In the last couple of years, both demonetisation and GST implementation have had deep impact on revenues. Companies that could unleash more market credit were able to smother the GST impact in Q2 of FY17, while others who were more process-led and therefore could not, were impacted. The industry which has a combination of route-to-market of direct to retail as well as having a distributor, has had to deal with these two quarterly blips. The slow recovery could stabilise only by the last quarter of FY 18. Having said this, what is heartening to see is that the margins in the business have been showing a healthy quarterly uptick. This is despite a steady increase of crude prices over last year, considering that this industry is raw-material intensive, with most of it being petroleum based.
In paints, decorative paints occupy 75% of the segment with the balance being industrial/auto coatings. The deco segment has been innovative and educating the consumer regarding variants, shades and colour options. In the past years, companies have expanded their portfolio to offer water-proofing and construction chemicals on one hand and home-decor and painting services and solutions on the other. This has helped in seeding consumption demand through more occasions in a customer life-cycle apart from other drivers like the construction sector and architects facilitating demand. The industrial coating has seen good growths riding on Auto OEMs and refinish segment.
The revenue growth of paints is expected to be in healthy double digits. With the monsoon progressing well, and a long pre-November Diwali season offering a good run for this industry, the financial year is looking extremely promising. There is only one cause for concern: crude oil rates, which are inching northward and may continue to do so. If the housing industry shows some positive movement given the interest rate fillips, it will give reasons for further growth coming from first-time home segment buyers. The latest reduction in the GST rates from 28% to 18% has been welcome. The related sectors like construction chemicals, water-proofing products, ply, tiles, modular furniture, window frames may show positive trends.
This industry has served extremely well as a grooming ground for best of talent across all functions. Historically, the talent has radiated out to leadership positions in consumer, telecom, chemical and manufacturing companies. In conclusion, we are sure that the leadership in these companies would have embarked on an aggressive growth trajectory for this year and acquiring new talent would be high on their agenda.