Indian Economy
With a remarkable growth rate of 8.7% in FY22, the Indian economy is poised for
sustained expansion in FY23, projecting a real growth rate of 7%. This substantial growth
can be a ributed to the significant contributions of private consumption and capital
formation, leading to increased employment opportunities and a decline in the urban
unemployment rate. The success of Indias second-largest vaccination drive, which has
administered over 2 billion doses, has played a crucial role in boosting consumer
confidence and fostering a continuous recovery in consumption.
The positive outlook for Indias growth is supported by various favourable factors. The
revival of private consumption has stimulated production activities, and increased capital
expenditure (CAPEX) has further strengthened the economic prospects. With widespread
vaccination coverage, individuals have regained confidence to engage in contact-based
services such as restaurants, hotels, shopping malls, and cinemas. Additionally, the
return of migrant workers to urban areas has significantly reduced housing market
inventory, revitalising the construction sector.
The strengthening of corporate balance sheets and well-capitalised public sector banks
will facilitate credit supply and support credit growth for Micro, Small, and Medium
Enterprises (MSMEs). Notably, credit growth to the MSME sector has been remarkably high,
averaging over 30.6% from January to November 2022, supported by the extended Emergency
Credit Linked Guarantee Scheme (ECLGS) introduced by the Union government. The recovery of
MSMEs is evident from their contribution to the Goods and Services Tax (GST), while the
ECLGS has alleviated their debt servicing concerns. Furthermore, the central governments
increased
Capital Expenditure (CAPEX) of 63.4% in the first eight months of FY23 has been a
significant driver of Indias economic growth, a racting private CAPEX since the first
quarter of 2022.
Looking ahead, India is expected to witness GDP growth ranging from 6.0% to 6.8% in
FY24. This anticipated growth will be supported by robust credit disbursal and a
favourable capital investment cycle as the corporate and banking sectors strengthen their
balance sheets. Additionally, the expansion of public digital platforms and the
implementation of transformative measures such as PM GatiShakti, the National Logistics
Policy, and Production-Linked Incentive schemes will enhance manufacturing output and
provide further support to economic growth.
Source: Ministry of Finance, Government of India
Paints and Coating Industry Overview
As we step into FY23, the paint and coating industry in India continues to shine, with
a market value estimated to be around H62,000 crore as per Indian Paint Association (IPA).
The industry has been growing at a rapid pace, making it one of the fastest-growing major
paint markets globally, with double-digit growth for over two decades. The organised
sector is leading the way in this industry, holding a significant 75% market share, while
the remaining 25% is shared by the unorganised sector.
The Indian paint industry is categorised into two segments - decorative paints and
coatings, and industrial paints and coatings. Decorative paints and coatings continue to
dominate the market, accounting for 74% of market value and 85% of market volumes, while
the industrial segment takes up the remaining share. The decorative paint category has
witnessed tremendous growth, with consumers shi_ing their preference from traditional
whitewash to premium quality emulsion and enamel paints. This segment includes a wide
range of products such as interior and exterior paints, design range, premier, enamel,
wood finishing, and waterproofing.
In the industrial paints and coatings segment, products such as automotive paints,
performance coating liquids, powder coating, marine coating, and refinishes are included.
Outlook, Trends, and Scenario
The paints and coatings industry has faced various challenges in the past years,
including the increased input costs and inflation, and supply chain disruptions, which
have hampered overall sentiments. Geopolitical tensions, Russia-Ukraine war, resurgence of
COVID-19 sporadically in certain Chinese cities and other parts of the world, etc., have
further exacerbated supply chain issues. However, the industry is expected to regain
momentum in the coming year due to low probability of severe waves of COVID-19, resilient
GDP growth in India and increased economic activity including rising income levels,
industrial production, infrastructure and construction spending. So, the paints and
coatings industry is expected to thrive in the upcoming years. Strong consumer demand,
increased disposable income, and growing nuclear families are driving the trend for luxury
home improvement solutions. Also, the rising popularity of working from home has
encouraged people to invest more in home renovations and decor, highlighting the
importance of aesthetics in furnishings. Moreover, the Indian governments housing for all
and infrastructure spending initiatives are fuelling the countrys housing demand, which
is expected to further boost the growth of the sector.
HISTORICALLY, THE PAINTS AND COATINGS INDUSTRY HAS GROWN 1.5 2X FASTER THAN THE GDP;
THUS, WITH INDIAS GDP PREDICTED TO GROW AT A GOOD RATE IN THE FUTURE, THE PAINT SECTOR IS
POISED FOR SUCCESS.
Market trend in Wood Coating and Finishes
In the world of wood coatings and finishes, India has emerged as a powerhouse in Asia
besides China and Japan. Catering to a broad range of needs, from residential to
commercial to hospitality, the coatings are an essential component of wooden furnishings,
providing durability, adhesion, anti-corrosion properties, and aesthetic value. However,
the industry has undergone a significant shiin recent years with a focus on
environmentally-friendly alternatives. New regulations, such as Eco-product Certificate
Schemes (ECS) in the European Union, have spurred a demand for non-toxic options that are
safe for the environment and consumers alike. Unfortunately, many Indian markets are still
saturated with toxic solvent-based coatings, which emit harmful VOCs into the environment,
endangering both human health and the ecosystem, due to price-sensitivity. But over a
period of time, a transition from harmful coatings like Nitrocellulose and Melamine to
high-quality Polyurethane coatings is happening because:
WITH AN INCREASING DEMAND FOR LUXURY HOME IMPROVEMENT SOLUTIONS, THE PAINT AND COATING
INDUSTRY IS EXPECTED TO CONTINUE ITS GROWTH TRAJECTORY AND REACH H1 LAKH CRORE MARKET IN
THE NEXT FIVE YEARS, AS PER IPA.
Water-borne coatings, which are eco-friendly and safe for consumers as compared to
solvent-based ones, have therefore grown in popularity, accounting for a significant
market share in developed markets. Leading the way in this transition is Sirca S.p.A.
(Italy), which already produces a full range of water-based polyurethane coatings. Looking
forward, higher disposable incomes and an increased focus on quality and value in the wood
coatings market will be the primary growth drivers in the industry. As the industry
continues to evolve, it is essential to embrace eco-friendly alternatives to ensure a
sustainable and prosperous future.
Company Overview
Sirca Paints India Limited (‘Sirca) stands tall as a beacon of excellence in the
Indian wood coatings industry, with a wealth of experience spanning over two decades. The
Company is renowned for manufacturing and selling premium wood coatings and decorative
paints, under its exclusively licensed brands such as Sirca, Unico, Oikos, and
DuranteVivan. Furthermore, the Company has exciting plans to expand its horizons in terms
of both product portfolio and geography expansion.
Sirca has been making remarkable strides in the Indian market, particularly in North
India, where it has established a dominant presence as a market leader in premium wood
coatings. The Company is leaving no stone unturned to expand its reach in other regions of
the country. With this goal in mind, Sirca is strengthening infrastructure in the East,
West, and South Indian markets, to strengthen its position and cater to the growing demand
for its products. The Company currently operates two state-of-the-art manufacturing
facilities, one for mass-market wood coatings products in Sonipat, Haryana, and another
for wall paints and pu y in the NCR region. Sircas unwavering commitment to quality,
innovation, and excellence has helped it carve a niche for itself in the Indian paint
industry, and with its upcoming expansion plans, the Company is poised for an even
brighter future.
Customer Segment
Sirca has primarily divided the market into two major customer segments:
Retail |
|
The retail customer segment, which constitutes almost 70%
of the revenue stream, is served by Sircas strong and expanding distribution network of
more than 1,823 dealers & distributors, supported by 12 branches & depots as well
as 27 Sirca Studios across key markets. Sirca Studios offer an enhanced consumer
experience giving customers and influencers a platform to be er understand its products.
The Company is expanding its dealer network in Southern, Western, and Central India, and
strengthening distribution infrastructure to be er |
serve these markets. To enhance brand recall, Sirca is
increasing its advertising, marketing, and sales promotion spending, particularly in newly
tapped territories, where it has developed a 360? marketing strategy. The Company has
launched commercials on television in Hindi and other regional languages, as well as
advertisements in various media. Additionally, Sirca is enhancing its outdoor presence by
pu ing up shop boards at its dealer network, with over ~1,290 already installed. |
OEMs |
|
Sirca has been working with furniture and fixture
manufacturers since its inception, providing premium wood coating solutions that have been
widely adopted by OEMs. The OEM segment, which accounts for nearly 30% of the total
revenue, has around 673 well-diversified clients, including Godrej & Boyce, Jindal
Stainless, Indoline, Space Wood, Pyramid, MAS Furniture, Alsorg, and Soundarya Decorators,
among others. Sirca has ensured utmost satisfaction and strong customer relationships by
providing strong technical and a_er-sales support to OEMs, which has made it the primary,
and offen the only, |
choice for furniture manufacturers when it comes to wood
coatings. The growing prominence of ready- made, modular furniture over on-site furniture
will increase this segments performance in the long run. This trend is fuelled by factors
such as convenience, faster turnaround times, and a growing range of options. As a result
of its ongoing innovation, new product introductions such as NC and Melamine coatings
through the Unico brand, and excellent technical assistance, Sirca has become an essential
vendor to OEMs and is well-positioned to take advantage of potential prospects in this
area. |
FY23 Performance Review
As we look back at FY23, Sirca Paints India Limited truly made waves, with our Revenue
from Operations soaring to an all-time high of H267.75 Crore, reflecting a remarkable
growth of 33.9% from the previous year. This phenomenal achievement was driven by a
significant boost in volumes of our core Italian PU portfolio, as well as the steady rise
of emerging product categories such as wall paints and the Unico range of products.
Our profitability also rose, with our EBITDA margins surging to 23.05% in FY23 from
18.90% in FY22, marking a 415 bps increase. We are proud to share that our PAT grew an
astounding 66.3% YoY basis, reaching H46.11 Crore.
SIRCA ACHIEVED AN
UNPRECEDENTED MILESTONE WITH ITS REVENUE SOARING TO AN ALL TIME HIGH OF H265.53 CRORE.
Financial Ratios |
|
|
|
|
Ratios |
FY23 |
FY22 |
% Change |
Remarks |
Total Debt to Equity (times) |
0.00 |
0.00 |
NA |
NA, as the Company is debt free. |
Current Ratio (times) |
5.42 |
5.52 |
(2%) |
NA |
Interest Coverage Ratio (times) |
- |
- |
NA |
NA, as the Company is debt free with miniscule Finance Costs. |
Debtors Turnover (times) |
5.52 |
4.51 |
22% |
NA |
Inventory Turnover (times) |
3.15 |
2.97 |
6% |
NA |
Operating Profit Margin (%) |
23.05% |
18.90% |
22% |
NA |
Net Profit Margin (%) |
17.22% |
13.86% |
25% |
On account of higher operating margins and operating leverage through
higher sales. |
Outlook
Sirca Paints India Limited is set to conquer new heights in the Indian paint and
coatings market and other home improvement categories by expanding its reach as well as
repertoire. The Company plans to expand by broadening its sales channels, introducing new
product lines, strengthening its physical infrastructure, and shi_ing manufacturing of
Italian products in India. The footprint of Sirca would also further expand in
sub-continent markets including Nepal, Bangladesh and Sri Lanka. This strategy, combined
with the significant opportunity unfolding in the Indian market, positions Sirca to create
a market for its products and capitalise on the enormous opportunity that lies ahead.
Internal Control System and Risk Management
Sirca has implemented an effective internal control system designed to protect against
unauthorised use or disposition of assets, ensure accurate reporting, and conduct business
operations according to prescribed policies and procedures. The Audit Commi ee and
management have reviewed the adequacy of the internal control systems and taken suitable
steps to improve them. The Company recognises the importance of sound risk management and
continues to strengthen its processes to identify, assess, and mitigate potential risks.
Human Resource
Sirca Paints India Limiteds HR domain is commi ed to delivering top-notch services to
its stakeholders, empowering them with cu ing-edge business tools, frameworks, and
analysis for effective management of the workforce. Skilful management of the workforce is
key to achieving transformational goals, enabling managers to tackle daily tasks, from
recruitment to development, and furnishing senior management with insights that support
strategy and decision-making. To this end, Sirca is continually investing in technology
and modern infrastructure, expanding its state-of-the-art so_ware for workforce analysis
and planning, a strategic innovation that also supports the Companys innovation and
digital agenda. Managers are equipped with people analytics and a workforce planning
solution. The strategic planning process leverages workforce tools to create a
holistically automated, cost-focussed workforce plan, fully integrated with the
business-wide strategic planning process. Moreover, to support employee performance, Sirca
India has already introduced the Sirca Parivar App, empowering them to track their
performance.
Sirca Paints India Limited is unwavering in its commitment to employee well-being,
referring to its workforce as an ‘ASSET of the organisation. The company follows
policies and procedures that promote be er productivity and a positive work environment,
ensuring that employees are valued and their contributions are recognised.
Cautionary Statement
The Management Discussion and Analysis and the rest of the annual report may contain
forward-looking statements describing the Companys objectives, projections, estimates,
and expectations. These statements are subject to various risks and uncertainties that may
cause actual results to differ materially. Factors that could impact the Companys
operations include economic and political conditions in India and other countries,
interest rate volatility, changes in government regulations and policies, tax laws,
statutes, and other incidental factors. The Company does not undertake to update these
statements.
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