Revenues of the Indian paint industry declined by 2% year-on-year in FY25, marking the first drop in two decades, showed data sourced from ICICI Securities Ltd. The decline is especially concerning as the the industry grew even during the covid pandemic.
A number of headwinds were responsible for the industry’s feeble growth in FY25, including a general widespread slowdown in consumption and increased competition from the entry of Birla Opus. In its March quarter (Q4FY25) earnings call, Grasim Industries Ltd’s management said the company’s organised decorative paints presence ended the quarter with a more than 10% revenue market share, as per its internal estimates, if the revenues of Birla Opus and Birla White Putty were combined.
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Weak pricing growing also hurt the industry’s growth last year as there were negligible price hikes coupled with higher trade schemes and offers. Consumer downtrading and urban demand slowdown were other challanges the industry faced last year.
Where do we go from here?
“The creation of favourable base results in strong growth for the paint industry in the following two years. This pattern was visible in FY16-19 (two weak years followed by two strong years) as well as in FY20-23 (two weak years followed by two strong years),” said ICICI Securities’ analysts in a report on 20 June. The broking firm defines a weak year as industry revenue growth of less than 5% and strong year as higher than 12% growth. “Considering there was weak revenue growth in FY24 and FY25, we believe the industry is ripe for revival in revenue growth in FY26-27,” it added.
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While that is encouraging, the recovery could well be gradual as demand challenges persist. Since paint demand is discretionary, consumers may well postpone their purchases. The early onset of monsoons this year means prospects for the first half of FY26 don’t appear bright.
Together, these factors could test the patience of investors in paint stocks. Shares of India’s largest decorative paints company Asian Paints Ltd are down about 22% over the past year. In the near-term, all eyes will be on the pace of the recovery in the second half of FY26.
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