Chennai: With around Rs 19,000 crore investments lined up, the production capacity of the organised paints sector is set to nearly double to 7.8 billion litre per annum by 2027. The industry is expected to see investments of Rs 19,000 crore, including by one large entrant, between FY24 and FY27.
A large part of the new capacity, around 2.4 blpa will be operational this fiscal, with the new player alone adding 1.3 blpa, primarily in the decorative segment, which accounts for 75-80 per cent of the total production, as per Crisil.
While volume will continue to rise at a healthy pace of 10-15 per cent annually in line with past trends, sizeable capacities coming on-stream will lead to increased competition for market share.Manufacturers could price products aggressively to draw customers and utilise their expanded capacities, especially in the value segment, which accounts for over half of the total revenue.
“The volume growth of 10-15 per cent this fiscal will be driven by steady demand from retail and business-to-business segments — catering to construction, real estate, and automobiles. Rising disposable incomes, increasing consumer preference for quality and branded products, rising home sales, and an expected recovery in rural demand will be supportive. However, pressure on realisations will partially offset the benefit of higher volume, tempering revenue growth this fiscal,” said Poonam Upadhyay, Director, CRISIL Ratings.
Last fiscal, revenue grew 4 per cent as manufacturers cut prices 4-5 per cent via higher discounts and rebates after crude-linked input prices softened, and increased promotional spending to counter competition. Prices of most raw materials, especially crude-linked derivatives, including binders, solvents, and additives, besides titanium dioxide, are seen steady.
