A new picture unfolds in paints biz
₹10,000 crore for its paints business and till Q1 had spent around ₹3,600 crore. It aims to become a profitable number two player in the coming years. The allure of the paints sector is understandable.
Over the last two decades, Asian Paints Ltd and Berger Paints (India) Ltd—have posted double-digit volume growth in most of the years, which is even faster than the growth clocked by consumer staples companies, pointed out a Nuvama Research report dated 14 September. During this time, many companies—global as well as domestic —had entered the paints sector. But given the high entry barriers, the past tells us that new companies have found it challenging to establish a significant foothold in this industry.
But this time around, the competitive scenario could shape up differently. Apart from Grasim, the other big companies that have forayed into the paints business lately are JSW Paints, JK Cement Ltd and Pidilite Industries Ltd. Notably, some also have a distribution channel in place, which is a key element for success in the sector.
“These financially sturdy entrants are anticipated to disrupt the market over the long haul. On the supply side, the industry is expected to augment its capacity by 20% of the current levels over the next three to four years," said Yogesh Shah, senior director, CareEdge Ratings. However, on the demand side, the industry’s growth trajectory is projected to ease to 9-10% in FY24, after pent-up demand kept growth elevated in the previous two years, he added.
Simply put, the chase for market share could get intense. So, companies might have to sacrifice on margins to protect volumes and this could ultimately hurt the industry’s profit pool. Eventually, this may pave the way for increased
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