“The repainting cycle has crunched. People earlier repainted their homes after five to seven years. They do it now after two to three years,” he said. “Paints are also available easily now. This is pushing up the repainting market.”
Abhijit Roy, managing director and chief executive officer, Berger Paints, said demand for paints in small towns and rural areas was robust.
“The nature of the market is such that people are not taking loans to repaint their homes. That is one reason. The second reason is that whenever possible people today are repainting their homes. It could be for a special occasion or a festival or to protect their homes or beautify their places of residence. All this is contributing to growth,” he said.
The Indian Paint Association, the apex body of paint manufacturers in the country, had earlier this year said the domestic paint market would grow to nearly Rs 70,000 crore in three years from Rs 50,000 crore now, led by strong double-digit growth in decorative paints.
Decorative paints, or paints used in homes and retail establishments, make up around 70 per cent of the total market, with industrial paints constituting the rest, sector experts said.
Analysts said that a reduction in the goods and services tax (GST) rate by 10 per cent had also aided growth.
“Earlier, paints as an item attracted the peak GST rate of 28 per cent,” said Abneesh Roy, senior vice-president, research (institutional equities), Edelweiss.
“It is now down to 18 per cent after the rate was revised (downwards) in July last year. Paint majors have passed these benefits to consumers. Plus, commodity prices, especially, the price of crude oil has been benign, implying there hasn’t been price hikes in the (June) quarter,” he added.
In the past one month, the price of crude had fallen by 11 per cent.
Derivatives of crude are used in paints. The price of titanium dioxide, another key input used in paints, had fallen 14 per cent year-on-year and 5 per cent sequentially in Q1. The result of all this was that margins had improved.
Operating margins in Q1 for the three paint majors had expanded between 70 and 165 basis points over the year-ago period. One basis point is equal to one-hundredth of a percentage point.
All three companies
are also pushing their distribution reach aggressively across markets, especially, into small towns and cities, to partake of growth.
Roy said his firm plans to expand distribution by 10 per cent every year to reap benefits of the overall demand for paints.
Bharuka said his company would push its direct reach into small towns and cities, while Asian Paints proposes to add around 3,000 dealers per annum to consolidate its hold in trade channels.