Will the Paint companies lack luster or shine come the festive season?

With Covid restrictions easing and economic revival, the paint industry is gaining steady demand for paints from project business sector. This is concluded from the conversations held with various paint dealer hailing from UP

According to the dealers’ statements, the quality of the paints of organised paints is more commendable and superior over the unorganized paints. Akzo Nobel seems to be gaining more popularity, loyalty and traction from its audiences majorly because of the quality their paints offer. It is rated with the “Best” quality tag.

Covid restrictions easing and economic revival has sent cheers to project business sector. Both organized and unorganized paint companies are facing a good momentum as builders and developers are looking for more cost efficacy in their spending in anticipation of higher revenues eventually. On this stance, Asian Paints, enjoying a rather higher revenue share, beats Akzo Nobel as the latter offers comparatively more expensive products.

“Velvet”, a brand of Akzo Nobel, led the victory for the company with strong off-take in sales. With such commendable performance from the brand, the company plans to launch new range under in it in the coming months. SmartChoice along with Velvet brought in more business, while Weathershield and Ambience brands had a weaker support of the company.

With increased number of players and increased competition, it is not easy for everyone to achieve turnover targets or get higher commissions for the dealers even if the schemes all of them offer are mor or less similar. For instance, Asian Paints benefits from their higher revenue share which makes it easier for them to attain turnover targets while it becomes difficult to do the same for its competitors especially ones like Akzo Nobel that offer products at premium rates

The prices of the products were increased in 2-3 tranches in Q2FY22 by all companies. The market approved of this change as the volumes did not seem to be affected with raised prices. However, this may affect the premium product segment more as compared to the economy products. One of the reasons the company may face some heat for demand in September quarter would be delayed Diwali.

The sector appears to lack some stability in standard policy making. As a result, the smaller paint companies constantly make changes in their policies which has a domino effect on hurting the business. The dealers are affected which the attrition in key salesmen and eventually affecting the customers too.

The risks that the companies may enjoy on the upside are higher than expected gross margins due to dip in the input prices while on the downside the companies may face challenges coming from increased competition and decreased demand.

The valuations and rating of the companies are calculated on the basis of DCF methodology and are mentioned as below: