Mumbai ,jun 11
The organized paints sector in India is on the cusp of significant expansion, with production capacity expected to nearly double to about 7.8 billion litres per annum (blpa) by fiscal 2027, as per CRISIL report.According to a press release, this surge will be fuelled by investments amounting to around Rs 19,000 crore, including significant contributions from a new major player entering the market.However, heightened competition and increased marketing expenses are likely to impact profitability in the sector.A substantial portion of the new capacity, approximately 2.4 blpa, is anticipated to become operational within the current fiscal year, with the new entrant alone adding 1.3 blpa.This expansion is predominantly within the decorative segment, which represents 75-80 per cent of total production.The sector is poised to continue its healthy volume growth trajectory of 10-15 per cent annually, consistent with past trends.However, the influx of new capacities is expected to intensify competition for market share.This increased competition is likely to drive manufacturers to adopt aggressive pricing strategies to attract customers and maximize the utilization of their expanded capacities, particularly in the value segment, which accounts for over half of the total revenue.Consequently, overall revenue growth is forecasted to moderate to 7-10 per cent this fiscal year.
Moreover, operating profitability is projected to decline to 15-17 per cent, influenced by increased marketing expenditures and pressure on product realizations.
Despite these challenges, capital expenditure (capex) will be managed through a combination of cash flows, debt, and surplus liquidity, ensuring that the sector can sustain its growth ambitions.
