SHADES OF SUCCESS

In a bull-run for the past two years, the Indian paint industry, currently valued at Rs 70,0000 crore, is projected to expand its market size to Rs 1 lakh crore over the next 4-5 years. What is driving this growth?

- Ashish Sinha

THE INDIAN PAINTS industry seems to have hit a purple patch. The good run that kicked off in the third quarter of fiscal year 2022, thanks to a 20 per cent increase in prices, has held on. FY2023 looked even better with an 18 per cent spike in revenue, helped by higher realisations due to a 6 per cent rise in prices during the fiscal. The uptrend is very much intact and expected to continue during FY24 and even beyond.

In fact, the industry expects its revenues to grow 10-12 per cent in FY2024. Experts say strong volume growth, coupled with stabilising input prices linked to crude oil, will likely help maintain operating margins at around 15-16 per cent in FY24, much like in FY2023.

The sector's success is tied to the fortunes of the five major paint companies namely Asian Paints, Berger Paints, Kansai Nerolac Paints, Akzo Nobel, and Indigo Paints, which together represent nearly 90 per cent of the organised sector's revenue, totalling around Rs 65,000 crore, out of a total estimated market size of Rs 70,000 crore.

Experts as well as the industry players see the total market size expanding to Rs 1 lakh crore over the next five years or so, thanks to the growth of existing participants, new entrants, increased investments, rising demand, and market expansion. Along with substantial growth, the industry may also witness mergers and acquisitions.

Despite aggressive capex by paint majors as well as the entry of new players, the sector has benefitted from the nearly debt-free balance sheets of leading companies, which help support their credit risk profiles. The industry consists primarily of the decorative paint segment, which accounts for almost 80 per cent of the market share; the remainder is dedicated to industrial paints.

Pushing Growth