MUMBAI (NewsRise) -- Asian Paints, India's largest paint producer, reported a better-than-expected 15% jump in third quarter net profit as demand for decorative paints surged.
Net income for the quarter ended in December stood at 6.36 billion rupees ($89 million), the company said in a statement. Analysts were expecting a net profit of 6.14 billion rupees, according to Refinitiv data. Revenue jumped 24% to 52.94 billion rupees.
The profit growth came despite the higher raw material costs caused by the jump in crude oil price to a record four-year high at the beginning of the quarter. Crude derivatives account for almost 60% of the inputs for paint manufacturing.
India is an underpenetrated paint market in comparison with developed nations, with one of the lowest per capita consumption globally. Analysts expect the strong pace of urbanization, rising incomes, and growing aspirations for a better lifestyle to drive the industry growth in the long run.
"The decorative business segment in India registered a high double-digit volume growth and delivered strong performance across regions," K.B.S. Anand, managing director and chief executive of Asian Paints, said in the statement.
Total expenses jumped 26% to 43.81 billion rupees, hurting margins, as the company delayed passing on the increased cost to consumers, analysts said.
Strong festival season, market share gains in distemper segment, and re-building of the southern Indian state of Kerala that was ravaged by floods in August were the key reasons for the upbeat quarterly performance, according to brokerage Phillip Capital.
Kerala was affected by the worst floods in a century in August, killing scores of people and wreaking damages worth billions of dollars.
Phillip Capital said it expects Asian Paints' margins to improve in the current quarter as the company raises prices even as input costs decline.
Meanwhile, the automotive segment witnessed "subdued growth" in the quarter, Anand said. India's automobile industry has slipped into a slow growth track as a cash crunch among financial companies and a weak economy hurt consumer sentiment in Asia's third-largest economy.
Shares of Asian Paints closed down 1% in Mumbai trading, while the benchmark S&P BSE Sensex lost 0.4%.
--Dhanya Ann Thoppil