Fire breaks out at Berger Paints Howrah factory - Stock Impact
The stock of the second-largest paint maker in the country, Berger Paints, is down about 3% on the bourses today (June 9, 2022). This is mainly on the back of a fire at the company’s factory on June 8, 2022.
According to the company’s statement, an accidental fire broke out at the company’s Howrah factory at around 2.20 pm (on June 8, 2022). The accident affected the exit gate and the raw material handling area.
The company stated that its production area remained completely unaffected. However, 21 of the company’s employees received injuries while attempting to douse the fire.
Eventually, the fire was brought under complete control but the reason for the occurrence is under investigation, the company said in a statement. A preliminary investigation points towards an electrical short circuit in an AC unit.
Berger Paints’ Howrah plant operation is temporarily stopped. But as per the company’s statement, it is expected to resume in a couple of days.
Berger Paints: What investors should know?
Berger Paints is one of the leading players in the paint industry. Asian Paints and Berger Paints hold dominant positions and control most of the market share in the industry.
For Berger Paints, the decorative segment contributes to about 80% of revenue while the remaining 20% comes from the industrial and coatings segment.
While Asian Paints holds a dominant market share, about 50%, Berger Paints has a dominant position in rural and urban markets (other than metro cities) compared with its peers. This gives the company an advantage in the pricing of products. Further, in a few product categories such as exterior paints and wall-proofing products, Berger Paints holds a better market position than Asian Paints.
While the paints industry had long been dominated by Asian Paints, Berger Paints, and even Kansai Nerolac (a leading player in industrial paints), competition, particularly from Grasim and other small regional players, is likely to impact the paint makers including Berger Paints.
Other challenges for paint makers include volatility in input costs. As paint raw materials are derived from crude oil, any upswing in the crude prices impacts the margins and the company’s pricing power. Considering the increasing competition in the market, the margins may come under pressure due to pricing competition.
In its recent March quarter of FY22, the company reported revenue growth of about 8% y-o-y to Rs 2,187 crore and profit growth of about 6% y-o-y to Rs 221 crore.
About Berger Paints
Berger Paints is said to be the 2nd largest paint maker in the country. It has a presence in 8 countries with exports across multiple countries.
The company has about 13 manufacturing plants across the country with 181 sales/depot offices. And it has over 25,000 dealers.
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Research Analyst: Bavadharini KS