The domestic paint market is estimated to be a Rs 50,000 crore industry with the decorative paint category constituting almost 75% of this market. The balance 25% of the paint industry is constituted of the industrial paint category, which includes a broad array of segments like automotive coatings, packaging coatings and other general industrial coatings.
The Indian domestic paint market has a sizeable 30-35% share by the unorganised players which predominantly cater to the lower end of the product basket. The paint industry continues to grow at a pastel pace than the overall GDP growth rate. Demonetisation and GST implementation had affected the growth rate resulting in some contraction in demand mainly in the retail segment. But this change over was essential and the affect short-lived, given the country’s innate resilience to a transforming environment.
Paint companies like Asian Paints and Berger Paints have outperformed the consumer staples in terms of volume growth for the last two quarters on the back of weakness in some raw materials, including crude oil. Most analysts tracking the paint sector expect their stocks to remain in the upward trajectory for the medium to long term horizon. The economy is in a slow down mode continuing into the second quarter with demand conditions in the paint industry adversely affecting industries. The overall challenging demand conditions were reflected in the coating segment which was adversely affected due to prolonged monsoon in many regions. The painting activity drops during the monsoon season and with monsoon extending right up to Diwali, the company had to re-jig its segment allocation focus accordingly. Asian Paints Ltd reported excellent second quarter 2019-20 results with consolidated profit going up 67% YoY to Rs 842 crores while revenue from operations grew by 9.4% to Rs 5,051 crores. This excellent performance was due to decorative paint business registering a high double digit volume growth plus benefit due to the corporate tax rate cut. Asian Paints stock currently quoting at Rs 1,790 can appreciate by 10% in the next six months time frame.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.