Credit rating agency Crisil in its latest report has said that continuing healthy demand from construction, real estate and automobile sectors will help the paint sector register a 10-12 per cent revenue growth this fiscal (FY24) against an 18 per cent estimated rise in the just-concluded fiscal (FY23). Paint companies are likely to close FY23 with a robust 18 per cent revenue growth, primarily led by higher realisations on the back of a 6 per cent price hike during the year, along with the full impact of a 20 per cent price hike effected in the third quarter of FY22.
According to the report, volume expansion and the resultant cash generation will help paint companies maintain healthy balance sheets, which will also buffer credit profiles despite the rising capex. It noted that the top five companies have announced Rs 12,000 crore capex in fiscal 2023 and 2024 on the back of Rs 7,000 crore they incurred in the previous four fiscals. It said new players are expected to add nearly one-third of the total existing capacity of 4.2 billion litres by fiscal 2025-end.
The report further said along with healthy volume growth, moderating crude-linked input prices will ensure operating margins to remain stable at 15-16 per cent in fiscal 2024, almost similar to the last fiscal. It also said their near debt-free balance sheets will support credit risk profiles despite all major paint companies being on an aggressive capex spree. The domestic paints sector also comprises the decorative segment, which commands 80 per cent of the market.
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