Paint manufacturers are keeping a close watch on rising crude prices and the falling rupee.

A sustained spike in oil prices and currency volatility could impact the input prices of paint, thereby affecting margins and prompting manufacturers to consider a price hike.

Crude oil derivatives are the key raw materials for paint manufacturers and some of the derivatives are sourced from the overseas markets.

A fluctuation in crude oil prices along with a volatile currency push up the raw material cost for the manufacturers who can either absorb the shock or pass it on to consumers.

The crude oil benchmark (Brent) rose above $70 a barrel on Monday amid escalating military tensions between Iran and the US.

No immediate action

The industry is in a watch-and-wait mode: a price hike is unlikely for now. But if crude prices stay at current levels for 2-3 months, the start of the fiscal could see a hike.

“The prices of raw materials keep on fluctuating. The industry keeps a close watch on the cost of raw materials. But there may not be any immediate call on increasing paint prices. Most manufacturers keep raw material stocks. But, if the crude prices sustain at higher level in the coming months, a call might be taken,” said Abhijit Roy, managing director and CEO of Berger Paints.

The industry had taken multiple rounds of price hikes in 2018 when Brent had crossed $80 per barrel. But there has also been subsequent reduction in prices when raw material prices moderated.

According to a senior industry executive, the profit margins at the moment are stable and the industry is optimistic amid the plan of the government to push housing and infrastructure. However, external shocks such as a hike in crude oil prices could affect the bottomline.