Asian Paints margin falls 4.96 points as costs outpace revenue
Year-on-year revenue grew 16.94%, but raw-material inflation and lower price pass-through pulled operating margin down 2.01 percentage points.
Filed 29 Oct 2026, 14:04 IST · Asian Paints Ltd (ASIANPAINT)
Key takeaways
- Asian Paints' consolidated operating margin fell 4.96 percentage points sequentially to 15.61% as revenue declined 5.36% while expenses rose 0.55%.
- Revenue grew 16.94% year on year, but expenses grew 19.80%, limiting operating-profit growth to 3.57%.
- The stock rose 0.76% after the results, a smaller move than its 3.36% median absolute reaction after the last eight results.
Price around the results
Sequential slowdown cuts operating leverage
Asian Paints reported consolidated revenue of Rs 9,976.51 cr and net profit of Rs 1,085.35 cr for Q2FY27. Sequentially, revenue fell 5.36% while expenses increased 0.55%, causing operating profit to decline 28.20% and operating margin to narrow 4.96 percentage points. Year on year, revenue still grew 16.94%, but the 19.80% rise in expenses held operating-profit growth to 3.57%.
Raw-material costs and pass-through pressure margins
Management said raw-material inflation and supply-chain volatility continued to weigh on gross margins, while lower price pass-through affected the quarter; it reported gross margin of 40.3%, down 339 basis points year on year. Interest expense also rose 26.28% year on year. Other income contributed 19.61% of pre-tax profit, so reported profit included a sizeable non-operating component, while the 0.27-percentage-point lower tax rate provided only a modest year-on-year benefit.
Margin remains above peers but has lost recent momentum
Operating margin fell from 20.09% in Q3FY26 to 19.32% in Q4FY26, rose to 20.57% in Q1FY27 and then dropped to 15.61% in Q2FY27. The latest margin was 2.87 percentage points above the 12.74% median for the 107 Consumer Discretionary peers that had reported. Management said decorative revenue grew 14.5%, supported by 6.4% volume growth and pricing actions, while new products contributed approximately 18% of overall revenue.
VAE capacity adds a product-differentiation initiative
Management said Phase 1 of the VAE plant was commissioned in Q2FY27, adding annual capacity of 150,000 MT and a gross-block addition of about Rs 1,060 cr. The company told analysts it plans to use the capacity for differentiated in-house formulations and develop next-generation VAE emulsions through its own R&D and green chemistry. For Q3FY27, management said its priorities include festive and wedding-season demand, calibrated pricing and cost efficiencies, while sustaining investment in innovation and brand-building.
Initial stock move was mild by Asian Paints' history
The stock was up 0.76% after the results, with a 0.02% opening gap and a 3.7-times volume ratio. That reaction was modest against the last eight result-day moves, when the stock rose twice and fell six times and the median absolute move was 3.36%.
Q2FY27 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q2FY27 | Q1FY27 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹9,977 cr | ₹10,542 cr | -5.36% | +16.94% |
| Other income | ₹290 cr | ₹279 cr | +3.86% | +22.30% |
| Expenses | ₹8,419 cr | ₹8,373 cr | +0.55% | +19.80% |
| Operating profit | ₹1,557 cr | ₹2,169 cr | -28.20% | +3.57% |
| Operating margin (%) | 15.61% | 20.57% | — | — |
| Interest | ₹55 cr | ₹48 cr | +15.83% | +26.28% |
| Depreciation | ₹314 cr | ₹304 cr | +3.12% | +2.87% |
| Profit before tax | ₹1,478 cr | ₹2,096 cr | -29.49% | +6.20% |
| Tax | ₹392 cr | ₹536 cr | -26.83% | +5.13% |
| Net profit | ₹1,085 cr | ₹1,559 cr | -30.40% | +6.59% |
| EPS (₹) | ₹11.14 | ₹16.06 | -30.64% | +7.43% |
Operating margin of 15.61% compares with a Consumer Discretionary sector median of 12.74% across 107 peers that have reported Q2FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | +0.76% | -0.29% |
Volume on the results session was 3.70× its 20-day average.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- Decorative revenues rose 14.5%, driven by 6.4% volume growth and pricing actions.
- Phase 1 of the VAE plant was commissioned in Q2FY27.
Guidance & outlook
- Q3FY27 priorities include capturing festive and wedding season demand through disciplined execution across markets.
- The company plans to sustain innovation and brand-building investment in Q3FY27.
- The company plans calibrated pricing and cost efficiencies in Q3FY27 to improve margins while protecting demand momentum.
- The company aims to deliver sustained profitable growth through differentiation, brand-building and innovation.
Planned next quarter
- The company will capitalize on festive and wedding season demand in Q3FY27.
Expansion
- Phase 1 of the VAE plant is on stream with annual VAE capacity of 150,000 MT and gross block addition of about ₹1,060 crore.
- The presentation associates Phase 2 with total capex of ₹3,250 crore.
New orders
- The presentation states that B to B business continued to perform well, but does not specify new orders.
New products
- New products contributed approximately 18% of overall revenues in Q2FY27.
New initiatives
- The company is developing next-generation VAE emulsions through its own R&D and green chemistry.
- The company plans to scale differentiated in-house formulations using the newly commissioned VAE capacity.
- Asian Paints scaled its Bigg Boss partnership to five regional markets with regional shade guides.
Competition
- Competitive intensity remains elevated in the near-term operating environment.
Problems & risks
- Raw material inflation and supply-chain volatility continue to weigh on gross margins.
- Competitive intensity remains elevated, making the near-term operating environment challenging.
- Gross margin moderated to 40.3% as higher-cost inventory flowed through after steep inflation in Q1 FY27.
- Lower price pass-through affected gross margin in the quarter.
What to watch
- Whether consolidated operating margin holds above 15.61% after the Q2FY27 decline.
- Whether new products sustain their approximately 18% contribution to overall revenue.
- Whether the 150,000 MT VAE capacity supports further differentiated in-house formulations.