Pidilite Industries Ltd is sailing through smoothly despite a challenging demand environment for consumer discretionary companies in general. The adhesives maker clocked nearly double-digit underlying volume growth (UVG) of 9.9% in the June quarter (Q1FY26). The consumer and bazaar (C&B) segment’s UVG came in 9.3%, the best in the past five quarters. Business-to-business (B2B) UVG was 12.6%.
Note that paint companies, another discretionary play, have had a rough Q1FY26. Most large paint makers saw modest volume growth and lacklustre margin owing to elevated competition and muted demand.
In contrast, Pidilite’s management said demand for its products was healthy across regions. Rural markets continued to outperform urban ones and the trend could persist, they said. Increased construction activity should aid growth and management believes the domestic operating environment may improve, led by a good monsoon and lower interest rates. Pidilite expects overall UVG to be in the double digits going ahead.
Consolidated revenue grew 10.5% year-on-year to ₹3,753 crore in Q1FY26. Gross margin moderated a bit sequentially to 54%, partly owing to product mix and marginally higher vinyl acetate monomer (VAM) consumption cost versus Q4FY25. Pidlite forecast gross margins of 54-55% through FY26.
Ebitda margin increased 114 basis points year-on-year to an 18-quarter high of 25.1%, aided by lower expenses. With raw material prices still benign, management maintained sustainable medium-term margin guidance of 20–24%, with FY26 possibly being on the higher end of the range.
Price increases will be tactical in nature and Pidilite has no plans for major hikes as no significant commodity inflation is currently anticipated. The near-term margin outlook seems stable, although margins leave a little scope of expansion from current levels, cautioned PL Capital. “Pidilite is operating at peak of the cycle margins, consequently, returns could be measured unless growth surprises meaningfully,” it said in a report dated 7 August.
‘Little room to expand margin’
Pidilite aims to grow at one or two times India’s gross domestic product (GDP) growth in its core categories and at two to four times in emerging or growth categories. Fevicol, Fevikwik, Fevistick, M-Seal are all in the core category, while waterproofing solutions fall under the growth category, and new businesses such as wood finish products and epoxy adhesives fall under the pioneer category. The B2B segment is seeing healthy UVG aided by the construction chemicals vertical.
According to Motilal Oswal Financial Services, Pidilite’s core categories still enjoy GDP multiplier (meaning they are growing at least as quickly as India’s GDP), and the advantage of penetration and distribution could help it deliver healthy volume-led growth in the medium term. However, Ebitda margin is already high (23% in FY25). “We do not estimate much expansion as growth drivers (consumer acquisition, distribution expansion, and brand investments) will require high operating expenses,” said Motilal Oswal report dated 8 August.
Pidilite’s paints business Haisha Paints is making steady progress and now operates in five states—Telangana, Andhra Pradesh, Karnataka, Tamil Nadu and Odisha. To beat competitive pressure from paint majors in categories such as tile adhesives and waterproofing, Pidilite continues to focus on initiatives around expanding rural distribution through Pidilite Ki Duniya stores and Dr Fixit Centres. The company is also entering electronics adhesives.
Pidilite’s shares are up about 8% so far in 2025, more than benchmark index Nifty 50’s 3% gain. The stock trades at 57 times estimated FY27 earnings, showed Bloomberg data, a premium to Asian Paints Ltd and Berger Paints India Ltd. Pidilite enjoys a strong franchise, high brand recall and extensive distribution, but a rich valuation leaves no scope for error, especially if margin fails to hold up.
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