Paint Companies to Witness 10-12% Growth in FY22

Revenue of paint companies will rise 10-12%, with improving consumer sentiment and economic recovery driving growth in decorative and industrial segments alike, according to Crisil Ratings. At the other end, operating margin will shrink ~200 basis points and is expected to be at about 17%, though lower than the decadal high of about 19% last fiscal. That is because high crude prices have resulted in a sharp increase in raw material prices (55-60% of costs) this fiscal, and price hikes by players have not entirely offset this. However, healthy cash accruals, well managed balance sheets and large cash surpluses will keep credit profiles stable. Anuj Sethi, senior director, Crisil Ratings said , “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 broader 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. Paint manufacturers are taking calibrated price hikes as demand slowly turns healthy after two years of tepid growth. The Rs 53,000 crore paints industry is dominated by organised players who account for about 70% of revenue. Within the organised sector, decorative paints have a revenue share of about 77% and industrial paints the balance.