The ₹55,209-crore market capitalisation company witnessed its stock trading at ₹472.35 on February 5, 2026, down 1.61% on the day and trading below all key moving averages, signalling technical weakness. The quarter's results present a mixed narrative—sequential improvement driven by margin expansion, but continued volume pressure dampening year-on-year growth.
The December quarter showcased Berger Paints' ability to navigate cost pressures through operational efficiency, even as volume growth remained elusive. Net sales grew a modest 0.30% year-on-year to ₹2,983.97 crores, whilst the sequential uptick of 5.53% from Q2 FY26's ₹2,827.49 crores reflected typical seasonal recovery in paint demand during the festive and wedding season.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | YoY Growth | Operating Margin | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|---|---|
| Dec'25 | 2,983.97 | +5.53% | +0.30% | 15.78% | 271.16 | 9.09% |
| Sep'25 | 2,827.49 | -11.66% | +1.91% | 12.46% | 206.29 | 7.30% |
| Jun'25 | 3,200.76 | +18.37% | +3.55% | 16.51% | 314.63 | 9.84% |
| Mar'25 | 2,704.03 | -9.11% | — | 15.82% | 262.05 | 9.72% |
| Dec'24 | 2,975.06 | +7.22% | — | 15.86% | 295.13 | 9.95% |
| Sep'24 | 2,774.61 | -10.24% | — | 15.65% | 269.66 | 9.73% |
| Jun'24 | 3,091.01 | — | — | 16.90% | 353.56 | 11.45% |
Financial Performance: Margin Expansion Offsets Volume Weakness
The quarter's standout feature was the sharp sequential improvement in operating margins. Operating profit before depreciation, interest, tax, and other income (PBDIT excl OI) rose to ₹470.97 crores, translating to a margin of 15.78%—a substantial 332 basis points expansion from Q2 FY26's 12.46%. This margin recovery, achieved despite minimal top-line growth, underscores effective cost management and favourable raw material price trends.
However, the year-on-year margin picture remained flat, declining marginally by 8 basis points from 15.86% in Q3 FY24. The PAT margin of 9.09% in Q3 FY26 showed sequential improvement of 179 basis points but remained 86 basis points below the prior-year quarter's 9.95%, reflecting the impact of subdued operating leverage amidst tepid volume growth.
Employee costs for the quarter stood at ₹227.61 crores, up from ₹199.83 crores in Q3 FY24, indicating wage inflation and potentially higher headcount to support distribution expansion. Interest costs declined to ₹14.10 crores from ₹15.99 crores year-on-year, benefiting from the company's net cash position. Depreciation charges increased to ₹100.02 crores from ₹88.81 crores, reflecting ongoing capital expenditure in manufacturing capacity.
Other income contributed ₹30.53 crores in Q3 FY26, up from ₹20.24 crores in the corresponding quarter last year, providing a cushion to overall profitability. The effective tax rate for the quarter was 22.96%, lower than the previous quarter's 24.85%, contributing to the bottom-line improvement.
Operational Challenges: Volume Pressure Persists in Decorative Segment
Whilst margin recovery provided relief, the underlying volume trends remain concerning. The meagre 0.30% year-on-year revenue growth in Q3 FY26 points to continued weakness in the decorative paints segment, which typically accounts for the bulk of Berger Paints' revenues. Industry headwinds including subdued urban demand, real estate slowdown, and intense competition have weighed on volume offtake.
The company's return on equity (ROE) stood at 21.37% on an average basis, demonstrating strong capital efficiency despite near-term challenges. This healthy ROE—significantly above the cost of capital—reflects Berger Paints' ability to generate attractive returns on shareholder funds, a testament to its market position and operational capabilities. The return on capital employed (ROCE) averaged 25.29%, indicating efficient utilisation of total capital deployed in the business.
Berger Paints maintains a fortress balance sheet with virtually zero net debt. As of March 2025, long-term debt stood at a negligible ₹2.96 crores against shareholder funds of ₹6,154.10 crores, resulting in a net debt-to-equity ratio of -0.01 (effectively net cash). This financial strength provides ample flexibility for growth investments, capacity expansion, and potential acquisitions without balance sheet strain.
Key Operational Concerns
Debtors Turnover Deterioration: The company's debtors turnover ratio on a half-yearly basis declined to its lowest level of 6.33 times in H1 FY26, indicating slower collection cycles and potential working capital pressure. This metric warrants close monitoring as it could impact cash generation.
ROCE Compression: Half-yearly ROCE fell to 22.09% in H1 FY26, the lowest in recent periods, reflecting subdued profitability relative to capital employed. Whilst still healthy in absolute terms, the declining trend suggests operational headwinds.
Industry Context: Navigating a Challenging Demand Environment
The Indian paints industry has faced a difficult operating environment through FY26, characterised by weak urban demand, elongated monsoons affecting painting activity, and subdued real estate transactions. Decorative paints, which constitute approximately 75-80% of the industry, have borne the brunt of these headwinds. Industrial paints have shown relatively better resilience, supported by automotive and infrastructure segments.
Raw material prices, particularly crude derivatives and titanium dioxide, have moderated from their FY24 peaks, providing margin tailwinds. However, intense competition—both from established players and new entrants—has limited pricing power, forcing companies to absorb cost increases through operational efficiencies rather than price hikes.
Berger Paints' 0.30% year-on-year revenue growth in Q3 FY26 compares unfavourably with the broader paints sector, which delivered a 1-year return of 2.33%. The company has underperformed its sector by 3.67 percentage points over the past year, reflecting company-specific challenges beyond industry-wide pressures.
Competitive Positioning: Holding Ground in a Tough Market
As India's second-largest paint manufacturer with a market capitalisation of ₹55,209 crores, Berger Paints commands a strong position in the industry. However, market share gains have proven elusive amidst aggressive competition from market leader Asian Paints and regional players. The company's distribution reach, brand equity in the premium segment, and product innovation remain key competitive advantages, but execution will be critical to reigniting growth momentum.
Industry Leadership: How Berger Paints Compares to Peers
Berger Paints occupies a distinctive position within the Indian paints sector, commanding premium valuations whilst maintaining robust profitability metrics. The company's price-to-earnings ratio of 49.82x places it at the higher end of the peer spectrum, reflecting market expectations of quality and growth potential despite near-term challenges.
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield (%) | Debt/Equity |
|---|---|---|---|---|---|
| Berger Paints | 49.82 | 8.77 | 21.37 | 0.80 | -0.01 |
| Asian Paints | 57.11 | 11.91 | 26.01 | 1.03 | -0.11 |
| Kansai Nerolac | 28.58 | 2.73 | 11.10 | 0.57 | -0.27 |
| Akzo Nobel | 34.24 | 5.74 | 24.90 | 6.71 | -0.09 |
| Indigo Paints | 33.57 | 4.53 | 14.20 | 0.34 | -0.22 |
| Sirca Paints | 44.38 | 6.16 | 15.49 | 0.30 | -0.14 |
Berger Paints' ROE of 21.37% positions it favourably within the peer group, trailing only industry leader Asian Paints (26.01%) and Akzo Nobel (24.90%). This strong ROE demonstrates superior capital efficiency compared to Kansai Nerolac (11.10%), Indigo Paints (14.20%), and Sirca Paints (15.49%), justifying a valuation premium.
However, the company's price-to-book value multiple of 8.77x, whilst lower than Asian Paints' 11.91x, remains elevated compared to peers such as Kansai Nerolac (2.73x) and Indigo Paints (4.53x). This premium valuation embeds expectations of sustained profitability and market share gains—expectations that recent volume trends have yet to validate.
The dividend yield of 0.80% lags behind Akzo Nobel's attractive 6.71% but aligns with other growth-oriented peers. All major paint companies maintain net cash positions (negative debt-to-equity ratios), reflecting the sector's strong cash generation characteristics and conservative financial management.
Valuation Analysis: Fair but Limited Upside at Current Levels
Trading at a price-to-earnings multiple of 50x trailing twelve-month earnings, Berger Paints commands a valuation marginally below the industry average P/E of 52x. The stock's current price of ₹472.35 represents a 21.87% decline from its 52-week high of ₹604.60, reflecting the market's recalibration of growth expectations amidst persistent volume challenges.
The company's enterprise value-to-EBITDA multiple of 30.89x and EV-to-sales ratio of 4.70x indicate premium valuations typical of quality consumer franchises. However, these multiples leave limited room for disappointment, particularly given the flat financial trend observed in recent quarters. The price-to-book value of 8.77x, whilst justified by the company's 21.37% ROE, suggests the market has already priced in much of the quality premium.
Berger Paints' valuation grade recently transitioned to "Fair" from "Expensive" in July 2025, acknowledging the stock's correction from earlier peaks. At current levels, the risk-reward appears balanced—the stock offers reasonable value for a quality franchise but lacks the margin of safety typically sought by value-oriented investors.
Shareholding: Stable Promoter Base, Gradual Institutional Shift
Berger Paints' shareholding structure reflects a stable promoter base with gradual shifts in institutional ownership patterns. Promoter holding remained rock-solid at 74.98% in Q3 FY26, unchanged sequentially and down marginally by just 0.01 percentage points from Q4 FY25. This unwavering promoter commitment provides governance comfort and signals long-term confidence in the business.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 74.98% | 74.98% | 74.98% | 74.98% | 0.00% |
| FII | 5.25% | 5.35% | 5.60% | 5.75% | -0.10% |
| Mutual Funds | 6.23% | 5.82% | 5.51% | 5.22% | +0.41% |
| Insurance | 4.81% | 4.85% | 4.90% | 4.82% | -0.04% |
| Other DII | 0.04% | 0.04% | 0.04% | 0.07% | 0.00% |
| Non-Institutional | 8.69% | 8.96% | 8.97% | 9.15% | -0.27% |
Foreign institutional investors (FIIs) have shown a consistent exit pattern, reducing their stake from 5.75% in March 2025 to 5.25% in December 2025—a cumulative decline of 50 basis points over three quarters. This gradual selling by FIIs, coinciding with the stock's underperformance, suggests waning foreign investor confidence in near-term growth prospects.
Conversely, domestic mutual funds have steadily increased their exposure, raising their stake from 5.22% in Q4 FY25 to 6.23% in Q3 FY26—a notable accumulation of 101 basis points. The sequential increase of 41 basis points in Q3 FY26 indicates domestic institutional investors are viewing the current valuation as attractive for long-term accumulation, potentially taking advantage of FII selling.
Insurance companies maintained relatively stable holdings at 4.81%, whilst non-institutional investors (retail and HNIs) reduced their stake from 9.15% to 8.69%, likely reflecting profit-booking or loss-cutting amidst the stock's decline. With zero promoter pledging and moderate institutional holding of 16.34%, the shareholding structure remains healthy.
Stock Performance: Sustained Underperformance Across Timeframes
Berger Paints' stock has endured a challenging period, underperforming the broader market across virtually all timeframes. Over the past year, the stock delivered a negative return of -1.34%, significantly trailing the Sensex's 6.44% gain—resulting in a negative alpha of -7.78 percentage points. This underperformance has been even more pronounced over longer periods, with the stock declining 16.60% over two years whilst the Sensex rallied 16.15%.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +1.91% | +0.91% | +1.00% |
| 1 Month | -10.60% | -2.49% | -8.11% |
| 3 Months | -12.12% | -0.17% | -11.95% |
| 6 Months | -17.49% | +3.23% | -20.72% |
| YTD | -12.19% | -2.24% | -9.95% |
| 1 Year | -1.34% | +6.44% | -7.78% |
| 2 Years | -16.60% | +16.15% | -32.75% |
| 3 Years | +1.94% | +36.94% | -35.00% |
The stock's volatility of 25.16% over the past year classifies it as "Medium Risk Low Return"—an unfavourable combination reflecting price weakness without commensurate returns. With a beta of 1.20, Berger Paints exhibits higher volatility than the broader market, amplifying downside movements during market corrections.
Technical indicators paint a uniformly bearish picture. The stock currently trades below all key moving averages—5-day (₹470.12), 20-day (₹499.25), 50-day (₹526.74), 100-day (₹535.45), and 200-day (₹547.10)—indicating sustained selling pressure. The technical trend turned bearish on January 21, 2026, at ₹515.70, with MACD, moving averages, and KST all signalling bearish momentum on weekly charts.
The stock finds immediate support at its 52-week low of ₹453.35, just 4.19% below current levels, whilst facing multiple resistance layers starting at the 20-day moving average of ₹499.25. A sustained move above ₹535-₹547 (100-day and 200-day moving averages) would be required to signal technical recovery, appearing unlikely in the near term absent fundamental catalysts.
Investment Thesis: Quality Franchise Awaiting Demand Recovery
Berger Paints presents a nuanced investment case—a fundamentally strong business navigating a cyclical downturn. The company's "Excellent" quality grade, underpinned by robust ROCE of 25.29%, healthy ROE of 21.37%, zero net debt, and consistent dividend payments, establishes it as a quality franchise. However, near-term headwinds—flat financial trend in recent quarters, bearish technical momentum, and persistent underperformance versus benchmarks—constrain investment appeal at current levels.
Key Strengths & Risk Factors
KEY STRENGTHS
- Market Leadership: Second-largest paint manufacturer in India with established brand equity and extensive distribution network across urban and rural markets.
- Fortress Balance Sheet: Net cash position with debt-to-equity of -0.01 provides financial flexibility for growth investments and acquisitions without leverage risk.
- Superior Capital Efficiency: ROE of 21.37% and ROCE of 25.29% demonstrate strong profitability and efficient capital allocation, justifying premium valuations.
- Margin Recovery Capability: Q3 FY26 operating margin expansion of 332 basis points sequentially showcases operational agility and cost management prowess.
- Zero Promoter Pledging: 74.98% stable promoter holding with no pledging reflects strong governance and long-term commitment.
- Consistent Dividend Track Record: Regular dividend payments with 37.53% payout ratio balances shareholder returns with growth reinvestment.
- Quality Recognition: "Excellent" quality grade based on consistent financial performance, low debt, and strong interest coverage of 20.44x.
KEY CONCERNS
- Volume Growth Stagnation: Meagre 0.30% year-on-year revenue growth in Q3 FY26 reflects persistent weakness in decorative paints demand and market share challenges.
- Year-on-Year Profit Decline: Consolidated net profit down 8.12% YoY despite sequential recovery, indicating structural demand headwinds beyond seasonal factors.
- Working Capital Deterioration: Debtors turnover ratio at lowest level of 6.33 times in H1 FY26 signals collection pressures and potential cash flow impact.
- Sustained Stock Underperformance: Negative alpha of -7.78% over one year and -32.75% over two years reflects market scepticism about growth prospects.
- Technical Weakness: Stock in bearish trend, trading below all moving averages with MACD and KST indicators signalling continued downside risk.
- FII Exit Pattern: Foreign institutional investors reducing stake from 5.75% to 5.25% over three quarters indicates waning international investor confidence.
- Elevated Valuations: P/E of 50x and P/BV of 8.77x leave limited room for disappointment, with valuations dependent on earnings recovery that remains elusive.
Outlook: What to Watch
POSITIVE CATALYSTS
- Volume Recovery: Sequential improvement in decorative paints demand driven by real estate revival and festive season pickup.
- Market Share Gains: Evidence of gaining share from unorganised players or regional competitors through distribution expansion.
- Margin Sustainability: Ability to maintain Q3 FY26's 15.78% operating margin levels in subsequent quarters despite competitive pressures.
- Working Capital Normalisation: Improvement in debtors turnover ratio indicating better collection efficiency and cash generation.
- Domestic Institutional Buying: Continued mutual fund accumulation providing price support and confidence signal.
RED FLAGS
- Continued Volume Decline: Further deterioration in year-on-year revenue growth indicating structural market share loss or demand destruction.
- Margin Compression: Inability to sustain margin improvements if raw material prices reverse or competitive intensity escalates.
- Working Capital Stress: Further deterioration in debtors turnover or inventory build-up straining cash flows.
- Technical Breakdown: Breach of 52-week low support at ₹453.35 triggering fresh selling pressure and momentum-based exits.
- Persistent FII Selling: Accelerated foreign institutional exit putting additional downward pressure on stock price.
The path forward for Berger Paints hinges critically on demand revival in the decorative paints segment. With the company demonstrating operational competence through margin recovery and maintaining a pristine balance sheet, the primary variable remains external—when will housing activity, urban consumption, and real estate transactions rebound sufficiently to drive volume growth?
For investors, the current juncture presents neither compelling opportunity nor imminent danger. The stock's "Fair" valuation acknowledges quality but offers limited margin of safety. The "Hold" rating with a score of 51/100 reflects this equilibrium—existing holders can maintain positions given the company's fundamental strength, but fresh investors would be prudent to await clearer signs of demand recovery or further valuation compression before initiating positions.
The Verdict: Quality Franchise in Waiting Mode
Score: 51/100
For Fresh Investors: Avoid initiating positions at current levels. Whilst Berger Paints remains a quality franchise with excellent fundamentals, the combination of flat financial trends, bearish technical momentum, and fair valuations offers limited risk-reward. Wait for either sustained volume recovery evidence (2-3 quarters of positive YoY growth) or further price correction toward ₹430-₹450 levels to provide adequate margin of safety.
For Existing Holders: Continue holding positions but avoid averaging down at current levels. The company's excellent quality grade, zero debt, and strong ROE provide comfort for long-term holders. However, set a stop-loss at ₹445 (below 52-week low) to protect against technical breakdown. Consider partial profit-booking if the stock rallies above ₹535 (100-day moving average) without fundamental improvement.
Fair Value Estimate: ₹490-₹510 range (3.7% to 7.9% upside from current levels), contingent on sustained volume recovery and margin maintenance. Current price of ₹472.35 offers modest upside but lacks compelling risk-reward for fresh deployment.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results, and all investments carry risk of loss.
