HomeNewsPaint sector to log 10-12% growth

Paint sector to log 10-12% growth

Paint companies will stage a strong comeback this fiscal, regaining the ground lost amid the second wave of the pandemic in the first quarter, says a study by Crisil Ratings. Revenue will rise 10-12%, with improving consumer sentiment and economic recovery driving growth in decorative and industrial segments alike. The conclusions are based on an analysis of six players, which account for 96% of the organised sector revenue.

The Rs 53,000 crore industry is dominated by organised players who account for 70% of revenue. Within the organised sector, decorative paints have a revenue share of 77% and industrial paints the balance.

Says Anuj Sethi, Senior Director, CRISIL Ratings, “Higher spending on home improvement and refurbishing, and a gradual increase in real estate activity is expected to drive revenue recovery of 11% in the decorative paints segment. Also, this year, revenue recovery is expected to be more broad based. Improving pace of vaccination and easing of pandemic related curbs will drive growth in the urban areas. On the other hand, better rural incomes on the back of an almost normal monsoon, will support recovery in the hinterland, which accounts for a sizeable chunk of decorative paint volumes. Last fiscal, while the overall paint sector registered only 4% growth, the decorative segment had fared better due to strong demand from the hinterland, which was less impacted by the first wave.”

New opportunities have also opened up, with building chemicals, adhesives, wall putties, wood polish finishes, and other such products now being distributed through the same network. These segments contribute less than 5-10% to revenue, but help players in the decorative segment offer more solutions in the home décor space.

Notably, the top five players account for 95% of the revenue in this industry despite the entry of new players in recent years. Strong brand association, tie-ups with customers (automotive paints), and established distribution networks remain key entry barriers. Given the healthy growth prospects, companies with sizeable financial flexibility and established distribution network for allied products are gearing up to enter the sector.

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