Paints Sector heading for a Colorful Year? - Views on News from Equitymaster

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Paints Sector heading for a Colorful Year?

Apr 28, 2000

The paint industry is expected to show higher growth rate in the current year, with both the automobile and housing sector witnessing a buoyant demand. Higher disposable income coupled with a sustained growth in the automobile and consumer goods sectors, is expected to improve the demand for paints.The automobile sector comprising passenger cars, utility vehicles have shown growth rate of 41.4%. Passenger car sales alone are up by 56%. This is due to the number of new launches from Maruthi, Hyundai, Toyota and Honda. Following are the growth in sales for various segments in automobile sector

(No. Of units sold)FY99FY00% Change
Passenger cars410,000639,00055.9%
Multi-utility vehicles111,000123,00010.8%
Commercial vehicles139,000171,00023.0%
Total660,000933,00041.4%

The companies are also aggressively tapping the rural and the semi-urban market which has a huge potential due to increasing income and consistent monsoon over a decade. With both real estate prices and interest rates falling, the housing sector is seeing good demand. This is also supported by the tax benefits that are announced by the finance minister in the recent budget. This has also led to demand growth in consumer durables like television, refrigerators etc, where again paint are used. The decorative segment in paint have seen a good demand in the festival season, which was in November last year, and this can be attributed to the impressive growth in the third quarter results of all the companies.

With the advent of excise duty reduction, the difference between the organised and the unorganised sector prices have narrowed down. The increased awareness of quality and brand has led to shift from the unorganised to the organised sector.

But with reports on deficit rainfall this year, whether the decorative segment witness the same demand that has been throughout a decade has to be seen.

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