The Indian paints sector is pegged at Rs 66 billion in value terms and is very fragmented. The organized sector accounts for about 70% of the business while around 2,000 players in the unorganized players accounts for the remaining. Read more
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The government has given great impetus to the housing industry and I hope that the same consideration will be given in the current budget also. Housing sector revival boosts the growth of the general economy and thereby the paint industry. I request the finance minister to increase exemption of interest from taxable income on housing loans and provide further incentives to boost the sector. |
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The government should give incentives to companies that invest money in R&D activities by way of weighted deductions for revenue spends and accelerated depreciation rates for investment in R&D equipments. This will help the Indian industry to become globally competitive. |
| Budget 2001-02 |
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Budget 2002-03 |
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Budget 2003-04 |
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| Increase in housing loan interest exemption to Rs 150,000.
Dividend tax reduced to 10% |
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Peak customs duty reduced to 30% from 35%.
Continuation of housing incentive.
Administered interest rates lower by 50 basis points. |
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Continuation in interest exemption on housing loans.
Peak custom duty reduced from 30% to 25%.
Spending in health, education and housing given priority by the government. |
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| Key Positives |
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Of the estimated Rs 66 billion paint industry, the share of organised players has grown to 70% as compared to 30% before five years. Going forward, the organised sector is likely to increase its share in the industry. |
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Due to cheaper interest rates, housing demand is expected to be strong going forward. This will benefit the decorative segment of the paint industry. |
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The Government's focus on infrastructure projects viz. roads and ports and capacity expansion plans of the manufacturing sector are likely to benefit the industrial paint segment of the industry. |
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Continuous fall in excise duty in the past has benefited organised players and the impending consolidation will add to the pricing power. | |
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| Key Negatives |
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Raw material cost account for around 50% of sales of the organised players. Though there are more than 300 raw materials used in manufacturing of paints, titanium dioxide, being the key raw material, accounts for around 30% of sales. Being a crude derivative, the higher crude oil prices affect the profitability adversely. |
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The fiscal state of the economy is a cause of concern. Slower progress of reforms (especially land reforms that are vital for the sector) is also limiting growth prospects of the economy. | |
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