Who Holds the Price Lever? A Cost Shock, Three Companies, Three Answers

Every company on the exchange faced the same thing this year: input costs went up — raw materials, freight, tariffs, currency. That is not interesting on its own. What separates a durable business from a fragile one is what happens next: can it pass the cost on, or does the cost land on its margin? Three companies filed transcripts and a rating notice the same week, each hit by rising costs, each giving a different answer. Read together, they show that pricing power is not really about whether you raise prices — it is about who holds the lever that sets them.

The one that held the lever

EPL Limited — the laminated-tube maker that packages toothpaste and cosmetics for the world's FMCG brands — reported a June quarter in which revenue rose 25.3% and the EBITDA margin held at 18.8%. Costs had risen; the margin did not fall. On the earnings call, managing director Hemant Bakshi said why, in one sentence: "We were able to pass on the entire cost increase through judicious pricing across all our regions and customers." Pressed by an analyst on whether "entire cost" meant raw material, freight and currency all together, he said simply: "That is right."

That is pricing power in its plain form. When your costs rise and you can lift your own prices enough to leave the margin intact, you hold the lever. EPL sells a specialised component to a broad base of large buyers who need it and have no easy substitute — so when it says the price is going up, the price goes up.

The one whose customers held it

Kitex Garments held the opposite end. On 28 August, India Ratings downgraded its long-term rating to "IND BBB+" from "IND A" and its short-term to "IND A2" from "IND A1," with a Negative outlook. The reason, in the agency's words: "The group's EBITDA margins deteriorated to 0.21% in FY26 (FY25: 20.34%…), mainly due to the operationalisation of the Warangal unit leading to high fixed costs and partial absorption of the US tariffs." A margin of twenty per cent, gone to almost nothing in a year.

The structural reason sits two lines down in the same filing: "The top five customers contribute almost 100% to the overall group revenue," with the US about 64% of sales. That is the whole story. A garment exporter selling essentially all of its output to five large American buyers cannot pass a US tariff back to those buyers — they are the ones with the alternatives, and they hold the lever. So the tariff cost had nowhere to go but the margin, and the margin absorbed it until there was none left. Concentration is the inverse of pricing power: the more your revenue depends on a handful of customers, the more the price is theirs to set, not yours.

The one where the state held it

Avanti Feeds sits in between, and its case is the most unusual. On its call, management confirmed the June-quarter profit-before-tax margin fell to 7.06% of revenue, from about 17% a year earlier — even though, as the company noted, it had taken a price increase of "around 10%" on 19 June. Prices went up; margin still halved. The cost side explains part of it: fish meal, the key feed input, averaged about ₹153 a kilo this quarter against ₹93 a year ago, and management said the current purchase price has climbed further, to ₹225.

But the more telling constraint is who sits on Avanti's price. Its director C. Ramachandra Rao told the call that "the governments have say in prices because of the various statutes that are there in Andhra Pradesh now… the feed manufacturers, government, and we are all working [out] the price" — and that the state has "constituted a committee with one of the big four consultants" to review feed pricing. Even where Avanti wants to raise prices to cover a doubling input cost, a state authority holds a hand on the lever. The company took its 10%; it could not take what the cost actually demanded.

What the three have in common

Put them side by side and the lesson is not that EPL is a good company and the other two are bad ones — Kitex's tariff hit may ease, and Avanti's fish meal may come down. The lesson is about where the lever sits. EPL holds its own price because its customers are many and dependent. Kitex does not, because five buyers are the market. Avanti does not, because the government is in the room. Same cost shock, three owners of the price.

That is the question worth carrying into any "pricing power" claim. Not "did they raise prices" — Avanti raised prices and still bled. The question is who decides the price: the company, its concentrated customers, or the state. When the answer is anyone but the company, a cost increase does not get passed on. It gets absorbed — and you can watch it land, in these three filings, on the margin line.

Educational research, not investment advice. Every figure and quote above is verbatim from the named company's own Q1 FY27 earnings-call transcript or rating disclosure filed 28-Aug-2026 and verified against the source. No buy/sell recommendations, no price targets. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.