Rosy Tint for Indian Paints Industry

Until a year back, the Indian paints industry was struggling to cope with the sluggish demand and steep hike in raw material prices. Most small-scale paint units found it difficult to sustain their operations. Recessionary pressures compelled some SME paint manufacturers to scale down productivity, while others to shut down. However, now things are changing gradually.

Riding on the back of resurgent demand, the Indian paints industry is once again gaining its foothold in the market. The revival signs in the economy and improving sales figures are providing a boost to paint manufacturers. Due to the enhanced business outlook for the sector, the Indian Paint Association (IPA) expects the industry to post 10-12% growth in the current financial year.

Bright growth forecasts

The demand pick-up in the real estate and automobile sectors, which are key consuming markets for SME paint companies, has made the paint firms hopeful of witnessing steady business during the current financial year.

“The sudden spurt of activity in the construction and real estate sector as well as rise in auto sales has resulted in increased sales growth for SME paint companies. Riding on initial signs of revival of user industries, we expect the paint industry to surpass last year's growth rate of just 9%,” said D Shivaram, President of the Indian Small Scale Paint Association (ISSPA).

However, the small-scale paint companies may have to battle some tough challenges before they can achieve the desired performance results. SME paint companies will have to combat stiff competition from larger players in the domestic market as well as higher input costs in orderto come out with steady growth results.

“Input costs are likely to go up during this year as most paint companies will have to bring down the use of lead. Shifting from inorganic pigments using lead to costly organic pigments will result in increase in production costs. Besides, surge in packaging and transportation costs may further make it difficult for paint companies to price their products competitively in the market,” said P Gupta, Proprietor of United Trading Company, a small-scale paint company in Kolkata.

Despite the positive growth projections for the current financial year, the Indian SME paints industry must tread with caution since the road to recovery is not free of challenges. Therefore, increased focus on improving network distribution, inventory management, product mix and access to improved technology will help small paint companies to gain a larger market share.