Page 8 - CV June-July 2023 Issue

PAINT COMPANIES TO LOG 10-12 PC

GROWTH IN REVENUE THIS FISCAL

he top five companies have announced Rs 12,000 crore The report also said their near debt-free balance sheets will support
capex in fiscal 2023 and 2024 on the back of Rs 7,000 crore credit risk profiles despite all major paint companies being on an
Tthey incurred in the previous four fiscals. New players are aggressive capex spree. The domestic paints sector also comprises
expected to add nearly one-third of the total existing capacity of 4.2 the decorative segment, which commands 80 per cent of the market.
billion litres by fiscal 2025-end, the report added.
According to Anuj Sethi, a senior director at the agency, paints
demand normally grows at 1.6x-2x of GDP. Decorative paints are
Continuing healthy demand from construction, real estate and likely to see a revenue increase of 11-12 per cent this fiscal, driven
automobile sectors will help the paint sector register a 10-12 per cent by increasing renovation/construction activity and a greater
revenue growth this fiscal against an 18 per cent estimated rise in preference for branded products.
the just-concluded fiscal, according to a report. Volume expansion On the other hand, industrial paints will see 8-9 per cent revenue
and the resultant cash generation will help paint companies maintain growth on the back of higher government spending on infrastructure
healthy balance sheets, which will also buffer credit profiles despite and steady demand from the automotive segment, Sethi added.
the rising capex, Crisil said in a report on Wednesday.
Since the key raw materials are crude-linked derivatives, the 30 per
Paint companies are likely to close FY23 with a robust 18 per cent cent fall in crude oil prices from a high of USD 115 per barrel in June-
revenue growth, primarily led by higher realisations on the back of a July 2022 to USD 85 per barrel now will help boost the operating
6 per cent price hike during the year, along with the full impact of a margins. But this will be largely offset by higher selling expenses due
20 per cent price hike effected in the third quarter of FY22. to aggressive sales push and increase in ad spend by industry
Along with healthy volume growth, moderating crude-linked input leaders to counter competition from new entrants.
prices will ensure operating margins to remain stable at 15-16 per
cent in fiscal 2024, almost similar to the last fiscal, the agency said in Another margin risk is the falling rupee, which the agency sees
the report based on the five top companies that account for 90 per trending at 82-83 a dollar, up from 80.2 in FY2023, impacting the
cent of the Rs 65,000-crore industry or 4.2 billion litres annual cost of imported materials, which account for a third of overall their
capacity now. raw material requirements.

CONSTRUCTION VISION 6 JUNE-JULY 2023