Berger Paints carrying inventory for 2.5 months; expects gross margin to move higher

With crude oil trading above $100 per barrel owing to Russia’s invasion of Ukraine, what is worrisome is how it will pan out for businesses that use it as a raw material. To understand its implications on the paint business, CNBC-TV18 spoke to Abhijit Roy, MD & CEO, Berger Paints.

Roy clarified that out of 4 ingredients, only one of them is linked to crude. He added that monomers, which are solvent binders, are a derivative of crude. However, it is more affected by demand-supply issues than the price of crude itself. He cited that overall, solvent binders form 30-35 percent of Berger’s raw material basket.

He said, “There is a correlation between oil and some of our raw materials, but it is not as strong as it is normally felt. The rest is immune and not linked directly to oil. Yes, as oil prices go up, sometimes the packaging, freight prices also go up. So it’s in general an inflationary trend for the Indian economy. However, the type of closeness that one expects that if oil prices go up the paint prices will immediately follow suit, doesn’t happen.”