3x Revenue, 300 PE: Inside this paint supplier’s high-stakes play to corner the global market

That question is back in focus after Asian Paints Q4FY26 results. Its decorative paints volume grew by 12.4% year-on-year, and net profit rose 34%. Berger Paints followed with 12% volume growth and 23% jump in profit. Kansai Nerolac also reported a double-digit earnings growth.

Many would assume this signals a structural turnaround. But that conclusion is hard to reach. Because even as demand recovers, competition remains intense, pricing power is weak, and companies are spending heavily on marketing just to defend existing market share.

However, there is a different way to play this industry. Instead of picking which paint company is winning, we can look for who benefits no matter who wins.

That shifts the focus from paint brands to their suppliers, which sit one layer deep inside the value chain.

Paint is Just a Brand Business. It is a Chemistry Supply Chain.

Many people think of paint as a consumer brand industry. Asian Paints, Berger, and Birla Opus compete for shelf space, dealer networks, and urban demand cycles. But, at its core, paint is a chemical formulation business.

Every litre of paint contains pigments for colour, resins for strength and finish, and additives for performance. Paint companies do not manufacture them all. They source them from specialised suppliers, each operating in its own supply chain.

This value chain is highly fragmented, with limited participation by listed companies across most upstream segments. But one part stands out as structurally different: pigments. This is an area where India has built meaningful manufacturing capability and genuine global competitiveness. Within this narrow but critical segment, one listed player has emerged at scale: Sudarshan Chemical Industries.

Sudarshan Chemical: From Domestic Supplier to Global Player

Sudarshan Chemical Industries is India’s largest pigment producer with a market share of 35%. But its real transformation is not just about scale, it’s about how it got there.

The company has steadily evolved from a domestic pigment supplier into a global supplier through strategic expansion in international markets. In October 2024, Sudarshan announced the acquisition of Germany-based Heubach Group, a 200-year-old company and the world’s largest pigment manufacturer, with revenue roughly three times that of Sudarshan.

That deal marked a structural shift. Sudarshan did not merely add capacity. It gained global access to consumers in the US and Europe, advanced pigment technologies, stronger positioning in high-value speciality pigments, and manufacturing footprints across multiple geographies. Today, Sudarshan is no longer just supplying pigments to India’s paint industry. It is participating in the global coatings supply chain.

But this is only part of the story. The financials reveal something more layered, one that goes beyond the headline transformation.

Financials – What the Numbers Actually Say

Before the acquisition, Sudarshan’s standalone business was structurally healthy.

Between FY20 and FY25, sales revenue compounded at a rate of 14.4%. Operating margins largely stayed in the range between 11 to 13%. And, net profits were steady over the period, though not linear. There were, however, clear cycles within this stability.

Sudarshan Chemicals: Sales and Profitability Trends

	FY20	FY21	FY22	FY23	FY24	FY25	FY26
Sales (₹ crores)	1,708	1,864	2,201	2,302	2,539	3,346	9,787
Operating Margin (%)	15	16	13	9	13	11	6
Net Profit (₹ crores)	145	141	130	45	357*	60	41

After the conclusion of the Heubach acquisition in March 2025, the scale of business changed overnight. Consolidated sales revenue tripled in a single year from ₹3,346 crores in FY25 to ₹9,787 crores in FY26. But the operating margin and net profit declined sharply, indicating stress in the newly combined company.

Why the Heubach Acquisition Dragged Profitability Down

Heubach was not a healthy business when Sudarshan acquired it. The company was undergoing insolvency proceedings. Sudarshan acquired its assets and operations at approximately 0.2x CY23 sales. Importantly, no debt was transferred as part of the deal.

On paper, it looked like an attractive entry into the global market at a great price. But in reality, it inherited significant complexity.

Heubach had itself acquired Clariant’s global pigments business in 2022 through an insolvency process. That integration was never fully completed before Heubach itself entered distress of its own. When Sudarshan stepped in, it did not take over a clean business. It took over three overlapping layers: legacy Sudarshan, the Heubach platform, and the half-integrated Clariant layer underneath. Each has its own ERP systems, supply chain processes, organisational cultures, and reporting standards.

The Margin Compression was a Deliberate Choice

The FY26 numbers look like a disaster. On ₹9,787 crore of revenue, Sudarshan earned just ₹41 crore in net profit. For a company that ran 13 to 16% margins for years, this looks like an acquisition gone badly wrong.

But, it wasn’t. Most of the margin compression was intentional.

When Sudarshan took over Heubach, it inherited a business that had spent years in insolvency. Customer trust was broken. Supply chains were unreliable. Rather than cutting costs to show early profitability, Sudarshan made the opposite call. Deliberately increased inventory in several areas to guarantee supply continuity. That decision raised overhead costs for Sudarshan, resulting in margin compression.

Q4FY26: Early Signs of Recovery

By the fourth quarter of FY26, that bet had started to pay off. Customers returned. Volumes recovered. Management had guided Heubach’s business to generate €9 to 10 million EBITDA for the year; it delivered €11 million (approximately ₹ 120 crore). All of this happened without any price hikes across product lines.

Sudarshan also reduced Heubach’s inventory by €29 million, against the planned reduction of €20 million. Net debt fell from ₹934 crore in December 2025 to ₹755 crore by March 2026. Legacy Sudarshan delivered Business EBITDA margins above 14%, its strongest quarter in years.

What Management is Guiding Toward

For FY27, management has guided €35 million in business EBITDA from the Heubach operations. A significant jump from the €11 million delivered in FY26. The long-term target is €90 to 100 million, to be achieved over the next three to four years.

Legacy Sudarshan is expected to grow 8 to 10%, after accounting for the geopolitical headwinds.

The €35 million guidance looks ambitious on paper. But management’s rationale is worth understanding: achieving it requires no new capital investment, since manufacturing capacities already exist across both entities. The path to higher EBITDA runs through better asset utilisation and pricing normalisation, not incremental capex.

Valuation: What the Market Is Pricing In

Sudarshan is currently trading at a very high trailing PE of around 300x. That number is misleading because FY26 earnings are unusually low due to acquisition-related disruption.

Sudarshan Chemicals P/E Trends

A better way to look at it is forward earnings. On expected FY28 earnings, according to the ICICI Direct brokerage report, the stock trades at approximately 14x PE and around 7.5x EV/EBITDA.

The key point is not the current multiple, but what the market is assuming about the future. The market is expecting earnings to grow strongly over the next 2–3 years, driven by both revenue growth and improvement in margins as the Heubach integration stabilises.

Return on equity is also expected to improve gradually as the business normalises after integration.

The real way to think about valuation is simple. You are not buying Sudarshan based on today’s earnings. You are buying it based on what earnings could look like once the Heubach integration is complete.

If the integration goes well and the acquired business delivers the expected EBITDA, the current valuation can look reasonable. But if integration takes longer than expected, earnings may stay under pressure, and the stock could remain range-bound.

In short, this is not a clean valuation story. It is a bet on execution over the next few years.

Why Keep a Watch on This Company

Sudarshan is not a buy-it-and-forget-it story right now. It is a company at an inflection point with asymmetric potential, if execution follows strategy. Here are three things to watch specifically:

#1 Quarterly Heubach EBITDA Trajectory

Management needs to show €35 million for FY27. Q1 FY27 results will be the first real test of whether Q4’s recovery was durable or seasonal.

#2 Pricing Action

While volumes are gradually recovering, price hikes have not taken place yet. When and how much pricing flows through will determine whether EBITDA margins normalise toward the 12–15% range, which the management has historically delivered on the legacy business.

#3 Debt Repayment Coverage

Sudarshan funded part of the Heubach acquisition through debt. It raised ₹1,600 crore, with repayment schedule to start in FY27 on a ballooning structure, meaning it steps up each year.

In FY27, Heubach is expected to generate around €35 million in EBITDA. At this level, cash flows may not be sufficient to cover the first year of debt repayment fully. To bridge this gap, Sudarshan may rely on the cash reserves of its standalone Indian business, which provides a buffer in the near term.

FY28 is expected to be the key turning point. By then, Heubach is projected to generate enough cash to support its own debt repayments. If the recovery takes longer than expected, the burden of support shifts back to the Indian holding company.

Sudarshan holds a position that few companies in Indian listed markets can claim. It is the dominant domestic supplier of an essential input to a structurally growing industry and, following a transformational acquisition, a top-two global player in that category.

The underlying logic is intact. The execution risk is real. And the market hasn’t fully priced either of those things yet. In a sector where everyone is watching which paint brand is winning shelf space, the more important question may be simpler: who actually makes the colour that goes into every can of paint? Right now, adding the stock to your watchlist could be a smart move.

Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only. 

Deepan Datta has spent over a decade studying stocks and mutual funds. His passion is to uncover interesting stories in the financial markets and share them through his writings with investors at large. He is focused on delivering clear, easy to understand and research-backed insights. Deepan began his career as a Research Associate at S&P Global, where he developed a strong foundation in financial research and data analysis.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article. The website managers, their employees (s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein.  The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors.  Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.