> ## Content Index > Fetch the complete content index at: https://www.moatmarginresearch.com/llms.txt > Use this file to discover other available public pages before exploring further. # Berger Paints Q2: CEO Puts Industrial Gross Margin Drop at About 5% While Prices Catch Up - URL: https://www.moatmarginresearch.com/berger-paints-q2-industrial-gross-margin-price-lag/ - Published: 2026-11-08T03:31:47.000Z - Updated: 2026-11-08T03:31:47.000Z - Description: Berger Paints Q2 FY27: the CEO puts the industrial gross margin drop at about 5% as price rises lagged costs, and hopes to recover 90% by end-November. - Author: A K Karthikeyan - Tags: Moat Insights **Berger Paints' standalone revenue grew 11.9% in July to September 2026 on volume growth of 3.0%, and standalone gross margin fell to 36.6%. On the call, the CEO put the fall at "about 5%" in industrial coatings and said the company is hoping to recover "almost 90%" of the intended price increase by the end of November, with the last 10% to follow by December. The filings and the call show customers and market share staying. They show the price rise running behind the raw-material cost in the quarter, and they give no contract terms for industrial customers.** MoatSCORE: 6.42 (read live on the Moat Screener on 8 Nov 2026, where it is labelled deep dive). It is provisional. Our deep dive on the company is [here](https://www.moatmarginresearch.com/does-berger-paints-have-a-moat/); the same test for the sector leader is in [our Asian Paints piece of 30 Oct](https://www.moatmarginresearch.com/asian-paints-q2-volume-held-margin-paid/). ## The idea in one sentence When costs jump, a company with pricing power is the one whose price catches the cost fastest, so the length of the lag, and which business carries it, tells a reader more than the headline margin does. ## The fact that breaks the assumption Revenue grew 11.9% and the company says price rises were taken, yet standalone profit before interest, depreciation and tax (PBDIT, the company's EBITDA before other income) fell 4.4% to ₹297.54 crore, and net profit fell 7.3% to ₹163.31 crore (\[IP\] p.5, \[RS\] p.3). Our arithmetic: material cost (cost of materials consumed, purchases of stock-in-trade and the change in inventories) rose 17.2% against revenue of 11.9%. Volume rose 3.0% (\[IP\] p.4), so per unit of volume, material cost rose about 13.8% while revenue per unit rose about 8.6% (our arithmetic; volume is the company's standalone figure, and revenue per unit blends price and mix). The gap between those two growth rates is about 5 percentage points; the gross margin lost in the quarter was 2.9 points (table below). The company's own explanation has three parts: "double-digit RM inflation", "liquidation of high-cost inventory" and "delayed price increases in the Industrial segment, with pressure further intensifying during the quarter" (\[IP\] p.3). It is the third that this piece follows, because the other two hit every paint maker and the third is specific to how Berger sells. ## One concrete thing, followed: the industrial price lag, in the CEO's numbers An HSBC analyst asked what price rises had gone through in industrial. Abhijit Roy, MD and CEO, answered (\[TR\] 31:33): "So, there was a gross margin drop of about 5% in the industrial business, 5.5% almost." Then: "we have been able to pass on, partially the price increase, you know, and some more price increases we have got in the month of October." On the plan: "hoping that, you know, we will be recovering almost 90% of the increase that we want at the end of November." The remaining "balanced 10%" he expects to push through "till December". The deck says the same in writing: "price hikes could not be fully passed on in a timely manner" (\[IP\] p.10). Three other group entities report raw-material pressure, each named by the company. SBL (we take this to be SBL Specialty Coatings Private Limited, listed in \[RS\] p.7; the deck does not spell the name out) saw "profitability impacted by steep inflation in solvent-based RMs"; the BNPA joint venture saw revenue growth of "over 40%" and "profitability and margins compressed as higher RM costs are yet to be fully offset by the impact of price increases"; STP's "margins moderated due to RM cost pressures" (\[IP\] p.16). Only the BNPA statement says price rises have yet to offset the cost; the SBL and STP lines do not say that a price lag is the cause (company statements; no entity's gross margin is given). How the margin fell, in the consolidated and standalone statements: | Gross margin (our arithmetic unless marked) | Q2 FY26 | Q1 FY27 | Q2 FY27 | | ------------------------------------------- | ------- | ------------ | ----------------------------------- | | Standalone | 39.6% | 39.3% | 36.6% (company: 36.6%, \[IP\] p.11) | | Consolidated | 41.6% | not computed | 39.3% (company: 39.3%, \[IP\] p.11) | Q1 FY27 standalone gross margin was 39.3% against 40.1% a year earlier, a fall of 0.8 points (our arithmetic from \[RS\] p.3 and \[IP\] p.6). Q2's standalone fall was 2.9 points (39.6% to 36.6%) and the consolidated fall 2.3 points (41.6% to 39.3%), which fits the deck's "pressure further intensifying". The CEO puts the blend at "about 2.5-3%" (a figure he gives as an average of decorative, where the drop was "lesser", and industrial, "even higher"), which matches our 2.9 points and is our reason for reading his "5%" and "5.5%" as percentage points. ## The mechanism Three clocks run at different speeds. **The cost clock.** Raw materials are bought ahead and carried in stock. The CEO: "Of course, we have a lag between the consumption and it converting into the COGS, cost of goods sold." He placed the peak early: "the highest level was in quarter one, which carried into quarter two, which impacted the quarter two area" (\[TR\] 29:47). Standalone inventories rose from ₹2,225.60 crore on 31 March to ₹2,666.38 crore on 30 September (+19.8%, our arithmetic; \[RS\] p.4), and the cash-flow statement shows an inventory outflow of ₹440.78 crore in the half (\[RS\] p.5). The CEO described this as "a planned inventory buildup" for the festive month of October, held "at the RM prices" of the day (\[TR\] 16:28). Our reading: stock built in the quarter will reach cost of goods sold from Q3; the CEO adds that raw-material prices dropped marginally in Q2, "which will carry forward in quarter three" (\[TR\] 29:47). **The price clock.** In decorative, the deck puts price growth at about 8% (\[IP\] p.3); the CEO adds, speaking of the two businesses together, that the company "pulled back on a little bit of rebates on certain product categories", at a cost to sales. Industrial paint is where the lag sits: price rises there are staged: some taken in October, more planned for November, and a push "till December" for the rest, on the CEO's account. Our reading: that is the cadence of negotiated increases with business customers, not list-price changes, but no document says so. **The cushion.** Gross margin fell 2.9 points but standalone PBDIT margin fell 1.8 points, from 12.7% to 10.8% (\[IP\] p.5). Our arithmetic: employee cost was ₹183.29 crore against ₹182.55 crore, a rise of 0.4%, and employee cost plus other expenses fell from 26.9% to 25.8% of revenue, even with about ₹22 crore of extra spend on the "Rang Bana Rahe" campaign (\[IP\] p.3; 0.8% of standalone revenue, our arithmetic). The CEO also said industrial "value sales growth was robust", so the operating margin "was not as bad as the gross margin reduction". Without the campaign the CEO says PBDIT growth "would have been about 3%" (\[TR\], opening remarks; the deck says \~3%, \[IP\] p.3); our arithmetic on standalone figures gives 2.7%. What this shows about the moat, in our reading: customers stayed (volume rose, the CEO puts market share at "about 20.2" against 20.3 earlier, a company measure over the top six listed companies, \[TR\] 27:21), but the price did not move as fast as the cost. A moat shows in the second half of that sentence only if the lag closes. The CEO says it closes by November or December, "if it stays at these lower levels, then we would have recovered almost everything". ## Where this breaks - **The company's own account of the cost path disagrees with itself.** The press release, dated 5 Nov, says: "With no sign of easing of the inflationary trend of raw materials, we will implement further rounds of price increases in November and beyond as and when required" (\[RS\] p.15, read on the page image). On the call, the same CEO says there was "a small drop in the second quarter in the raw material prices", that "the crude prices have softened a bit", and, answering a different question, that "the raw material prices went up in this quarter only". The press release also says "the full impact" of the rise "was felt in this quarter". If the peak was Q1, the lag is mostly stock; if costs are still rising, the 90% is chasing a moving target. - **"90%" is not 90% of the cost rise.** It is 90% of "the increase that we want", a target the documents do not size. If the target was set before costs moved again, 90% of it could be less than 90% of the cost (our reading). The CEO's own answer: if crude stays at the lower levels, "we would have recovered almost everything"; if it climbs back, 90% would be recovered. - **A lag that closes may be normal for this customer.** A business that sells coatings to manufacturers may be built on price reviews that trail cost by a quarter or two. If so, the Q2 gross margin is the price of that structure and the moat reading is neutral. The filings give no contract terms and no customer data to decide between a temporary lag and a standing one. - **Margin may have been partly traded for volume (our reading).** The company "pulled back on a little bit of rebates", and price-sensitive decorative categories (putty, textures and enamel, \[IP\] p.7) "de-grew for us" (\[TR\], opening remarks). Standalone volume growth was 3.0% in Q2 against 5.6% for the half (\[IP\] p.4); the deck also says volume moderated as "later Diwali shifted festive demand to Q3" (\[IP\] p.7). The competitor's behaviour matters here: the CEO says the new entrant raised prices to match the industry but is "rebating a little bit more", so "that intensity of competition remains to that extent" (\[TR\] 27:21). - **The cushion rests on one quarter.** Employee cost was nearly flat (+0.4%, our arithmetic) in a quarter when sales grew 11.9%. The CEO says the campaign spend will taper and return in a "burst" after "7-8 months". - **Review, not audit.** The auditors' (B S R & Co. LLP) conclusion on both the standalone and the consolidated results is unmodified: "nothing has come to our attention that causes us to believe" the statement is misstated or fails to disclose what Regulation 33 requires. A review is "substantially less in scope than an audit" (\[RS\] pp.2, 8). For the group, other auditors reviewed some subsidiaries and two joint ventures, and four subsidiaries and a step-down subsidiary were not reviewed and are, per management, not material; the report says "Our conclusion is not modified in respect of this matter" (\[RS\] pp.8-9). - **One quarter, one call.** The "about 5%" and "5.5% almost" and the 90% are the CEO's rounded oral statements, in a machine-made transcript; the filed deck gives no industrial margin figure. For balance, the deck calls industrial volume and value growth "robust high double-digit" (\[IP\] p.10) and the press release credits the good performance of the industrial, construction chemical and international businesses for consolidated growth (\[RS\] p.15). ## Why it costs the reader something A reader who sees volume up, share held and margin down, and files it with every other paint company in the quarter will miss where Berger's margin loss sits and when it ends. In the company's account it sits in industrial and in some subsidiary and joint-venture businesses (no entity's margin is given), and the CEO has given a hoped-for date for the end: recovery of almost 90% of the intended increase by end-November, the remainder pushed through till December. That date can be tested against the Q3 results. What the margin must do is large. The company says its guided EBITDA range is 15 to 17 and that it is "quite confident that we will be quite close to that 15% to 17% band" in the third quarter and possibly the fourth (\[TR\], opening remarks). Standalone PBDIT margin was 14.4% for H1 and 10.8% in Q2\. As an illustration only: if the band applies to the full year (not stated) and second-half revenue grows 12% on the second half of FY26 (our assumption, not guidance), second-half PBDIT margin would have to be about 15.6% for 15% and 19.7% for 17% on the full year (our arithmetic from \[RS\] p.3). Q1 FY27 standalone PBDIT margin was 17.4% (our arithmetic): second-half margins like Q1's would put the full year near 15.9%, inside the band, while margins like Q2's would leave it near 12.6% (same assumptions, our arithmetic). Cost inflation also takes cash. Standalone operating cash flow for the half was ₹100.78 crore against ₹625.65 crore a year earlier, with trade receivables up ₹287.68 crore and inventories up ₹440.78 crore (\[RS\] p.5); the balance sheet shows current borrowings of ₹400.00 crore and no figure for them at 31 March (\[RS\] p.4). The CEO calls the receivables "the normal course of business" and the inventory a planned build ahead of October (\[TR\] 16:28); the filings do not test either statement. ## The concrete thing, again "There was a gross margin drop of about 5% in the industrial business" is one sentence on an evening call, and it is the only place any document sizes the damage. In a quarter when standalone gross margin fell from 39.6% to 36.6% and PBDIT fell 4.4%, it is the company's own measure of what the lag cost. It also gives the reader a date and a number to hold the company to: almost 90% recovered by end-November, the rest by December, and PBDIT margin toward 15% to 17% in the third quarter. If the Q3 filing shows gross margin still near 36.6%, the lag is not closing; if it is back near the 39% of Q1, the Q2 fall was a timing cost. ## Sources - **\[RS\]** [Berger Paints India, outcome of the board meeting, results, review reports and press release, 5 Nov 2026](https://nsearchives.nseindia.com/corporate/PAINTBERGE%5F05112026143719%5FResultsFinal051126.pdf) (NSE) - **\[IP\]** [Berger Paints India, Q2 and H1 FY27 earnings update, 5 Nov 2026](https://nsearchives.nseindia.com/corporate/PAINTBERGE%5F05112026150332%5FInvestorPresentationFinal051126.pdf) (NSE) - **\[TR\]** [Berger Paints India, transcript of the Q2 FY27 earnings call, filed 6 Nov 2026](https://nsearchives.nseindia.com/corporate/PAINTBERGE%5F06112026164518%5Ftranscripts.pdf) (NSE) - Earlier Moat & Margin pieces: [Does Berger Paints Have a Moat?](https://www.moatmarginresearch.com/does-berger-paints-have-a-moat/), [Asian Paints Q2: Volume Up 6.4%, Gross Margin Down 339 bps](https://www.moatmarginresearch.com/asian-paints-q2-volume-held-margin-paid/) --- > Educational research, not investment advice. Every figure above is drawn from Berger Paints India's own filings of 5 and 6 November 2026 (results and review reports, press release, investor presentation and earnings-call transcript), read from the primary documents on 8 November 2026; derived figures are our arithmetic, labelled as such. MoatSCORE: 6.42 (read live on the Moat Screener on 8 Nov 2026, where it is labelled deep dive). It is provisional. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.