Rising crude prices are a matter of grave concern for paint manufacturers along with others who are dependent on petroleum based products as raw materials. In recent times, rising crude oil prices have impacted significantly the margins of paint companies. Paint makers had heaved a sigh of relief when titanium dioxide prices had corrected marginally in the second half of last year. However, relief was shortlived as the prices started rising again and are now up 10% from the lows of January’18. As there are no signs of prices cooling down, paint makers may be left with no option but go for price hike. According to some analysts, major paint markets like Asian Paints, Kansai Nerolac and Berger Paints may soon pass on the increased cost of raw materials to consumers by increasing prices of end products by 1-3%.
Paint industry is raw material intensive industry where raw materials account for nearly 60% of the sales revenue. Paint making requires more than 300 different raw materials and most of them are petroleum based. Thus, a hike in the price of petroleum products raises input costs for paint makers.
Currently, the size of Indian Paints industry is estimated to be around Rs 56,000 crore and is expected to touch 72,000 crores by 2020. Between, 2005-15, the industry saw a robust growth of 17% p.a. However, thereafter the growth was slowed down slightly due to slowdown in real estate sector. Despite that the industry has been able to maintain double digit growth between 2015-2017. Asian Paints, Kansai Nerolac and Berger Paints are the leading players in the industry.