volume gap of 5% sustaining for a few more quarters - in your thinking, you have reflected largely mix-led activity causing this. Is it also competitive signalling - that you expect competition to behave in a certain manner and you have inbuilt that pricing will remain in this band? Is it a two-year phenomenon? When would you see the base catching up - is there a framework we should think about?

If you look at the construct of the market - the premium-luxury market contributes to only a certain portion of the entire market and you can really grow the premium-luxury market only by that percentage points, even if you were to take a hypothetical price increase. The fact is that today there is a large segment which is the upgradation economy segment, with a lot of attendant products like undercoats. Given that we look at this product mix which is true for a larger set of companies, it is realistic to assume that this gap will remain for a certain point of time. This structure can't change strongly very easily in a very short time. Even from waterproofing range, it has a mix from premium as well as eco category in terms of how it balances out. This gap will remain if you want to have a far healthier growth across the range of products.

Tejas Shah · Avendus Sparkweak

If we attribute this quarter's slowdown or disappointment on growth to shorter Diwali window, is it right that the corollary was that last quarter had some tailwind coming from early puja/Navratri? Despite headwinds of heavy monsoon, we did very well in 2Q. So, on 9 month over 9 month basis, neutralizing volatility, we still seem to be struggling - and the industry too. Are those green shoots we saw in 2Q still there, or is it still sometime away before we come out of this headwind environment?

Not too much is going to change for the immediate quarter or the immediate two quarters. Largely given the demand trends overall, some of those demand trends from retail, B2B, industrial would remain in the same zone. Progressively we could say there could be some improvement given the cyclicity of the industry and the fact that in the past also we have seen that demand coming back, but we will have to really watch the environment very carefully - it is also dependent on a lot of other factors. Some consumption patterns are changing and given that we are in a discretionary category, it also governs the growth. We need to wait for another one or two quarters before we really see some things changing in the market.

▸ Other Q&A (10)
Abneesh Roy · Nuvama

On the regional variants - how many states have regional offerings, and do you see proof of the concept, is growth faster in such states? Second, given real estate stocks/index and business updates suggest demand-side change and possibly fag end of the real estate upcycle - 15% of India demand comes from new homes - what is your take on that 15% segment?

Regionalization is a very differentiated strategy. We now cater to almost about 8 to 9 states where we have taken different kind of products, varying from upgradation emulsions to premium emulsions to luxury emulsions, and waterproofing variants in regional packs. States include J&K, Kerala, West Bengal, Karnataka, Haryana - it is not just a shot in one or two states. The proof of the concept comes from acceleration in growth, differentiated offerings supported by below-the-line initiatives, and excitement levels from dealers and consumers. Consumers are adorning these packs into their homes, with regional colour preferences and books linked to popular TV soaps. On the construction segment - across parts of the country, the luxury and premium housing is on an uptick and that reflects in product mix; growths are far higher than just repainting retail segment. There is also a lot of demand for waterproofing, repair and construction chemicals fuelling our numbers.

Abneesh Roy · Nuvama

On competition and advertising spends - the new player took a price hike while your gross/EBITDA margin is at multi-quarter high. What is your near-term pricing strategy? On media, given Cricket World Cup in February as official paint partner, what is your share of voice and break-up between digital and traditional spends?

Some of this pricing increase is just an artificial strategy - a price increase has meaning only at a reasonable discounting structure. Anything in 2-3% zone will not have any impact. We look at pricing from a market perspective. As a leader we can command a certain premium and we are not tinkering with the prices. We will watch out for inflation indications and review accordingly. The coming cricket series is exciting with a lot of innovations from our side given the colour partnership. Our digital spends have also increased given fragmented media. We are leading the share of voice game today not only in north, east, west markets but also across the southern markets. We have been putting a lot of money in the overall marketing spend - a strong strategy to propel the brand geographically rather than concentrating on specific markets.

Avi Mehta · Macquarie

On decorative coatings industry growth momentum - what exactly was the growth in November, December versus the overall 3Q?

October was depressed for us given the festive season was just about 15 days and was affected by a little bit of prolonged monsoon. So, the growth which came in was much higher in the months of November and December. In fact, the exit growth rates were even higher than what possibly we saw in November. So, progressively, November and December is much higher. October gave very little growth.

Avi Mehta · Macquarie

On Home Decor - what are we doing to drive profitability? Is it fair to say that we are now in consolidation as we focus on profitability, which should impact sales growth?

As far as decor is concerned, it's a very fragmented market. From the point of view of the organized market, the organized market is very small, the unorganized market is very high. There will always be pricing pressures coming in. Where we are leading the game is maximizing our sales on the Beautiful Home store network, which are also places where we cross sell from paints to space decor and vice versa. We are opening some stores every year so that gives us a larger coverage. The approach is we spend sensibly here, at the same time, look at innovation and concentrate on growing the business through our Beautiful Home Store Network.

Mihir Shah · Nomura

On demand environment - given 3Q was impacted by shorter festive and prolonged monsoon, can one expect volumes to be better in coming quarters? How is January shaping up?

We are seeing some of the trajectory of December into January as well, for sure. Given the fact that the second quarter for us was at about 10.9%, this quarter is about a high-single-digit. I think as we go ahead, this band would remain, in terms of what we would be able to target for the Q4 as well.

Mihir Shah · Nomura

On the latest latex paints launched focusing on rural market - how are they doing? Any thoughts around share gains from unorganized players (we have about 220 paint companies in India, names of only about 10)?

We had launched "NeoBharat" and we have been pursuing it very strongly. We have looked at the latex market which is basically sold in "Kgs" across various markets. In certain states where we have seeded the product where the profile of the region suits it, we are seeing some uptick from those geographies, digging into unorganized markets. The purpose literally was that if we can upgrade the unorganized customer to organized markets. We have not made it a mega launch across the country, but we have seeded it in certain states, where we would continue to focus on that product.

Percy Panthaki · IIFL

The volume-value gap for last several years has been negative for us. Any chance this will become zero or something in absence of any price changes, or will it remain at this 3-4% gap?

The gap has come down. Earlier, the volume and the value gap used to be about 6% to 8%. So, the gap has come down, which is an indication of the fact that possibly there is a premiumization which we are attempting. If you look at the entire segment of economy, primers, some of the upgradation products, it is a large segment. By virtue of the fact that you would like to grow both sides - upgradation and premium luxury segment - some of this gap is bound to remain. I would say that this 4%-5% is a more realistic thing which would remain in the market.

Percy Panthaki · IIFL

If 9-10% volume growth is a respectable number and there is a gap in volume-value, does that mean about 5-6% value growth is what we should be realistically expecting in the next few quarters? And on margins - earlier you gave 18-20% band, now we are at the 20% number - do you think assuming input costs more or less remain where they are, we would maintain this 20% going ahead or it could fluctuate between 18-20% band?

I think that is a reasonable take in terms of what we can look at [on the 5-6% value growth]. Given the kind of environment, the volatility, the kind of competitive intensity, our spends in terms of building the brand going forward - we should judiciously use the monies, to say what is the longer term view we are taking, what are the endeavours which we are making - investment in the market, technology (both information technology, AI or development technologies), marketing impetus. We would keep the guidance between that 18 and 20% band as we go ahead and that is something which we will endeavour to maintain.

Amit Sachdeva · UBS

You had given some sort of ambition for second half - kind of 5% or mid-single-digit revenue growth and value volume gap of some 5%. Given Q3 performance and the fact that Q4 tends to have channel filling and competitive activity, is it a remote possibility that your guidance is intact and we could see strong volume growth in Q4, or are you sticking to that guidance?

I have been maintaining that band of 8-10% for volume and gap between the volume and the value is a good indicator. This whole thing of channel filling is something which is always artificial. It is not something which becomes very productive when you start the next quarter. We basically take a balanced stance in terms of how we would like to channelize our sales and to some extent there is a little bit of a hockey stick effect which comes in every quarter. So, literally if you see, it is built into your base as well. I would like to maintain the numbers in terms of what I just said.

Tejas Shah · Avendus Spark

On margins - there appears to be some divergence between the growth outlook, the competitive intensity commentary and the margin performance. Despite muted growth and elevated competition, we are still at higher range of the margin. Is it that the industry believes passing on the benefit to consumer will not revive demand and hence it is better to either hold margins or invest in marketing/branding?

I do not think that is the case, because the competitive intensity is still very strong in the market. I don't think we see any pull back happening. Our strong ingredient has been the whole cost model which we have broken up in a very big way. So we are not relying on just the external deflation or the prices. We are working on a very strong cost model which attacks the structural cost in our system - fixed or variable. The model is also looking at strong material innovation. This builds a war chest for us to really look at spending money in the market, investing in technology. At the same time, we are able to stay within our margin range as we go forward.

▸ Prepared remarks (5 blocks)
Thank you for joining us today for Asian Paints Q3 and 9M FY26 results call. I'm Lakshya Sharma from Investor Relations team, and it's my pleasure to welcome you all. We are today joined by senior members of our management team, including our MD and CEO, Mr. Amit Syngle, our CFO and Company Secretary, Mr. RJ Jeyamurugan, our AVP finance, Mr. Parag Rane. I would now like to invite our MD and CEO to give us his opening remarks. Over to you sir.
Good evening, everyone, great to have you for the Investor Conference for the Q3 and the 9M FY26 results. Let me take you right into the area in terms of what we are going to speak today. You are aware of the core value in terms of what we have been driving from a long time. This is about delivering joy since 1942. We exist to beautify, preserve, transform all spaces and objects, bringing joy and happiness to the world. As we start, I wanted to really take you on to a journey in terms of what we have been driving this year, very strongly. The first area has been from a point of view of seeing how we can really propel the brand going forward. The second area is that one of the bedrocks of our strategy has been based on innovation. The whole area of services is the third big area. The fourth area is another trump card from our side in terms of what we have been doing, and this is about the whole area of regionalization. The fifth area is the whole area of B2B, which is really galloping at a good pace. And the last area is what we have been speaking for a while, the whole area of backward integration. As you know that this is a journey, which we are on to, we have started our white cement plant. When we look at the whole area of brand building, one of the big things which we are proud of is that we became the colour partner to the team India, and this is something which we invoked very strongly. We felt that this is a very strong partnership which we have done with BCCI which helps us really appropriate the entire cricket team in a very strong manner. Services, as I said, is a big area we have been speaking about. The "Beautiful Home Painting Service", is possibly the largest painting service in the world. We have really amped up the service literally, and we are now looking at AI as a very big force in terms of hyper segmentation of the customer, and not only that looking at the service being seamless and, at the same time, looking at AI-led NPS to measure the output. The second big area is "Total Assure". This is a comprehensive service which basically looks at offering solutions to large factories, large projects. Another variant is "Smart Assure", which is literally being the waterproofing expert and offering the same service which is supervision controlled. Not only that we built a whole platform for asset protection service also. This is an asset management service called "Metacare". Coming on to the Q3 results, as you see, we have been able to drive a strong high single-digit volume growth of <strong>7.9%</strong> which is strong. If you see in the last three quarters, the trajectory has been strong and resilient which possibly, going ahead, we should be able to maintain. When we look at, from a point of view of the overall volume and value of the decorative business, we had a little bit of a compressed festive season. All of you know, we had earlier Diwali, and therefore we got only about 15 odd days in October which was festive. We also had a prolonged monsoon which stepped into October as well. So, it was not great. So, overall, November and December, were good, which helped us basically prop the entire Q3 volume to about 7.9% growth. The value growth was about 2.8%, so you can see the difference between the value and the volume was approximately about 5%, which indicates a relatively strong mix in terms of what we have been able to deliver. When we look from a 9M level the respective volume growth is about 7.5%, and the value is about 2.4%, which is a marked improvement in terms of what was there last year. However, the story changes when you look at the overall coatings business, which is the entire decorative and industrial business, which is a comparison which is done with the industry. When we see this the volume growth jumps to about 8.3% from the 7.9% in decorative and the value growth for all coatings jumps to 4.4%. So, I think it literally is closer to the mid-digit level in terms of what we spoke about last time. Overall, from a point of view of 9M growths again in the same regime, about 7.7% on the volume and about 3.5% on a value on a 9M frame. So, I think the industrial business has done quite well and has added a lot of acceleration in terms of the overall coatings. Now we look at some of the things which in the quarter worked very well for us. As I said, high single-digit volume growths, despite the fact that there was a shorter festive period along with a prolonged monsoon. One of the things which we saw was, that the rural parts batted better than the urban centres, possibly a good rainfall which has augured well. From a point of view of product categories, I think a strong focus on the premium and the luxury category, is something which is helping us really improve the margins and help us with better realization. Not only this, I think we have been able to trail blaze the whole waterproofing portfolio and cementing the leadership in this category and really becoming the water proofing expert in the market. We also continue to expand our distribution footprint.
We have added about 3,500 to 4,000 retailers this year overall, and our reach is now in more than 1.6 lakh retail outlets. The B2B business did better than the overall retail area, was led by strong growths coming from the factories and the government. The other thing which we see very clearly is that our Beautiful Home Painting Service is giving us a very strong edge. We see better implementation, huge technology which we have put into it, seeing the outcomes and the response from the consumer, which is AI-led resulting in better NPS. Not only that, a lot of new products in terms of what we have launched, we showed you some of them in the last call and now more products which are coming in. And today, new product contributes to about 16% of our overall revenues. Just to show you one very innovative product, which is a first in the world called the "PU Gold". This is a premium polyurethane paint which has got anti-termite element in it. We had also launched two other variants. One is basically called the water-based glossy product, which is "Aquadur" and the other is a VFM category polyester paint which we have launched. We have been pursuing this strategy, which is really owning homes, the area of moving from surface decor to space decor. The progress here has been a little bit limiting in terms of what you have been seeing in the previous quarters as well, but I think this is a very important area for us which kind of gives us credence in terms of owning homes. Right now, obviously it contributes to about 4% of our decorative revenue. Our Beautiful Home stores network, which is doing quite well overall, expands to about 74 stores across the country. However, as I said, from a top line perspective, the categories of White Teak and Weatherseal did well. Although we were stretched in terms of the overall bottom line for White Teak, but two categories' top line is now emerging to really build-in. The area of bath was something which continued to be weak. Kitchen has done fairly okay in terms of 3% growth while improving the bottom line there as well. From the point of view of international business, you can see our footprint. I think a good steady business in terms of what we have done. We see there is a 6.3% value growth, in constant currency terms it boils down to about 4.2%, given the fact that INR has depreciated. Very strong growth which has been coming in units of Sri Lanka, UAE, Ethiopia, and that is something which has given us a larger growth. Even PBT has been very strong this year. For AP Global overall, we have got a 26% growth which comes in, at 9M level, the growths are even higher. When we come to the industrial segment, again a very strong performance, the PPGAP which is our JV, which is about auto and general industrial segment, this is something which has really delivered a stellar performance in terms of almost growing by 17% this quarter, and on a 9M level also growing at a strong 14%. Even from a point of view of PBT, we have really expanded the PBT margin for the quarter. It is an all-time high with almost 300 bps growth year on year. When we look at the APPPG, which is comprising of protective paints and powder coatings and some traffic paints. In this business again, a very strong quarter with about a 16% value growth. On a 9M basis, we are on a double-digit growth and again we have delivered PBT growth of 11% on a Q3 level and about 7% on a 9M level. When we look a little bit deeper to see what is really happening, I think the paint market has gone through a certain bit of deflation, given the fact that today consumption worldwide is something which is down. And we see larger raw materials, whether it is monomers, whether it is TiO2 - the prices have been low. And we have seen a material deflation of about 1.1% as well, which is also really helping us in the gross margins we are deriving in this quarter. Now, coming to the outlook for Q4, we want to really maintain the growth momentum. From a point of view of competitive intensity, it is bound to remain now. We have obviously newer competition; we have also amalgamation of two players which is kind of coming in the market. So, I think we will have the competitive environment continue as we kind of go ahead. From a point of view of industrial segment, I think this is something which will really grow, and I think there would be a strong traction which will come in, along with the B2B. So, these two, as I said earlier would kind of continue to grow possibly higher than retail, going forward. International business, again with the exception of Bangladesh, I think all other countries should do well overall, and that momentum should be maintained. Overall, yes, we all know that there is a geopolitical uncertainty in terms of how the world is kind of sitting at. I think some of those volatilities will remain, but we are obviously getting used to this volatility.
So, finally, we look at the overall financials for Q3 at a standalone level. If you see that the Net Sales growth is about <strong>2.9%</strong>, I think a little bit lower here because of the festive season being cut short. But, the volume growth has been strong at almost about 8%. At the same time, when we look at the gross margin, one of the highest Gross Margins I would say over the quarters in terms of what we have registered, about 44.9%, 200 bps points higher, and I think other than the deflation, we have also seen a lot of efficiencies in terms of the cost which we have brought in giving us a boost in terms of overall gross margins. The PBDIT growth is almost closer to 8% in terms of what we have been able to drive, and the PBDIT margins are also quite good at 21.4%, 100 bps up yoy. So, I think the Gross Margins, PBDIT margins, have been strong and PAT before the exceptional items is close to about 6.6% growth. On a 9M basis, again, if you look at it the Net Sales growth is about 2.3%. Gross Margins are high at about 43.9%, almost about 170 bps points higher. PBDIT has grown by 6.6%, and the PBDIT margins are strong at about 19.8%, almost 80 bps points higher. PAT before exceptional items, again on a 9M basis, is up by about 4.6%. So, overall if you see, a strong quarter from the perspective of how the growths have come in. At a consolidated level, when we see again, from a top line perspective we are at about 4% yoy growth, a part of the industrial sale is not here. The Gross Margin is 44.3% which is higher by about 200 bps points.
Again, in terms of the PBDIT growth, almost 9% growth here, with PBDIT margin of 20.1%, which is also higher about by 90 bps points. From a point of view of PAT, when we look at before the minority interest and the exceptional items, it is at a strong growth of 7.7%. On a 9M basis, similar picture with 3.2% top line growth, Gross Margin of 43.3%, PBDIT growth at about 7.4%, and a margin at about 18.7% overall. There are two exceptional items in the quarter which are there, one is all of you are aware, the impact of the labour code, which basically has a component in terms of gratuity and leave accumulation. And that is something which is Rs. 63.74 crores. As I mentioned that while we got the top line in White Teak the month of October was not good. I think the whole bottom line was affected here. So, we have to take another impairment here, and that has been something which is close to about Rs. 94 crores which has been taken in White Teak which is the Obgenix Software Private Limited. Similarly, on a standalone basis, the two exceptional items, one is on the labour code, which is about Rs. 60.56 crores, and similarly an impairment loss on the standalone numbers which comes close to about Rs. 106 crores.
Watch next