The report also said their near debt-free balance sheets will support credit risk profiles despite all major paint companies being on an aggressive capex spree. Continuing healthy demand from construction, real estate and automobile sectors will help the paint sector register a 10-12 per cent revenue growth this fiscal against an 18 per cent estimated rise in the just-concluded fiscal, according to a report. Volume expansion and the resultant cash generation will help paint companies maintain healthy balance sheets, which will also buffer credit profiles despite the rising capex, Crislip said in a report on Wednesday. The top five companies have announced ₹12,000 crore capex in fiscal 2023 and 2024 on the back of ₹7,000 crore they incurred in the previous four fiscals. New players are expected to add nearly one-third of the total existing capacity of 4.2 billion liters by fiscal 2025-end, the report added. Paint companies are likely to close FY23 with a robust 18 per cent revenue growth, primarily led by higher realizations on the back of a 6 per cent price hike during the year, along with the full impact of a 20 per cent price hike effected in the third quarter of FY22. Along with healthy volume growth, moderating crude-linked input 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 the report based on the five top companies that account for 90 per cent of the ₹65,000-crore industry or 4.2 billion liters annual capacity now.

The Report Also Said Their Near Debt-Free Balance Sheets.

will support credit risk profiles despite all major paint companies being on an aggressive capex spree. The domestic paints sector also comprises the decorative segment, which commands 80 per cent of the market. According to Anuj Seth, a senior director at the agency, paints demand normally grows at 1.6x-2x of GDP. Decorative paints are likely to see a revenue increase of 11-12 per cent this fiscal, driven by increasing renovation/construction activity and a greater preference for branded products. On the other hand, industrial paints will see 8-9 per cent revenue growth on the back of higher government spending on infrastructure and steady demand from the automotive segment, Seth added. Since the key raw materials are crude-linked derivatives, the 30 per cent fall in crude oil prices from a high of USD 115 per barrel in June-July 2022 to USD 85 per barrel now will help boost the operating margins. But this will be largely offset by higher selling expenses due to aggressive sales push and increase in ad spend by industry leaders to counter competition from new entrants. Another margin risk is the falling rupee, which the agency sees trending at 82-83 a dollar, up from 80.2 in FY2023, impacting the cost of imported materials, which account for a third of overall their raw material requirements.