Sales revenues of the paint companies in India will jump 10-12 percent
Sales revenues of the paint companies in India will jump 10-12 percent as there is improving buyer sentiment and greater economic recovery, according to Crisil Ratings.
However, the operating margins will shrink by as much as 200 basis points and likely to settle at around 17 percent. This is because higher international crude prices have caused a surge in raw material prices of 55-60 percent of the costs in the current fiscal. The price hikes by paint players have not completely offset this.
The credit profiles the paint players will remain intact since there will be healthy cash accruals, decently managed balance-sheets and big cash surpluses.
Anuj Sethi, Senior Director of Crisil Ratings said , “Higher spending on home improvement and refurbishing, and a gradual increase in real estate activity is expected to drive revenue recovery of 11 percent in the decorative paints segment. Also, this year, revenue recovery is expected to be more broad based. Improving pace of vaccination and easing of pandemic related curbs will drive growth in the urban areas."
"On the other hand, better rural incomes on the back of an almost normal monsoon, will support recovery in the hinterland, which accounts for a sizeable chunk of decorative paint volumes. Last fiscal, while the overall paint sector registered only 4 percent growth, the decorative segment had fared better due to strong demand from the hinterland, which was less impacted by the first wave," he said.