The Indian paint industry, which experienced strong growth in FY’22 and FY’23, is now facing challenges from increasing competition and shrinking margins, according to a CareEdge Ratings report. Revenue growth for key players like Asian Paints, Berger Paints, Kansai Nerolac, Akzo Nobel, and Indigo Paints slowed to 4% in FY’24, a sharp drop from the 14-15% compound annual growth rate (CAGR) seen between FY’19 and FY’23. The decline was driven by price reductions due to lower raw material costs and a growing share of lower-value products in sales.
Despite a volume growth of over 10%, revenue was impacted by price cuts, changes in product mix, stiff competition, general elections, and extended monsoon conditions in H1FY’25. New entrants like JSW Paints and Grasim Industries have disrupted the market, aggressively expanding capacities, dealer networks, and promotional activities.
This has forced established players to increase their own spending on advertising and capital investments, further straining profitability. Ad and sales promotion expenses are expected to rise by 100-200 basis points as a percentage of revenue, while operating margins fell from an average of 18% during FY’20-FY’24 to 16% in H1FY’25 and are projected to drop further to 14% by FY’26.
However, gross margins are likely to stay stable around 40%, supported by recent price increases of 1.5-2.5% to offset rising input costs, especially crude oil derivatives. Organised players are expected to increase their market share to 80% in the medium term, fueled by over 1 billion litres of additional capacity coming online by FY’25-FY’26, primarily from new entrants.
Decorative paints, accounting for 70-75% of demand, remain the main growth driver, supported by repainting activity, urbanisation, and higher disposable incomes. Industrial paints, contributing 25-30% of demand, are boosted by sectors like automotive, oil and gas, and infrastructure. CareEdge Ratings Associate Director Richa Bagaria noted that while the sector is expected to grow at 8-10% annually, operating margins are projected to settle at 14% by FY’26, down from the five-year average of 18%.
