What to expect from paint industry in FY18?

The Indian paint market is expected to reach Rs 70,875 crore by 2019-20 from around Rs 40,300 crore in 2014-15. In value terms, the Indian paint industry is expected to grow at a CAGR of around 12 per cent during 2016-17 to 2021-22.

This is due to the shift in preferences of people from the traditional whitewash to higher quality paints like emulsions and enamel paints. This, along with water soluble paints, are catching up in the market. It has been noticed that not only high quality paints, but also the frequency of painting has increased, leading to paint companies launching highly advanced products and customised products.

The shift in trend is also more accentuated in Tier 1 and Tier 2 cities, which are leading in demand for dust and water-resistant paints. Coming to the demand part, decorative paints enjoy maximum demand. Under the decorative segment, the emulsion paint market has witnessed a massive demand over the past few years and is expected to drive the market in the coming years too. The domestic paint industry had been growing at a rapid pace over the years, but it was not supported by supply of adequate skilled talent. The market for raw materials too is growing with the growth of the paint industry.

We saw that demonetisation impacted Asian Paints and Akzo Nobel the most, with most of the paint manufacturers witnessing a decelerating quarterly growth of 2-3% in Q3FY17, as against the 8-13% growth witnessed in the previous quarter. Asian Paints, which has high penetration in rural markets, felt the accentuated effect more than in the urban markets.

However, we expect the growth to pick up and normalise in Q4FY17. Also, with the implementation of GST in FY18, organised players like Asian Paints and Kansai Nerolac can expect market share gains seeping in. This will be largely due to the level playing field that the organised sector will be enjoying with the unorganised sector.