Pidilite Industries may not raise prices as raw material cost moderates

In its market outlook the company said the global operating environment in terms of inflation, currency and supply chain disruptions remain fragile and might impact margins

Pidilite Industries may not increase rates as raw material prices have started to taper but the company expects its margins to improve only from the second half of the financial year. 

The maker of Fevicol expects demand to moderate in the second quarter (July-September). This is because prices of vinyl acetate monomer (VAM) — one of its main raw materials — was at an all-time high of $2,600 per tonne in the April-June quarter. And, it will get consumed in the second quarter, Bharat Puri, managing director (MD) of Pidilite Industries told Business Standard. He also said that the company has passed on only 75 per cent of the raw material price increase to consumers.

He said, “We believe that this was temporary, and it’s unfair to load the consumer because you will impact your own growth, and we would rather prioritise volumes over near-term margin.”

He also said, “Barring unforeseen circumstances, we believe that if the current trend continues, we will not need any further pricing.”

He also said that growth in rural and semi-urban India is beginning to moderate because consumers are facing the brunt of inflation.

He added, “It will take time for the market to adjust. The good news, however, is that we are seeing some moderation now in input prices.”

Puri believes that VAM prices will moderate even further in the second half as it has already corrected from $2,600 per tonne to $2,000. 

In its market outlook, the company said that the global operating environment, in terms of inflation, currency and supply chain disruptions, remains fragile and may impact margins.

The tailwinds that the company is witnessing are from the housing sector, real estate and good monsoon, which it hopes will augur well over the next six months. 

In its international business, Puri said that the company will have to wait and watch until it reaches a new normal.

“As far as India is concerned, we believe that the growth story is intact and it will actually pick up. We’re well positioned for growth, both from a geopolitical and from our own internal points of view,” he said.

The company has also invested in its factories — it expanded five of them and put up 10 new ones.

Puri said that five have already started and five more will start in the next six-nine months. 

“We’ve clearly invested for the future, whether it’s in innovation, whether it’s in digital, whether it is in ecommerce and of course in people. So, we are getting ready for the next phase of growth,” Puri added. 

The company’s capital expenditure is typically between three to five per cent of its sales, which is between Rs 500 and Rs 700 crore. 

In its conference call with analysts, the company said that it has also expanded its rural reach. In rural India, it has added another 17,000 villages to its direct coverage in the course of the last six months. These are villages with a population of between 5,000 and 8,000.