Paint is an integral part of every household in India. With rising aspirations and near perfect demographics, demand for paint in the country is expected to bounce back. The rising level of affordability among middle-class Indians has reduced the repainting cycle over the last decade from seven to eight years to three to five years. In perspective, only 20 per cent of the demand comes from fresh painting, while the remaining 80 per cent is from re-painting. <p></p> <p>The paint industry is classified into two broad categories: Decorative and industrial. Decorative paints account for over 70 per cent of the paint market in India and is growing at a faster pace than industrial paints. Industrial paints essentially comprise general industrial, automotive, protective and powder coatings.</p> <p>The rising culture of nuclear families and resultant demand for new houses is expected to drive demand for paint over the next decade. Notably, over the last decade, apart from the cost of paint by itself, the cost of rising labour has consistently added to the increasing cost of paint. This has improved the scope of premium products, leading to better margins. </p> <p>With increasing aspirations of keeping homes beautiful coupled with higher availability of texture paints, we expect demand for paints to remain buoyant for several years to come. </p> <p>The Indian paint market is expected to reach Rs 70,875 crore by 2019-20 from around Rs 40,300 crore in 2014-15, as estimated by the Indian Paint Association (IPA). The decorative paint market is expected to witness a CAGR of 12.7 per cent, while the industrial paint market a CAGR of 9.5 per cent, as per IPA. The decorative paint market comprises 75 per cent of the total paint market, with industrial paints comprising 25 per cent. In FY2014-15, the market size for decorative paints in the country stood at Rs 30,385 crore, with the industrial paints market at Rs 9,915 crore. In terms of value, the paints industry has grown at 12.9 per cent CAGR from 2011-12 to 2014-15, while the per capita consumption of paint in India was estimated at 3.34 kg in FY2014-15. Exterior and interior emulsions in the decorative paints category and auto refinish and powder coatings in the industrial paints category have witnessed a high growth.</p> <p>With the government's focus on rural India and its initiatives to improve farm income, we expect demand from rural India to aid the overall volume growth. The demand volume for paint products in India is expected to bounce back to higher double digits in FY2018. With GST already being implemented, we expect organised players to take on the unorganised competition, although there will be some disruption for a quarter from an inventory stocking point of view, considering there is a difference of just 2 per cent in the GST rate (taxed under 28 per cent bracket) than the existing rate, which can be absorbed easily. </p> <p>Going ahead, we believe that companies having a strong pipeline of capex and execution capabilities will grow at a faster pace than the industry. In the long term, we expect companies in the organised sector who have an efficient supply chain and a pan-India distribution network to be the beneficiaries. </p>