Paints & varnishes

Industry Code (as per CMIE Prowess): 0101013030000000'

June 2022

Individual Parameters Contributing to the Score

Moderate Demand

The paint industry volumes were impacted during FY21, largely on account of the severe lockdowns in the first quarter. Besides the decorative paints segment which is the major segment (more than 70% of overall volumes), the industrial segment was also impacted due to factors like lower automotive sales especially in the first half. In the second half, there was traction in the demand of leading players like Asian Paints & Berger. As per CMIE data, the industry reported 13.86% y-o-y growth in sales from Rs.101 billion for March 2021 quarter to Rs.115 billion for March 2022 quarter. The exports value increased by 13.22% from Rs.9.9 billion for FY21 to Rs.11.8 billion for FY22. With a pickup in the automotive and the real estate sector, the long term demand prospects would continue to be strong.

Neutral

While there are few smaller players in the industry, the industry is dominated by only a few large branded players like Asian Paints, Berger & Kansai. This is reflected in the healthy average operating margins in the industry. The entry barriers in the industry will continue to remain high.

Stable Regulatory environment

The threat of imports of paints in India is limited due to the relatively high import duties. The industry is subject to pollution control norms given the toxic nature of the effluents. The government's focus on affordable housing will give a strong boost to the paints industry.

No supply disruptions / very narrow price band or fluctuations

The sector is vulnerable to raw material price volatility given the strong linkages with crude oil dynamics. Further, the domestic industry is significantly dependent on imports of titanium dioxide for which adequate capacity is not available in India. With the easing of the pandemic lockdowns, no major supply chain challenges are foreseen in the near term.