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Paint industry highlights of 2018-19

Though performed better than expectation, for paint makers 2018-19 was a dull year compared to earlier years. One of the main reasons being the slowdown in real estate sector which has seen lesser number of new launches during the year. Despite the slowdown there are some highlights in the performance of paint manufacturing companies:

  • For paint manufacturers Metro and Tier I cities are no longer growth drivers. In fact, decorative paints were able to register healthy growth because of demand from Tier II & III cities. Though demand is almost evenly distributed all over the country, demand from East was slightly higher than rest of the regions.
  • While residential real estate sector is facing continued slowdown saving grace is home improvement market which has helped paint makers to keep the growth scale ticking.
  • Overall, financial year 2019 was difficult one due to challenging domestic economic environment and volatile rupee value and crude oil prices and the geo-political tensions given a potential trade war. Liquidity crunch due to NBFC crisis also added to the problems as many dealers are dependent on these NBFC for their finance requirements. General elections and unpredictable Monsoon ensure that situation would continue at least in the first half of this financial year.
  • Some paint manufacturers resorted to increased incentives and discounts to dealers to maintain growth rate. For example, Asian Paints increased incentives to dealers in view of intensifying competition and tight market conditions. On the other hand, Kansai Nerolac decided to cut down rebates offered to dealers as a result of which the company saw moderate growth in its sales volume.
  • Earlier, the average cost to paint for a middle-income customer with a two-bedroom house was around Rs 30,000 (material + labour cost). Now this has gone up to Rs 40,000 due to increase in labour cost. Earlier labour to material cost ratio was 60:40 which has gone up to 70:30 now.
  • Wood coating business is also witnessing some interesting developments. Rs 3,500 crore wood coating business has been dominated by Asian Paints for the last three decades. However, now many new players are entering the market thus intensifying the competition.

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