Production capacity of India's paint sector will double by FY27: CRISIL

New Delhi: Paint sector capacity is set to double to nearly 7.8 billion litre per annum (blpa) between financial year (FY) 2024 and 2027 with capital expenditure (capex) of Rs 19,000 crore by organised players including new entrant, as per the CRISIL Ratings.

According to the report, due to new entrants, competition has increased between the key players for market share and marketing expenses are likely to hit the profitability of the companies.

A large chunk of the capacity expansion, nearly 2.4 blpa, is anticipated to become operational in the current financial year. The new entrant alone will add 1.3 blpa capacity.

The expansion is dominated by the decorative segment, which accounts for 70 to 80 per cent of the total capacity.

The reports add that capex will be a mix of cash, debt, and surplus liquidity.

CRISIL expects volume capacity to continue to rise at 10 to 15 per cent annually. while operating profitability is moderate to 15-17 per cent due to intense competition among the market players.

Overall revenue growth is increasing at a pace of 7-10 per cent in FY25.

Poonam Upadhyay, Director, CRISIL Ratings said that the volume growth of 10-15 per cent in the current financial year will be driven by sustained demand from retail and B2B (Business to Business) segments such as construction, real estate, and automobiles.

“However, pressure on realisations will partially offset the benefit of higher volume, tempering revenue growth this fiscal,” Poonam Upadhyay said.