India paints sector: Volume up 8%, revenue stuck at 5% as price pressure bites, says CRISIL

India’s organised paints industry is likely to see revenue growth capped at 3–5% in the current and next fiscal year, as intense competition and pricing pressure offset steady demand, ratings agency CRISIL Ratings said on Thursday.

The sector, which recorded revenue growth of about 2% last fiscal, continues to face aggressive pricing as incumbents and new entrants compete for market share, CRISIL said.

Operating margins of established players, which fell by around 300 basis points to about 15% last fiscal, are expected to remain range-bound through fiscal 2027, as savings from softer crude-linked input costs are offset by rising marketing and trade incentives.

“Large capacity additions by incumbents and new entrants, alongside recent consolidation, are pressuring prices as players rely on higher trade incentives and promotional rebates to protect market share,” said Anuj Sethi, senior director at CRISIL Ratings.

For established companies, such incentives are estimated at 17–18% of gross sales, limiting their ability to translate steady demand into higher revenue growth, Sethi said.

While diversified demand from housing, real estate and automobiles is expected to support volume growth of 7–8%, pricing pressure will continue to cap top-line expansion.

CRISIL’s analysis covered 13 companies accounting for more than 90% of the organised paints market, which itself makes up about 75% of India’s overall paints industry.

Decorative paints account for nearly three-fourths of demand, with industrial and other coatings comprising the rest.

Despite competitive stress, credit profiles of established players are expected to remain stable, supported by near-debt-free balance sheets, strong liquidity and lower capital expenditure following recent capacity expansions, CRISIL said.

“Intensifying competition is also shaping profitability, with operating margin expected to stabilise at ~15%,” said Poonam Upadhyay, director at CRISIL Ratings.

Marketing expenses have risen structurally to 4.5–5% of revenue, from about 3–3.5% earlier, she added.

CRISIL noted that capacity additions by a major new entrant over the past two years have pushed installed capacity to roughly 6.5 billion litres per annum, outpacing volume growth and keeping utilisation for incumbents at 65–70%.

Capital expenditure by established players is expected to remain contained at around 2,500 crore rupees ($300 million) over the current and next fiscal years, largely focused on product portfolio expansion and technology upgrades.